EXHIBIT 10.25
3 PEA TECHNOLOGIES, INC. CONFIDENTIAL PRIVATE OFFERING MEMORANDUM
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EXHIBIT A
3PEA TECHNOLOGIES, INC.
CONVERTIBLE PROMISSORY NOTE PURCHASE AGREEMENT
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INSTRUCTIONS
Two original copies of the Purchase Agreement and Exhibits B, C and D attached
to the Agreement should be completed, executed and delivered to the Company at 3
Pea Technologies, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇.
Upon Acceptance, the Company will execute both copies of the Agreement and
return one to you for your records. Subject to the terms and conditions of this
Agreement, Investor agrees to purchase at the Closing, and the Company agrees to
sell and issue to Investor at the Closing. At the Closing, upon receipt of
agreed amount, the Company shall deliver to Investor the Note against payment of
the purchase price therefore by check, wire transfer, or a combination thereof.
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK. PURCHASES OF THESE SECURITIES SHOULD BE CONSIDERED ONLY BY PERSONS OR
ENTITIES WHO CAN AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT.
THE SECURITIES OFFERED HEREUNDER ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION D, RULE 506, ADOPTED UNDER SUCH ACT, AS WELL AS IN RELIANCE UPON THE
"PRIVATE PLACEMENT" EXEMPTION CONTAINED IN SECTION 4(2) OF THE SECURITIES ACT.
THIS OFFERING MEMORANDUM CONSTITUTES AN OFFER ONLY TO THE PERSON WHOSE
NAME APPEARS IN THE APPROPRIATE SPACE PROVIDED ABOVE. DELIVERY OF THIS
MEMORANDUM TO ANYONE OTHER THAN THE PERSON NAMED ABOVE IS UNAUTHORIZED AND ANY
REPRODUCTION OF THIS MEMORANDUM, IN WHOLE OR IN PART, OR ANY DIVULGENCE OF ITS
CONTENTS, IN WHOLE OR IN PART, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY
IS PROHIBITED.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR
PERSONS WHO CAN AFFORD A LOSS OF THEIR INVESTMENT.
THIS OFFER CAN BE WITHDRAWN AT ANY TIME BEFORE CLOSING AND IS
SPECIFICALLY MADE SUBJECT TO THE CONDITIONS DESCRIBED IN THIS AGREEMENT IN
CONNECTION WITH THE OFFERING. THE COMPANY RESERVES THE RIGHT TO REJECT ANY
SUBSCRIPTION IN WHOLE OR IN PART OR TO ALLOCATE TO ANY PROSPECTIVE INVESTOR LESS
THAN THE NUMBER OF SHARES APPLIED FOR BY SUCH INVESTOR.
CONVERTIBLE PROMISSORY NOTE PURCHASE AGREEMENT
THIS CONVERTIBLE PROMISSORY NOTE PURCHASE AGREEMENT ("Purchase
Agreement") dated as of JUNE 21, 2005, is entered into between 3Pea
Technologies, Inc., a Nevada corporation (the "COMPANY" or "3PEA"), and
("Investor").
WHEREAS, 3PEA is seeking up to $7,000,000 in loans in the form of
Convertible Promissory Notes (the "Note" or "Notes"); and
WHEREAS, Investor desires to invest in 3PEA by purchasing the Notes
upon the terms and subject to the conditions set forth in this Agreement, and
3PEA desires such an investment; and
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"TRANSACTION DOCUMENTS" means this Agreement, the Note, the Accredited
Investor Certificate attached hereto as EXHIBIT C and all other certificates,
documents, agreements and instruments delivered to Investor under or in
connection with this Agreement.
ARTICLE II
PURCHASE AND SALE OF NOTE
SECTION 2.01 SALE AND ISSUANCE OF NOTE. Subject to the terms and
conditions of this Agreement, Investor agrees to purchase at the Closing, and
the Company agrees to sell and issue to Investor at the Closing, one Note in the
principal amount of Dollars ($) (the "NOTE") upon receipt of such amount.
SECTION 2.02 CLOSING. At the Closing, the Company shall deliver to
Investor the Note against payment of the purchase price therefore by check, wire
transfer, or a combination thereof.
ARTICLE III
TERMS OF THE NOTE
SECTION 3.01 INTERESTS. Interest shall accrue on the unpaid principal
amount of each Note from the date of such Note until the maturity thereof, at a
rate of 6.0% per annum. Interest shall be computed as simple annual interest on
the basis of a year of 360 days for the actual number of days occurring in the
period for which such interest is payable. Interest accrued on a particular Note
will be forgiven upon conversion of such Note into shares of Common Stock.
SECTION 3.02 REPAYMENT OF THE NOTES. The principal amount and accrued
interest outstanding under each Note hereunder shall be due and payable on or
before the second anniversary of the date of issuance of such Note (the
"MATURITY DATE"), unless earlier prepaid under Section 3.03, converted under
Section 3.05 (in which event interest will be forgiven).
SECTION 3.03 PREPAYMENTS. 3PEA may, upon prior notice to Investor not
later than 10 Business Days prior to the date of prepayment, prepay the
outstanding principal amount and interest under the Note, without premium or
penalty. The notice given of any prepayment shall specify the date and amount of
the prepayment and the date of the Note to which such prepayment shall be
applied. The Investor shall have the right to convert note upon notice of
prepayment within the notice period.
SECTION 3.04 PAYMENTS. 3PEA shall make payment under the Notes,
unconditionally and in full without set-off, counterclaim or other defense, not
later than 5:00 p.m. (Pacific Standard Time) on the Maturity Date in Dollars and
in immediately available funds, at the address of Investor (as set forth in
Section 8.02 below, which may be amended from time to time in accordance
therewith), or to such other office and account of Investor as it from time to
time shall designate in a written notice to 3PEA.
SECTION 3.05 UNSECURED NOTES. The Notes are general, unsecured
obligations, PARI PASSU in right of payment to all of our existing and future
senior debt except for any secured indebtedness. Holders of any secured
indebtedness would have claims that are superior to your claims as a holder of
the Notes to the extent of the value of the assets securing such other
indebtedness. If we become insolvent, file for bankruptcy, reorganize our
business or close down, the assets which serve as collateral for any secured
indebtedness would be available to satisfy the obligations under the secured
indebtedness before any payments were to be made on the Notes.
SECTION 3.06 CONVERSIONS OF NOTES.
(a) RIGHT TO CONVERT. Investor may convert note between May
19, 2006 and May 19, 2007 subject to and upon compliance with the provisions of
this Agreement. Investor shall have the right, at its option, to convert the
outstanding principal amount under the Note, into the number of fully paid and
non-assessable shares of 3PEA Common Stock. This number is obtained by dividing
the principal amount under such Note surrendered for conversion by the
Conversion Price (as defined below).
(b) EXERCISE OF CONVERSION PRIVILEGE; ISSUANCE OF COMMON STOCK
ON CONVERSION; NO ADJUSTMENT FOR INTEREST OR DIVIDENDS. In order to exercise the
right to conversion with respect to a Note, Investor shall surrender the Note
and shall give written notice of conversion to 3PEA that Investor elects to
convert the Note in said notice. Such notice shall also state the name or names
(with address) in which the certificate or certificates for shares of 3PEA
Common Stock which shall be issued.
As promptly as practicable, but in no event more than 15 Business Days
after satisfaction of the requirements for conversion set forth above, 3PEA
shall issue and shall deliver to Investor, a certificate or certificates for the
number of full shares issuable upon conversion. A check or cash will be issued
for any fractional shares.
(c) CONVERSION PRICE. The "CONVERSION PRICE" shall be $1.00,
unless the Company has, during the offering period, sold its capital stock for a
lower price in which case such Note will convert at the lower of $1.00 or such
lower price, and
(d) FUNDAMENTAL CHANGES. In case any transaction or event
(including without limitation, any merger, consolidation, combination,
recapitalization, sale of assets, tender or exchange offer, reclassification,
compulsory share exchange or liquidation) shall occur in which all or
substantially all outstanding shares of Common Stock are converted into or
exchanged or acquired for or constitute the right to receive stock, other
securities, cash, property or assets (each, a "FUNDAMENTAL CHANGE"), the holder
of this Note outstanding immediately prior to the occurrence of such Fundamental
Change shall have the right upon any subsequent conversion to receive (but only
out of legally available funds, to the extent required by applicable law) the
kind and amount of stock, other securities, cash, property or assets that such
holder would have received if such share had been converted immediately prior
thereto.
(e) STOCK SPLITS AND COMBINATIONS. In case the Company shall at any
time or from time to time after the Closing Date (A) subdivide or split the
outstanding shares of Common Stock, (B) combine or reclassify the outstanding
shares of Common Stock into a smaller number of shares or (C) issue by
reclassification of the shares of Common Stock any shares of Capital Stock of
the Company, then, and in each such case, the Conversion Price and number of
shares in effect immediately prior to such event or the record date therefor,
whichever is earlier, shall be adjusted so that the holder of this Note
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other securities of the Company which such holder
would have owned or have been entitled to receive after the occurrence of any of
the events described above, had such Note been surrendered for conversion
immediately prior to the occurrence of such event or the record date therefor,
whichever is earlier. An adjustment made pursuant to this subparagraph (i) shall
become effective at the close of business on the day upon which such corporate
action becomes effective. Such adjustment shall be made successively whenever
any event listed above shall occur. The abovementioned will also apply to the
Warrant options.
(f) RESERVATION OF SHARES; SHARES TO BE FULLY PAID. 3PEA shall
provide, free from preemptive rights, out of its authorized but unissued shares
or shares held in treasury, sufficient shares to provide for the conversion of
the Notes as such Notes are presented for conversion. From the execution of this
Agreement, 3PEA will take all corporate action which may, in the opinion of its
counsel, be necessary in order that 3PEA may validly and legally issue shares of
such 3PEA Common Stock at such adjusted Conversion Price.
3PEA covenants that all shares of 3PEA Common Stock which may be
issued upon conversion of Notes will upon issue be fully paid and non-assessable
by 3PEA.
SECTION 3.07 ISSUANCE OF FUTURE WARRANT in order to induce the
Purchaser to enter into the aforesaid loan transaction and to make said loan to
the Borrowers, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties covenant and agree as
follows:
(a) Issuance of Warrant at conversion date of Note or upon repayment
(b) The Warrant will represent one share for each dollar invested.
(c) Upon the Note conversion date between MAY 19, 2006 and MAY 19,
2007, the Company will issue to the Investor a warrant (the "WARRANT") to
purchase shares of Common Stock of the Company (such shares of Common Stock
shall be available at $1.50 with an exercise period between MAY 19, 2006 and MAY
19, 2008.
SECTION 3.08 TAXES ON PAYMENTS. 3PEA will not be responsible for any
income tax of Investor for interest due on the Note, or stamp duty or other tax
due on conversion of the Note into shares of Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF 3PEA. 3PEA hereby
represents and warrants to Investor that:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has all requisite corporate power and authority
to carry on its business as now conducted. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant in any
joint venture, partnership, or similar arrangement.
(b) CAPITALIZATION AND VOTING RIGHTS. The authorized capital
of the Company consists, or will consist immediately prior to the Closing, of:
(i) COMMON STOCK. 100,000,000 shares of Common Stock of
which, 20,394,800 shares are outstanding.
(ii) The outstanding shares of Common Stock have all been
duly and validly authorized and issued, fully paid and nonassessable, and were
issued in accordance with the registration or qualification provisions of the
Securities Act and any relevant state securities laws or pursuant to valid
exemptions therefrom.
(c) AUTHORIZATION. The execution, delivery and performance of
the Transaction Documents and any other agreement contemplated hereunder by 3PEA
have been duly authorized by all necessary corporate action of 3PEA. The shares
of Common Stock to be issued upon conversion of the Notes have been or will be
duly authorized by all necessary corporate action of 3PEA, and, upon issuance
and payment therefor, will be validly issued, fully paid and non-assessable, and
issued, upon Investor making appropriate written investment representations to
3PEA upon the conversion of each Note into shares of Common Stock as provided in
this Agreement, in compliance with the qualification and registration
requirements or exemptions therefrom under all applicable state and federal
securities laws.
(d) APPROVALS AND CONSENTS. No approval, consent or
authorization of any natural person, firm, corporation or Governmental Authority
which has not heretofore been obtained is necessary for the execution or
delivery of this Agreement.
(e) OFFERING. Subject in part to the truth and accuracy of
Investor's representations set forth in Section 4.02 of this Agreement, the
offer, sale and issuance of the Notes as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
(f) LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company. The Company
is not a party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. There
is no action, suit, proceeding or investigation by the Company currently pending
or that the Company intends to initiate.
(g) DISCLOSURE. The Company has provided Investor with all the
information that it has requested for deciding whether to purchase the Notes.
(h) TITLE TO PROPERTY AND ASSETS. The Company owns its
property and assets free and clear of all Liens.
(i) FINANCIAL STATEMENTS. 3PEA has furnished Investor with the
the audited balance sheets of 3PEA Technologies, Inc. (A Development Stage
Company) as of December 31, 2003 and 2002, and the related statements of
operations, stockholders' deficit, and cash flows for the years ended December
31, 2003 and 2002 and the period from February 21, 2001 (Date of Inception)
through December 31, 2003. 3PEA has also provided investor with the interim
unaudited financial statements as of September 30, 2004
(j) TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed
all tax returns and reports as required by law. These returns and reports are
true and correct in all material respects. The Company has paid all taxes and
other assessments due, except those contested by it in good faith. The provision
for taxes of the Company as shown in the Financial Statements is adequate for
taxes due or accrued as of the date thereof.
SECTION 4.02 REPRESENTATIONS AND WARRANTIES OF INVESTOR. Investor
hereby represents and warrants to 3PEA that:
(a) AUTHORIZATION. Investor has full power and authority to
enter into this Agreement and the Transaction Documents, and each such agreement
constitutes its valid and legally binding obligation, enforceable in accordance
with its terms.
(b) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with Investor in reliance upon its representation to 3PEA, which by its
execution hereof Investor hereby confirms, that the Notes to be received by it,
the Common Stock issuable upon conversion of the Notes will be acquired for
investment for its own account. By executing this Agreement, Investor further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities.
(c) DISCLOSURE OF INFORMATION. Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Notes. Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Notes, and the business, properties,
prospects and financial condition of the Company. The foregoing, however, does
not limit or modify the representations and warranties of the Company in Section
4.01 of this Agreement or the right of Investor to rely thereon.
(d) INVESTMENT EXPERIENCE. Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Notes. If
other than an individual, Investor also represents it has not been organized for
the purpose of acquiring the Notes.
(e) RESTRICTED SECURITIES. Investor understands that the
Securities it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act, only in certain limited circumstances. In this connection,
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
(f) LEGENDS. It is understood that the certificates evidencing
the Securities may bear one or all of the following legends:
(i) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Securities Act or an opinion of
counsel satisfactory to the Company that such registration is not required or
unless sold pursuant to Rule 144 of such Securities Act."
(ii) Any legend required by the laws of the State of
Nevada
ARTICLE V
CONDITIONS
SECTION 5.01 CONDITIONS OF INVESTOR AT THE CLOSING. The obligation of
Investor to purchase the Notes at the Closing shall be subject to the
satisfaction of each of the following conditions:
(a) The representations and warranties of 3PEA contained in
Section 4.01 shall be true on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of the date
of such Closing.
(b) The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
SECTION 5.02 CONDITIONS OF 3PEA. The obligations of the Company to
Investor under this Agreement are subject to each of the following conditions:
(a) The representations and warranties of Investor contained
in Section 4.02 shall be true on and as of the Closing as though such
representations and warranties had been made on and as of such dates.
(b) Investor shall have funded the principal amount of the
Notes as specified in Sections 2.01
ARTICLE VI
COVENANTS
SECTION 6.01 AFFIRMATIVE COVENANTS. So long as any of the Notes shall
remain unpaid, 3PEA agrees that:
(a) PRESERVATION OF EXISTENCE. 3PEA will maintain and
preserve, through itself or any successor to its business, its corporate
existence, its rights to transact business and all other rights, franchises and
privileges necessary or desirable in the normal course of its business and
operations and the ownership of its material properties.
(b) PAYMENT OF TAXES. 3PEA will pay and discharge all taxes,
fees, assessments and governmental charges or levies imposed upon it or upon its
properties or assets prior to the date on which penalties attach thereto, and
all lawful claims for labor, materials and supplies which, if unpaid, might
become a Lien upon any properties or assets of 3PEA, except to the extent such
taxes, fees, assessments or governmental charges or levies, or such claims, are
being contested in good faith by appropriate proceedings and are adequately
reserved against in accordance with generally accepted accounting principles.
(c) COMPLIANCE WITH LAWS. 3PEA will comply in all material
respects with the requirements of all applicable laws.
(d) MAINTENANCE OF PROPERTIES. 3PEA will use commercially
reasonable efforts to maintain and preserve all of its material properties.
(e) LICENSES. 3PEA will use commercially reasonable efforts to
obtain and maintain all licenses.
(f) PLACE OF BUSINESS. The Company shall provide Investor
prompt written notice of any change in the location of its principal place of
business and its chief executive office from ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇
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(h) VISIT RIGHTS. The Company shall permit Investor, at
Investor's expense, to visit the Company's office, and to discuss the Company's
affairs, finances and accounts with its officers upon mutually acceptable
arrangements.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01 EVENTS OF DEFAULT. Any of the following events that shall
occur shall constitute an "EVENT OF DEFAULT":
(a) PAYMENTS. 3PEA shall fail to pay when due any amount of
principal of, or interest on, any Note, or any other amount payable under any
Transaction Document, and such failure shall remain unremedied by 3PEA for a
period of 30 days following the date of notice that such payment is due.
(b) REPRESENTATIONS AND WARRANTIES. Any representation or
warranty by 3PEA in the Transaction Documents shall prove to have been incorrect
in a material respect when made or deemed made.
(c) FAILURE BY 3PEA TO PERFORM CERTAIN COVENANTS. 3PEA shall
fail to perform or observe any material term, covenant or agreement contained in
this Agreement and any such failure shall remain unremedied for a period of 30
days from the notice by Investor of the occurrence thereof.
SECTION 7.02 CURES. Upon each of such Event of Default, the Company
shall have thirty (30) days to cure such default after receipt of written notice
of default from Investor specifying the nature of the Company's default. If the
Company is unable to cure its default within such thirty (30) day period,
Investor may, at its option, accelerate repayment of the Outstanding Balance in
which case the Outstanding Balance shall be due and payable immediately. Upon
any default of the Company hereunder, Investor may pursue any remedies that are
available to it.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of 3PEA and Investor.
SECTION 8.02 NOTICES. Except as may be otherwise provided herein, all
notices, requests, waivers and other communications made pursuant to this
Agreement shall be in writing. All notices shall be sent via FedEx Standard
overnight delivery with signature confirmation to the address below or as
revised in writing by the parties.
To Investor:
To:
Address:
Attn:
Fax:
To the Company:
3Pea Technologies, Inc.
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Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 8.03 SURVIVALS. All covenants, agreements, representations and
warranties made herein shall, except to the extent otherwise provided herein,
survive the execution and delivery of this Agreement, the execution and delivery
of the Notes, and shall continue in full force and effect so long as Investor
has any commitment, any Notes remain outstanding or unpaid or any obligation to
perform any other act under this Agreement or the Transaction Documents
otherwise remains unsatisfied.
SECTION 8.04 BENEFITS OF AGREEMENT. The Transaction Documents are
entered into for the sole protection and benefit of the parties hereto and their
successors and assigns, and no other person shall be a direct or indirect
beneficiary of, or shall have any direct or indirect cause of action or claim in
connection with, any Transaction Document.
SECTION 8.05 BINDING EFFECT; ASSIGNMENT. This Agreement shall become
effective when it shall have been executed by 3PEA and Investor and thereafter
shall be binding upon, inure to the benefit of and be enforceable by 3PEA,
Investor and their respective successors and assigns.
SECTION 8.06 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with the law of the State of Nevada.
SECTION 8.07 ENTIRE AGREEMENTS. This Agreement and the documents
referred to herein constitute the entire agreement between the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
SECTION 8.08 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
SECTION 8.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same agreement.
SECTION 8.10 PUBLIC ANNOUNCEMENTS. Neither party shall use the other's
name nor refer to the other directly or indirectly in connection with the
investment contemplated herein in any advertisement, news release or
professional or trade publication, or in any other manner, unless otherwise
required by law, or with prior written consent.
SECTION 8.11 DISPUTE RESOLUTION. The parties agree to negotiate in
good faith to resolve any dispute between them regarding this Agreement. If the
negotiations do not resolve the dispute to the reasonable satisfaction of both
parties, then each party shall nominate one officer as its representative. These
representatives shall, within thirty (30) days of a written request by either
party to call such a meeting, meet in person and alone (except for one assistant
for each party) and shall attempt in good faith to resolve the dispute. If the
disputes cannot be resolved in such meeting, the parties agree that they shall,
if requested in writing by either party, meet within thirty (30) days after such
written notification for one day with an impartial mediator and consider dispute
resolution alternatives other than litigation. If an alternative method of
dispute resolution is not agreed upon within thirty (30) days after the one day
mediation, either party may begin litigation proceedings. This procedure shall
be a prerequisite before taking any additional action hereunder.
SECTION 8.12 BLUE SKY NOTICES:
IT IS ANTICIPATED THAT THE SECURITIES DESCRIBED HEREIN MAY BE OFFERED
FOR SALE IN SEVERAL STATES. THE SECURITIES BLUE SKY LAWS OF SOME OF THOSE STATES
REQUIRE THAT CERTAIN CONDITIONS AND RESTRICTIONS RELATING TO THE OFFERING BE
DISCLOSED. A DESCRIPTION OF THE RELEVANT CONDITIONS AND RESTRICTIONS REQUIRED BY
THE STATES IN WHICH THE COMPANY MAY OFFER ITS SECURITIES FOR SALE IS SET FORTH
BELOW.
SECTION 8.13 STATE NOTICE REQUIREMENTS
NOTICE REQUIREMENTS IN STATES WHERE SHARES MAY BE SOLD ARE AS FOLLOWS:
FOR ALABAMA RESIDENTS: THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM
OF EXEMPTION UNDER THE ALABAMA SECURITIES ACT. A REGISTRATION STATEMENT RELATING
TO THESE SECURITIES HAS NOT BEEN FILED WITH THE ALABAMA SECURITIES COMMISSION.
THE COMMISSION DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF ANY SECURITIES, NOR
DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY PRIVATE PLACEMENT
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE
PURCHASE PRICE OF THE INTEREST ACQUIRED BY A NON-ACCREDITED INVESTOR RESIDING IN
THE STATE OF ALABAMA MAY NOT EXCEED 20% OF THE PURCHASER'S NET WORTH.
FOR ALASKA RESIDENTS: THE SECURITIES OFFERED, HAVE BEEN REGISTERED
WITH THE ADMINISTRATOR OF SECURITIES OF THE STATE OF ALASKA UNDER PROVISIONS OF
3 AAC 08.500-3 AAC 08,506. THE INVESTOR IS ADVISED THAT THE ADMINISTRATOR WILL
MAKE ONLY A CURSORY REVIEW OF THE REGISTRATION STATEMENT AND HAS NOT REVIEWED
THIS DOCUMENT SINCE THE DOCUMENT IS NOT REQUIRED TO BE FILED WITH THE
ADMINISTRATOR. THE FACT OF REGISTRATION DOES NOT MEAN THAT THE ADMINISTRATOR HAS
PASSED AN ANY WAY UPON THE MERITS. RECOMMENDED, OR APPROVED THE SECURITIES. ANY
REPRESENTATION TO THE CONTRARY IS A VIOLATION OF A. S. 45.55.170.
THE INVESTOR MUST RELY ON THE INVESTOR'S OWN EXAMINATION OF THE PERSON
OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED, IN MAKING AN INVESTMENT DECISION ON THESE SECURITIES.
FOR ARIZONA RESIDENTS: THE SECURITIES OFFERED HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF ARIZONA, AS AMENDED, AND ARE OFFERED IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION PURSUANT TO A.R.S. SECTION 44-1844(1). THE
SECURITIES CANNOT BE RESOLD UNLESS REGISTERED UNDER THE ACT OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION.
FOR ARKANSAS RESIDENTS: THESE SECURITIES ARE OFFERED PURSUANT TO A
CLAIM OF EXEMPTION UNDER SECTION 14(b)(14) OF THE ARKANSAS SECURITIES ACT AND
SECTION 4(2) OF THE SECURITIES ACT OF 1933. A REGISTRATION STATEMENT RELATING TO
THESE SECURITIES HAS NOT BEEN FILED WITH THE ARKANSAS SECURITIES DEPARTMENT OR
WITH THE SECURITIES AND EXCHANGE COMMISSION. NEITHER THE DEPARTMENT NOR THE
COMMISSION HAS PASSED UPON THE VALUE OF THESE SECURITIES, MADE ANY
RECOMMENDATIONS AS TO THEIR PURCHASE, APPROVED OR DISAPPROVED THE OFFERING, OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS MEMORANDUM. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
THE PURCHASE PRICE OF THE INTEREST ACQUIRED BY AN UNACCREDITED INVESTOR
RESIDING IN THE STATE OF ARKANSAS MAY NOT EXCEED 20% OF THE PURCHASER'S NET
WORTH.
FOR CALIFORNIA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE CALIFORNIA CORPORATIONS
CODE, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED
AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY
REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR COLORADO RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981,
BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY
OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR CONNECTICUT RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER SECTION 36-485 OF THE CONNECTICUT UNIFORM SECURITIES ACT AND THEREFORE
CANNOT BE RESOLD UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR DELAWARE RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE DELAWARE SECURITIES ACT AND ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION
UNDER SECTION 7309(b)(9) OF THE DELAWARE SECURITIES ACT AND RULE 9(b)(9)(11)
THEREUNDER. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED
OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER THE ACT
OR AN EXEMPTION IS AVAILABLE.
FOR FLORIDA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE FLORIDA SECURITIES ACT, BY REASON
OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR EXEMPTION
FROM REGISTRATION IS AVAILABLE.
THE SHARES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE
HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE FLORIDA SECURITIES
ACT. THE SHARES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA.
IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE
PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE
BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR
WITHIN THREE (3) DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED
TO SAID PURCHASER, WHICHEVER OCCURS LATER.
FOR GEORGIA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
SECURITIES ACT OF 1933, AS AMENDED, OR SECTION 10-5-5 OF THE GEORGIA SECURITIES
ACT OF 1973 AND ARE BEING SOLD IN RELIANCE UPON EXEMPTION S THEREFROM. THESE
SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON
OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
THE INVESTMENT IS SUITABLE IF IT DOES NOT EXCEED 20% OF THE INVESTOR'S
NET WORTH.
FOR HAWAII RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE HAWAII UNIFORM SECURITIES ACT
(MODIFIED), BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED
AVAILABILITY OF THE OFFERING.
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
FOR IDAHO RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE IDAHO SECURITIES ACT (THE "ACT") AND MAY BE TRANSFERRED OR RESOLD BY
RESIDENTS OF IDAHO ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT OR
IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE INVESTMENT IS SUITABLE IF IT DOES NOT EXCEED 10% OF THE INVERSOR'S
NET WORTH.
FOR ILLINOIS RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECRETARY OF STATE OF ILLINOIS OR THE STATE OF ILLINOIS, NOR
HAS THE SECRETARY OF STATE OF ILLINOIS OR THE STATE OF ILLINOIS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FOR INDIANA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
SECTION 3 OF THE INDIANA BLUE SKY LAW AND ARE OFFERED PURSUANT TO AN EXEMPTION
PURSUANT TO SECTION 23-2-1-2(b)(10) THEREOF AND MAY BE TRANSFERRED OR RESOLD
ONLY IF SUBSEQUENTLY REGISTERED OR IF AN EXEMPTION FROM REGISTRATION IS
AVAILABLE. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
INDIANA REQUIRES INVESTOR SUITABLY STANDARDS OF A NET WORTH (EXCLUSIVE
OF HOME, FURNISHINGS, AND AUTOMOBILES) OF THREE TIMES THE INVESTMENT BUT NOT
LESS THAN $75,000 OR A NET WORTH (EXCLUSIVE OF HOME, FURNISHINGS, AND
AUTOMOBILES) OF TWICE THE INVESTMENT BUT NOT LESS THAN $30,000 AND GROSS INCOME
OF $30,000.
FOR IOWA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
IOWA UNIFORM SECURITIES ACT (THE "ACT") AND ARE OFFERED PURSUANT OF A CLAIM OF
EXEMPTION UNDER SECTION 502.203(9) OF THE ACT REQUIRING SALES TO ACCREDITED
INVESTORS ONLY. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE. INVESTORS SHOULD BE AWARE THAT THEY
WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
FOR KANSAS RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE KANSAS SECURITIES ACT, BY REASON
OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
FOR KENTUCKY RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES ACT OF KENTUCKY, BY
REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF
THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR LOUISIANA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE LOUISIANA SECURITIES LAW,
BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY
OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE INVESTMENT IS SUITABLE IF IT DOES NOT EXCEED 25% OF THE INVESTORS
NET WORTH.
FOR MAINE RESIDENTS: THESE SECURITIES ARE BEING SOLD PURSUANT TO AN
EXEMPTION FROM REGISTRATION WITH THE BANK SUPERINTENDENT OF THE STATE OF MAINE
UNDER SECTION 10502(2)(R) OF TITLE 32 OF THE MAINE REVISED STATUTES. THESE
SECURITIES MAY BE DEEMED RESTRICTED SECURITIES AND AS SUCH THE HOLDER MAY NOT BE
ABLE TO RESELL THE SECURITIES UNLESS PURSUANT TO REGISTRATION UNDER STATE OR
FEDERAL SECURITIES LAWS OR UNLESS AN EXEMPTION UNDER SUCH LAWS EXISTS.
FOR MARYLAND RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE MARYLAND SECURITIES ACT, BY
REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF
THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR MASSACHUSETTS RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE MASSACHUSETTS UNIFORM
SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE
LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE
SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR MICHIGAN RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
SECTION 451.701 OF THE MICHIGAN UNIFORM SECURITIES ACT (THE "ACT") AND MAY BE
TRANSFERRED OR RESOLD BY RESIDENTS OF MICHIGAN ONLY IF REGISTERED PURSUANT OF
THE PROVISIONS OF THE ACT OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE INVESTMENT IS SUITABLE IF IT DOES NOT EXCEED 10% OF THE INVESTOR'S
NET WORTH.
FOR MINNESOTA RESIDENTS: THE SECURITIES REPRESENTED BY THIS MEMORANDUM
HAVE NOT BEEN REGISTERED UNDER CHAPTER 80a OF THE MINNESOTA SECURITIES LAWS AND
MAY NOT BE SOLD, TRANSFERRED, OR NOT OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
REGISTRATION, OR AN EXEMPTION THEREFROM.
FOR MISSISSIPPI RESIDENTS: THE SECURITIES, IF OFFERED, MUST BE OFFERED
PURSUANT OF A CERTIFICATE OF REGISTRATION ISSUED BY THE SECRETARY OF STATE OF
MISSISSIPPI PURSUANT TO RULE 477, WHICH PROVIDES A LIMITED REGISTRATION
PROCEDURE FOR CERTAIN OFFERINGS. THE SECRETARY OF STATE DOES NOT RECOMMEND OR
ENDORSE THE PURCHASE OF ANY SECURITIES, NOR DOES THE SECRETARY OF STATE PASS
UPON THE TRUTH, MERITS, OR COMPLETENESS OF ANY OFFERING MEMORANDUM FILED WITH
THE SECRETARY OF STATE, ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FOR MISSOURI RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE MISSOURI UNIFORM SECURITIES ACT,
BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY
OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR MONTANA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES ACT OF MONTANA, BY
REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF
THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR NEBRASKA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES ACT OF NEBRASKA, BY
REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF
THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR NEVADA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE NEVADA SECURITIES ACT, BY REASON
OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
FOR NEW HAMPSHIRE RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE NEW HAMPSHIRE UNIFORM
SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE
LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE
SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE INVESTMENT IS SUITABLE IF IT DOES NOT EXCEED 10% OF THE INVESTORS
NET WORTH.
FOR NEW JERSEY RESIDENTS: THE ATTORNEY GENERAL OF THE STATE OF NEW
JERSEY HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. NOR HAS THIS
DOCUMENT REFLECTING THE WITHIN OFFERING HAS BEEN FILED WITH THE BUREAU OF
SECURITIES OR THE DEPARTMENT OF LAW AND PUBLIC SAFETY OF THE STATE OF NEW
JERSEY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
FOR NEW MEXICO RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES BUREAU OF THE NEW MEXICO DEPARTMENT OF REGULATION
AND LICENSING, NOR HAS THE SECURITIES BUREAU PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS MEMORANDUM, ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
FOR NEW YORK RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE NEW YORK FRAUDULENT PRACTICES
("▇▇▇▇▇▇") ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE
LIMITED AVAILABILITY, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS
SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE NEW
YORK FRAUDULENT PRACTICES ("▇▇▇▇▇▇") ACT, IF SUCH REGISTRATION IS REQUIRED.
THIS PRIVATE OFFERING MEMORANDUM HAS NOT BEEN FILED WITH OR REVIEWED BY
THE ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE
STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
PURCHASE OF THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THIS
PRIVATE OFFERING MEMORANDUM DOES NOT CONTAIN AN UNTRUE STATEMENT OF A MATERIAL
FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE, IN
LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, IT
CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS OF DOCUMENTS PURPORTED TO BE
SUMMARIZED HEREIN.
FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING MERITS AND
RISKS INVOLVED. THE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES ARE SUBJECT TO RESTRICTIONS OR TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR SOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATUTE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
THE INVESTMENT IS SUITALBE IF IT DOES NOT EXCEED 10% OF THE INVESTOR'S
NET WORTH.
FOR NORTH DAKOTA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES COMMISSIONER OF THE STATE OF NORTH DAKOTA NOR HAS
THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
FOR OHIO RESIDENTS: THESE CECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE OHIO SECURITIES ACT, BY REASON OF
SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
FOR OKLAHOMA RESIDENTS: THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
OKLAHOMA SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OF THEM UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND/OR THE
OKLAHOMA SECURITIES ACT, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
FOR OREGON RESIDENTS: THE SECURITIES OFFERED HAVE NOT BEEN REGISTERED
WITH THE CORPORATION COMMISSIONER OF THE STATE OF OREGON UNDER PROVISIONS OF OAR
815 DIVISION 36. THE INVESTOR IS ADVISED THAT, IF FILED, THE COMMISSIONER WILL
ONLY MAKE A CURSORY REVIEW OF THE REGISTRATION STATEMENT. THIS DOCUMENT IS NOT
REQUIRED TO BE FILED WITH THE COMMISSIONER.
THE INVESTOR MUST RELY ON THE INVESTOR'S OWN EXAMINATION OF THE COMPANY
CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND
RISKS INVOLVED IN MAKING AN INVESTMENT DECISION ON THESE SECURITIES.
FOR PENNSYLVANIA RESIDENTS; THE SHARES OFFERED HEREBY HAVE NOT BEEN
REGISTERED UNDER SECTION 201 OF THE PENNSYLVANIA SECURITIES ACT OF 1972 (THE
"ACT") AND MAY BE RESOLD BY RESIDENTS OF PENNSYLVANIA ONLY IF REGISTERED
PURSUANT OF THE PROVISIONS OF THAT ACT OR IF AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
EACH PERSON WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM
REGISTRATION BY SECTION 203(d),(f),(p), OR (R), DIRECTLY FROM AN ISSUER OR
AFFILIATE OF AN ISSUER, SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT
INCURRING ANY LIABILITY TO THE SELLER, UNDERWRITER (IF ANY), OR ANY OTHER PERSON
WITHIN TWO BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE ISSUER OF HIS WRITTEN
BINDING CONTRACT OF PURCHASE OR, IN THE CASE OF A TRANSACTION IN WHICH THERE IS
NO WRITTEN BINDING CONTRACT OF PURCHASE, WITHIN TWO BUSINESS DAYS AFTER HE/SHE
MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED.
NEITHER THE PENNSYLVANIA SECURITIES COMMISSION NOR ANY OTHER AGENCY
HAS PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING, AND ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
FOR RHODE ISLAND RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE BLUE SKY LAW OF RHODE
ISLAND, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED
AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY
REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR SOUTH CAROLINA RESIDENTS: IN MAKING AN INVESTMENT DECISION,
INVESTORS MUST RELY ON THEIR OWN EXAMINATIONS OF THE PERSON OR ENTITY CREATING
THE SECURITIES AND TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
FOR SOUTH DAKOTA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER CHAPTER 47-31 OF THE SOUTH DAKOTA SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF FOR VALUE EXCEPT PURSUANT TO REGISTRATION,
EXEMPTION THEREFROM, OR OPERATION OF LAW.
EACH SOUTH DAKOTA RESIDENT PURCHASING ONE OR MORE SHARES MUST WARRANT
THAT HE HAS EITHER (1) MINIMUM NET WORTH (EXCLUSIVE OF HOME, FURNISHINGS AND
AUTOMOBILES) OF $30,000 AND A MINIMUM ANNUAL GROSS INCOME OF $30,000 OR (2) A
MINIMUM NET WORTH (EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES) OF $75,000.
ADDITIONALLY, EACH INVESTOR WHO IS NOT AN ACCREDITED INVESTOR OR WHO IS AN
ACCREDITED INVESTOR SOLELY BY REASON OF HIS NET WORTH, INCOME OR AMOUNT OF
INVESTMENT, SHALL NOT MAKE AN INVESTMENT IN THE PROGRAM IN EXCESS OF 20% OF HIS
NET WORTH (EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES).
FOR TENNESSEE RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE TENNESSEE SECURITIES ACT OF
1980, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED
AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY
REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR TEXAS RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE TEXAS SECURITIES ACT, BY REASON
OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
THE INVESTMENT IS SUITABLE IF IT DOES NOT EXCEED 10% OF THE INVESTOR'S
NET WORTH.
FOR UTAH RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE UTAH UNIFORM SECURITIES ACT, BY
REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED LIABILITY OF
THE OFFERING.
THE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO
ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
FOR VERMONT RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE VERMONT SECURITIES ACT, BY REASON
OF SPECIFIC EXEMPTIONS HEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE
OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
FOR VINGINIA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE VIRGINIA SECURITIES ACT, BY
REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF
THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR WASHINGTON RESIDENTS: THIS OFFERING HAS NOT BEEN REVIEWED OR
APPROVED BY THE WASHINGTON SECURITIES ADMINISTRATOR, AND THE SECURITIES OFFERED
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT (THE "ACT") OF WASHINGTON
CHAPTER 21.20 RCW AND MAY BE TRANSFERRED OR RESOLD BY RESIDENTS OF WASHINGTON
ONLY IF REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT OR IF AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
THE INVESTOR MUST RELY ON THE INVESTOR'S OWN EXAMINATION OF THE PERSON
OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED, IN MAKING AN INVESTMENT DECISION ON THESE SECURITIES.
FOR WEST VIRGINIA RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE WEST VIRGINIA UNIFORM
SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE
LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE
SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR WISCONSIN RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE WISCONSIN UNIFORM
SECURITIES LAW, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE
LIMITED AVAILABILITY OF THE OFFERING.
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE.
FOR WYOMING RESIDENTS: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE WYOMING UNIFORM SECURITIES ACT,
BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY
OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
(COMPANY)
3PEA TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Date: MAY 19, 2005
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Name:
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Title:
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(INVESTOR)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇-▇▇▇▇▇ Date: MAY 19, 2005
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Name:
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Title:
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--SIGNATURE PAGE TO THE CONVERTIBLE NOTE PURCHASE AGREEMENT--
EXHIBIT B
NOTE
3PEA TECHNOLOGIES, INC.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED FOR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IS AN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
$100,000 Date: MAY 19, 2005
Las Vegas, Nevada
FOR VALUE RECEIVED, 3 PEA TECHNOLOGIES, INC., a Nevada corporation
("MAKER" or "3PEA"), promises to pay to the order of ("HOLDER"), the principal
sum of Dollars ($), together with interest from the date of this Note on the
unpaid principal balance at a rate of 6.0% per annum. Interest shall be computed
as simple annual interest on the basis of a year of 360 days for the actual
number of days occurring in the period for which such commitment fee or interest
is payable. Payment shall be made by Maker to Holder at the address of or to
such other address of Holder as it shall designate in a written notice to Maker.
This Note is issued pursuant to that certain Purchase Agreement dated
as of MAY 19, 2005, between Maker and Holder ("Agreement"). Terms used herein
have the meanings assigned to those terms in the Agreement, unless otherwise
defined herein.
The terms of payment of principal and accrued interest shall be in
accordance with the terms and conditions of the Agreement. Payment shall be made
in lawful tender of the United States and shall be credited first to accrued
interest then due and payable with the remainder applied to principal.
Prepayment of the principal, together with accrued interest, may be made at any
time without penalty or premium, subject to Section 3.03 of the Agreement.
The unpaid principal on this Note (or any portion thereof) shall be
convertible at the election of Holder into shares of 3PEA Common Stock pursuant
to the terms and conditions set forth in the Agreement.
If action is instituted to collect this Note, the party found to be in
the wrong will pay all costs and expenses, including reasonable attorneys' fees,
incurred in connection with such action. Maker hereby waives notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor
and all other notices or demands relative to this instrument.
The holding of any provision of this Note to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provisions and the other provisions of this Note shall remain in full force and
effect.
This Note shall be construed in accordance with the laws of the state
of Nevada, without regard to the conflicts of law provisions of the state of
Nevada or of any other state.
The Maker has caused this Note to be issued as of the date first above
written.
3PEA TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name:
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Title:
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