INDEX TO EXHIBITS
Exhibit No. Description
99.1 Subscription Agreement.
DIGITAL DATA NETWORKS, INC. Subscription Agreement
Exhibit 99.1
DIGITAL DATA NETWORKS, INC.
SUBSCRIPTION AGREEMENT
U.S. SUBSCRIPTION AGREEMENT
The Securities being offered and subscribed for hereby are speculative
and risky. See "Risk Factors" attached as Addendum A. Subscribers must be
prepared to bear the economic risk of their investment for an indefinite time
period and must be able to withstand a total loss of their investment. The
Securities have not been registered under the Securities Act of 1933, as amended
("Securities Act") or any state or foreign securities laws. Neither the
Securities and Exchange Commission ("SEC") nor any state or foreign regulatory
authority has reviewed or endorsed the merits of this Offering. Any
representation to the contrary is a criminal offense. The Securities are offered
under exemptions provided by the Securities Act and certain state securities
laws. The Securities are subject to restrictions on transferability and resale,
and may be transferred or resold only if effectively registered with the SEC
under the Securities Act and with any state whose securities laws apply, or
under an exemption from registration that is available under those laws. If a
holder wishes to transfer or sell Securities under an exemption from
registration, the holder must provide to the Company an attorney's opinion
acceptable to the Company that states the reasons why an exemption from
registration is available.
No person is authorized to give any information or to make any
representation not contained in the accompanying materials, and, if any such
information or representation is given or made, such information or
representation must not be relied upon as having been authorized by the Company.
The delivery of these materials at any time does not imply that the information
contained herein is correct as of any subsequent time. These materials do not
purport to be all-inclusive or to contain all the information that a potential
subscriber may desire in considering the Offering.
All potential subscribers will have an opportunity to meet with
representatives of the Company to verify any of the information included in the
accompanying materials and to obtain additional information regarding the
Offering and the Company. Copies of all documents, contracts, financial
statements and other Company records will be made available for inspection at
any such meeting or during normal business hours upon request to the Company.
Subscribers must acknowledge below that they have read the accompanying
materials carefully and thoroughly, they were given the opportunity to obtain
additional information, and they did so to their satisfaction. In making an
investment decision, investors must rely on their own examination of the Company
and the terms of the Offering, including the merits and risks involved.
The following documents accompany this Subscription Agreement and are
incorporated herein by reference:
Addendum A Risk Factors
Addendum B Summary of Placement
The Company is a reporting company under the Securities Act of 1934.
The Company's common stock is currently listed for trading in the
over-the-counter market and is quoted on the National Association of
Securities Dealers, Inc. Over the Counter Bulletin Board ("OTCBB")
under the symbol "DIDA". Prospective investors may review the Company's
1934 Act filings at the Securities and Exchange Commission's Web site
at ▇▇▇.▇▇▇.▇▇▇. Investors are urged to review the Company's SEC filings
prior to investing in this offering. Should prospective investors
request, copies of the Company's SEC filings may be requested by
writing to Digital Data Networks, Inc., Attention ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇,
Vice President of Finance and Operations, at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or faxing the same request to Digital Data
Networks, Inc., Attention ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇, Vice President of Finance
and Operations, at fax number ▇▇▇-▇▇▇-▇▇▇▇.
The Date of these Subscription Documents is July 10, 2002.
Arizona Residents: THESE SECURITIES HAVE BEEN EXEMPTED FROM REGISTRATION
PURSUANT TO A.R.S. ss.44-1846, BUT THE FACT OF THE GRANTING OF SUCH EXEMPTION IS
NOT TO BE DEEMED TO BE A FINDING BY THE ARIZONA CORPORATION COMMISSION THAT
THESE OFFERING MATERIALS ARE TRUE OR ACCURATE, NOR DOES SUCH GRANT OR EXEMPTION
MEAN THAT THE COMMISSION HAS PASSED UPON THE MERITS OR OTHERWISE APPROVED THE
SECURITIES DESCRIBED HEREIN.
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 THESE PRIVATE PLACEMENT
MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
California Residents: THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS
AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION
25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL
PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
Florida Residents: THE SECURITIES BEING OFFERED HAVE NOT BEEN REGISTERED WITH
THE FLORIDA DIVISION OF SECURITIES AND INVESTOR PROTECTION. THE FIRM IS
REGISTERED AS AN ISSUER/DEALER TO SELL ITS OWN SECURITIES.
Georgia Residents: THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON
PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973"
AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER
SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
Illinois Residents: THESE SECURITIES ARE BEING OFFERED AND SOLD PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SECTION 4G OF THE ILLINOIS SECURITIES LAW OF
1953, AS AMENDED, AND CANNOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION THAT
IS EXEMPT UNDER THE ILLINOIS SECURITIES LAW OR PURSUANT TO AN EFFECTIVE
REGISTRATION THEREUNDER OR OTHERWISE IN COMPLIANCE WITH SUCH LAW.
Kentucky Residents: The Securities offered by this Memorandum have not been
registered under the Kentucky Securities Act, are offered in reliance upon an
exemption from registration thereunder and may not be resold, pledged,
hypothecated or otherwise transferred unless so registered or an exemption from
registration is available.
New York Residents: THESE PRIVATE PLACEMENT MATERIALS HAVE NOT BEEN REVIEWED BY
THE ATTORNEY GENERAL PRIOR TO THEIR ISSUANCE AND USE. THE ATTORNEY GENERAL OF
THE STATE OF NEW YORK HAS NOT PASSED UPON OR ENDORSED THE MERITS OF THIS
OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THESE PRIVATE PLACEMENT MATERIALS DO 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 ARE MADE, NOT MISLEADING.
THESE MATERIALS CONTAIN FAIR SUMMARIES OF THE MATERIAL TERMS OF DOCUMENTS
SUMMARIZED HEREIN.
North Carolina Residents: IN MAKING INVESTMENT DECISIONS, INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE ISSUER AND THE 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 THESE OFFERING DOCUMENTS. 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 THEREFOR. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
Ohio Residents: The Securities offered by this Memorandum are issued in reliance
upon the exemptionS from registration set forth in SectionS 1707.03(k)(2), (O)
AND (Q) of the Ohio Revised Code, and they cannot be resold, pledged,
hypothecated or otherwise transferred except in a transaction that is exempt
under the Ohio Revised Code or pursuant to an Effective registration thereunder
or otherwise in compliance with such Code.
Oklahoma Residents: THE SECURITIES OFFERED PURSUANT TO THESE OFFERING MATERIALS
HAVE NOT BEEN REGISTERED UNDER THE OKLAHOMA STATUTES, 1971, AS AMENDED (THE
"OKLAHOMA ACT"), AND MAY NOT BE RESOLD WITHOUT BEING REGISTERED OR QUALIFIED FOR
AN EXEMPTION UNDER THE OKLAHOMA ACT.
Texas Residents: The Securities offered by this Memorandum may be offered and
sold only to "Accredited Investors" as defined under the TEXAS Securities Act.
This Memorandum is only for your confidential use and may not be reproduced. Any
action contrary to these restrictions may place you and the Company in violation
of the Texas Securities Act.
Tennessee Residents: IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE ISSUER AND THE 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 MEMORANDUM. 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 U. S. SECURITIES
ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
Article 1. Subscription
1.1 The undersigned subscriber ("Subscriber"), intending to be legally
bound, hereby irrevocably subscribes for and agrees to purchase from DIGITAL
DATA NETWORKS, INC., a corporation organized under the laws of the State of
Washington, U.S.A. (the "Company"), shares of the Company's Common Stock, no par
value per share (the "Shares"), at a price of USD $0.08 per Share, for a
purchase price of Sixteen Thousand and no/100 U.S. Dollars (USD $16,000.00) (the
"Purchase Price"). This subscription is submitted to you in accordance with and
subject to the terms and conditions set forth in this Subscription Agreement and
pursuant to Rule 506 of Regulation D promulgated under the U.S. Securities Act
of 1933, as amended (the "Securities Act"). The Subscription Agreement and
Shares are sometimes referred to herein collectively as the "Securities."
1.2 Subscriber's subscription payment, in the form of a bank check or
certified check made payable to "Digital Data Networks, Inc." in the amount of
the Purchase Price is delivered herewith (unless payment is being wired in
accordance with the following instructions) together with two executed copies of
this Subscription Agreement. In the event this subscription is not accepted, in
whole or in part, by the Company, the full or ratable amount, as the case may
be, Subscriber's subscription payment shall be promptly refunded to Subscriber
without deduction therefrom or interest thereon. Wiring instructions are as
follows:
Account Name & Address: Digital Data Networks, Inc. dba
The Transit Network
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
Account Number: 1290928309
Bank Name & Address: Bank of America
Plaza Banking Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
ABA Number: ▇▇▇▇▇▇▇▇▇
Notify on Arrival: ▇▇▇▇ ▇▇▇▇▇▇▇
1.3 In the event this subscription is accepted by the Company, in whole
or in part, the Company shall deliver to Subscriber a certificate for the Shares
as to which Subscriber's subscription is accepted, such certificate to be dated
the date of acceptance of this subscription and to bear the legends described
herein, together with a copy of this Subscription Agreement executed by the
Company.
1.4 Subscriber acknowledges and agrees that the Company did not prepare
any information to be delivered to prospective investors in connection with this
subscription other than the materials accompanying this Subscription Agreement,
and the Company does not make any representation or warranty concerning the
completeness of any information received by prospective investors. Subscriber
acknowledges and agrees that prospective investors are advised to conduct their
own review of the business, properties and affairs of the Company before
subscribing.
1.5 Subscriber understands and agrees that: (1) this subscription is
not subject to the Company's receiving any minimum amount of subscriptions or
the escrow of any subscription payments; (2) this Subscription Agreement is not
binding upon the Company until accepted by it; (3) Subscriber's subscription
payment shall be available to the Company immediately after the Company's
acceptance of this subscription; and (4) the Company shall have the right to
accept or reject this subscription in whole or in part for any reason or for no
reason.
Article 2. Representations and Warranties of the Company
The Company represents and warrants to, and agrees with, Subscriber as
follows:
2.1 The Company is duly organized, validly existing and in good
standing under the laws of the State of Washington, U.S.A., with all requisite
power and authority to own, lease, license, and use its properties and assets
and to carry out the business in which it is engaged. The Company is duly
qualified to transact the business in which it is engaged and is in good
standing as a foreign corporation in every jurisdiction in which its ownership,
leasing, licensing or use of property or assets or the conduct of its business
make such qualification necessary.
2.2 The Company is authorized to issue Ten Million (10,000,000) shares
of Common Stock, no par value per share, and One Million (1,000,000) shares of
Preferred Stock, no par value per share.
2.3 The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Subscription Agreement and to
issue, sell and deliver the Securities. This Subscription Agreement has been
duly authorized by the Company, and (subject, with respect to enforceability,
to the provisions of specific performance, bankruptcy and similar laws and
principles of equity) when executed and delivered by the Company, will
constitute the legal, valid and binding obligation of the Company, enforceable
as to the Company in accordance with its terms. The Securities have been duly
authorized by the Company and (subject, with respect to enforceability, to the
provisions of specific performance, bankruptcy and similar laws and principles
of equity), when issued, sold and delivered in accordance with the terms of this
Subscription Agreement, the Shares will be duly authorized, validly issued,
fully paid and non-assessable.
2.4 No consent, authorization, approval, order, license, certificate or
permit of or from, or declaration or filing with, any federal, state, local or
other governmental authority or any court or any other tribunal is required by
the Company for the execution, delivery or performance by the Company of this
Subscription Agreement or the execution, issuance, sale or delivery of the
Securities (except as may be required under federal, state or provincial
securities laws).
2.5 No consent of any party to any contract, agreement, instrument,
lease, license, arrangement or understanding to which the Company is a party or
to which any of its properties or assets are subject is required for the
execution, delivery or performance by the Company of this Subscription Agreement
or the issuance, sale and delivery of the Securities.
2.6 The execution, delivery and performance of this Subscription
Agreement and the issuance, sale and delivery of the Securities, will not
violate, result in a breach of, conflict with (with or without the giving of
notice or the passage of time or both) or entitle any party to terminate or call
a default under any material contract, agreement, instrument, lease, license,
arrangement or understanding, or violate or result in a breach of any term of
the certificate of incorporation or by-laws of, or conflict with any law, rule,
regulation, order, judgment or decree binding upon, the Company or to which any
of its operations, businesses, properties or assets are subject, the result of
which may have a material adverse effect on the business, operations,
liabilities or condition (financial or otherwise) of the Company.
Article 3. Representations and Warranties of Subscriber
Subscriber hereby represents, warrants and certifies to, and agrees
with, the Company as follows:
3.1 Subscriber has received, thoroughly reviewed, and understands all
of the information contained in Addenda A and B described on page 2 of this
Subscription Agreement, and Subscriber has had an opportunity to ask questions
and to obtain all desired information regarding the Company, the Offering and
this Subscription Agreement. Subscriber currently has knowledge sufficient to
Subscriber, in the prudent management of Subscriber's affairs, regarding the
Company and its operations and principals to justify Subscriber's submission of
this Subscription Agreement to the Company. Regarding the Company, its business
plans and financial condition: Subscriber has received all materials that have
been requested by Subscriber, and the Company has answered all inquiries that
Subscriber or Subscriber's representatives have put to it; Subscriber has had
access to all additional information necessary to verify the accuracy of the
information requested by Subscriber or this Subscription Agreement; and
Subscriber has taken all the steps necessary to evaluate the merits and risks of
an investment by Subscriber in the Securities. In making this investment
decision, Subscriber has not relied on any information not provided by the
Company.
3.2 Subscriber has such knowledge and experience in finance,
securities, investments and other business matters as to be able to protect
Subscriber's interests in connection with this transaction, and Subscriber's
investment in the Company hereunder is not material when compared to
Subscriber's total financial capacity. Subscriber has adequate means for
providing for Subscriber's current needs and possible contingencies, has no
need for liquidity regarding this investment, and has no reason to expect a
change in Subscriber's circumstances, financial or other, that may cause or
require sale of Subscriber's Securities.
3.3 Subscriber understands the many risks of an investment in the
Company and can afford to bear such risks, including, but not limited to, the
risk of losing Subscriber's entire investment.
3.4 Subscriber acknowledges that the Shares presently are quoted on the
NASD Over-the-Counter Bulletin Board (OTCBB), that such market generally is thin
and illiquid, and that Subscriber may find it impossible to liquidate
Subscriber's investment at a time when Subscriber may desire to do so, or at any
other time.
3.5 Subscriber has been advised by the Company that: (a) the Securities
have not been registered under the U.S. Securities Act of 1933, as amended
("Securities Act"), (b) the Securities are being offered and sold to Subscriber
on the basis of the exemptions from registration provided by Securities Act
Section 4(2) and Regulation D promulgated under the Securities Act, (c) the
Offering has not been filed with or submitted to, reviewed by, or otherwise
passed on by the U. S. Securities and Exchange Commission or any other U.S.
federal or state agency or self-regulatory organization where an exemption is
being relied upon, and (d) the Company's reliance on the exemptions provided by
Securities Act Section 4(2) and Regulation D is based in part upon the
representations made by Subscriber in this Subscription Agreement. Subscriber
acknowledges that Subscriber has been informed by the Company of, or Subscriber
is otherwise familiar with, the nature of the limitations imposed by the
Securities Act and the rules and regulations thereunder on the transfer of
securities.
3.6 Subscriber (or any person identified in any special instructions
above) is acquiring the Securities for Subscriber's (their) own account for
investment and not with a view to the sale or distribution thereof or the
granting of any participation therein, and Subscriber (or such person) has no
present intention of distributing or selling to others any of such Securities or
granting any participation therein. Subscriber (or such person) has no agreement
or other arrangement, formal or informal, with any person to sell, transfer,
pledge or otherwise dispose of any of the Securities which would guarantee to
Subscriber (or such person) any profit, or protect Subscriber (or such person)
against loss, regarding the Securities, and Subscriber (or such person) has no
plans to enter into any such agreement or arrangement.
3.7 Subscriber is an "Accredited Investor" as that term is defined in
Rule 501(a) of Regulation D promulgated under the Securities Act. Specifically,
Subscriber is (check all appropriate item(s)):
________(a) A bank as defined in Section 3(a)(2) of the Securities Act, or a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; an insurance company as defined in Section 2(13) of the
Securities Act; an investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that Act; a small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $3,000,000; an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment advisor, or if the employee benefit plan has total assets in excess
of $3,000,000 or, if a self-directed plan, with investment decisions made solely
by persons that are accredited investors.
________(b) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
________(c) An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $3,000,000.
________(d) A director or executive officer of the Company.
___X____(e) A natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his or her purchase exceeds
$1,000,000.
________(f) A natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's spouse
in excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year. If Subscriber is a
California resident, Subscriber's investment in the Company will not exceed 10%
of Subscriber's net worth (or, if married, joint net worth with spouse). If
Subscriber is a Massachusetts resident, Subscriber's investment in the Company
will not exceed 25% of Subscriber's joint net worth with spouse (exclusive of
principal residence and its furnishings).
________(g) A trust, with total assets in excess of $3,000,000, 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)
promulgated under the Securities Act (i.e., a purchaser not an Accredited
Investor who either alone or with his purchaser representative(s) has such
knowledge and experience in financial and business matters that the purchaser is
capable of evaluating the merits and risks of the prospective investment).
________(h) An entity in which all of the equity owners are accredited
investors. (If this alternative is checked, Subscriber must identify each equity
owner and provide statements signed by each equity owner demonstrating how each
qualifies as an accredited investor.)
3.8 If Subscriber is a natural person, Subscriber is: a bona fide
resident of the State contained in Subscriber's address set forth on the
signature page of this Agreement as Subscriber's residence address; at least 21
years of age; and legally competent to execute this Agreement. If Subscriber is
an entity other than a natural person, Subscriber is duly authorized to execute
this Agreement, and this Agreement, when executed and delivered by Subscriber,
will constitute Subscriber's legal, valid and binding obligation, enforceable
against Subscriber in accordance with its terms; and the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite corporate or
other necessary action on the part of Subscriber.
3.9 Subscriber acknowledges the Securities will be subject to a stop
transfer order and the certificate or certificates evidencing the Securities
will bear the following or a substantially similar legend and such other legends
as may be required by other applicable securities laws (if any):
"These Securities have not been registered under the
Securities Act of 1933, as amended. Such Securities may be
sold or offered for sale, transferred, hypothecated or
otherwise assigned only pursuant to registration under such
Act or pursuant to an available exemption from registration
supported by an opinion reasonably acceptable to the Company
by counsel reasonably acceptable to the Company that an
exemption from registration for such sale, offer, transfer,
hypothecation or other assignment is available under such
Act."
3.9 Subscriber agrees that Subscriber will not offer or resell the
Securities unless: (a) resale of such Securities is registered under the
Securities Act, or (b) an exemption from registration is available under the
Securities Act.
3.10 Subscriber is acquiring the Securities for Subscriber's own
account for investment and not with a view to the sale or distribution thereof
or the granting of any participation therein, and Subscriber has no present
intention of distributing or selling to others any of such Securities or
granting any participation therein. Subscriber has no agreement or other
arrangement, formal or informal, with any person to sell, transfer, pledge or
otherwise dispose of any of the Securities which would guarantee to Subscriber
any profit, or protect Subscriber against loss, regarding the Securities, and
Subscriber has no plans to enter into any such agreement or arrangement.
3.11 It never has been represented, guaranteed or warranted to
Subscriber by the Company, or its principals, including any of the officers,
directors, shareholders, partners, employees or agents of either, or any other
persons, whether expressly or by implication, that:
(a) the Company or Subscriber will realize any given percentage
of profits or amount or type of consideration, profit or loss as a result of the
Company's activities or Subscriber's investment in the Company; or
(b) the past performance or experience of the management of the
Company, or of any other person, in any way indicates the predictable results of
ownership of the Securities or of the Company's activities.
3.12 Subscriber understands that the net proceeds from all paid and
accepted subscriptions will be used for Company purposes, and that the
Securities to be issued hereunder will not be secured by any collateral.
Further, the Company may, in its sole discretion, reject this subscription or
reduce this subscription in any amount and to any extent, whether or not pro
rata reductions are made of other investors' subscriptions.
3.13 The representations, warranties, certifications and agreements
made by Subscriber herein are true and correct and shall survive the execution
and delivery of this Subscription Agreement and the purchase and receipt of the
Securities.
Article 4. Indemnification
Subscriber acknowledges that Subscriber understands the meaning and
legal consequences of the terms of this Subscription Agreement, including, but
not limited to, the representations, warranties, certifications and agreements
made by Subscriber in Article 3 hereof, and Subscriber hereby agrees to
indemnify and hold harmless the Company and each officer, director, employee,
agent and controlling person thereof, past, present or future, from and against
any and all claims, loss, damage, liability, costs and expenses, including
without limitation reasonable attorneys' fees and expenses, due or relating to
or arising out of a breach, inaccuracy or inadequacy of any such representation,
warranty, certification or agreement or of any other term of this Subscription
Agreement.
Article 5. General Provisions
5.1 Neither this Subscription Agreement, nor any of Subscriber's
interest herein, shall be assignable or transferable by Subscriber in whole or
in part except by operation of law.
5.2 All notices or other communications given or made hereunder shall
be in writing and shall be delivered or mailed to Subscriber at the address set
forth below and to the Company at the address set forth below, or shall be
delivered by facsimile transmission with a copy by first class mail, postage
prepaid, to the other party at his/its address set forth below. Notices hand
delivered shall be deemed given upon receipt and notices sent by mail shall be
deemed given on the fifth business day following deposit in the mail, first
class airmail postage prepaid. Notices delivered by facsimile transmission shall
be deemed given one business day following the day of transmission, provided
that the sender has confirmation of receipt of transmission and mails a copy by
first class mail, postage prepaid, addressed to the other party at his/its
address below.
5.3 This Subscription Agreement shall be construed in accordance with
and governed by the laws of the State of Washington, U.S.A., as in effect for
contracts made and to be performed in the State of Washington. Subscriber hereby
submits to the jurisdiction of the courts of or located in the State of
Washington for all purposes relating to this Subscription Agreement, the
Securities and Subscriber's interest in the Company, and such courts shall have
exclusive jurisdiction relating thereto.
5.4 This Subscription Agreement constitutes the entire agreement
between the parties hereto regarding the subject matter hereof and may be
amended only by a writing executed by both parties.
5.5 This Subscription Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year this subscription is accepted by the Company as
set forth below.
Signature of/for Subscriber(s): Signature of/for Any Co-Subscriber:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Print Name of Signatory Here Print Name of Any Co-Signatory Here
Subscriber's Mailing Address: Type of Ownership:
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇
----------------------------------------- Individual -----X----
Street and Number Community
Property ---------
Plantation Tenants in
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City or Town Common ---------
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ With Rights
----------------------------------------- of Survivorship ---------
State Country Zip Code Partnership ---------
Corporation ---------
Custodial Account -------
----------------------------------------- Other (explain) --------
U.S. Social Security or other
Tax Number of Subscriber
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
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CERTIFICATE OF SIGNATORY
(To be completed if Securities are being subscribed for by an Entity)
I,_____________________________ , am the ______________________________
of __________________________________________ (the "Entity"). I hereby certify
that I am empowered and duly authorized by the Entity to execute and carry out
the terms of the Subscription Agreement and to purchase and hold the Securities
on behalf of the Entity, and I further certify that the Subscription Agreement
has been duly and validly executed on behalf of the Entity and constitutes a
legal and binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this _____ day of
________________, 2002.
-------------------------------------
(Signature)
ACCEPTANCE
DIGITAL DATA NETWORKS, INC., a corporation organized under the laws of
the State of Washington, U.S.A., hereby accepts the foregoing subscription
subject to the terms and conditions of this Subscription Agreement this 25th day
of July, 2002.
DIGITAL DATA NETWORKS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile Number: ▇▇▇-▇▇▇-▇▇▇▇
ADDENDUM A
RISK FACTORS
Securities of the Company involve a high degree of risk and should be
regarded as speculative. In addition to matters set forth elsewhere, potential
subscribers should carefully consider the risk factors described below relating
to the business of the Company and the Offering.
1. History; Financial Condition, Liquidity and Going Concern
The Company began operation in October 1988 as Transit Information
Systems, Inc. and the present name was adopted in July 1995. The Company also
operates as The Transit Network under an assumed name certificate.
The Company has a contract to provide services with the Dallas Area
Rapid Transit ("DART"), which was extended for one year and which now expires in
October 2002. If DART wishes to continue having a digital information network on
its vehicles, as the Company believes it does, DART must solicit new proposals
for this project via a Request for Proposal ("RFP"), or extend the Company's
existing contract again. If DART does issue an RFP, the Company intends to
respond to the RFP and hopes to enter into a new contract in order to continue
providing services to DART. However, there can be no assurance that the Company
will be the successful bidder or that a new contract would have terms similar to
the current contract. As noted in an explanatory paragraph in the report of
Independent Certified Public Accountants on the Company's annual audited
consolidated financial statements included in the Annual Report, these
conditions raise substantial doubt about the Company's ability to continue as a
going concern.
The Company continues to experience net losses and negative cash flows
from operations, and has an accumulated deficit at March 31, 2002 of
approximately $13.6 million and a negative working capital position. The ability
of the Company to generate positive cash flows from operations and net income,
is dependent, among other things, on market conditions, the recovery of recorded
assets, cost control, maintaining existing revenue-producing activities,
identifying and securing additional revenue sources, and the Company's ability
to raise capital under acceptable terms. The Company has pursued merger
possibilities and continues to do so. While the Company has had some successes
in these endeavors in the past, there can be no assurance that its efforts will
be successful in the future. In the event that the Company is unsuccessful in
these endeavors, it will have a material adverse effect on the Company.
2. Significant Capital Requirements; Need for Additional Financing
The Company's capital requirements are and will continue to be
significant, as the Company may incur additional, significant operating losses
in the future. The Company anticipates, based on management's internal forecasts
and assumptions relating to its operations, that the Company's current cash
resources will be insufficient to satisfy the Company's contemplated cash
requirements, and the Company may be required to seek additional financing
sooner than currently anticipated. There can be no assurance that the Company
will be able to obtain additional financing on terms acceptable to the Company.
If additional revenue sources or cash infusions are not realized, the Company
may need to dramatically change its business plan, sell or merge its business,
or face bankruptcy. To the extent that any financing involves the sale of the
Company's equity securities, the interests of the Company's then existing
shareholders could be substantially diluted.
3. Potential Fluctuations in Quarterly Results
The Company may experience significant fluctuations in future quarterly
operating results and uses of cash that may be caused by many factors, some of
which are outside of the Company's control.
4. Uncertainty of New Product Development and Other Technological Factors
The Transit Network's wireless communications systems are subject to
rapidly changing technology and evolving industry standards which could result
in product obsolescence or short product life cycles. The Company believes that
its future success will depend on its ability to anticipate and respond to such
changes. The Company continues to work to refine and improve both the hardware
and software components of these systems. Continued system refinement and
improvement efforts remain subject to the risks inherent in product development,
including unanticipated technical and other problems which could result in
material delays and/or increased costs. Additionally, there can be no assurance
that other parties with financial resources far greater than those of the
Company will not develop technologies or products that render the Company's
products obsolete or less marketable.
5. Developing Markets; Unproven Acceptance of the Company's Products
The markets for the Company's technologies and products continue to
develop. Demand and market acceptance for recently introduced products and
services are subject to a high level of uncertainty and risk. Because the
markets for the Company's technologies and products are still evolving, it is
difficult to predict the future growth rate, if any, and size of this market.
There is no assurance either that the markets for the Company's technologies and
products will become sustainable. If the markets fail to develop, develop more
slowly than expected or becomes saturated with competitors, or if the Company's
technologies and products do not achieve or sustain market acceptance, the
Company's business, results of operations and financial condition will be
materially and adversely affected.
6. Substantial Dependence Upon Third Parties
The Company depends substantially upon third parties for several
critical elements of its business including, among others, the manufacturing and
maintenance of its hardware.
7. Dependence Upon Key Personnel
The success of the Company will be largely dependent upon the personal
efforts of certain personnel. Competition for qualified employees is intense,
and the loss of key personnel or the inability to attract and retain the
additional highly skilled employees required for the Company's activities could
adversely affect its business. There can be no assurance that the Company will
be able to hire or retain such necessary personnel.
8. Financial Information
The financial position of the Company and its operating costs and
activities could change materially in a very short period of time. The Company's
audited financial statements reflect the results of operations for the year
ended December 31, 2001. Readers are cautioned not to utilize the financial
information provided to predict future operating performance.
9. Competition
The Company operates its digital information network pursuant to a
contract with DART. The advertising industry is intensely competitive. The
Company competes for advertising dollars with all advertising and promotional
channels, including television, radio, magazines, newspapers, outdoor and direct
mailings. Management believes that its primary competition is radio and
newspapers, which charge rates significantly higher than those charged by the
Company. The Company believes that the primary basis for competition in the
advertising industry is price and value, although other factors such as market
coverage, audience demographics, and time and cost of production are also of
importance. Other parties, some with financial resources far greater than the
Company's, may enter the market, making it more difficult to compete for
advertising dollars.
10. Government Regulation
The Company is not currently subject to direct regulation by the
Federal Communications Commission or any other agency, other than regulations
applicable to businesses generally. Changes in the regulatory environment
relating to commerce on or access to the Internet, including regulatory changes
which directly or indirectly affect telecommunication costs or increase the
likelihood or scope of competition, could have an adverse effect on the
Company's business. The Company cannot predict the impact, if any, that future
regulation or regulatory changes may have on its operations.
11. Absence of Dividends; Dividend Policy
The Company has never paid dividends on its Common Stock and does not
anticipate paying any dividends on its Common Stock in the foreseeable future.
The declaration and payment of dividends by the Company are subject to the
discretion of the Company's Board of Directors. Any determination as to the
payment of dividends in the future will depend upon results of operations,
capital requirements, restrictions in loan agreements, if any, and such other
factors as the Board of Directors may deem relevant.
12. Lack of Liquidity of Investment
The Shares have not been registered under the Securities Act or
qualified under applicable state or other securities laws and regulations. The
Shares may not be resold or otherwise transferred unless they are registered
under the Securities Act or unless exemptions from the registration and
qualification requirements are available and the Company receives an opinion of
counsel acceptable to it that such registration and qualification is not
required. Therefore, an investor may be unable to liquidate an investment in the
Shares. The certificates evidencing the Shares will bear a legend referring to
these restrictions on transfer. Purchasers of the Shares should be aware that
they will be required to bear the financial risks of their investment for an
indefinite period of time.
13. Denial of Cumulative Voting and Preemptive Rights; Lack of Control
Holders of the Common Stock have no preemptive rights in connection
with such securities. The security holders may be further diluted in their
percentage ownership of the Company if additional securities are issued by the
Company in the future. Cumulative voting in the election of directors is
prohibited. Accordingly, the holders of a majority of the outstanding shares of
Common Stock, present in person or by proxy, will be able to elect all the
members of the Company's board of directors.
14. Authorization of Preferred Stock
The Company's Restated Articles of Incorporation, as amended, authorize
the issuance of 1,000,000 shares of preferred stock with such designations,
rights and preferences as may be determined from time to time by the board of
directors, without shareholder approval. In the event of issuance, the preferred
stock could be utilized under certain circumstances as a method of discouraging,
delaying or preventing a change in control of the Company. At present the
Company has no particular plans to issue any shares of its preferred stock.
ADDENDUM B
SUMMARY OF PLACEMENT
The Placement
The Company is offering a total of One Million Two Hundred Fifty
Thousand shares of common stock (1,250,000) at a purchase price of $0.08 per
share for a total offering amount of One Hundred Thousand and no/100 Dollars
(USD$100,000). The Subscription is being offered inside the United States to
persons who are "accredited investors." The Company reserves the right to reject
any subscription, in whole or in part, in its sole discretion for any reason or
no reason. The Subscription is offered subject to prior sale and subject to
approval of certain legal matters by counsel for the Company.
The Offering is being made inside the United States pursuant to
exemptions from registration provided by Section 4(2) of the Securities Act of
1933, as amended ("Securities Act") and Rule 506 of Regulation D promulgated
thereunder. Persons desiring to purchase the Shares must execute the form of
Subscription Agreement prepared for use in connection with the Offering. The
Company is paying all expenses of the Offering, except that investors desiring
to engage separate counsel or other experts in connection with their investment
must pay their own expenses therefor.
The Offering has no escrow or minimum sale requirements that must be
met before the Company can utilize the proceeds from subscriptions. Subscription
payments will be transferred into the Company's account upon acceptance of
subscriptions. The Company will utilize every dollar so received, thus
increasing the risk of loss to investors if inadequate subscriptions are
received.
Use of Proceeds
Proceeds from the Offering will be used primarily to fund the Company's
operation, including general and administrative expenses, working capital and
other general corporate purposes. The expenses of the Offering are estimated to
be approximately $10,000.
Eligible Investors
Subscriptions will be accepted only from persons who are "accredited
investors" as defined by Rule 501(a) of Regulation D.
Opportunity to Make Inquiries
The Company is making available to each offeree, prior to the sale of
the Securities, an opportunity to ask questions and to receive answers from the
Company concerning any aspect of the investment, and to obtain any additional
information to the extent that the Company possesses such information or can
acquire it without unreasonable effort or expense.
Restrictions on Transferability of Securities
The Securities have not been registered under the Securities Act or the
laws of any state or other jurisdiction. Resales of Securities purchased by
persons who are not U.S. Persons may be made pursuant to Regulation S, but may
be subject to restrictions imposed by the laws of other jurisdictions.
Securities purchased in the United States will be "restricted securities" under
Rule 144 promulgated under the Securities Act and may be resold only pursuant to
registration under the Securities Act or an exemption therefrom, which exemption
may include Rule 144. Rule 144 permits public resale of restricted securities
generally only after they have been held for one year and subject to compliance
with various other provisions of Rule 144. Hedging transactions relating to the
Securities may be conducted only as permitted by the Securities Act.
Certificates for the Securities will bear appropriate legends reflecting
applicable restrictions on their transferability.
Outstanding Common Stock
Assuming sale of the Shares, the outstanding Common Stock of the
Company, after the closing of this Offering, would be as follows:
As Adjusted for Offering and Full Dilution
Shares of Percent
Common Stock of Total
------------ ---------
Common Stock outstanding at July 10, 2002 2,452,641 56 %
Shares this Offering 1,250,000 29 %
Total outstanding 3,702,641 85 %
Stock Options, Warrants and commitments 661,757 1 15 %
Total (fully diluted) 4,364,398 2 100.0 %
=======
Capitalization
The following table sets forth the unaudited capitalization of the
Company at July 10, 2002, and as adjusted to give effect to sale by the Company
of the Shares (in thousands):
At July 10, 2002
------------------------------------------
Actual As Adjusted*
-------------------- ---------------
Shareholders' Equity (Deficit)
Common Stock $ 13,402 $ 13,492
Accumulated Deficit (13,592) 3 (13,592)
---------------- ----------------
Total Shareholders' Equity (Deficit) $ (190) $ (100)
=================== ================
*As adjusted for issuance of 1,250,000 shares of Common Stock from the current
Dilution in Book Value TO investors
At July 10, 2002, there were 2,452,641 shares of Common Stock
outstanding and book value (shareholders' equity) of the Company was ($190,000),
or ($0.08) per share, determined on the basis of including accumulated deficit
at March 31, 2002. Assuming that the Offering is sold in its entirety, pro forma
book value of the Company at such date would have been ($100,000), or ($0.03)
per share. Subscribers who purchase Securities in the Offering would experience
dilution as of July 10, 2002 as follows:
Price per Common Share (maximum price) $ 0.08
Book Value per share
at July 10, 2002 ($ 0.08)
Increase in Book Value per share
attributable to this Offering $ 0.05
Book Value per share (Primary),
as adjusted for the offering ($ 0.03)
Dilution to Investors in the Offering $ 0.05 or 62%
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1 Includes all options to acquire shares of Common Stock, whether or not
currently exercisable. The Company has granted options to purchase a
total of 443,801 shares of Common Stock to the directors and officers
of the Company. The exercise prices of the options vary between $0.07
and $9.93 per share; they vest over various periods and, when
exercised, will cause dilution to the Company's investors. Upon
request, the Company will make available additional information
regarding the Company's stock option plan, number of granted options,
exercise prices and vesting schedules.
2 Includes the options described in Footnote 1 above.
3 Accumulated deficit is as of March 31, 2002, the date of the most
recently available financial statements.