EXHIBIT 10.2
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO PURCHASE ANY OF THE SECURITIES REFERRED TO HEREIN.
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT (this "Subscription Agreement") is entered
into by and between the Investor signing the Signature Page attached hereto and
Blackwater Midstream Corp., a Nevada corporation (the "Corporation"). The
Corporation is offering for the sale of restricted shares of Common Stock at a
price of $2.00 per share. The Investor subscribes for and agrees to purchase the
following:
Name of Investor: _____________________________
Number of Shares Subscribed For: _____________________________
Cash Purchase Price ($2.00/ share): _____________________________
Address of Investor: ___________________________________
___________________________________
The amount of cash or good funds as tender of the purchase price for
the Shares is enclosed (in the case of a check, the check should be payable to
the order of "Blackwater Midstream Corp.") or will be sent via wire transfer to
the Corporation's account.
INVESTOR RIGHTS
---------------
1. ANTI-DILUTION RIGHTS. Except for "Excluded Securities" described
below, in the event that the Corporation conducts any private placement of
shares of common stock for cash consideration at a price of less than $2.00 per
share, as adjusted for splits, combinations and similar events (the "Base
Price"), during the first year following the Investor's purchase of the Shares
(a "Dilutive Issuance"), so long as the Investor currently owns the Shares, then
Investor shall be entitled to receive for each Share purchased hereunder owned
as of the date of the Dilutive Issuance (the "Base Shares"), and for no
additional consideration; an additional amount of shares of common stock of the
Corporation equal to (i) the number of Base Shares divided by (ii) (X+Y)/(X+Z)
minus (iii) the number of Base Shares, where:
X equals the number of common shares outstanding prior to the Dilutive
Issuance;
Y equals the gross proceeds to the Corporation in the Dilutive Issuance
divided by the Base Price; and
Z equals the number of shares sold in the Dilutive Issuance.
The anti-dilution provision of this Section 1 shall not apply to the issuance of
any shares of capital stock of the Corporation (i) issued upon the exercise of
any options, warrants or similar rights outstanding as of the date of this
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Agreement or to be issued pursuant to the 2008 Employee Incentive Plan to the
maximum of the currently reserved issuance thereunder. (ii) issued and sold in
any public offering and (iii) issued as a result of this Section 1
(collectively, the "Excluded Securities").
2. PREEMPTIVE RIGHTS. In the event that the Corporation conducts any
private placement sale of shares of common stock during the first year following
the Investor's purchase of the Shares, and provided the Investor is still the
owner of all Shares purchased hereunder, the Investor shall be entitled to
purchase his pro rata portion of the shares offered for sale in the private
placement. An Investor's pro rata share shall be equal to the number of shares
offered for sale in the private placement multiplied by the Investor's
percentage ownership of the outstanding shares of common stock immediately prior
to such private placement. The Corporation shall provide the Investor fifteen
(15) days advance notice, including the material terms of such offering, and the
Investor shall provide its binding commitment to purchase its pro rata portion
no later than the 10th day following receipt of such notice. The Investor's
rights hereunder are subject to the completion of the private placement by the
Corporation and in the event the Corporation decides to abandon the private
placement for any reason the Investor's rights and commitment to purchase such
shares shall become null and void. The provisions of this Section 2 shall not
apply to the issuance of any Excluded Securities.
INVESTOR REPRESENTATIONS
------------------------
The Investor hereby represents and warrants to, and covenants with, the
Corporation as follows, recognizing that the Corporation will rely to a material
degree on such representations, warranties and covenants, each of which shall
survive any acceptance of this subscription in whole or in part by the
Corporation and the issuance and sale of any Shares to the Investor:
1. ORGANIZATION AND GOOD STANDING. The Investor, if the Investor is a
corporation, partnership, trust or other entity, is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has full power, authority and legal right to execute, deliver
and perform its obligations under this Subscription Agreement.
2. AGREEMENT DULY AUTHORIZED. The execution, delivery and performance
by the Investor of this Subscription Agreement has been duly authorized by all
necessary action, this Subscription Agreement has been duly executed and
delivered, and, when executed and delivered by the Corporation, this
Subscription Agreement will constitute the legal, valid, binding and enforceable
obligation of the Investor, subject to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws, regulations or
procedures of general applicability now or hereafter in effect relating to or
affecting creditors' or other obligees' rights generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
3. SOPHISTICATION OF INVESTOR. The Investor either (i) has a
pre-existing personal or business relationship with the Corporation or its
controlling persons, such as would enable a reasonably prudent purchaser to be
aware of the character and general business and financial circumstances of the
Corporation or its controlling persons, or (ii) by reason of the Investor's
business or financial experience, individually or in conjunction with the
Investor's unaffiliated
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professional advisors who are not compensated by the Corporation or any
affiliate or selling agent of the Corporation, directly or indirectly, is
capable of evaluating the merits and risks of an investment in the Shares,
making an informed investment decision and protecting the Investor's own
interests in connection with the transactions contemplated hereby.
4. STATEMENTS OF INVESTOR TRUE AND ACCURATE. All statements and
representations made in Annex I attached hereto ("Nature of Investor; Form of
Ownership"), which has been or is being furnished concurrently herewith to the
Corporation by the Investor, continue to be and are true, accurate and complete
as of the date hereof. The Investor agrees to provide such additional
information as reasonably may be required by the Corporation for compliance with
the securities laws of the state in which the Investor is located.
5. INVESTOR AWARE OF RISKS. The Investor has been informed and is aware
that an investment in the Shares involves a high degree of risk and speculation,
and the Investor has read carefully and considered any information provided by
the Corporation and its affiliates in their entirety. The Investor has read and
understands the "Risk Factors" attached hereto as Exhibit A.
6. INVESTOR RELYING UPON OWN ADVISORS. The Investor confirms that the
Investor has been advised that the Investor should rely on, and that the
Investor has consulted and relied on, the Investor's own accounting, legal and
financial advisors with respect to this investment in the Shares. The Investor
and the Investor's professional advisor(s), if any, have been afforded an
opportunity to meet with the officers and directors of the Corporation and to
ask and receive answers to all questions about this offering and the proposed
business and affairs of the Corporation and to obtain any additional information
that the Corporation possesses or can acquire without unreasonable effort or
expense, and the Investor and the Investor's professional advisor(s) therefore
have obtained, in the judgment of the Investor and/or the Investor's
professional advisor(s), sufficient information to evaluate the merits and risks
of investment in the Shares.
7. SUITABILITY. The Investor understands and has fully considered for
purposes of this investment the risks of this investment and understands that
(i) this investment is suitable only for an investor who is able to bear the
economic consequences of losing the Investor's entire investment; (ii) the
Corporation is a starting a new business and has no significant operating
history in such business; (iii) the purchase of the Shares is a speculative
investment which involves a high degree of risk of loss by the investor of the
Investor's entire investment, and (iv) there are substantial restrictions on the
transferability of, and there will be no public market for, the Shares, and
accordingly, it may not be possible for the Investor to liquidate the Investor's
investment in the Shares.
8. ACCREDITED INVESTOR. The Investor is an "Accredited Investor" within
the meaning of Rule 501 of Regulation D.
9. LACK OF LIQUIDITY. The Investor is able (i) to bear the economic
risk of this investment, (ii) to hold the Shares for an indefinite period of
time, and (iii) to afford a complete loss of the Investor's investment; and
represents that the Investor' has sufficient liquid assets so that the lack of
liquidity associated with this investment will not cause any undue financial
difficulties or affect the Investor's ability to provide for the Investor's
current needs and possible financial contingencies.
3
10. INVESTMENT INFORMATION. At the request of the Investor, the
Corporation may provide to the Investor various offering documents related to
the Corporation and the terms of the offer and sale of the Common Stock (the
"Offering Documents"). The Investor acknowledges that such Offering Documents,
if any, contain the views of the management of the Corporation, and that the
analysis of the market and of the Corporation's strategy contained therein
represents a subjective assessment about which reasonable persons could
disagree.
11. ACCESS TO INFORMATION. The Investor, in making the Investor's
decision to purchase the Shares, has relied solely upon independent
investigations made by the Investor and the representations and warranties of
the Corporation contained herein and the Investor has been given (1) access to
all material books and records of the Corporation; (ii) access to all material
contracts and documents relating to this offering; and (iii) an opportunity to
ask questions of, and to receive answers from, the appropriate executive
officers and other persons acting on behalf of the Corporation concerning the
Corporation and the terms and conditions of this offering, and to obtain any
additional information, to the extent such persons possess such information or
can acquire it without unreasonable effort or expense, necessary to verify the
accuracy of the information set forth in the Offering Documents. The Investor
acknowledges that no valid request to the Corporation by the Investor for
information of any kind about the Corporation has been refused or denied by the
Corporation or remains unfulfilled as of the date thereof. The Investor has
carefully read the Offering Documents, including without limitation this
Subscription Agreement. In evaluating the suitability of an investment in the
Corporation, the Investor has not relied upon any representations or other
information (whether oral or written) other than as set forth in the Offering
Documents or as contained in any documents or answers to questions furnished by
the Corporation.
12. NO ENDORSEMENT BY FEDERAL OR STATE AGENCIES. The Investor
understands and acknowledges that no federal or state agency has made any
finding or determination as to the fairness or suitability for investment in, or
any recommendation or endorsement of, the Corporation or the Shares.
13. INVESTOR HAS EVALUATED RISKS. Based on the review of the materials
and information described above, and relying solely thereon and on the knowledge
and experience of the Investor and/or the Investor's professional advisor(s), if
any, in business and financial matters, the Investor has evaluated the merits
and risks of investing in the Shares and has determined that the Investor is
both willing and able to undertake the economic risk of this investment.
14. SHARES ACQUIRED FOR PERSONAL ACCOUNT. NO VIEW TO DISTRIBUTION. The
Investor is acquiring the Shares for the personal account of the Investor for
investment and not with a view to, or for resale in connection with, any
distribution thereof or of any interest therein, and no one else has any
beneficial ownership or interest in the Shares being acquired by the Investor,
nor is any of the Shares being acquired by the Investor to be subject to any
lien or pledge. The Investor has no present obligation, indebtedness or
commitment pending, nor is any circumstance in existence, that will compel the
Investor to secure funds by the sale, transfer or other distribution of any of
the Shares or any interest therein.
15. RESTRICTED SECURITIES. The Investor understands and acknowledges
that the Shares will be offered and sold, if at all, pursuant to one or more
exemptions from the registration and qualification requirements of the
4
Securities Act of 1933, as amended, and the securities laws of the various
slates in which the Shares are sold, the availability of which depend (in part)
on the truth and completeness of the information provided to the Corporation in
Annex I attached hereto and the BONA FIDE nature of the foregoing
representations and warranties. With such realization, the Investor hereby
authorizes the Corporation to act as the Corporation may see fit in reliance on
such information, representations and warranties, including the placement of the
following or any substantially similar legend on any stock certificate issued to
the Investor in addition to any other legend that may be imposed thereon that,
in the opinion of the Corporation's counsel, may be required by applicable
securities laws:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER APPLICABLE STATE SECURITIES LAWS, RULES AND
REGULATIONS. THESE SECURITIES MAY NOT BE PLEDGED, SOLD OR TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS
COVERING THE SECURITIES OR AN OPINION OF QUALIFIED COUNSEL OR OTHER
EVIDENCE SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED."
16. INDEMNIFICATION. The Investor hereby indemnifies and holds harmless
the Corporation and the Corporation's respective officers, directors,
shareholders, employees, attorneys and agents, as the case may be, from and
against all damages suffered and liabilities of any kind incurred by any of them
(including costs of investigation and defense and attorneys' fees) arising out
of any inaccuracy in the agreements, representations, covenants and warranties
made by the Investor in this Subscription Agreement.
17. FIDUCIARY REPRESENTATIONS. If the Investor is purchasing the Shares
subscribed for hereby in a fiduciary capacity, then all of the foregoing
representations, warranties and covenants shall be deemed to have been made on
behalf of the person or persons for whom the Investor is so purchasing.
18. SUBSCRIPTION IRREVOCABLE. The Investor hereby acknowledges and
agrees that the Investor is not entitled to cancel, terminate or revoke this
subscription or any agreement of the Investor hereunder and that such
subscription and agreement shall survive the death or disability of the
Investor.
19. ACCEPTANCE OR REJECTION BY CORPORATION. The Investor understands
and acknowledges that this subscription may be accepted or rejected by the
Corporation in its sole and absolute discretion, together with a completed and
executed Annex I attached hereto and all information required by the provisions
hereof and payment of the full amount of the subscription price for the Shares
subscribed for. All amounts tendered in excess of the total amount payable as
the purchase price for Shares as to which this subscription has been accepted
thereafter will be delivered to the investor as soon as practicable (without
interest). The Corporation shall signify its rejection by returning to the
Investor this Subscription Agreement and all funds (without interest or
deduction) submitted by the Investor.
5
NEITHER THE CORPORATION NOR ANY OFFICER, DIRECTOR, SHAREHOLDER,
EMPLOYEE, ATTORNEY OR AGENT OF ANY OF THEM SHALL BE LIABLE TO ANY PERSON FOR THE
REJECTION, IN WHOLE OR IN PART, OF ANY OFFER TO SUBSCRIBE TO PURCHASE SHARES,
NOTWITHSTANDING THAT THE INVESTOR MAY OTHERWISE BE QUALIFIED AS A PROSPECTIVE
INVESTOR.
20. CHANGES IN STATUS. If, before the sale of any Shares to the
Investor, the Investor's investment intent as expressed herein materially
changes, or if any change occurs that would make either the representations or
warranties made by the Investor herein or the information provided by the
Investor in any of the forms attached hereto (including Annex I attached hereto)
materially untrue or misleading, then the Investor shall immediately so notify
the Corporation; and any prior acceptance of the subscription of the Investor
shall be voidable at the option of the Corporation in its sole and absolute
discretion.
21. FORWARD LOOKING STATEMENTS. The Offering Documents to the Investor
contain forward-looking statements within the meaning of Section 27A of the
Securities Act. Such forward-looking statements are indicated by the use of such
words as "intends," "expects," "may," "anticipates," "estimates," "desires,"
"believes," "projections" and similar expressions. Actual results may differ
from those described by forward-looking statements as a result of many risks and
uncertainties.
22. MATERIAL NON-PUBLIC INFORMATION; NO TRADING. The Investor
acknowledges and agrees that he or she may have received material non-public
information that has been disclosed to the Investor for the purpose of
evaluating the Corporation and the Shares. The Investor agrees that he or she
shall not purchase or sell any securities of the Corporation until such time as
all material information provided to the Investor has been made publicly
available.
6
IN WITNESS WHEREOF, the Investor executes and agrees to be bound by
this Subscription Agreement by executing the Signature Page attached hereto to
be effective as of the date therein indicated.
INDIVIDUAL INVESTOR
-------------------
------------------------------------ ---------------------------------------
Print Name of Purchaser Signature of Purchaser
------------------------------------ ---------------------------------------
Print Name of Spouse Signature of Spouse
(if funds arc to be invested (if funds are to be invested
in joint name or are community in joint name or are community
property) property)
------------------------------------ $ -------------------------------------
Number of Shares purchased Amount of immediately available
funds transferred herewith
--------------------------------------------------------------------------------
Please PRINT the exact name(s) {registration) investor(s) desire(s) for the
Shares
------------------------------------ ---------------------------------------
Occupation Tel. No.
------------------------------------
Social Security or Tax I.D. No.
--------------------------------------------------------------------------------
Street Address
--------------------------------------------------------------------------------
City State Zip
SUBSCRIPTION ACCEPTED: BLACKWATER MIDSTREAM CORP.:
Dated: __________________, 2008 By: ___________________________________
Its: __________________________________
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IN WITNESS WHEREOF. the Investor executes and agrees to be bound by
this Subscription Agreement by executing the Signature Page attached hereto to
be effective as of the date therein indicated.
ENTITY INVESTOR
---------------
I have checked the appropriate boxes in Annex I ("Nature of Investor;
Form of Ownership") as a qualifying entity and have completed the purchasing
entity representation letter.
------------------------------------ ---------------------------------------
Print Name of Partnership, Signature of authorized representative
Corporation or Trust
By:
--------------------------------- ---------------------------------------
Signature of authorized Capacity of authorized representative
representative
------------------------------------ $ -------------------------------------
Number of Shares purchased Amount of immediately available
funds transferred herewith
--------------------------------------------------------------------------------
Please PRINT the exact name(s) (registration) investor(s) desire(s) for the
Shares
------------------------------------
Tel. No.
------------------------------------
Tax I.D. No.
--------------------------------------------------------------------------------
Street Address
--------------------------------------------------------------------------------
City State Zip
SUBSCRIPTION ACCEPTED: BLACKWATER MIDSTREAM CORP.:
Dated: __________________, 2008 By: ___________________________________
Its: __________________________________
8
ANNEX I. ACCREDITED INVESTOR FORM
Each prospective investor in Shares of Common Stock of Blackwater
Midstream Corp. that is a US resident must meet one or more of the standards
enumerated below. By your signature below, you certify that you are an
Accredited Investor as defined by Regulation D of the Act:
If you are not a US resident, indicate by initialing here: _____________________
(a) You are a natural person whose individual net worth or joint net
worth with your spouse at the time of your purchase of the Securities exceeds
$1,000,000.00;
------------------------------------
(Signature of Investor)
(b) You are a natural person who had an individual income in excess of
$200,000.00 in each of the two most recent years or joint income with your
spouse in excess of $300,000.00 in each of.years and you have a reasonable
expectation of reaching the same income level in the current year;
------------------------------------
(Signature of Investor)
(c) You are a trustee for a trust that is revocable by the grantor at
any time {including an ▇▇▇) and the grantor qualified under either (a) or (b)
above. A copy of the declaration of trust or trust agreement and a
representation as to the net worth or income of the grantor is enclosed;
------------------------------------
(Signature of Investor)
(d) You are a trustee of a trust, with total, assets in excess of
$5,000,000.00, not formed for the specific purpose of acquiring the securities
offered whose purchase is directed by a sophisticated person as described in
Rule 506 (B)(2)(ii) of the Act;
------------------------------------
(Signature of Investor)
(e) You are an organization described in Section 501 (c)(3) of the
Internal Revenue Code, corporation, business trust, or partnership, not formed
for the specific purpose of acquiring the securities offered, with total assets
in excess of $5,000,000.00;
------------------------------------
(Signature of Investor)
(f) You are a director or officer of Blackwater Midstream Corp.; or
------------------------------------
(Signature of Investor)
(g) Investor is an employee benefit plan within the meaning of ERISA
having total assets in excess of Five Million Dollars ($5,000,000.00).
------------------------------------
(Signature of Investor)
9
(h) Investor is a self-directed employee benefit plan within the
meaning of ERISA with investment decisions made solely by persons who are
accredited investors as defined in Rule 501(a) of Regulation D.
------------------------------------
(Signature of Investor)
(i) Investor is an entity all the equity owners of which are
"accredited investors" within one a:- more of the above categories, other than
Category (e). If relying upon this category alone, each equity 'Owner muss
complete a separate copy of this Subscription Agreement.
------------------------------------
(Signature of Investor)
(j) You represent and warrant that (i) if you are an individual or
individuals, none of you have been convicted of a felony: or (ii) if you are a
corporation, partnership, limited liability company, trust or other entity, none
of the beneficial owners thereof have been convicted of a felony.
------------------------------------
(Signature of Investor)
The Investor is/are (INITIAL AND CHECK ALL APPLICABLE ANSWERS):
------------------------------------------
INITIAL CHECK
------- -----
____ 1. [ ] Individual (one signature required)
____ 2. [ ] Joint Tenants with right of survivorship
(both parties must sign)
____ 3. [ ] Tenants in Common (both parties must sign)
____ 4. [ ] Community Property (one signature required
if the Shares are held in one name, I.E., managing
spouse; two signatures required if the Shares are
held in both names or if purchaser is a resident of
California)
____ 5. [ ] Corporation (signature of authorized party or
parties required)
____ 6. [ ] Partnership (signature of general partner
required and all additional signatures required by
Partnership Agreement)
____ 7. [ ] Trust (Trust must sign as follows:
___________________ as trustee for__________________,
dated_________________________).
____ 8. [ ] Other Entities (signatures as required by
applicable organization documents)
DATE: __________________________________
________________________________________________________________________________
PRINT NAME PRINT NAME
________________________________________________________________________________
SIGNATURE SIGNATURE
10
EXHIBIT A
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED
BELOW AND THE OTHER INFORMATION IN THE INVESTMENT MEMORANDUM DATED JUNE 2008
BEFORE DECKLING WHETHER TO INVEST IN SHARES OF OUR COMMON STOCK (THE "SHARES").
THE OCCURRENCE OF ANY OF THE FOLLOWING RISKS COULD MATERIALLY AND ADVERSELY
AFFECT OUR BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS. IN ANY SUCH
CASE, YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.
RISKS INHERENT IN OUR BUSINESS
OUR SUCCESS DEPENDS ON THE VIABILITY OF OUR BUSINESS MODEL, WHICH IS UNPROVEN
AND MAY BE UNFEASIBLE.
Our revenue and income potential are unproven, and our business model
is new. We have not commenced any development operations. Our activities to date
have been primarily negotiating the acquisition of real property, selecting
management and developing a business strategy. Our business model is based on a
variety of assumptions relating to our ability to develop fuel storage
facilities, the revenue and cost assumptions for our facility and our operating
costs and expenses. These assumptions may not reflect the business and market
conditions that we actually face. As a result, our operating results could
differ materially from those projected under our business model, and our
business model may prove to be less profitable than we anticipate.
WE EXPECT TO EXPERIENCE LOSSES INITIALLY.
Our initial operations will he to design and construct the facility.
During this period, we will incur operating and net losses. We intend to
increase our operating expenses substantially as we: o Acquire real property; o
Continue to build our management team and corporate infrastructure; and o Design
and construct our fuel storage facilities.
Because we will spend these amounts before we receive any significant revenue
from these efforts, our losses will be substantial. In addition, we may find
that these efforts arc more expensive than we currently anticipate which would
further increase our losses. We are unable to provide any assurance or guarantee
that our Corporation will become profitable or generate positive cash flow at
any time in the future.
WE MUST ACCOMPLISH A NUMBER OF CRITICAL BUSINESS OBJECTIVES TO BE SUCCESSFUL.
In order to succeed, we must do most, if not all, of the following:
o raise additional corporate equity and/or debt to have
sufficient funds to construct the facility;
o obtain all required coning, permitting and other entitlements
to construct the facility;
o design and construct the facility;
o attract, integrate, retain and motivate qualified management
and technical personnel;
o attract long-term customers;
o respond appropriately and timely to competitive developments;
and
o develop, enhance, promote and carefully manage our corporate
identity.
11
Our business will suffer if we are unable to accomplish these and other
important business objectives.
WE MAY BE FORCED TO CURTAIL OR DISCONTINUE OPERATIONS IF WE ARE UNABLE TO
OBTAIN, ON COMMERCIALLY ACCEPTABLE TERMS, ADDITIONAL EQUITY CAPITAL THAT WE MAY
REQUIRE FROM TIME TO TIME IN THE FUTURE TO FINANCE OUR OPERATIONS AND GROWTH.
The proceeds of the current Offering are expected to be sufficient to
sustain pre-development activities for approximately IS months. However, we need
additional capital to construct the facility. We do not currently have
sufficient cash reserves or revenue from operations to do so. Without additional
capital we will not be able to construct the facility. We are unable to provide
any assurance or guarantee that additional capital will be available when needed
by our Corporation, or that such capital will be available under terms
acceptable to our Corporation or on a timely basis. This limitation could harm
substantially our business, results of operations and financial condition.
WE MAY BE UNABLE TO COMPETE SUCCESSFULLY AGAINST EXISTING AND FUTURE
COMPETITORS, WHICH COULD HARM OUR MARGINS FIND OUR BUSINESS.
The fuel and chemical storage business is highly competitive. We expect
the competitive environment to continue in the future. We face competition from
a number of existing storage facilities. We believe that with relatively strong
financial performance of fuel and related industries, this industry will
continue to attract new competitors and encourage existing competitors to
increase their involvement.
We can provide no assurance that we will be able to compete
successfully against current or potential competitors. Many of our current and
potential competitors have longer operating histories, better brand recognition
and significantly greater financial, technical and marketing resources than we
do. Many of these competitors may have well-established relationships with
customers and other key partners and can devote substantially more resources to
marketing and sales. As a result, they may be able to secure customers on more
favorable terms. Larger competitors may enjoy significant competitive advantages
that result from, among other things, a lower cost of capital and enhanced
operating efficiencies. In addition, the number of entities and the amount of
funds competing for customers may increase. This will result in reduced prices
and increased cost of sales. Our profitability may he reduced and you may
experience a lower return on your investment,
OUR INABILITY TO RETAIN OUR EXECUTIVE OFFICERS AND OTHER KEY PERSONNEL MAY HARM
OUR BUSINESS AND IMPEDE THE IMPLEMENTATION OF OUR BUSINESS STRATEGY.
Our future success depends to a significant degree on the skills,
experience and efforts of our key management personnel. Our principal managers
are ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇. We have executed
five-year employment agreements with each of them and have granted them
substantial equity incentives to remain with the Corporation. However, we cannot
guarantee that they will remain employees. The loss of their services could harm
our business and operations. In addition, we have not obtained key person life
insurance on any of our key employees as of the date of this memorandum. If any
of our executive officers or key employees left, died or was seriously injured
and unable to work and we were unable to find a qualified replacement and/or to
obtain adequate compensation for such loss, we may be unable to manage our
business, which could harm our operating results and financial condition.
However, we believe that qualified replacement personnel could be found to
continue to execute the business plan.
OUR DEVELOPMENT ACTIVITIES COULD RESULT IN LOSSES.
Our facility is a new development from ground up. Development of new
facilities always entails risks, such as the risks associated with delays in
development, inability to obtain required permits and licenses, cost overruns,
insufficient capital to complete construction, and other problems that may cause
our properties not to perform as expected.
THE ECONOMIC PERFORMANCE AND VALUE OF OUR FACILITY DEPEND ON MANY FACTORS BEYOND
OUR CONTROL.
12
The economic performance and value of our facility can be affected by
many factors, including the following:
o economic downturns and recessions;
o declines in revenue due to loss of customers or reduced
volume;
o reduced demand in the surrounding geographic regions due to
general economic conditions;
o construction of competitive properties nearby and competition
from other available facilities;
o increased operating costs and expenses; and
o availability of long term financing at reasonable rates.
OUR FACILITY IS SUBJECT TO ENVIRONMENTAL LAWS AND ENVIRONMENTAL RISKS.
Under various federal, state and local laws, ordinances and
regulations, we are considered to be en owner or operator of real property or to
have arranged for the disposal or treatment of hazardous or toxic substances. As
a result, we could become liable for the costs of removal or remediation of
certain hazardous substances released on or in our properly. We could also be
liable for other costs that relate to hazardous or toxic substances (including
governmental fines and injuries to persons and property). Many if not all of the
chemicals and fuels we intend to store arc considered to be hazardous materials.
Inadvertent releases or spills can subject us to costly remediation expenses
and/or fines.
RISKS RELATING TO THIS OFFERING
OUR MANAGEMENT HAS BROAD DISCRETION REGARDING HOW TO USE THE PROCEEDS FRONT THIS
OFFERING.
We intend to use the proceeds from this offering to commence
pre-construction activities and as working capital and operating expenses.
Although we intend to spend the proceeds to in the best interests of the
Corporation, we will have broad discretion over how we use these proceeds. We
may spend these proceeds in ways with which you disagree.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE VALUE OF YOUR
SHARES FOLLOWING THIS OFFERING.
If you purchase Shares in this offering, you will experience immediate
and substantial book value dilution, in that the price you pay per Share will be
substantially greater than our net tangible book value per share or the per
share value of our assets after subtracting our liabilities.
YOUR OWNERSHIP PERCENTAGE WILL BE DILUTED BY FUTURE ISSUANCES OF CAPITAL STOCK.
Our business strategy requires us to raise additional equity capital
through the sale of common stock or preferred stock, or the issuance of debt
which may be convertible into equity securities. Your percentage of ownership
will become diluted as we issue new shares of stock, unless you exercise any
applicable preemptive rights set forth above. We may issue common stock,
convertible debt or common stock pursuant to a public offering or a private
placement, upon exercise of warrants or options, or to sellers of properties we
directly or indirectly acquire instead of, or in addition to, cash
consideration. Investors purchasing Common Stock in this offering who do not
participate in any future stock issues will experience dilution in the
percentage of the issued and outstanding stock they own.
THE OFFERING PRICE OF THE SHARES IS ARBITRARY.
The offering price of the Shares we are offering was arbitrarily
determined by us, the management of our Corporation, and bears no relationship
to earnings, asset values, hook value or any other recognized criteria of value.
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THE SHARES ARE RESTRICTED AND TRANSFERABILITY IS LIMITED.
The Shares are offered and sold pursuant to one or more exemptions from
registration under the Securities Act and without qualification or registration
under the securities laws of the various states. Consequently, the Shares that
you would be purchasing are restricted and may not be sold, transferred or
hypothecated without registration under the Securities Act and applicable state
laws or without an exemption from such registration or qualification. The Shares
you will receive will bear a legend restricting their transfer accordingly.
WE HAVE SET NO MINIMUM INVESTMENT AND HAVE NOT ESTABLISHED ALL ESCROW.
We have not established a minituutn number of Shares that must be sold
in this offering. As a result, all subscriptions accepted by us will be
deposited into our Corporation's accounts and will be available for immediate
use. We have not established an escrow to hold any of the proceeds of this
offering. If fewer than all of the Shares we are offering are sold, the proceeds
may be insufficient to complete our business strategy.
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