Legal Research Center. Inc.
---------------------------- -----------------------------
Name of Investor Social Security Number or EIN
INTEGRITY INTERACTIVE CORPORATION
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT by and between the investor named above (the "Investor"
or, with respect to Legal Research Center, Inc.. "ERG") and INTEGRITY
INTERACTIVE CORPORATION, a Delaware corporation with offices at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"). The Company is offering to
accept from potential investors up to $600,000 in subscriptions for Shares, as
defined below; provided, however, that the Company reserves the right, in its
sole discretion to accept subscriptions for more than $600,000.
A. Number of Shares Subscribed for: 810,000
B. Total Purchase Price: $500,000
C. Address of Principal Residence: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The Investor acknowledges that the Investor has received and reviewed this
Subscription Agreement in its entirety, including without limitation the
representations and warranties set out in Section 2 hereof. The Investor and the
Company each executes this Subscription Agreement as an instrument under seal.
INVESTOR:
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Legal Research Center. Inc.
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Print Name of Investor
/s/ ▇. ▇. ▇▇▇▇▇▇▇▇▇
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(Signature)
Name: ▇. ▇. ▇▇▇▇▇▇▇▇▇
Title: CEO
The Company hereby accepts this subscription subject to the terms and
conditions set forth herein.
July 18, 2000 INTEGRITY INTERACTIVE CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
1. Subscription. Subject to the terms and conditions hereof, the Investor hereby
irrevocably subscribes for and agrees to purchase the number of shares of Series
A Convertible Preferred Stock of the Company, $.001 par value (the "Preferred
Stock"), described in Section A of the cover page (the "Shares") for the Total
Purchase Price set forth in Section B of the cover page. The rights and
privileges of the Preferred Stock shall be substantially as set forth in the
Preferred Stock Terms attached to this Subscription Agreement as Exhibit A. This
subscription may only be accepted by the Company's signing the cover page. The
effective date of such acceptance by the Company shall be the date set forth on
the cover page opposite the Company's signature.
2. Representations and Warranties of the Investor. The Investor understands and
acknowledges that (a) the Shares are being offered and sold under one or more of
the exemptions from registration provided for in Section 4(2) or Section 3(b) of
the Securities Act of 1993, as amended (the "Securities Act"), including
Regulation D promulgated thereunder ("Regulation D"), and any applicable state
securities laws, (b) the Investor has reviewed the confidential business plan of
the Company entitled "Integrity Interactive Business Plan" dated May 1, 2000,
and such other material documents of the Company as the Investor has deemed
necessary or appropriate for purposes of this offering and this Subscription
Agreement (collectively, the "Offering Documents"), and (c) this transaction has
not been reviewed or approved by the United States Securities and Exchange
Commission or by any regulatory authority charged with the administration of the
securities laws of any state or foreign country. The Investor also represents
and warrants as follows:
2.1. Citizenship, Age and Residence. The Investor is a bona fide resident
and domiciliary (not a temporary or transient resident) of or has its principal
place of business in the state and at the address described in Section C of the
cover page and has no present intention of becoming a resident of or moving the
location of its principal place of business to any other state or other
jurisdiction. If the Investor is a natural person, then Investor is a citizen of
the United States and is at least 21 years of age,
2.2. Sophistication of Investor. The Investor either (i) has a preexisting
personal or business relationship with the Company 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 Company 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
professional advisors who are not compensated by the Company or any affiliate or
selling agent of the Company, 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.
2.3. 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
Company is a start-up enterprise with no significant operating history; (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
2
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.
2.4. Accredited Investor. The Investor is not an "Accredited Investor"
within the meaning of Rule 501 of Regulation D.
2.5. 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.
2.6 Investment Information. The Investor acknowledges that the Offering
Documents contain the views of the management of the Company, and that the
analysis of the market and of the Company's strategy contained therein
represents a subjective assessment about which reasonable persons could
disagree.
2.7. 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 Company contained
herein and the Investor has been given (i) access to all material books and
records of the Company; (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 Company concerning the Company 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 Company by the Investor for information of any kind
about the Company has been refused or denied by the Company or remains
unfulfilled as of the date thereof
2.8. Review of Offering Documents. The Investor has carefully read the
Offering Documents, including without limitation this Subscription Agreement. In
evaluating the suitability of an investment in the Company, 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 Company.
2.9. Accuracy of Information. All of the information set forth on the cover
page of this Subscription Agreement indicated as applicable to the Investor, is
true and correct in all respects.
2.10. Investment Intent. The Shares are being acquired by the Investor
solely for the Investor's own personal account, for investment purposes only,
and not with a view to, or in connection with, any resale or distribution
thereof; the Investor has no contract, undertaking, understanding, agreement or
arrangement, formal or informal, with any person to sell, transfer or pledge to
any person the Shares for which the Investor hereby subscribes, or any part
thereof, any
3
interest therein or any rights thereto; the Investor has no present plans to
enter into any such contract, undertaking, agreement or arrangement; and the
Investor understands the legal consequences of the foregoing representations and
warranties to mean that the Investor must bear the economic risk of the
investment for an indefinite period of time because the Shares have not been
registered under the Securities Act and applicable state securities laws and,
therefore, cannot be sold unless they are subsequently registered under the
Securities Act and applicable state securities laws (which the Company is not
obligated, and has no current intention, to do) or unless an exemption from such
registration is available.
2.11. No Distribution of Offering Documents. The Investor has not
distributed any of the Offering Documents to any other person or party, and the
Investor has not used the Offering Documents or any of them for any purposes
other than to evaluate the merits of an investment in the Company.
2.12. Control of Funds. The Investor represents that the funds provided for
this investment are separate property of the Investor or are otherwise funds as
to which the Investor has the sole right of management.
2.13. No Brokers. The Investor has not engaged any broker, dealer, finder,
commission agent or other similar person in connection with the offer, offer for
sale, or sale of the Shares and is not under any obligation to pay any broker's
fee or commission in connection with the Investor's investment.
2.14. Securities Act Compliance. The Investor understands that the Shares
have not been registered under the Securities Act, by reason of a specific
exemption under the provisions of the Securities Act which depends in part upon
the investment intent and the aforesaid representations and warranties of the
Investor and that, in issuing the Shares to the Investor, the Company is relying
upon said representations and warranties. The Investor also understands that any
routine sales of the Shares in reliance upon Rule 144 under the Securities Act,
if the provisions of such Rule should then be available as to the Shares, can be
made only after the holding period specified in the Rule, in limited amounts,
and in accordance with all the terms and conditions of that Rule and that, in
the case of securities to which that Rule is not applicable, compliance with
Regulation A under the Securities Act or some other exemption will be required.
The Investor understands that Rule 144 is not now available as to the Shares.
The Investor understands that the Company is under no obligation to register the
Shares or to comply with Regulation A or any other exemption under the
Securities Act or to supply any information necessary to permit routine sales
under Rule 144. The Investor understands that the Company may, if it so desires,
permit the transfer of the Shares only when such shares are the subject of an
effective registration statement under the Securities Act or when the Company
has received an opinion of counsel that such registration is not required under
the Securities Act. The Investor agrees to furnish such documentation and
undertakings as the Company and its counsel may reasonably require in connection
with any such opinion, whether under Rule 144 or some specific exemption under
the Act.
3. Representations and Warranties of the Company. The Company represents and
warrants to
4
the Investor except as set forth in the Disclosure Schedule (attached as
Schedule 1) as follows:
3.1 Organization and Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to conduct its business as presently
conducted and as proposed to be conducted by it and to enter into and perform
this Subscription Agreement and to carry out the transactions contemplated by
this Subscription Agreement. The Company is duly qualified to do business as a
foreign corporation and is in good standing in The Commonwealth of Massachusetts
and in any other jurisdiction in which the failure to so qualify would have a
material adverse effect on the operations or financial condition of the Company.
The Company has furnished to special counsel to the Investor true and complete
copies of its Certificate of Incorporation and By-laws, each as amended to date
and presently in effect.
3.2 Capitalization. The authorized capital stock of the Company
(immediately prior to the Closing) consists of (a) 12.000,000 shares of common
stock, $0.001 par value per share (the "Common Stock"), of which 7,932,000
shares are issued and outstanding and (b) 973,384 of Series A Convertible
Preferred Stock, $0.001 par value per share, none of which is issued or
outstanding. At the Closing, the Common Stock and the Preferred Stock will have
the voting powers, designations, preferences, rights and qualifications, and
limitations or restrictions set forth in the Certificate of Incorporation. All
of the issued and outstanding shares of Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable.
3.3 Issuance of Shares. The issuance, sale and delivery of the Shares in
accordance with this Subscription Agreement, and the issuance and delivery of
the shares of Common Stock issuable upon conversion of the Shares, have been
duly authorized by all necessary corporate action on the part of the Company,
and all such shares have been duly reserved for issuance. The Shares when so
issued, sold and delivered against payment therefor in accordance with the
provisions of this Subscription Agreement, and the shares of Common Stock
issuable upon conversion of the Shares, when issued upon such conversion, will
be duly and validly issued, fully paid and non-assessable.
3.4 Authority for Agreement. The execution, delivery and performance by the
Company of this Subscription Agreement, and the consummation by the Company of
the transactions contemplated hereby and thereby, have been duly authorized by
all necessary corporate action. This Subscription Agreement has been duly
executed and delivered by the Company and constitute valid and binding
obligations of the Company enforceable in accordance with their respective
terms. The execution of and performance of the transactions contemplated by this
Subscription Agreement and compliance with their provisions by the Company will
not violate any provision of law and will not conflict with or result in any
breach of any of the terms, conditions or provisions of, or constitute a default
under, or require a consent or waiver under, its Certificate of Incorporation or
By-laws (each as amended to date) or any indenture, lease, agreement or other
instrument to which the Company is a party or by which it or any of its
properties is bound, or any decree, judgment, order, statute, rule or regulation
applicable to the Company.
5
3.5 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
governmental authority is required on the part of the Company in connection with
the execution and delivery of this Subscription Agreement, the offer, issuance,
sale and delivery of the Shares, or the other transactions to be consummated at
the Closing, as contemplated by this Subscription Agreement, except such filings
as shall have been made prior to and shall be effective on and as of the
Closing. Based on the representations made by the Investor in Section 2 of this
Subscription Agreement, the offer and sale of the Shares to the Investor will be
exempt from the registration requirements of applicable Federal and state
securities laws.
3.6 Litigation. There is no action, suit or proceeding, or governmental
inquiry or investigation, pending, or, to the best of the Company's knowledge,
any basis therefor or threat thereof, against the Company, which questions the
validity of this Subscription Agreement or the right of the Company to enter
into it, or which might result, either individually or in the aggregate, in any
material adverse change in the business, prospects, assets or condition,
financial or otherwise, of the Company, nor is there any litigation pending, or,
to the best of the Company's knowledge, any basis therefor or threat thereof,
against the Company by reason of the past employment relationships of its
employees, the proposed activities of the Company, or negotiations by the
Company with possible investors in the Company.
3.7 Financial Statements. The Company has furnished to the Investor the
unaudited balance sheet of the Company as of June 30, 2000 and the related
statement of income for the seven-month period ending June 30, 2000
(collectively, the "Financial Disclosure Schedule"). The Financial Disclosure
Schedule is complete, correct and fairly represents the financial position of
the Company as of the date thereof and the results of its operations through
that date.
3.8 Events Subsequent to the Date of the Balance Sheet. Since the date of
the Balance Sheet and except as specifically provided for hereunder, the Company
has not (i) issued any stock, bond, warrant, option or other corporate security,
(ii) split, combined or reclassified its stock; (iii) borrowed any amount or
incurred or become subject to any liability (absolute, accrued or contingent),
except current liabilities incurred and liabilities under contracts entered into
in the ordinary course of business, (iv) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities shown on the Balance Sheet and
current liabilities incurred since the date of the Balance Sheet in the ordinary
course of business, (v) declared or made any payment or distribution to
stockholders or purchased or redeemed any share of its capital stock or other
security, (vi) mortgaged, pledged, encumbered or subjected to lien any of its
assets, tangible or intangible, other than liens of current real property taxes
not yet due and payable, (vii) sold, assigned or transferred any of its tangible
assets except in the ordinary course of business, or cancelled any debt or
claim, (viii) sold, assigned, transferred or granted any exclusive license with
respect to any patent, trademark, trade name, service ▇▇▇▇, copyright, trade
secret or other intangible asset, (ix) suffered any loss of property or waived
any right of substantial value whether or not in the ordinary course of
business, (x) made any change in officer compensation except in the ordinary
course of business and consistent with past practice, (xi) made any material
change in the manner of business or operations of the Company, (xii) entered
into any transaction except in the ordinary course of
6
business or as otherwise contemplated hereby, (xiii) purchased capital assets or
made capital expenditures in excess of $50,000, (xiv) changed accounting
methodology, (xv) voluntarily terminated any agreement which would have
constituted a material contract other than termination by expiration, (xvi)
suffered business interruption or property damage which had or could have a
materially adverse effect, or (xvii) entered into any commitment (contingent or
otherwise) to do any of the foregoing.
3.9 Absence of Liabilities. Except as set forth in Section 3.9 of the
Disclosure Schedule, the Company does not have any liabilities of any type,
whether absolute or contingent, which in the aggregate exceed $25,000.
3.10 Taxes. The Company has filed or has obtained presently effective
extensions with respect to all federal, state, county, local and foreign tax
returns which are required to be filed by it, such returns, if any, are true and
correct and all taxes shown thereon to be due have been timely paid with
exceptions not material to the Company. Federal income tax returns of the
Company have not been audited by the Internal Revenue Service, and no
controversy with respect to taxes of any type is pending or, to the best of the
Company's knowledge, threatened. The Company has withheld or collected from each
payment made to its employees the amount of all taxes required to be withheld or
collected therefrom and has paid all such amounts to the appropriate taxing
authorities when due.
3.11 Property and Assets. The Company has good title to, or a valid
leasehold interest in, all of its properties and assets, including all
properties and assets reflected in the Financial Disclosure Schedule, except
those disposed of since the date thereof in the ordinary course of business, and
none of such properties or assets is subject to any mortgage, pledge, lieu,
security interest, lease, charge or encumbrance other than those the material
terms of which are described in the Financial Disclosure Schedule.
3.12 Intellectual Property
(a) No third party has claimed or, to the best of the Company's knowledge,
has reason to claim that any person employed by or affiliated with the Company,
in connection with his or her employment by or affiliation with the Company, (i)
has violated or is violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such third party, (ii) has
disclosed or is disclosing or has utilized or is utilizing any trade secret or
proprietary information or documentation of such third party or (iii) has
interfered or is interfering in the employment relationship between such third
party and any of its present or former employees. No third party has requested
information from the Company which suggests that such a claim might be
contemplated. To the best of the Company's knowledge, no person employed by or
affiliated with the Company has employed or proposes to employ any trade secret
or any information or documentation proprietary to any former employer, and to
the best of the Company's knowledge, no person employed by or affiliated with
the Company has violated any confidential relationship which such person may
have had with any third party, in connection with the development, manufacture
or sale of any product or proposed product or the development or sale of any
service or proposed service of the Company, and the Company has
7
no reason to believe there will be any such employment or violation. To the best
of the Company's knowledge, none of the execution or delivery of this
Subscription Agreement, or the carrying on of business of the Company by any
officer, director or key employee of the Company, or the conduct or proposed
conduct of the business of the Company, will conflict with or result in a breach
of the terms, conditions or provisions of or constitute a default under any
contract, covenant or instrument under which any such person is obligated.
(b) Set forth in Section 3.12 of the Disclosure Schedule is a list of all
domestic and foreign patents, patent rights, patent applications, trademarks,
trademark applications, service marks, service ▇▇▇▇ applications, trade names
and copyrights, and all applications for such which are in the process of being
prepared, owned by or registered in the name of the Company, or of which the
Company is a licensor or licensee or in which the Company has any right, and in
each case a brief description of the nature of such right. The Company owns or
possesses licenses or other rights to use all patents, patent applications,
trademarks, trademark applications, service marks, service ▇▇▇▇ applications,
trade names, copyrights, manufacturing processes, formulae, trade secrets,
customer lists and know-how (collectively, "Intellectual Property") necessary
for the conduct of its business as conducted and as proposed to be conducted,
and no claim is pending or, to the best of the Company's knowledge, threatened
to the effect that the operations of the Company infringe upon or conflict with
the asserted rights of any other person under any Intellectual Property, and, to
the best of the Company's knowledge, there is no basis for any such claim
(whether or not pending or threatened). No claim is pending or threatened to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company otherwise has the right to use, is invalid or unenforceable by
the Company, and, to the best of the Company's knowledge, there is no basis for
any such claim (whether or not pending or threatened). To the best of the
Company's knowledge, all technical information developed by and belonging to the
Company which has not been patented has been kept confidential. The Company has
not granted or assigned to any other person or entity any right to manufacture,
have manufactured, assemble or sell the products or proposed products or to
provide the services or proposed services of the Company.
3.13 Compliance. The Company has, in all material respects, complied with
all laws, regulations and orders applicable to its present and proposed business
and has all material permits and licenses required thereby. There is no term or
provision of any mortgage, indenture, contract, agreement or instrument to which
the Company is a party or by which it is bound, or, to the best of the Company's
knowledge, of any provision of any state or Federal judgment, decree, order,
statute, rule or regulation applicable to or binding upon the Company, which
materially adversely affects or, so far as the Company may now foresee, in the
future is reasonably likely to materially adversely affect, the business,
prospects, assets or condition, financial or otherwise, of the Company. To the
best of the Company's knowledge, neither any founder nor any other employee of
the Company is in violation of any term of any contract or covenant (either with
the Company or with another entity) relating to employment, patents, proprietary
information disclosure, non-competition or non-solicitation.
3.14 ERISA. The Company does not have or otherwise contribute to or
participate in any employee benefit plan subject to the Employee Retirement
Income Security Act of 1974.
8
3.15 Insurance. The Company currently maintains a commercial general
liability insurance policy with a general aggregate limit of $2,000,000 as to
its properties and business.
3.16 Subscription Agreement. Each of ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ (collectively, the "Original Investors") has entered
into separate subscription agreements ("Purchase Agreement") dated May 31, 2000
with Integrity Interactive Corporation, a Massachusetts corporation (Integrity
Interactive--MA) which has since reincorporated as a Delaware corporation.
Pursuant to each Original Investor's Purchase Agreement, the Original Investors
each purchased 860 shares of Common Stock in Integrity Interactive - MA at a
purchase price of $10.00 per share.
3.17 Convertible Note Purchase Agreement. Each of the Original Investors
has entered into a Convertible Note Purchase Agreement ("Convertible Note
Purchase Agreement") dated as of May 31, 2000 with Integrity Interactive - MA
whereby each Original Investor purchased a note in the original principal amount
of $25,000, with interest accruing at the rate of 6.62% per annum (the "Notes").
According to each Original Investor's Convertible Note Purchase Agreement, the
principal of each Note (and at the option of the Company any accrued but unpaid
interest thereon), shall be treated by the Company as surrendered for
cancellation and exchanged into the equity securities issued by the Company at
the closing of the next Qualified Financing at the same price and subject to the
same terms of the Qualified Financing. "Qualified Financing" shall mean the next
sale or related group of sales by the Company of capital stock or securities
convertible into capital stock (other than the Notes), in an arms-length
transaction which sale generated gross proceeds to the Company of at least
$500,000, excluding amounts received by the Company from the sale of the Notes.
Upon receipt and acceptance by the Company of at least $500,000 from the
Investor or other investors in accordance with the terms and conditions hereof
and as part of the transactions contemplated hereby, such investment shall
constitute a Qualified Financing under the Convertible Note Purchase Agreement.
3.18 Restricted Stock Purchase Agreement. Each of Messrs. ▇▇▇▇ and ▇▇▇
entered into a Restricted Stock Purchase Agreement dated May 24, 2000 with
Integrity Interactive - MA whereby each of Messrs. ▇▇▇▇ and Gee purchased 1,500
shares of Integrity Interactive - MA's Common Stock at a purchase price of
$10.00 per share.
3.19 Common Stock of Integrity Interactive - MA. Each share of Common Stock
in Integrity Interactive - MA was subsequently converted into 300 shares of
Common Stock of the Company pursuant to an Agreement of Merger dated June 8,
2000 and effective filing of Articles of Merger with the Secretary of the
Commonwealth of Massachusetts and the Certificate of Merger with the Secretary
of State of the State of Delaware.
3.20 Material Contracts. Except as set forth in the Disclosure Schedule,
the Company is not a party to any written contract, obligation, instrument,
corporate restriction or commitment which involves a potential commitment in
excess of $25,000 or which is material, to the business, assets, liabilities,
financial condition, results of operations or prospects of the Company.
9
3.21 Disclosures. No representation or warranty by the Company contained in
this Subscription Agreement and no statement contained in any of the Disclosure
Schedules, certificate or other document or instrument delivered or to be
delivered pursuant to this Subscription Agreement by the Company contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary in order to make the statements contained
herein or therein not misleading, provided, however, that the Company does not
guarantee the achievement of any projections which have been provided to the
Investor.
4. Restrictive Legend. The Investor consents to the placement of certain legends
on the certificate(s) for the Shares as required by applicable laws, including
legends in forms substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS AND NONE OF SUCH SECURITIES, NOR ANY INTEREST THEREIN, MAY
BE SOLD, TRANSFERRED, ASSIGNED, MADE THE SUBJECT OF ANY SECURITY INTEREST,
OR OTHERWISE DISPOSED OF, UNLESS THE COMPANY SHALL FIRST HAVE RECEIVED AN
OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, TO
THE EFFECT THAT SUCH SECURITIES OR INTEREST THEREIN, AND THE PROPOSED
DISPOSITION THEREOF, ARE THE SUBJECT OF A CURRENTLY EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAW, OR THAT
REGISTRATION UNDER SUCH ACT AND LAW IS NOT REQUIRED IN CONNECTION WITH SUCH
DISPOSITION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CERTAIN
SUBSCRIPTION AGREEMENT, BY AND BETWEEN THE COMPANY AND THE HOLDER OF THIS
CERTIFICATE, A COPY OF WHICH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE
OFFICES OF THE COMPANY UPON WRITTEN REQUEST THEREFOR.
5. Transferability. The Investor agrees not to transfer or assign this
Subscription Agreement, or any of the Investor's interest herein, and further
agrees that the assignment and transfer of the Shares acquired pursuant hereto
shall be made only in accordance with all applicable laws, this Subscription
Agreement and the Company's Certificate of Incorporation, as amended.
6. Revocation. The Investor agrees that the Investor may not cancel, terminate
or revoke this Subscription Agreement or any agreement of the Investor made
hereunder and that this Subscription Agreement shall survive the death or
disability of the Investor and shall be binding upon the Investor's heirs,
executors, administrators, successors and assigns.
7. Distribution Agreement. The investment made by LRC hereunder is made in
connection with and in accordance with a certain letter agreement between LRC
and the Company dated as of
10
May 3, 2000 (the "Distribution Agreement") and such an investment shall satisfy
the condition set forth in Paragraph H thereof.
8. Miscellaneous.
8.1. Notices. All notices or other communications given or made hereunder
shall be in writing and shall be delivered or mailed by registered or first
class mail, postage prepaid or express overnight courier service, to the
addresses set forth on the cover page hereof.
8.2. Governing Law. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts,
excluding its conflicts of laws and choice of laws rules.
8.3. Entire Agreement. This Subscription Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and may
be amended or superseded only by a writing executed by the parties.
8.4. Gender. Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms, the singular number
shall include the plural, and the plural shall include the singular.
9. Continuing Effect of Representations, Warranties and Acknowledgments. The
Investor and the Company agree that the representations and warranties of
Section 2 and Section 3, respectively, are true and accurate as of the date of
this Subscription Agreement and shall be true and accurate as of the date of
delivery to and acceptance by the Company of this Subscription Agreement, and
shall survive such delivery and acceptance, subject to applicable statute of
limitations. If in any respect such representations, warranties and
acknowledgments shall not be true and accurate prior to such delivery and
acceptance, the Investor or the Company, as the case may be, shall give
immediate written notice of such fact to the other party and to their
representative(s), if any, specifying which representations and warranties and
acknowledgments are not true and accurate and the reasons therefor.
10. Indemnification. The Investor and the Company understand the meaning and
legal consequences of their respective representations and warranties contained
in Section 2 and Section 3, and each party (the "Indemnifying Party") agrees to
indemnify and hold harmless the other party, its officers or any of its
affiliates, controlling shareholders, agents, directors, or employees from and
against any and all loss, damage or liability (including costs and reasonable
attorney's fees) due to or arising out of a breach of any representation,
warranty or acknowledgment of the Indemnifying Party contained in this
Subscription Agreement, provided however that the Company's liability hereunder
shall not exceed the amount of funds received by the Company from the Investor
hereunder.
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Exhibit A
Preferred Stock Terms
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Schedule I
Disclosure Schedules
Nothing in these Schedules is intended to broaden the scope of any
representation or warranty of the Company contained in the Agreement or to
create any covenant on the part of the Company. Inclusion of any item in the
Schedules (1) does not represent a determination by the Company that such item
(a) is material, nor shall it be deemed to establish a standard of materiality,
or (b) did not arise in the ordinary course of business and (2) shall not
constitute, or be deemed to be, an admission to any third party concerning such
item by the Company.
All references to "Section" or "subsection" refer to a Section or
subsection in the Agreement, unless the context otherwise requires. All
references to "Schedules" refer to one of the Schedules, unless the context
otherwise requires. The reference "see attachments" means further information is
included in the documents attached to the Schedules, The headings in the
Schedules are for convenience of reference only and shall not affect the
disclosures contained herein.
Whenever the Schedules includes descriptions of certain documents or brief
summaries of certain aspects of the Company or its business, such descriptions
and summaries are qualified by reference to the actual documents or other
matters to which they refer.
Section 3.7 Financial Statements
Please see the attached.
Section 3.9 Absence of Liabilities
The following lists the liabilities of the Company as of 6/30/2000:
Convertible notes $100,000
Accounts payable in normal course of business $6,988
Accruals for:
Consulting fees $25,000
Travel reimbursement $36,800
Legal $5,000
Asset purchases $13,800
Other $500
--------
Total $188,088
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Section 3.12 Intellectual Property
The ▇▇▇▇ is "Integrity Interactive" is presently registered with the United
States Patent and Trademark Office in the name of Compliance Systems Legal Group
("CSLG"). CSLG has commenced the process to transfer the registration to the
Company.
Section 3.20 Material Contracts
The Company has the following material contracts in effect as of the date
hereof:
(a) Joint Development Agreement dated as of November 30, 1999, by and between
VIS Development Corporation and the Company
(b) Hosting and Development Agreement dated as of June 30, 2000, by and between
VIS Development Corporation and the Company
(c) Letter agreement dated May 3, 2000, by and between the Company and LRC (to
be amended and restated (or otherwise superseded) as part of the investment
contemplated herein).
The Company is presently negotiating the following agreements:
(a) Master Services Agreement by and between Nextel Communications, Inc. and
the Company; and
(b) Letter Agreement by and between the Company and ▇▇▇▇▇▇▇▇▇ Services Group
currently dated as of June 12. 2000.
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