Overview of Private Placements Securities Laws Exemptions From the Registration Requirement Rule 504: Offerings of $1 million or less Rule 505: Offerings of $5 million or less Rule 506: Offerings of no limit Accredited Investors Content of the Private Placement Memorandums and Offerings Safe Harbor Statement Example of a Private Placement Memorandum Executive Summary Another Example a Private Placement Memorandum Executive Summary Examples of Private Placement Memorandum Notices
Overview of Private Placements Private Placements are offerings of new securities by an issuer made privately without registration with a government authority. Such securities are typically subject to a resale holding period and are, therefore, not a liquid investment. Investing in Private Placements is speculative and highly risky and is only appropriate for certain investors. We do not provide tax, legal, or accounting advice and do not recommend the suitability of any investment or investment strategy. You assume full responsibility for determining whether any new issue is appropriate for you. If your company is not publicly traded, and you are seeking equity capital as funding, then you need private equity investors. The owner and the principals of your company are free to invest your own money. Your family members and the family of principals are also generally exempt from any restriction on investing in a private equity placement. In addition to these exempt individuals, you may also have up to 35 non-qualified investors, who can be anyone without exception. You may also have up to an infinite number of qualified investors, who are generally those who meet the test of financial status you suggest.
A private placement memorandum may be organized by an investment banking company on behalf of a private company that is not registered with the SEC and is a non-reporting company. The investment bankers will look over the business plan, the results achieved, and the assets pledged. Often, investment bankers will want to do a good deal of investigation, known in the trade as "due diligence" which will include verifying numbers, audit-type activities, and may include various financial analyses. The investment bankers will then create a private placement memorandum, a document, which they will circulate among their contacts. These contacts may include large institutional investors, wealthy individuals, and anyone else they believe may be interested in an investment in the given company. Often, the investment banker will want the contact lists of the principals of the company to circulate copies of the memorandum to, so they can get the placement fully subscribed as quickly as possible.
It is possible to raise tens of millions of dollars through a series of private placement memoranda, and a number of companies have done just that. Generally, a small amount of money is raised first, often from the principals of the company and their personal contacts. That money is used to develop a refined business plan and get started on some of the essential aspects of the innovation being pursued. This stage of investment is often referred to as seed capital. Seed capital may consist of only a few tens to hundreds of thousands of dollars. It may produce such milestones as a finished business plan and a conceptual design of the products or services to be offered. Few investment bankers or venture capitalists will provide
seed capital.
After seed capital, depending on how the plan is organized, it may be possible to set up several phases of development, and match these to phases of investment. It is sometimes possible to obtain commitments for second round financing which include additional commitments for later rounds of financing in the event milestones are met. In some instances, companies will decide to go to the public and sell stock through an initial public offering, or IPO. Such a public offering would be made by means of a registration statement and prospectus filed with and reviewed by the SEC , which is generally a lengthy and expensive undertaking.
More often, however, companies will want to conduct a stock offering not involving a public offering, and instead plan for a "private placement". Offers and sales not involving a public offering are exempt from registration under federal securities laws, and most states have comparable exemptions. Case law and rulings under federal securities laws provide some guidance as to what specific transactions may constitute private placements.
Generally, the simplest and safest way to ensure that a private placement offering and transaction is exempt from the registration requirement is to conduct it in a manner that complies with the safe harbor for private placements, Regulation D, [which is found at CFR 230.501-230.508].
Securities Laws The United States Federal Securities Act of 1933 provides that it is unlawful for any person to make use of any means or instruments of transportation or communication in interstate commerce or the mails to offer or sell a security unless a registration statement is in effect with respect to the security [Securities Act, section 5.]
The Securities Act also provides that the foregoing restriction is not applicable to transactions by persons other than the issuer, underwriter, or dealer, nor to transactions by an issuer not involving a public offering [Securities Act, Sections 4(1) and 4(2).]
These laws have the effect generally of requiring a company to register it's stock or other securities with the SEC prior to offer of sale in interstate commerce unless transactions or securities themselves are exempt from the registration requirement. Most states have a similar requirement. Securities laws also prohibit the offer and sale of securities without disclosing all material facts about the issuer. As a practical matter, prior to selling stock, every start-up company needs to prepare and deliver to investors an offering document (referred to as a "memorandum" or "prospectus") which describes the business and company's financial condition, all risks associated with the investment, and the products and services offered to which specific markets.
Exemptions From the Registration Requirement
Registration exemptions are a critical portion of the securities laws for smaller firms and start-up companies looking to raise investment funds. Under federal law, there are three primary exemptions for the private placements of securities as defined in Section 4(2) of the Securities Act of 1933 and SEC Regulation D. These exemptions are set forth in SEC Rules 504, 505, and 506.
Rule 504: Offerings of $1 million or less
The amount of money a company needs to raise will affect the rule under Regulation D you cause the transaction to comply with. In general, Rule 504 may be used for offerings of $1 million or less [17CFR230.504(b)(2)]. Under SEC Rule 504, an issuer may within a twelve-month period issue up to $1,000,000 worth of securities to an unlimited number of unsophisticated investors who purchase the securities for their own account and not for resale. There are no required disclosures under Rule 504 except those that are necessary under the antifraud disclosure laws. (General solicitation is usually limited or prohibited by state law.) The securities are not "restricted securities," and so are free of some restrictions on resale. A Form D must be filed with the SEC within 15 days after the first sale. The date of the first sale is the date on which the first investment agreement is signed by an investor, not necessarily the date on which the money is transferred. The issuer must comply with the securities laws of each state in which a purchaser is a resident, and must usually file a notice with that state’s commissioner of corporations or similar official. The persons who acquire the securities should sign an investment agreement as proof of their investment intent and other required representations. Three major advantages to Rule 504, as contrasted with Rules 505 and 506, are that: There are no requirements to furnish any specific information to investors investors in a memorandum, although general anti-fraud rules apply, [17CFR 230.502(b)(1)]; The securities obtained in a transaction complying with Rule 504 are not "restricted securities", [17CFR230.502(d),17CFR230.504(b)(1)]; There is no limit to the number of purchasers in the transaction.
Although Rule 504 may seem attractive because of the above three items, it's major drawback is that some states do not have a comparable rule. This means that although your transaction is exempt from federal regulations there may be no comparable exemption under the state laws. The other major drawback is that for most companies $1 Million is simply to little money to achieve the intended objectives.
Rule 505: Offerings of $5 million or less
Rule 505 is available for offerings of $5 million or less [17CFR230.505(b)(2)(i)] and is restricted to 35 purchasers other than "accredited investors" [17CFR230.505(b)(2)(ii), 17CFR230.506(b)(2)(i), 17CFR230.501(e)(1)(iv)]. Under SEC Rule 505, an issuer may a within twelve-month period issue up to $5,000,000 worth of securities to thirty-five unsophisticated investors plus any number of "accredited investors." There are a number of required disclosures, which are described below, if the sale of securities includes investors who are not accredited investors. Advertising and a general solicitation are prohibited. The securities are "restricted securities" and may not be readily resold. A Form D must be filed with the SEC within 15 days after the first sale. The Issuer must comply with the securities laws of each state in which a person who buys the security is a resident, and must usually file a notice with that state’s commissioner of corporations or similar official. The persons who acquire the securities should sign an appropriate investment agreement.
Rule 506: Offerings of no limit Under SEC Rule 506, an issuer may issue an unlimited amount of securities, with no dollar limit, to 35 sophisticated investors plus any number of "accredited investors." There are required disclosures, described below, if a sale of securities includes purchasers who are not accredited investors. Advertising and a general solicitation are prohibited. The securities are "restricted securities" which may not be readily resold. There is a singular and great advantage to Rule 506, and this is that it supersedes and preempts the securities laws of all the states. This save a lot of time, effort, and expense if the issuer is obtaining money from investors in several states. Form D must be filed with the SEC within 15 days after the first sale of securities and also with the commissioner of corporations of each state in which a purchaser is a resident. The persons who acquire the securities should sign an appropriate investment agreement.
Accredited Investors
Both Rules 505 and 506 require that certain specified information must be supplied by the company to "unaccredited investors" [17CRF230.505(b)(1), 17CRF230.506(b)(1), 17CRF230.502(b)]. The term "accredited investor" has a lengthy definition which includes among other things:
A person whose net worth, or joint net worth with his or her spouse exceeds $1,000,000; A person who has made over $200K in each of the past two years and reasonably expects to do so in the current year; A person who, with his or her spouse, has made over $300K in the past two years and reasonably expects to do so in the current year. A financial institution such as bank, broker-dealer, insurance company or business development company. Any director, officer or general partner of the issuer, or a trust or business partnership with assets in excess of $5 million that was not formed for the purpose of acquiring the unregistered securities. Any entity wholly owned by accredited investors. [17CFR230.501(a)]
The rules *advise* that if a company supplies information to unaccredited investors, it should consider supplying the same information to accredited ones [17CRF230.502(b)(note)]
In practice a company will usually have it's counsel prepare a private placement memorandum which contains all the information required to be disclosed to unaccredited investors, and the memorandum will be distributed to all prospective investors, whether accredited or not. Note that investments in Private Placement Offerings are not covered by SIPC insurance. Only registered securities (such as Initial Public Offerings) are included under the SIPC coverage.
Content of the Private Placement Memorandums and Offerings
A well-prepared Private Placement Memorandum acts as insurance against risks. For that reason, an issuer should be careful, pay attention to details and not be too quick in developing a Private Placement Memorandum. The following is a checklist regarding the contents and items to be included in a private placement memorandum for a securities offering intended to meet disclosure requirements of SEC Regulation D. It should include at least the following: Cover Page: The name, address, and telephone number of the issuer.
Securities Legends Suitability Standards for Investors Summary of the Securities Offering: Description and the Price of the securities offered.
The Offering Amount, including minimum and maximum amounts, if any. Terms of the Securities Offered A statement describing how the offering price was determined.
Plan and Cost of Distribution of the Securities Principal Shareholders
Management and Compensation: An identification of the officers and directors of and advisors to the issuer.
The Business of the Company A description of the issuer's business and products or services and how they meet a market need, to include a thorough review (excluding the disclosure of trade secrets) of any technology which is a key to the issuer’s proposed business.
A discussion of the market for the issuer's products and services, and methods of marketing and distribution.
Selected Financial Data and Financial Statements: A recent balance sheet which can be prepared without audit. It is better if the balance sheet is prepared by an outside accountant.
Recent statements of income and cash flow prepared without audit.
Projections for future revenues, expenses, and profits or losses.
Use of Proceeds from the securities offering Management’s Discussion and Analysis of Financial Condition and Results of Operation
A statement detailing that neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities or passed on the adequacy or accuracy of the disclosures in the prospectus.
A description of the Capitalization of the Company and a calculation of Dilution. Description of Capital Stock of the Company: A description of prior offerings, stock plans, and stock options.
A description of the restrictions on the resale of the issuer’s securities and the fact that no market now exists or may ever exist for them, together with a description of legends to be placed on the issuer’s securities.
A disclosure of Certain Transactions (transactions between the Company and its shareholders, officers, directors or affiliates) and a disclosure of the shareholdings and compensation of management.
A disclosure of all material contracts with, or commitments to others.
Documents Available for Inspection: Exhibits, such as Articles of Incorporation, founders agreements, tax opinions (if any), etc.
Tax Matters relating to the business Legal Matters relating to the business Experts relating to the business and its future goals An offer for the investors to meet with management, tour the issuer’s facilities, and ask questions and receive answers to questions. Risk Factors, to include at least the following: (a) The fact that the issuer has no operating history; (b) The fact that the issuer has had no profits from operations; (c) The fact that the issuer has an uncertain financial position; (d) A risk assessment of the issuer’s products or services and technology. (e) The fact that the issuer is subject to competition, and a description of the competition. (f) A description of the risks of the issuer’s securities and their lack of liquidity. (g) A warning that the issuer might become insolvent or bankrupt. (h) A specific warning that an investor might lose his entire investment in the issuer.
Depending upon the particular nature of the issuer and its business and products, other disclosures may be needed. The requirement is to disclose completely and accurately all material facts about each specific issuer so that an investor can make a fully informed decision about investing in the issuer.
Safe Harbor Statement
The following is the Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements which are not historical facts contained in this press release are forward-looking statements that involve certain risks and uncertainties including but not limited to risks associated with the uncertainty of future financial results, additional financing requirements, development of new products, government-approval processes, the impact of competitive products or pricing, technological changes, the effect of economic conditions and other uncertainties detailed in the Company's filings with the Securities and Exchange Commission.
Stock Warrants and Debt Instruments
Banks are not the only people from whom one can borrow money. One of the techniques for raising investment capital is to offer a debt instrument which includes an option to convert the debt to stock, sometimes involving an additional cash investment. A strip of debt may also be sold alongside a strip of equity.
One instrument often used in this regard is a warrant. A stock warrant is a certificate entitling the owner to buy a specified amount of stock at a particular time for a particular price. It is different from a stock option in that options are generally provided to employees and principals while warrants are provided to investors. The "particular time" can be for perpetuity, or it can be tied to the achievement of certain milestones, such as profitability.
If the company achieves its milestones, the reasoning goes, it will be worth more as a company than is reflected in the debt instrument. If the company does not achieve its milestones, the debt instrument may reflect a greater investment than the company is worth. A convertibility approach allows an investor to put up a certain amount of money which is a debt obligation of the company. As such, it may be secured or collateralized by tangible property. That collateral may be pledged more than once, depending upon the limitations of the first mortgage.
In the event the company fails, long term debt holders stand to collect first (typically after payroll and trade credit obligations are fulfilled), and ahead of stockholders. Preferred stockholders would collect next, and common stockholders would divide up whatever is left. Secured debt holders also have the fallback of collateral to collect.
If the company succeeds, it may be in an excellent position to pay off its debt holders, who get the return they expect on their investment. However, they don't get the big ride up that the equity investors would get. So, with the ability to convert debt to equity, a debt holder can have all the advantages of a secured note, all the certainty of standing ahead of the stockholders at bankruptcy, and also have the ability to convert to equity to realize enormous gains if the company comes through a winner.
Example of a Private Placement Memorandum Executive Summary:
The Newco Company, Inc. ("the Company")
Tombstone General Announcement
in accordance with the provisions of
California Corporations Code Section 25102(n) The Newco Company, Inc. a Delaware Corporation, is conducting a Private Offering of 199,000 Series "A" 12% Cumulative Convertible Preferred Shares (the Class "A" shares) at $5.00 per share for an aggregate offering price of $995,000.00 Minimum Purchase: 1,000 shares ($5,000.00)
Each Class "A" Share is convertible into ten (10) Common Shares of the Company ("Common Shares"), par value $0.0001 per share, for no additional consideration. The Class "A" shares can be converted in whole or in part, at the option of the holder, at any time commencing six (6) months following the close of the Offering, and provided that the average bid price of the Common Shares is at least $5.00 per share on any twenty (20) trading days prior to such conversion date. The Class "A" shares are callable by the Company at any time the average bid price of the Common Shares is at least $5.50 per share on any twenty (20) trading days prior to such a call.
PROSPECTIVE INVESTORS MUST MEET SUITABILITY STANDARDS AS DESIGNATED BY THE CALIFORNIA CODE OF REGULATIONS.
(I) No Money or other consideration is being solicited by means of this Announcement nor will money be accepted. An offer may be made only by means of a Private Placement Memorandum ("the Memorandum"), which can be obtained by prospective purchasers of the Class "A" shares. Only prospective purchasers who meet the suitability requirements described in the Memorandum, shall be permitted to purchase the Class "A" shares.
(II) An indication of interest made by a prospective purchaser shall involve no obligation or commitment of any kind.
Summary: The Company is a development stage company that has developed a product for _________________________________. The Company has completed initial product development efforts and the product is ready to market. The Company is ready to conduct _____________ tests to confirm efficacy of the product.
Use of Proceeds: The Company will (1) arrange and direct at least three separate _________________ studies on __________________, in order to test the efficacy of the product. Additionally, proceeds have been allocated generally to (2) administrative expenses, (3) legal and consulting, (4) product marketing, (5) repayment of debt, (6) continued research and development, (7) salaries, and (8) working capital.
THIS ANNOUNCEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE SECURITIES DESCRIBED ABOVE IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD NOT BE PERMITTED BY LAW.
Registered Address:
The Newco Company, Inc.
123 Main Street
City, California 90001
Telephone: 1-800-555-1111
Fax: 1-555-123-1234
e-Mail: jnewco@newco.com
Please Note: All prices mentioned herein are in U.S. Dollars.
Another Example a Private Placement Memorandum Executive Summary:
THIS ANNOUNCEMENT IS NOT AN OFFER TO SELL SECURITIES. THE OFFER IS MADE IN THE OFFERING MEMORANDUM. TO OBTAIN AN OFFERING MEMORANDUM, PLEASE CONTACT THE COMPANY. THESE SECURITIES ARE NOT REGISTERED WITH ANY GOVERNMENT AGENCY AND ARE OFFERED IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION AS A SMALL BUSINESS PRIVATE PLACEMENT OF SECURITIES. FOR MORE INFORMATION, PLEASE CONTACT THE COMPANY. THIS OFFERING MAY EXPIRE WITHOUT NOTICE AT ANYTIME. NEWCO COMPANY OFFERING MEMORANDUM HIGHLIGHTS:
PRIVATE PLACEMENT OF STOCK:
100,000 Common Stock shares
Price: $ 1.00 per share
Minimum Purchase: $ 500.00
Gross Proceeds: $ 100,000.00
Estimated Net Proceeds: $ 95,000.00 (less Costs of Offering)
Optional Funding Method: Loan or Credit line
No minimum. All funds raised will be put to immediate use by the company. Company Overview Newco is a private company founded in 1998, engaged in: (1) ______________ services
(2) production and distribution of ______________
(3) Company customers include _______, _______, _______, _______, and other customers. Current Assets: $2.2 million
Liabilities $190,000 Long Term / $8,000 Current
Earnings: $.03 per share in 2002
Projected revenues 2003: $350,000.00
Projected earnings 2003: $ .12 per share
Purpose of Expansion and Capital Allocation The company will start a ________________ service providing __________________ for _________________ and ______________. Funds will be allocated for purchase of _______, _________, __________, and _____________. New ___________ includes __________, __________, _______. Additional _________ will specialize in ___________ for ___________ revenue. Company Products Completed products and programs feature ___________, ____________, __________, _____________, and ___________. __________ of _________ are offered in ___________. The company website has been active since 1998. The site address is: http://www.newco.com. Market Analysis and Strategy The company reports a growing number of _________ sales driven mostly from __________. People obtaining one of the __________________ from ____________ usually contact the firm upon _________________ and purchase ________________________. The company earns from $____ to $____ net revenue per sale when selling ____________________. In general, special interest _______________________ are difficult to find in local video stores while that segment of the industry reports $_____________ in sales. New ________________ will feature ____________, ____________, ____________, ____________, and other ________. ________ delivery using ________ is a cost-effective means to reach a large pool of potential customers. Management John Newco will oversee all activities of the company. Newco management, staff, marketing and salespersons will focus on building revenue. Management of Newco draws on years of experience in ___________, ____________, ___________, ____________, and ____________. Additional people will be hired as needed. Return on Investment and Exit Strategy Repayment of loans or credit lines is pledged from revenues and capital. Future IPO, merger or sale of company assets is expected to generate revenue for return on investment. Stock dividends and stock value appreciation is anticipated early on. The company is profitable. Expansion will increase revenues and earnings. Stock and loan combination options available. Investors should contact John Newco. Risk factors include a limited market for the company's securities, reliance upon key personnel and competition from larger firms engaged in the same activities. Please contact the company for additional information. E-mail: jnewco@newco.com --
you may also write to
John Newco, President
Newco Company
PO Box 123
City, CA 90001 Telephone: 1-800-800-555-1111 USA ONLY.
Examples of Private Placement Memorandum Notices
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
FOR ACCREDITED INVESTORS ONLY NOTICES
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH, OR APPROVED OR DISAPPROVED BY, THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") 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.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. THE SECTION OF THIS PRIVATE PLACEMENT MEMORANDUM ENTITLED "RISK FACTORS" COMMENCING ON PAGE 5 SHOULD BE CAREFULLY REVIEWED BY EACH PROSPECTIVE INVESTOR.
The Units being offered hereby, are being offered directly by "VC" . The Offering of 100,000,000.00 Units are being offered on a "best efforts" basis. There is no requirement that any minimum amount be sold in the Offering. This Offering will expire on the earlier to occur of (i) November 15, 2003, unless extended by "VC" in its sole discretion for up to an additional 60 days (collectively, the "Termination Date"), or (ii) the sale of all of the Units offered hereby. The "Shares" of "Shares" comprising the Units will be delivered promptly to subscribers after each respective Closing.
THE SECURITIES BEING OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND ARE BEING OFFERED AND SOLD ONLY TO ACCREDITED INVESTORS IN RELIANCE UPON AN EXEMPTION FROM SUCH REGISTRATION, WHICH DEPENDS ON THE FULL COMPLIANCE WITH CERTAIN TERMS AND CONDITIONS, INCLUDING: (i) THAT THE SECURITIES ARE NOT OFFERED THROUGH GENERAL ADVERTISING OR GENERAL SOLICITATION, INCLUDING BUT NOT LIMITED TO ADVERTISEMENTS OR COMMUNICATIONS IN NEWSPAPERS, MAGAZINES, OR OTHER MEDIA; (ii) THIS CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM SHALL BE TREATED AS CONFIDENTIAL BY THE PERSON TO WHOM IT IS DELIVERED, AND ANY DISTRIBUTION THEREOF OR DIVULGENCE OF ANY OF ITS CONTENTS IS UNAUTHORIZED; (iii) THIS OFFERING MAY BE MADE ONLY TO PERSONS WHO ARE "ACCREDITED INVESTORS" AND "VC" , AFTER REASONABLE INQUIRY, SHALL HAVE REASONABLE GROUNDS TO BELIEVE THAT SUCH PERSONS POSSESS THE KNOWLEDGE OR EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT WOULD ENABLE SUCH PERSONS TO EVALUATE THE MERITS AND RISKS OF THE INVESTMENT. THE INFORMATION WHICH MUST BE SUPPLIED BY INVESTORS IN THIS REGARD MAY BE RELIED UPON BY "VC" TO BE ACCURATE.
THERE IS NO PUBLIC MARKET FOR THE "SHARES" OF "SHARES" , AND IT IS NOT ANTICIPATED THAT A PUBLIC MARKET FOR THESE SECURITIES WILL DEVELOP IN THE FORESEEABLE FUTURE, IF AT ALL. ACCORDINGLY, INVESTORS MAY FIND IT DIFFICULT TO DISPOSE OF SUCH SECURITIES, AND MUST BE PREPARED TO RETAIN THEM FOR AN INDEFINITE PERIOD OF TIME.
AN INVESTMENT IN THE "SHARES" OF "SHARES" OFFERED HEREBY INVOLVES SUBSTANTIAL RISKS AND SHOULD ONLY BE CONSIDERED BY ACCREDITED INVESTORS WHO HAVE NO NEED FOR LIQUIDITY IN THEIR INVESTMENT AND CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
THIS MEMORANDUM CONSTITUTES AN OFFER ONLY IF A MEMORANDUM IDENTIFICATION NUMBER APPEARS IN THE APPROPRIATE SPACE PROVIDED ON THE COVER PAGE AND THEN ONLY TO THE OFFEREE THEREIN NAMED. UNLESS OTHERWISE INDICATED, STATEMENTS CONTAINED IN THIS MEMORANDUM ARE MADE AS OF THE DATE OF THE MEMORANDUM AND DO NOT STATE EVENTS THAT MAY HAVE OCCURRED SUBSEQUENT THERETO. THE INFORMATION CONTAINED HEREIN IS NOT TO BE RELIED UPON BY PERSONS OTHER THAN PERSONS ACQUIRING SECURITIES, AND THEN ONLY WITH RESPECT TO THE ACQUISITION OF THE SECURITIES.
THE "SHARES" OF "SHARES" OFFERED ARE SUBJECT TO THE PROVISIONS OF, AND EACH OF THE INVESTORS PURCHASING ANY "SHARES" OF "SHARES" WILL BE REQUIRED TO EXECUTE, A SUBSCRIPTION AGREEMENT. ANY PURCHASE OF ANY "SHARES" OF "SHARES" SHOULD BE MADE ONLY AFTER A COMPLETE AND THOROUGH REVIEW OF THE PROVISIONS OF SUCH AGREEMENT. IN THE EVENT THAT ANY OF THE TERMS, CONDITIONS OR OTHER PROVISIONS OF SUCH AGREEMENT ARE INCONSISTENT WITH OR CONTRARY TO THE DESCRIPTIONS OR TERMS IN THIS MEMORANDUM, SUCH SUBSCRIPTION AGREEMENT WILL CONTROL.
PRIOR TO COMPLETION OF THE SALE OF THE SECURITIES, EACH OFFEREE OR HIS REPRESENTATIVE IS ENCOURAGED TO ASK QUESTIONS OF THE OFFICERS OF "VC" OR TO REVIEW ADDITIONAL DOCUMENTS CONCERNING THE TERMS AND CONDITIONS OF THIS OFFERING OR ANY OTHER MATTER SET FORTH HEREIN AND TO RECEIVE ANY ADDITIONAL INFORMATION, TO THE EXTENT THE OFFICERS POSSESS SUCH INFORMATION OR CAN ACQUIRE SUCH INFORMATION WITHOUT UNREASONABLE EFFORT OR EXPENSE, NECESSARY TO VERIFY THE ACCURACY OF THE INFORMATION SET FORTH HEREIN. ANY OFFEREE OR HIS REPRESENTATIVE HAVING QUESTIONS OR DESIRING ADDITIONAL INFORMATION MAY CONTACT THE OFFICERS OF "VC" OR MEET AND CONFER WITH THEM.
PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM AS INVESTMENT, LEGAL, BUSINESS OR TAX ADVICE. EACH PROSPECTIVE INVESTOR MUST RELY UPON HIS OWN REPRESENTATIVE(S) (INCLUDING BUSINESS ADVISOR, LEGAL COUNSEL AND ACCOUNTANT) AS TO LEGAL, TAX AND RELATED ASPECTS CONCERNING AN INVESTMENT IN "VC" .
THE INFORMATION CONTAINED IN THIS MEMORANDUM IS FURNISHED ON A CONFIDENTIAL BASIS FOR USE BY THE NAMED OFFEREE AND, IN CERTAIN CASES, HIS OFFEREE REPRESENTATIVE. BY ACCEPTANCE OF THIS MEMORANDUM, SUCH INDIVIDUAL, AND OFFEREE REPRESENTATIVE, IF ANY, ACKNOWLEDGES THAT THIS MEMORANDUM CONTAINS CONFIDENTIAL INFORMATION PROPRIETARY TO "VC" AND THEREBY AGREES THAT HE WILL NOT TRANSMIT, REPRODUCE, OR MAKE AVAILABLE TO ANYONE OTHER THAN HIMSELF OR HIS OFFEREE REPRESENTATIVE THIS MEMORANDUM AND ANY EXHIBITS AND DOCUMENTS SUPPLIED IN CONNECTION THEREWITH. THE OFFEREE AND HIS OFFEREE REPRESENTATIVE, IF ANY, AGREE TO RETURN THIS MEMORANDUM TO "VC" IN THE EVENT HE DOES NOT SUBSCRIBE TO ANY OF THE SECURITIES OFFERED HEREBY.
NO OFFERING LITERATURE OR ADVERTISING IN ANY FORM SHALL BE EMPLOYED IN THE OFFERING OF THE SECURITIES EXCEPT FOR THIS MEMORANDUM. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS MEMORANDUM. ANY REPRESENTATION NOT CONTAINED HEREIN MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY "VC" . NEITHER THE DELIVERY OF THIS MEMORANDUM NOR THE ISSUANCE OF ANY SECURITIES OFFERED HEREBY SHALL CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR THE AFFAIRS OF "VC" SINCE THE DATE HEREOF.
"VC" RESERVES THE RIGHT TO WITHDRAW OR MODIFY THIS OFFERING AT ANY TIME PRIOR TO THE INITIAL CLOSING OF THE SECURITIES OFFERED HEREBY.
BY ACCEPTANCE OF THIS CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM, YOU SHALL ACCEPT AND TREAT AS CONFIDENTIAL ALL INFORMATION OBTAINED BY YOU RELATING TO "VC" AND SHALL NOT DISCLOSE TO ANY THIRD PARTY ANY SUCH INFORMATION. IN THE EVENT YOU DO NOT PURCHASE SECURITIES FROM "VC" PURSUANT TO THE TERMS OF THIS CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM, YOU WILL PROMPTLY RETURN ALL WRITTEN INFORMATION DELIVERED TO YOU AND WILL NOT THEREAFTER MAKE USE OF ANY SUCH INFORMATION, EXCEPT INSOFAR AS SUCH INFORMATION (i) WAS AT THE TIME OF DISCLOSURE TO YOU BY "VC" IN THE PUBLIC DOMAIN, (ii) SHALL HEREAFTER BECOME A PART OF THE PUBLIC DOMAIN THROUGH NO FAULT ON YOUR PART, OR (iii) SHALL BE DISCLOSED TO A THIRD PARTY WHO DID NOT ACQUIRE SUCH INFORMATION FROM "VC" UNDER AN OBLIGATION OF CONFIDENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAS THE COMMISSION OR ANY OTHER AUTHORITY ASSESSED THE ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE "SHARES" ARE NOT REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THE "SHARES" ARE BEING OFFERED AND SOLD IN RELIANCE ON RULE 504 OF REGULATION D PROMULGATED BY THE COMMISSION PURSUANT TO THE ACT, AND ANY OTHER APPLICABLE EXEMPTIONS AND PURSUANT TO EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES LAWS OF STATES IN WHICH THE "SHARES" ARE OFFERED AND SOLD.
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED. NO SALE WILL BE CONSUMMATED PURSUANT TO THIS OFFERING CIRCULAR IN ANY STATE OR OTHER JURISDICTION UNLESS: (A) THE STATE IN WHICH THE SALE IS CONSUMMATED PROVIDES AN EXEMPTION FROM REGISTRATION FOR SALES OF SECURITIES TO "ACCREDITED INVESTORS;" (B) THE CONSUMMATION OF SUCH SALE MAY BE MADE WITHOUT REGISTRATION UNDER THE BLUE SKY OR OTHER LAWS OF SUCH STATE OR JURISDICTION REGULATING THE SALE OF SECURITIES; OR (C) THE REGISTRATION OF THE "SHARES" UNDER THE LAWS OF SUCH STATE MAY BE MADE WITHOUT UNDUE DELAY, BURDEN OR EXPENSE, AS DETERMINED IN THE SOLE AND ABSOLUTE JUDGMENT OF "VC" .
STATES WITH AN ACCREDITED INVESTOR EXEMPTION [as of March 27, 2000]: ALABAMA, ARIZONA, ARKANSAS, CALIFORNIA, COLORADO, CONNECTICUT, DISTRICT OF COLUMBIA, THE STATE, HAWAII, ILLINOIS, INDIANA, IOWA, KANSAS, KENTUCKY, MAINE, MARYLAND, MASSACHUSETTS, MICHIGAN, MINNESOTA, MISSOURI, NEBRASKA, NEVADA, NEW HAMPSHIRE, NEW JERSEY, NEW MEXICO, NORTH DAKOTA, OHIO, OKLAHOMA, PENNSYLVANIA, PUERTO RICO, RHODE ISLAND, SOUTH CAROLINA, SOUTH DAKOTA, TEXAS, UTAH, VIRGINIA, WASHINGTON, WEST VIRGINIA, WISCONSIN, WYOMING.
NO SALES WILL BE MADE TO INDIVIDUALS WHO ARE NOT ACCREDITED INVESTORS AND WHO DO NOT RESIDE IN THE AFOREMENTIONED STATES OR ANOTHER STATE WITH AN APPLICABLE ACCREDITED INVESTOR EXEMPTION.
NO OFFER IS MADE HEREBY, AND NO SECURITIES WILL BE SOLD, TO A PROSPECTIVE INVESTOR, UNLESS SUCH INVESTOR IS AN "ACCREDITED INVESTOR" AS DEFINED UNDER REGULATION D, RULE 501(a), OF THE SECURITIES ACT OF 1933.
ACCREDITED INVESTORS INCLUDE, AMONG OTHERS, (I) A NATURAL PERSON WHO, AT THE TIME OF PURCHASE OF SECURITIES, HAS A NET WORTH, INDIVIDUALLY OR JOINTLY WITH THAT PERSON'S SPOUSE, EXCEEDING $1,000,000, OR WHO HAD INDIVIDUAL INCOME EXCESS OF $200,000, OR JOINT INCOME WITH THAT PERSON'S SPOUSE IN EXCESS OF $300,000, IN EACH OF THE TWO MOST RECENT YEARS, AND WHO REASONABLY EXPECTS TO REACH THE SAME INCOME LEVEL IN THE CURRENT YEAR; AND (II) CORPORATIONS, BUSINESS TRUSTS OR PARTNERSHIPS NOT FORMED FOR THE SPECIFIC PURPOSE OF ACQUIRING THE SECURITIES OFFERED HEREBY, AND HAVING TOTAL ASSETS IN EXCESS OF $5,000,000.
ALL PURCHASES MUST BE MADE FOR INVESTMENT PURPOSES ONLY AND NOT WITH THE VIEW TO OR FOR SALE IN CONNECTION WITH A DISTRIBUTION OF THE SECURITY. ANY RESALE OF A SECURITY SOLD IN RELIANCE ON THIS EXEMPTION WITHIN TWELVE MONTHS OF THE SALE SHALL BE PRESUMED TO BE WITH A VIEW TO DISTRIBUTION AND NOT FOR INVESTMENT, EXCEPT A RESALE PURSUANT TO A REGISTRATION OR TO AN ACCREDITED INVESTOR PURSUANT TO AN EXEMPTION.
NOTICE TO ARIZONA RESIDENTS
These securities are being sold in reliance upon Arizona's Limited Offering exemption from registration pursuant to A.R. S. 44-1844
THE stock OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE ARIZONA SECURITIES ACT, AS AMENDED, AND THEREFORE, CANNOT BE TRANSFERRED OR RESOLD UNLESS THEY ARE REGISTERED UNDER SUCH ACT OR AN EXEMPTION THEREFROM IS AVAILABLE.
As a purchaser of such securities I hereby represent that I understand these securities cannot be resold without registration under the Arizona Securities Act or an exemption therefrom. I am not an underwriter within the meaning of A.R.S. 44-1801(17), and I am acquiring these securities for myself, not for other persons. If qualifying as a non-accredited investor, I further represent that this investment does not exceed 20% of my net worth (excluding principal residence, furnishings therein and personal automobiles).
NOTICE TO CALIFORNIA RESIDENTS
These securities are being sold in reliance upon California's Limited Offering Exemption 25102(f) of the California Code, as amended.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS DOCUMENT 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 THEREFROM PRIOR TO SUCH QUALIFICATIONS IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATIONS BY SECTION 25100, 25102 OR 26105 OR THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF THE SECURITIES.
NOTICE TO COLORADO RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981 BY REASONS OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE COLORADO SECURITIES ACT OF 1981, IF SUCH REGISTRATION IS REQUIRED.
NOTICE TO CONNECTICUT RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISERED UNDER SECTION 36-458 OF THE CONNECTICUT UNIFORM SECURITIES ACT AND WILL BE SOLD PURSUANT TO AN EXEPTION THEREFROM. THE SECURITIES CANNOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER THE CONNETICUT UNIFORM SECURITIES ACT OR PURSUANT TO AND EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR IN A TRANSACTION WHICH IS OTHERWISE IN COMPLIANCE WITH SAID ACT.
NOTICE TO THE STATE RESIDENTS
THE STATE SECURITIES AND INVESTOR PROTECTION ACT (THE "THE STATE ACT") PROVIDES, WHEN SALES ARE MADE TO FIVE OR MORE INVESTORS IN THE STATE, ANY SALE MADE PURSUANT TO SECTION 517.061 (ii) OF THE STATE ACT SHALL BE VOIDABLE BY SUCH THE STATE PURCHASER EITHER WITHIN THREE DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO "VC" , AN AGENT OF "VC" , OR ANY ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
THE SECURITIES BEING OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE STATE DIVISION OF SECURITIES AND INVESTOR PROTECTION AND ARE BEING OFFERED IN RELIANCE UPON EXEMPTIONS PROVISIONS CONTAINED UNDER THE STATE ACT. EACH THE STATE RESIDENT WHO SUBSCRIBES FOR THE SECURITIES HAS THE RIGHT, PUSUANT TO SECTION 517.061(11)(A)(5) OF THE STATE ACT TO WITHDRAW SUCH SUBSCRIPTION FOR THE SECURITIES, WITHOUT ANY LIABILITY WHATSOEVER, AND RECEIVE A FULL REFUND OF ALL MONIES PAID, WITHIN THREE (3) DAYS AFTER THE EXECUTION OF THE SUBSCRIPTION AGREEMENT OR PAYMENT FOR THE SECURITIES HAS BEEN MADE, WHICHEVER IS LATER.
notice to GEORGIA RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE GEORGIA SECURITIES ACT OF 1973 PARAGRAPH (13) OF CODE SECTION 10-5-9. BY REASONS OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE GEORGIA SECURITIES ACT OF 1973, IF SUCH REGISTRATION IS REQUIRED.
NOTICE TO INDIANA RESIDENTS
These securities are being sold in reliance upon Indiana's transactional exemption from registration pursuant to 517.061(12) of the Indiana Securities Act.
I further represent that I understand the SECURITIES BEING OFFERED HAVE NOT BEEN REGISTERED WITH THE INDIANA DIVISION OF SECURITIES. Such securities are being sold either through a registered dealer in the State of Indiana, through an associated person of the issuer meeting the qualifications for exclusion from the definition of a dealer, pursuant to 517.012(9) and/or (9)(b), Indiana Statutes, or through the issuer firm which is registered as an issuer/dealer to sell its own securities.
I also understand that if sales of these securities are made to five or more persons in Indiana, any sale in this State made pursuant to the above referenced and claimed exemption from registration is voidable by me either within three days after the first tender of consideration is made by me to the issuer or agent, or its escrow agent, or some other escrow agent, or within three days after the availability of that privilege is communicated to me, whichever occurs later.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE INDIANA SECURITIES ACT IN RELIANCE UPON EXEMPTION PROVISIONS CONTAINED THEREIN. THEREFORE ANY SALE MADE PURSUANT TO SUCH EXEMPTION PROVISIONS IS VOIDABLE BY THE PURCHASER. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE LAWS OF THIS STATE, IF SUCH REGISTRATION IS REQUIRED.
RESIDENTS OF THE STATE OF INDIANA WHO SUBSCRIBE FOR stock HAVE THE RIGHT, PURSUANT TO 517.061(A)(5) OF THE INDIANA SECURITIES ACT, TO WITHDRAW THEIR SUBSCRIPTIONS AND RECEIVE FULL REFUND OF ALL MONEYS PAID WITHIN THREE DAYS AFTER RECEIPT OF THIS DOCUMENT OR WITHIN THREE DAYS AFTER THE FIRST TENDER OF MONEY OR OTHER CONSIDERATION TO THE ISSUER, AN AGENT OF THE INSURER, OR AN ESCROW AGENT, WHICHEVER OCCURS LATER.
NOTICE TO ILLINOIS RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED, APPROVED OR DISAPPROVED BY THE STATE OF ILLINOIS NOR HAS THE SECRETARY OF STATE OF THE STATE OF ILLINOIS PASSED UPON THE ACCURACY OF THIS CONFIDENTIAL DOCUMENT. IN ADDITION, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE CONFIDENTIAL DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOTICE TO NEW MEXICO RESIDENTS
THE SECURITIES DESCRIBED HEREIN ARE OFFERED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF NEW MEXICO. ACCORDINGLY, THE NEW MEXICO SECURITIES BUREAU HAS NOT REVIEWED THE OFFERING OF THESE SECURITIES AND HAS NOT APPROVED OR DISAPPROVED THIS OFFERING. THE NEW MEXICO SECURITIES BUREAU HAS NOT PASSED UPON THE VALUE OF THESE SECURITIES OR UPON THE ADEQUACY OR ACCURACY OF THE INFORMATION CONTAINED IN THIS CONFIDENTIAL DOCUMENT.
NOTICE TO NEW JERSEY RESIDENTS
THIS CONFIDENTIAL DOCUMENT HAS NOT BEEN FILED WITH OR REVIEWED BY THE ATTORNEY GENERAL OF THE STATE OF NEW JERSEY PRIOR TO ITS ISSUANCE AND USE, NOR HAS THE ATTORNEY GENERAL PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THIS CONFIDENTIAL DOCUMENT DOES NOT CONTAIN ANY UNTRUE STATEMENTS OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS OF DOCUMENTS PURPORTED TO BE SUMMARIZED HEREIN.
NOTICE TO new york RESIDENTS
THIS DOCUMENT HAS NOT BEEN FILED WITH OR REVIEWED BY THE ATTORNEY GENERAL PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF new york HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION OF THE CONTRARY IS UNLAWFUL.
THIS DOCUMENT DOES NOT CONTAIN AN UNTRUE STATEMENT OF A MATERIAL FACT AND DOES NOT OMIT ANY MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS SUPPORTED TO BE SUMMARIZED HEREIN.
Purchaser Statement:
I understand that this Offering of "Shares" has not been reviewed by the Attorney General of the State of new york because of the Offerer's representation that this is intended to be a non-public Offering. I understand that any literature used in connection with this Offering has not been previously filed with the Attorney General and has not been reviewed by the Attorney General. This Investment Unit is being purchased for my own account for investment, and not for distribution or resale to others. I agree that I will not sell or otherwise transfer these securities unless they are registered under the Federal Securities Act of 1933 or unless an exemption from such registration is available. I represent that I have adequate means of providing for my current needs and possible personal contingencies of financial problems, and that I have no need for liquidity of this investment.
It is understood that all documents, records and books pertaining to this investment have been made available to inspection by my attorney, my accountant, or my offeree representative and myself, and that, upon reasonable notice, the books and records of the issuer will be available for inspection by investors, at reasonable hours at the principal place of business.
NOTICE TO PENNSYLVANIA RESIDENTS
These securities are being sold in reliance upon the Pennsylvania transactional exemption {Sec.203(d)} of the Pennsylvania Securities Act of 1972, as amended (the "Act").
THE TRANSFERABILITY OF SUCH SECURITIES IS RESTRICTED
As a purchaser of the above referenced securities, I hereby agree not to sell said securities within 12 months after the date of purchase unless the securities are subsequently registered under the Act. As a purchaser of the above referenced securities, I hereby represent that I either have a pre-existing personable or business relationship with the offerer or one of its partners, officers, directors or controlling persons, or have the capacity to protect my own interests in connection with this transaction by reason of my own business or financial experience.
PRIOR TO OFFERING THE SHARE TO ANY PENNSYLVANIA RESIDENTS, "VC" WILL FILE A NOTICE UNDER SECTION 203(D) OF THE PENNSYLVANIA SECURITIES ACT WHICH PROVIDES AN EXEMPTION FROM THE PENNSYLVANIA PROVISIONS OF SAID ACT UNDER CERTAIN CIRCUMSTANCES. EACH OFFEREE WHO IS A PENNSYLVANIA RESIDENT SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING ANY LIABILITY TO THE SELLER OR ANY OTHER PERSON WITHIN TWO BUSINESS DAYS FROM THE DATE OF RECEIPT BY "VC" OF HIS SUBSCRIPTION AGREEMENT, OR, WITHIN TWO BUSINESS DAYS AFTER HE MAKES THE INITIAL PAYMENT FOR THE SHARE BEING OFFERED. IN ADDITION, IN ACCORDANCE WITH SECTION 203(D)(I) OF THE PENNSYLVANIA SECURITIES ACT, PENNSYLVANIA RESIDENTS MAY NOT RESELL, TRANSFER OR CONVEY THEIR SHARE FOR A PERIOD OF TWELVE MONTHS AFTER THE DATE OF PURCHASE.
EACH PERSON IS ENTITLED TO EXERCISE THE RIGHT TO WITHDRAW GRANTED BY SECTION 207(M), AND WHO WISHES TO EXERCISE SUCH RIGHT, MUST WITHIN TWO BUSINESS DAYS AFTER HE DELIVERS A SUBSCRIPTION AGREEMENT, OR MAKES ANY PAYMENT FOR THE STOCK OR THE EXEMPTION BECOMES EFFECTIVE, WHICHEVER IS LATER, CAUSE A WRITTEN NOTICE OR TELEGRAM TO BE SENT TO "VC" AT THE ADDRESS PROVIDED IN THIS CONFIDENTIAL DOCUMENT INDICATING HIS INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM MUST BE SENT AND POSTMARKED ON OR PRIOR TO SUCH SECOND BUSINESS DAY. IF A PERSON IS SENDING A LETTER, IT IS PRUDENT TO SEND IT BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME WHEN IT WAS MAILED. SHOULD A PERSON MAKE THIS REQUEST ORALLY, HE MUST ASK FOR WRITTEN CONFIRMATION THAT HIS REQUEST HAS BEEN RECEIVED.
NOTICE TO TEXAS RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE TEXAS SECURITIES ACT BY REASONS OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE COLORADO SECURITIES ACT, IF SUCH REGISTRATION IS REQUIRED.
NOTICE TO WASHINGTON RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE WASHINGTON SECURITIES ACT, CHAPTER 21.20 RCW, BY REASONS OF SPECIFIC EXEMPTIONS THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE WASHINGTON SECURITIES ACT, IF SUCH REGISTRATION IS REQUIRED.
INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK, AND INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOSE THEIR INVESTMENT IN ITS ENTIRETY.
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.
Also see:
Examples of Proposed Terms and Valuation for Private Placement Memorandums How to Raise Capital and Comply with the SEC Stock and Debt Offering Options For Small Businesses Back to Business Financing and Planning
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