Document:

domi_ex1016.htm

Exhibit 10.16

 

CONFIDENTIAL MATERIAL

 

The information contained in this Note Purchase Agreement, including all of the Addenda hereto (collectively, this “Agreement”), is confidential and proprietary to DIGI OUTDOOR MEDIA, INC. (the “Company”).  By accepting a copy of this Agreement, the recipient acknowledges and agrees that:

 

(a)           Recipient will hold all of the information contained in this Agreement in confidence for the benefit of the Company;

 

(b)           Recipient will not share with or disclose to any other person or entity any of the information contained in this Agreement, without the express, written consent of the Company;

 

(c)           Recipient will not reproduce, market, make application of, or otherwise use any of the information contained in this Agreement other than for the purpose of make a decision whether to invest in the Company;

 

(d)           Recipient’s breach, or threatened breach, of any of the foregoing covenants will result in irreparable damage and injury to the Company, and the Company shall be entitled to seek preliminary and/or permanent injunctive relief, without the posting of bond, enjoining and restraining recipient’s breach (or threatened breach) in addition to any other remedies to which the Company may be entitled, in law or in equity, including the right to recover from the recipient any and all damages that may be sustained as a result of recipient’s breach; and

 

(e)           Recipient irrevocably submits to the jurisdiction of any state or federal court located in Seattle, Washington, in any action or proceeding related to or arising from this Agreement, and recipient further irrevocably waives the defense of an inconvenient forum.

 

  

  

  

 

Digi Outdoor Media, Inc.

35332 S.E. Center Street

Snoqualmie, WA  98065

 

=====================================

USD $1,000,000 of Promissory Notes

---------------------------------------

 

Accredited Investors Only

 

Minimum Investment Amount of USD $100,000

 

=====================================

 

FORM OF NOTE PURCHASE AGREEMENT

 

IMPORTANT:  IF YOU INVEST, YOU WILL BE REQUIRED TO MAKE SIGNIFICANT REPRESENTATIONS.  READ THIS ENTIRE DOCUMENT CAREFULLY BEFORE SIGNING.  THIS INVESTMENT IS VERY RISKY.  YOU SHOULD PURCHASE THE NOTES ONLY IF YOU CAN AFFORD A COMPLETE LOSS.  SEE “RISK FACTORS” AT ADDENDUM B.

This is a private offering under the securities laws.  Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the securities referred to herein (the “Securities”), or has reviewed, endorsed or passed upon the merits, accuracy or adequacy of this Note Purchase Agreement or any other related materials.  Any representation to the contrary is a criminal offense.

The Securities being offered hereby are speculative and risky.  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.  These Securities have not been registered under the U. S. Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws, and are offered under exemptions provided by the Securities Act and certain state securities laws.  These Securities are subject to restrictions on transferability and resale in the United States, and may be transferred or resold only with the prior written consent of the Company and 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 the Securities under an exemption under applicable securities laws, 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.  Hedging transactions involving these Securities may not be conducted unless in compliance with the Securities Act.

No persons have been authorized to give any information or to make any representation not contained in this Agreement, 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 this Agreement does not imply that the information contained herein is correct as of any date subsequent to the date stated hereon.  These materials do not purport to be all-inclusive or to contain all the information that a potential investor may desire in considering whether to invest.

 

  

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All investors will have an opportunity to meet with the CEO of the Company to verify any of the information included herein, and to obtain additional information regarding 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.  Investors must acknowledge below that they have read these 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 this Note Purchase Agreement, including the merits and risks involved.

Prospective investors should not construe the contents of this document, including the Addenda hereto, as providing legal, tax or investment advice.  Investors should consult their own legal counsel, accountant or business advisor as to matters concerning an investment in the Notes.  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 Company is offering to sell Promissory Notes (the “Notes”) in the aggregate principal amount of One Million Dollars (USD $1,000,000).  Each Note will bear simple interest on the unpaid principal amount at the rate of twelve percent (12%) per annum.  No monthly or other periodic payments of interest or principal on the Notes will be due, and all unpaid principal and accrued interest on the Notes will be paid in full on the maturity date, which is six (6) months from the date of issuance of the Note.  The Company, however, will have the option and right to extend the maturity date of any Note for an additional period of six (6) months, subject to payment of an extension fee equal to one percent (1%) of the unpaid principal amount of the Note.  The extension fee, together with all unpaid principal and accrued interest, will be due and payable in full on the extended maturity date.

 

In addition, for each One Hundred Thousand Dollars ($100,000) invested in a Note, an investor will receive 22,222 shares of restricted common stock the Company (the “Shares”) as an “equity kicker” for such investment.  The Notes and Shares are sometimes referred to herein as the “Securities.”

 

The Company is offering the Notes on the terms set forth in this Purchase Agreement, including the Addenda attached hereto.  Each investor will be required to invest a minimum amount of One Hundred Thousand Dollars (USD $100,000).  The Company, however, reserves the right to accept, in its discretion, less than the minimum investment amount from any subscriber.  The Company also may reject your subscription for any reason.

 

The Offering of the Notes will terminate on March 31, 2015, subject to the right of the Company to extend the Offering for an additional thirty (30) days in the event the Offering is not fully subscribed as of March 31, 2015.

 

  

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The following documents are attached to this Purchase Agreement and considered to be part of this document:

 

Addendum A                                           Terms of the Offering

Addendum B                                           Risk Factors

Addendum C                                           Form of Promissory Note

Addendum D                                           Digi Outdoor Media, Inc. Executive Summary

Addendum E                                           Financial Statements of Digi Outdoor Media, Inc. (2014)

 

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JURISDICTIONAL NOTICES

 

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 THE 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.

Colorado Residents:  THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND ARE OFFERED UNDER EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND COLORADO REVISED STATUTES SECTION 11-51-308.  NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR THE COLORADO SECURITIES DIVISION HAS REVIEWED OR APPROVED THIS OFFERING DOCUMENT.

District of Columbia Residents:  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES BUREAU OF THE DISTRICT OF COLUMBIA, NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT.  ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

Idaho Residents:  THE SECURITIES BEING SOLD HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE IDAHO SECURITIES ACT IN RELIANCE UPON EXEMPTION FROM REGISTRATION PURSUANT TO SECTION 30-1435(8) AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR HYPOTHECATED EXCEPT IN TRANSACTION WHICH IS EXEMPT UNDER SAID ACT, OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SAID ACT.

Maryland Residents:  THESE SECURITIES ARE BEING ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.

 

  

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Montana Residents:  IN ADDITION TO THE INVESTOR SUITABILITY STANDARDS THAT ARE OTHERWISE APPLICABLE, ANY INVESTOR WHO IS A MONTANA RESIDENT MUST HAVE A NET WORTH (EXCLUSIVE OF HOME FURNISHINGS AND AUTOMOBILES) IN EXCESS OF FIVE (5) TIMES THE AGGREGATE AMOUNT INVESTED BY SUCH INVESTOR IN THE SECURITIES.

Oregon Residents:  IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY A 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, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

Virginia Residents:  THESE SECURITIES ARE BEING OFFERED IN VIRGINIA PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE VIRGINIA SECURITIES ACT.  THE STATE CORPORATION COMMISSION DOES NOT PASS UPON THE ADEQUACY OR ACCURACY OF THE SECURITY OR THIS OFFERING CIRCULAR OR UPON THE MERITS OF THIS SECURITY OR THIS OFFERING.  THESE SECURITIES ARE NOT INSURED OR GUARANTEED BY ANY STATE OR FEDERAL AGENCY.

Washington Residents: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND THE WASHINGTON ADMINISTRATOR OF SECURITIES HAS NOT REVIEWED OR RECOMMENDED THE OFFERING OR OFFERING CIRCULAR, AND THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF WASHINGTON, CHAPTER 21.20 RCW, AND, THEREFORE, CANNOT BE RESOLD UNLESS THEY ARE REGISTERED UNDER THE SECURITIES ACT OF 1933 AND THE SECURITIES ACT OF WASHINGTON CHAPTER 21.20 RCW OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.

 

  

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Article 1.  Subscription

1.1           The undersigned subscriber (“Subscriber”), intending to be legally bound, hereby irrevocably subscribes for and agrees to purchase from Digi Outdoor Media, Inc., a Nevada corporation (the “Company”), a Promissory Note (the “Note”) in the principal amount of _____________________________ Dollars (USD $__________) (the “Purchase Price”), upon the terms and conditions set forth below.  This subscription is submitted to the Company in accordance with and subject to the terms and conditions set forth in this Purchase Agreement and pursuant to Regulation D promulgated under the U.S. Securities Act.

1.2           Subscriber’s subscription payment, in the form of a bank check or certified check made payable to “Digi Outdoor Media, Inc.” in the amount of the Purchase Price, is delivered herewith (unless Subscriber has delivered payment of the Purchase Price by wire transfer in accordance with the wire instructions below), together with two executed copies of this Purchase 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, of Subscriber’s subscription payment shall be promptly refunded to Subscriber without deduction therefrom or interest thereon.  Wiring instructions are as follows:

To:                                             Bank of America

   New York, NY

 

Fed Wire Number:                   026-009-593

 

International SWIFT Code:   BOFAUS3N

 

Account Name:                        Dig Outdoor Media, Inc.

            35332 S.E. Center Street

            Snoqualmie, WA  98065

 

Account No:                            0044-6532-3962

1.3           In the event this subscription is accepted by the Company, in whole or in part, the Company shall deliver to Subscriber a Note in the principal amount of USD $[_____________], dated the date of acceptance of this subscription and to bear the legends described herein, together with a copy of this Purchase Agreement executed by the Company.

1.4           Upon the Company’s acceptance of this subscription, the Company also will issue to Subscriber shares of common stock of the Company (the “Shares”) in an amount equal to Twenty-Two Thousand Two Hundred and Twenty-Two (22,222) Shares for each $100,000 invested.

1.5           Subscriber acknowledges and agrees that the Company did not prepare any information to be delivered to prospective investors in connection with this Offering other than this Purchase Agreement and the Addenda hereto, 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.

 

  

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1.6           Subscriber understands and agrees that: (a) this subscription is not subject to the Company’s receiving any minimum number or amount of subscriptions, and Subscriber’s subscription payment shall be available to the Company immediately after the Company’s acceptance of this Purchase Agreement; and (b) this Purchase Agreement is not binding upon the Company until accepted by it, and 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 hereby represents and warrants to Subscriber that:

2.1           The Company was formed as a Nevada corporation on January 14, 2014, and is the surviving entity of a merger that was effective on August 18, 2014.  As part of the merger, both Placer Creek Mining Company (“Placer”) and Digi Outdoor Media, Inc. (“DOM”) merged with and into the Company.  The Company (formerly named Placer Creek of Nevada, Inc.) changed its name to Digi Outdoor Media, Inc. as of the effective date of the merger.

2.2           The Company is validly existing and in good standing under the laws of the State of Nevada, and has all requisite corporate power and authority to carry on its current and contemplated business, and to enter into and perform its obligations under this Purchase Agreement.

2.3           The Company is authorized to issue and deliver the Notes subscribed for under this Purchase Agreement.

2.4           As of February 2, 2015, the capitalization of the Company consisted of:

 

	
  

	
(a)

	
Forty-Five Million (45,000,000) authorized shares of Common Stock, par value $.001 per share, of which 18,682,476 shares are issued and outstanding;

 

	
  

	
(b)

	
Five Million (5,000,000) authorized shares of Preferred Stock, par value $.001 per share, none of which have been issued; and

 

	
  

	
(c)

	
Warrants to purchase 50,300 shares of Common Stock at an exercise price of $0.70 per share, which warrants have a term of five years.

If all of the Notes are sold in this Offering, the investors in this offering collectively will receive 222,220 shares of common stock, which represents approximately 1.17% of the Company on a fully diluted basis.

2.5           This Purchase 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 Notes have been duly authorized by the Company, and when issued, sold and delivered in accordance with the terms of this Purchase Agreement, will be duly authorized and validly issued.

 

  

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Article 3.  Representations and Warranties of Subscriber

Subscriber hereby represents, warrants and certifies to, and agrees with, the Company as follows:

3.1           Subscriber’s information, representations and warranties set forth herein are true and complete, and may be relied upon by the Company.

3.2           If, before acceptance of this Purchase Agreement and any issuance to Subscriber of the Securities, there is any material change with respect to Subscriber’s status or affairs that would affect Subscriber’s information, representations or warranties set forth herein and/or Subscriber’s ability to invest in the Company or purchase the Securities, Subscriber will promptly notify the Company of that change.

 

3.3           Subscriber acknowledges that Subscriber has been advised to consult with his/her own independent counsel regarding the consequences of an investment in the Company and the Securities.  Subscriber has such knowledge and experience in financial and business matters that he/she is capable of: (a) requesting, reviewing, and understanding the information acquired regarding the Company and its operations, management and control; and (b) evaluating the merits and risks of an investment in the Company and the Securities, including the risks of losing Subscriber’s entire investment.

 

3.4           Subscriber has received, thoroughly reviewed and understands all of the information contained in this Purchase Agreement, and Subscriber (together with any of Subscriber’s authorized representatives and agents) has been given an opportunity to ask questions of and to obtain all desired information regarding the Company and this Purchase Agreement, and has used such information and access to Subscriber’s satisfaction.  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 Purchase Agreement to the Company.  Subscriber has received all materials that have been requested by Subscriber regarding the Company, including its current Executive Summary and financial statements (attached hereto as Addenda D and E, respectively), 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 in this Purchase 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.

3.5           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, has no reason to expect a change in Subscriber’s circumstances, financial or otherwise, that may cause or require sale of Subscriber’s Securities, and is in a financial position to hold the Securities for an indefinite period of time.

 

  

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3.6           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 in the Company and the Securities.

3.7           Subscriber acknowledges that the Securities are restricted securities, that no market presently exists for the Company’s Notes and Shares, that no market may develop in the future, 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.

3.8           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”) or any other state, national or other governmental securities laws or regulations; (b) the Securities are being offered and sold to Subscriber on the basis of the exemptions from registration provided by Regulation D promulgated under the Securities Act; (c) the offering of these Securities 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 Regulation D under the Securities Act is based upon the representations made by Subscriber in this Purchase Agreement, and the Company will not issue the Securities in the absence of such representations.  Subscriber acknowledges that Subscriber has been informed by the Company of, or Subscriber is otherwise familiar with, the nature of the limitations imposed on the transfer of securities by the Securities Act and the rules and regulations thereunder.

3.9           Subscriber is: (a) a resident of the State of [_______________] and is of legal age (if an individual) in accordance with the laws of the State of [_____________]; (b) acquiring the Securities solely for Subscriber’s own account or as fiduciary for the benefit of another; and (c) not acquiring the Securities as a nominee or agent for the benefit of any other person.  To the extent Subscriber is acting as a fiduciary in acquiring the Securities, all warranties, representations and covenants herein shall be deemed to have been made on behalf of the person or persons for whom Subscriber is acting.

3.10           Subscriber is acquiring the Securities for investment and not with a view to any offering, sale or distribution of all or any part of the Securities.  Subscriber has no present intention of selling, granting participation in, or otherwise distributing the Securities.  Subscriber does not have any contract, understanding, agreement, or arrangement with any person to sell, transfer, or grant participation to such person, or to any third person, with respect to all or any portion of the Securities.  Subscriber acknowledges that the basis for the exemptions from relevant securities laws may not be present if, notwithstanding such representations, Subscriber currently has in mind merely acquiring the Securities for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise.  Subscriber does not have any such present intention, and Subscriber will not transfer or assign this Purchase Agreement, in whole or in part.

3.11           Subscriber acknowledges and understands that: (a) an investment in the Securities involves certain risks; (b) financial forecasts developed by the Company are based on certain assumptions regarding future events, many of which may not occur, and actual results of operations will vary from projected results, and such variations may be material; and (c) there are restrictions upon the transferability of the Securities, and accordingly, Subscriber may not be able to dispose of the Securities when desired (even in the event of an emergency).

 

  

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3.12           Subscriber acknowledges that the only information regarding the offering of the Securities that has been furnished to Subscriber is this Purchase Agreement and written responses to inquiries, if any, and that Subscriber has relied only upon such information in determining whether to invest in the Company.

3.13           Subscriber acknowledges that legends stating that the Securities have not been registered and referring to restrictions on transferability and sale of the Securities may be placed upon the Securities or upon the certificate evidencing Subscriber’s Securities, and that the Securities shall be subject to stop transfer or stop order instructions prohibiting transfer or disposition of the Securities other than in accordance with applicable law.

 

3.14           Subscriber agrees that Subscriber will not offer or resell the Securities unless:

 

(a) Subscriber gives written notice (the "Transfer Notice") to the Company and the Company consents in writing to such transfer.  The Transfer Notice shall describe in reasonable detail the proposed sale or transfer including, without limitation, the nature of such sale or transfer, the consideration to be paid, and the name and address of each prospective purchaser or transferee; and

 

(b) (i)    the resale of the Securities is registered under the Securities Act; or

 

	
  

	
(ii)

	
an exemption from registration is available under the Securities Act; or

 

	
  

	
(iii)

	
the resale of the Securities is in accordance with Rule 144 under the Securities Act.

 

3.15           Subscriber represents that he/she/it is an “Accredited Investor” as that term is defined in Section 501(a) of Regulation D promulgated under the Securities Act, and Subscriber specifically represents and warrants that he/she/it is:  (check all applicable items)

 (i)           A bank as defined in Section 3(a)(2) of the Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the 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 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 $5,000,000; 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 $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors.

 

  

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 (ii)           A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.

 (iii)           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 $5,000,000.

 (iv)           A director or executive officer of the Company.

 (v)           A natural person whose individual net worth, or joint net worth with Subscriber’s spouse, at the time of purchase exceeds One Million U.S. Dollars ($1,000,000), excluding the value of Subscriber’s primary residence.

 (vi)           A natural person who had an individual income in excess of USD $200,000 in each of the two most recent years, or joint income with Subscriber’s spouse in excess of USD $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year.  Subscriber’s investment in the Company will not exceed 10% of Subscriber’s net worth (or joint net worth with spouse).

 (vii)           A trust, with total assets in excess of USD $5,000,000, 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) (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 he is capable of evaluating the merits and risks of the prospective investment).

 (viii)           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 demonstrating how each qualified as an accredited investor.)

3.16           Subscriber represents and warrants that:

 

Subscriber is not subject to any outstanding judgments or involved in                                                                                                                     __________

any litigation or other dispute which, if an adverse decision was reached, might                                                                                                                         (Initial)

adversely affect Subscriber’s financial situation.  (INITIAL if true; if not true, provide details.)

 

____________________________________________________________________________

 

____________________________________________________________________________

 

Subscriber has not been subject to bankruptcy, reorganization or debt                                                                                                                     __________

restructuring.                                 (INITIAL if true; if not true, provide details.)                                                                                                                            (Initial)

 

____________________________________________________________________________

 

____________________________________________________________________________

 

  

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3.17           If Subscriber is a natural person, Subscriber represents that he/she is: a bona fide resident of the State of [______________], and resides at the address set forth on page 15 of this Purchase Agreement, is at least 21 years of age and legally competent to execute this Purchase Agreement.  If Subscriber is an entity, the person signing this Purchase Agreement is duly authorized to execute this Purchase Agreement and this Purchase Agreement, when executed and delivered by Subscriber, will constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms; and the execution, delivery and performance of this Purchase 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 the undersigned.

3.18           It never has been represented, guaranteed or warranted to Subscriber by the Company, or its principals, including any of the managers, officers, directors, members, 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.

3.19           Subscriber understands that the net proceeds from all paid and accepted subscriptions will be immediately available to the Company and used for Company purposes, whether or not the Offering is fully subscribed, 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.

 

 

3.20           Subscriber acknowledges that there may be material tax consequences to Subscriber of an acquisition or disposition of the Securities.  The Company gives no opinion and makes no representation with respect to the tax consequences to the undersigned under United States, state, or local tax law of Subscriber’s acquisition or disposition of such Securities.

3.21           Without limiting any of Subscriber’s other representations, warranties and agreements made hereunder, Subscriber acknowledges that Subscriber is fully aware of the risk factors of investing in the Company and the Securities.  Subscriber further acknowledges that the representations, warranties, certifications and agreements made by Subscriber herein are true and correct and shall survive the execution and delivery of this Purchase 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 Purchase Agreement, including but not limited to (a) the confidentiality obligations and requirements set forth on page 1 of this Agreement, and (b) 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 incorporator, officer, director, employee, agent and controlling person thereof, past, present or future, from and against any and all claims, losses, damages, liabilities, 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 Purchase Agreement.

 

  

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Article 5.  General Provisions

 

5.1           Neither this Purchase 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 its signature.  Notices hand delivered shall be deemed given upon receipt, and notices sent by mail shall be deemed given on the third (3rd) business day following deposit in the mail, first class postage prepaid.

5.3           This Purchase Agreement shall be governed by and construed in accordance with the laws of the State of Washington, without giving effect to its conflict of law principles for the purpose of applying the laws of another jurisdiction.  Subscriber hereby submits to the jurisdiction of the state and federal courts located in the State of Washington for all purposes relating to this Purchase Agreement, the Securities, and Subscriber’s interest in the Company, and such courts shall have exclusive jurisdiction relating thereto.

5.4           This Purchase Agreement, including the Addenda hereto, 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 Purchase Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute one and the same agreement.

[Signatures on following page]

 

  

Page 13

  

 

DATE:                                           , 2015

 

Investment Amount: $ ___________________                                                                

 

Signature of/for Subscriber(s):  

 

____________________________________

(Print Name of Signatory Here)

____________________________________

 

 

Signature of/for Any Co-Subscriber:

 

____________________________________

 

____________________________________

 (Print Name of Any Co-Signatory Here)

 

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 Purchase Agreement and to purchase and hold the Securities on behalf of the Entity, and I certify further that the Purchase 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 ______________, 2015.

 

                            __________________________________

                                  (Signature)

 

                                _________________________________

                                  (Print Name)

 

 

 

ALL INVESTORS MUST COMPLETE THE“SUBSCRIBER DATA” ON THE FOLLOWING PAGE AND PROVIDE THE REQUISITE ADDITIONAL INFORMATION

 

  

Page 14

  

 

SUBSCRIBER DATA

Ownership.  Title to the Note to be held in one of the following manners, as marked:

    ___  Individual or Separate Property (in community property state, submit Spouse's Consent)

___  Joint Tenants with Right of Survivorship (each party must sign)

___  Tenants in Common (each party must sign)

___  Community Property (each spouse must sign)

___  Individual Retirement Account ("IRA")/HR-10 ("Keogh")/Other: ________________

___  Trust (exact name of trustee must be indicated)

___  Other (specify) ____________________________________________________________

 

Joint Ownership..........Generally each party must sign this Purchase Agreement.

	
  Fiduciary Capacity...

	
Contact the Company immediately if purchasing in a fiduciary capacity  for the benefit of an IRA, Keogh or other plan established under the Employee Retirement Income Security Act of 1974.

 

 

Personal Data.

Full Name: ________________________________________       Telephone: ______________________

 

Residence Address

(Street/City/State/Zip): ______________________________      Taxpayer/SSN: ___________________

 

________________________________________________       Birth Date: ______________________

 

Mailing Address

(PO/City/State/Zip):__________________________________      Citizenship: U.S.____    Other_______

 

Facsimile Number: __________________________________       E-Mail: ________________________

If IRA/Keogh account, residence of beneficiary:                                                          Designated address for receipt of cash distributions:

 

______________________________________                                                      _______________________________________

(Street/City/State/Zip Code)                                                                           (Fund/Account Name and Number)

 

__________________________________________                                             ___________________________________________

(Bank/Entity Name & Address)                                                                           (Bank/Entity Name & Address)

Spouse (Full Name): _________________________________    Spouse's SSN: ____________________

 

Telephone: _________________    Facsimile: _________________   E-Mail: ______________________

 

Assets: $_______________             Annual Income: $____________   Liabilities: $__________________

 

Contact for Verification of Income:  _________________________   Telephone: ___________________

 

Contact's Relationship with Subscriber: ___________________________________________________

 

Employment Information.                                                                                                                                                                                    Nature of

Business Name: ____________________________________                                                                                                                Business: ____________________

Business Address: __________________________________                                                                                                               Telephone: ___________________

 

(Street/City/State/Zip)________________________________

Position(s) Held: ___________________________________                                                                                                                  Length of Employment: _________

 

  

Page 15

  

 

ACCEPTANCE

 

DIGI OUTDOOR MEDIA, INC., a corporation organized under the laws of the State of Nevada, hereby accepts the foregoing subscription subject to the terms and conditions of this Purchase Agreement this _____ day of ________________, 2015.

 

Digi Outdoor Media, Inc.

                               ___________________________________________

 

                                By: _______________________________________

                                                         

                               Title: _______________________________________    

                                                          

  

Page 16

  

ADDENDUM A

 

Terms of the Offering

 

Summary

 

Because this is only a summary, it may not contain all of the information important to you.  You should read this whole document and the Purchase Agreement, including all Addenda, carefully before you decide whether or how much to invest. All capitalized terms not otherwise defined in this Addendum A shall have the meanings defined in the Purchase Agreement.

	
What is Being Offered:

	
The Company is offering to sell unsecured Promissory Notes (“Notes”) in the aggregate principal amount of USD $1,000,000. Simple interest on the outstanding principal amount of the Notes will accrue at the rate of 12% per annum.  No fixed, periodic payments of interest and/or principal will be made on the Notes.  All unpaid principal, together with all accrued and unpaid interest on the Notes, will be due and payable in full six months from the date of issuance (the “Maturity Date”); provided, however, that the Company will have the right to extend the Maturity Date of any Note for an additional period of six months subject to payment of an extension fee equal to 1% of the unpaid principal amount of the Note, which extension fee will be due and payable on the extended Maturity Date.

 

	
Equity Grant:

	
As additional consideration for investing in this offering, each Investor will receive equity in the Company as follows: For each $100,000 invested, the Investor will receive 22,222 shares of common stock of the Company (the “Shares”).

	
Minimum Investment:

	
Each Investor will be required to investment a minimum amount of One Hundred Thousand Dollars ($100,000), although the Company reserves the right to accept a purchase agreement for a lesser amount.

 

	
Prepayment:

	
The Company will have the right, at any time prior to the Maturity Date (including any extended Maturity Date), to prepay without penalty or premium, all outstanding principal and accrued interest on the Notes.

	
No Security:

	
The Notes will be unsecured obligations of the Company.  The form of Promissory Note is attached hereto as Addendum C.  The Company will use its best efforts to sell all of the Notes in this Offering, but there is no guarantee we will be able to do so.  See the section below on “The Offering” and the Risk Factors at Addendum B.

 

  

Page 17

  

 

	
Default on Notes:

	
The Notes will be in default and all unpaid principal and interest will be due and payable in full in the event of any of the following:

 

	
●  

	
The Company’s failure to make any payment on the Notes when due;

 

	
●  

	
Bankruptcy or insolvency proceedings are filed by the Company; or

 

	
●  

	
Involuntary bankruptcy or insolvency proceedings are filed against the Company.

 

	
No Escrow or Minimum:

	
All proceeds from the Notes will be immediately available to the Company, and the Company is not required to sell any minimum amount of Notes in order to use the proceeds from the sale of the Notes.

 

	
Use of Proceeds:

	
The Company plans to use the proceeds from this Offering for construction of signs, permitting, and other costs related thereto, as well as for general working capital.  See the section below on “Use of Proceeds.”

 

	
Closing Date:

	
The Offering of the Notes will terminate on March 31, 2015, subject to the right of the Company to extend the Offering for an additional thirty (30) days in the event the Offering is not fully subscribed as of March 31, 2015.

 

	
Restrictions on Transfer:

	
The Notes and Shares will be “restricted securities” under the Securities Act, and may be resold only pursuant to registration under the Securities Act or an exemption therefrom.  The Notes and certificates for the Shares will bear appropriate restrictive legends reflecting such restrictions on their transferability.

 

	
Risk Factors:

	
This is a risky investment.  You should not purchase a Note unless you can afford a complete loss of your investment.  Before you decide to invest, read carefully Addendum B, “Risk Factors.”

 

 

	
  

	
Expenses of Offering:The Company is paying all expenses of this Offering; however, if you wish to engage your own legal counsel or other experts in connection with your investment, you must pay your own expenses for such experts.

 

	

The Offering

	
 

 

The Company is offering to sell unsecured Promissory Notes (the “Notes”) in the aggregate principal amount of One Million Dollars (USD $1,000,000).  The Notes will bear simple interest on the unpaid principal balance at the rate of twelve percent (12%) per annum.  All unpaid principal, together with all accrued and unpaid interest on the Notes, will be due and payable in full six (6) months from the date of issuance (the “Maturity Date”); provided, however, that the Company will have the right to extend the Maturity Date of any Note for an additional period of six (6) months subject to payment of an extension fee equal to one percent (1%) of the unpaid principal amount of the Note, which extension fee will be due and payable on the extended Maturity Date.

 

  

Page 18

  

No fixed, periodic payments of interest and/or principal will be made on the Notes, and the Notes will be due and payable in full on the Maturity Date (or, if applicable, the extended Maturity Date).  The Notes will be unsecured obligations of the Company.

 

As additional consideration for investing in this Offering, each Investor will receive equity in the Company as follows: For each $100,000 invested, an Investor will receive 22,222 shares of common stock of the Company (the “Shares”).  If all of the Notes are sold in this Offering, the Investors in this Offering collectively will receive 222,220 shares of common stock, which represents approximately 1.17% of the Company on a fully-diluted basis.

 

We are offering the Notes only to persons who are Accredited Investors.  Each investor will be required to invest a minimum of USD $100,000 although we reserve the right to accept, in our discretion, less than the minimum investment amount from any subscriber.  We may reject any subscription, in whole or in part, in our sole discretion for any reason or no reason.  We may have already sold all of the remaining Notes if and when you decide to invest.  Our attorneys also will have to approve sales of the Notes.

 

The Offering is being made pursuant to exemptions from registration provided by the Securities Act and rules and regulations promulgated thereunder.  If you want to purchase a Note, you must execute the form of Note Purchase Agreement we have prepared.  We are paying all expenses of the Offering, except that if you want to engage separate counsel or other experts in connection with your investment, you must pay your own expenses.

The Offering will terminate on March 31, 2015, subject to the right of the Company to extend the Offering for an additional thirty (30) days in the event the Offering is not fully subscribed as of March 31, 2015.

Use of Proceeds

 

If the Company sells all of the Notes, the total gross proceeds will be One Million Dollars (USD $1,000,000).  After payment of the costs and expenses of this Offering, including legal fees, all remaining proceeds from the Notes will be immediately available to the Company.  The Company is not required to sell any minimum amount of Notes in order to use the proceeds from the sale of the Notes.  We plan to use this money for construction of signs, permitting, and other costs related thereto, as well as for general working capital.  What we don’t spend immediately, we may deposit in interest or non-interest bearing accounts, or government obligations, certificates of deposit, money market mutual funds or similar investments.

This represents our best estimate of how we will use the money, based on what we now know and our current circumstances.  The Company anticipates, however, based on current plans and assumptions relating to its operations, that it will be necessary for the Company to raise significant additional funds of not less than Six Million Dollars ($6,000,000) in the very near future in order to fully implement its business plan.  Please see Addendum B, “RISK FACTORS.”

 

  

Page 19

  

Opportunity to Make Inquiries

 

Before selling any Notes, we will give you an opportunity to ask questions and to receive answers from us concerning any aspect of the investment, and to obtain any additional information, to the extent that we possess such information or can acquire it without unreasonable effort or expense.

You may review copies of any documents or agreements that we have identified or referred to in these materials, although we may request that you execute a confidentiality agreement with respect to our private information.

Restrictions on Transferability

 

The Notes and Shares have not been registered under the Securities Act or the laws of any state or other jurisdiction.  The Notes and Shares 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 under the Securities Act.  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.  The Notes and certificates for the Shares will bear appropriate legends reflecting applicable restrictions on their transferability.  In addition, the Notes may not be transferred without the written consent of the Company.

 

  

Page 20

  

 

ADDENDUM B

 

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 before making an investment decision.  If any of the following risks actually occurs, the Company’s business, financial condition and/or operating results could be materially harmed.  This document contains forward-looking statements that involve known and unknown risks and uncertainties.  These statements relate to the Company’s plans, objectives, expectations and intentions.  Our actual results could differ materially from those discussed in these statements.  Factors that could contribute to these differences include those discussed below and elsewhere in this document.  The risks and uncertainties described below are not the only ones we face.

 

Our lack of operating history makes it difficult to evaluate our future prospects.

 

Investment in an early-stage company such as the Company is inherently subject to many risks, and investors should be prepared to withstand a complete loss of their investment.

 

The Company was formed as a Nevada corporation on January 14, 2014, and is the surviving entity of a merger that was effective on August 18, 2014.  As part of the merger, both Placer Creek Mining Company (“Placer”) and Digi Outdoor Media, Inc. (“DOM”) merged with and into the Company.  The Company (formerly named Placer Creek of Nevada, Inc.) changed its name to Digi Outdoor Media, Inc. as of the effective date of the merger.

 

As a result of the merger, the Company has acquired all of the assets and assumed all of the debts and liabilities of the two merged entities, Placer and DOM.  Because of the Company’s lack of operating history and the limited operations of the two merged entities, the Company’s pro forma financial information is of limited value in projecting future results.  The Company’s business and future prospects therefore are difficult to evaluate, and an investor should consider and evaluate the Company’s operating prospects in light of the risks and uncertainties frequently encountered by early-stage companies in intensely competitive markets.  As of the date of this Offering, we had no revenues and no earnings.  A copy of the Company’s audited financial statements for the fiscal year ended September 30, 2014 is attached hereto as Addenda E.

 

We expect to continue to incur significant costs relating to sales, marketing, and general and administrative expenses.  As a result, the Company will need to generate significant revenues in order to achieve profitability.  If the Company is unable to execute its business plan for any reason, amounts invested in the Company will likely be entirely lost.

 

Our financial forecasts are highly speculative.

 

Any financial forecasts of the Company included in this document are highly speculative and are based upon assumptions the Company currently believes to be reasonable, but which are uncertain and unpredictable.  The forecasts and projections include certain stated assumptions that must be examined carefully.  These projections do not constitute representations as to future operations, and no assurance can be given as to the reliability of the assumptions on which they are based.  Such assumptions may be incomplete or inaccurate, and unanticipated events and circumstances are likely to occur.  Actual results achieved during the periods covered are likely to vary from the projections and such variations may be material and adverse.

 

  

Page 21

  

 

We need substantial additional financing to accomplish our business strategy.

 

We require substantial working capital to fund our business.  Shortly following the completion of this Note Offering, we will need to obtain significant additional financing to continue our business.  We anticipate that we will need to raise at least Six Million Dollars ($6,000,000) in this next round of financing (the “Subsequent Financing”) in order to fully implement our business plan, including building out our digital signage network, purchasing and installing the signs, marketing and sales, securing advertising customers and contracts, and hiring additional staff.  We currently have no committed sources of additional capital, and there can be no assurance that any financing arrangements will be available in amounts or on terms acceptable to us, if at all.  If we do not raise at least $6,000,000 in the Subsequent Financing, the Company will be unable to execute on its business plan.  The Company’s failure to raise the necessary funds in the Subsequent Financing also will impair our ability to repay the Notes in this Offering, absent some other means of financing.

 

If we raise funds in the Subsequent Financing by selling additional shares of stock in the Company, the percentage ownership in the Company of holders of Notes in this Offering will be substantially diluted.

 

We also may raise additional capital in the Subsequent Financing by issuing equity securities that are preferred or senior to our existing common shares for purposes of dividend and liquidating distributions, and which may have superior voting rights, all of which will adversely affect the rights and value of our shares of common stock.

 

We expect to continue to incur significant costs relating to developing and building out our digital signage network, sales, marketing, and general and administrative expenses.  As a result, the Company will need to generate significant revenues in order to achieve profitability.  Our growth strategy includes increasing our revenues by increasing the number and locations of our digital signs, and securing and increasing our advertising contracts.  If the Company is unable to increase the size of its digital signage network, its customer base and service volume, it will not achieve profitability and will be unable to execute its business plan.  If this occurs, amounts invested in the Company will likely be entirely lost.

 

No guarantee of payment of the Notes; no collateral.

 

There is no guarantee that the Company will have sufficient funds to repay the Notes, particularly if the Company is not successful in raising the necessary funds in the Subsequent Financing.  Accordingly, investors may not receive any payments on the Notes.  The Notes also are unsecured obligations of the Company, and in the event the Company defaults on its obligations under the Notes, you will not have recourse to any specific collateral or assets of the Company to satisfy the Notes.

 

  

Page 22

  

 

The Company has other debt with priority.

 

In addition to the Company’s obligations to the Note holders in this Offering, the Company has other outstanding debt in the aggregate principal amount of $1,180,500, of which $900,000 (plus accrued interest thereon) is due and payable on June 1 2015, subject to one 90-day extension of the due date.  Accordingly, a significant portion of the Company’s other debt obligations will need to be repaid prior to any repayment of the Notes in this Offering if the Company elects to exercise its right to extend the maturity date of the Notes for six months.  If the Company fails to raise sufficient funds in the Subsequent Financing, the Company likely will not be able to repay the Notes when they become due, and amounts invested in the Company will be lost.

 

We face significant competition from other companies.

 

The Company will face competition from other more established digital signage companies and other media companies.  Current competitors as well as new competitors may be able to develop a larger digital signage network, secure better sign locations, and provide advertising services at the same or a lower cost.  Accordingly, we believe that our success will depend heavily upon our ability to quickly develop and build out our digital signage network and to secure long-term lease agreements for our signs at prime locations before our competitors can do so.

 

We will be competing with other providers of similar services.  Our current competitors such as Clear Channel Outdoor Holdings, CBS Outdoor, Lamar Advertising Company, and J.C. Decaux North America have longer operating histories, greater name recognition, larger client/customer bases, and greater financial and marketing resources and experience than we do.  In addition, some of the Company’s competitors have more diversified operations, such as television, radio, other broadcast media, mobile devices, satellite radio, Internet-based services and direct mail advertising.  These diversified competitors have the advantage of cross-selling complementary advertising products to customers.

 

The industry competes for advertising revenue along the following dimensions: exposure (the number of “impressions” an advertisement makes), advertising rates (generally measured in cost-per-thousand impressions), ability to target specific demographic groups or geographies, effectiveness, quality of related services (such as advertising copy design and layout), and customer service.  The Company may be unable to compete successfully along these dimensions, and the competitive pressures that the Company faces could adversely affect its profitability or financial performance.

 

In order to be competitive, we must respond promptly and effectively to the demands of the marketplace by offering new and improved advertising services, and by continuing to enhance our services as well as our marketing channels.  Increased competition could result in a decrease in use of our services by customers, loss of market share and brand recognition, and a reduction in our prices and/or margins.  We cannot assure you that we will be able to compete successfully against current and future competitors.  Competitive pressures faced by us could have a material adverse effect on our business, operating results and financial condition.

 

  

Page 23

  

 

Federal, state and local regulations may adversely affect our business.

 

Advertising, and in particular, outdoor advertising, is subject to governmental regulation at the federal, state and local levels.  For example, the Highway Beautification Act regulates outdoor advertising on Federal-Aid Primary, Interstate and National Highway Systems’ roads in the United States.  States and municipalities also have adopted regulations that could negatively impact digital outdoor advertising.  Regulations generally restrict the size, spacing, lighting, configuration, and other aspects of advertising structures and pose a significant barrier to entry and expansion in many markets, including our target metropolitan markets.

 

Digital signs are relatively new and have only recently been introduced into the market on a large scale.  Accordingly, existing regulations that currently do not apply by their terms to digital signs could be revised to impose greater restrictions.  In addition, new regulations could be adopted further restricting, and possibly prohibiting altogether, the installation and operation of outdoor digital signs.  These regulations may impose greater restrictions on digital signs due to alleged concerns over aesthetics or driver safety.  The adoption and implementation of such regulations are outside of our control, and to the extent such regulations prohibit us from locating and installing our digital signs at desirable, high-traffic locations, it could make it extremely difficult or impossible for us to develop and build out our digital signage network, and could have a material adverse impact on the growth of our business, our results of operations, and financial condition.

 

Our success depends in large part on the continuing efforts of a few individuals and our ability to attract, retain and motivate new personnel to expand our operations.

 

We depend substantially on the continued services and performance of our founders and other key management personnel.  We have written employment agreements with some of our executive officers; however, these agreements are not long-term employment agreements and these individuals may not remain with the Company in the future.  The loss of services of any of our founders or other key management personnel could hurt our business, and our financial condition and results of operations could suffer.  Our future success also will depend on our ability to attract, hire, train, retain and motivate other skilled managerial, sales and marketing, and business development personnel.  Competition for such personnel is intense.  If we fail to successfully attract, assimilate and retain a sufficient number of qualified managerial, sales and marketing, business development and administrative personnel, our ability to manage and expand our business could suffer.

 

Advances and changes in the industry may reduce our profitability.

 

Adoption of new and superior advertising services, products and technologies could render some of our services and digital signs obsolete, thereby reducing the amount of revenues we receive.  Reduction of revenues could decrease our profitability.  We also may have to expend significant capital resources to deploy new services, products and/or technology to remain competitive.  Our inability to provide access to new and improving services, products, technology and equipment could deter clients from using our services and digital signs.

 

  

Page 24

  

 

The Company’s revenues will be affected by general economic conditions and other external events beyond the Company’s control.

 

The Company intends to sell advertising space on its digital signs to generate revenues.  Advertising spending is particularly sensitive to changes in economic conditions, and periods of a slowing economy or recession, or periods of economic uncertainty, may be accompanied by a decrease in advertising.  Additionally, the occurrence of any of the following external events could further depress the Company’s revenues: (i) a widespread reallocation of advertising expenditures to other available media by customers of the Company’s digital signs; (ii) a decline in the amount spent on advertising in general or outdoor advertising in particular by companies; (iii) unfavorable shifts in population or other demographics, which may cause us to lose advertising customers as people migrate to markets where we have a smaller (or non-existent) presence, or which may cause advertisers to be willing to pay less in advertising fees if the general population shifts into a less desirable age or geographical demographic from an advertising perspective; and (iv) unfavorable changes in labor conditions, which may impair our ability to operate or require us to spend more to retain and attract key employees.

 

No marketability of the Company’s securities.

 

Because the Company is not a public company, there is no market for the Company’s Securities.  The Securities have not been registered under the Securities Act, and will be subject to significant restrictions on resale.  Such Securities may only be resold if they are subsequently registered with the U.S. Securities and Exchange Commission, or if they are sold pursuant to an exemption from the registration requirements.

 

Tax Consequences.

 

There may be material tax consequences to a subscriber with respect to the acquisition or disposition of the Securities.  The Company is not offering or giving any opinion or advice on any tax matters, and is not making any representation with respect to the tax consequences, whether material or adverse to a subscriber, under federal, state, or local tax law with respect to the acquisition or disposition of such Securities.  Each investor should consult with his/her own tax advisor concerning the U.S. federal, state and local tax consequences of an investment in the Company in light of the investor’s particular situation.

Projected Expectations May Not Be Met.

 

No assurance can be given as to the future performance of the Company. All projected expectations provided by the Company are dependent upon a number of assumptions, which management believes to be reasonable on the basis of the limited information presently known to it.  Investors should recognize that there can be no assurance that the projected expectations will be achieved, and should not place reliance upon the Company's expectations or the underlying expectations.  Investors should be aware that a number of factors could cause the projected expectations to be incorrect or differ materially from actual results.  Such factors may include, without limitation: (i) the ability of the Company to complete the development and marketing of its digital advertising network; (ii) the demand for, and timing of demand for, such advertising signs and services; (iii) competition from other companies; (iv) the Company’s sales and marketing capabilities; (v) the Company’s ability to sell its services and products profitably; (vi) the availability of adequate debt and equity financing; and (vii) general business and economic conditions.

 

  

Page 25

  

Potential Fluctuations in Operating Results.

 

Significant annual and quarterly fluctuations in the Company’s results of operations may be caused by, among other factors, the volume of revenues generated by the Company and general economic conditions.

 

There can be no assurances that the level of revenues and profits, if any, achieved by the Company in any particular fiscal period will not be significantly lower than in other, including comparable, fiscal periods.  The Company’s expense levels are based, in part, on its expectations as to future revenues.

 

As a result, if future revenues are below expectations, net income or loss may be disproportionately affected by a reduction in revenues, as any corresponding reduction in expenses may not be proportionate to the reduction in revenues.  As a result, the Company believes that period-to-period comparisons of its results of operations may not necessarily be meaningful and should not be relied upon as indications of future performance.

Risk of Managing Growth.

 

The Company anticipates growing and expanding its existing operations.  The anticipated growth could place a significant strain on the Company’s management, and operational and financial resources.  Effective management of the anticipated growth will require expanding the Company’s management and financial controls, hiring additional appropriate personnel as required, and developing additional expertise by existing management personnel.  There can be no assurance, however, that these or other measures implemented by the Company will effectively increase the Company’s capabilities to manage such anticipated growth or to do so in a timely and cost-effective manner.  Moreover, management of growth is especially challenging for a company with a limited operating history and limited financial resources, and the failure to effectively manage growth could have a material adverse effect on the Company’s operations.

 

  

Page 26

  

Absence of Merit Review.

 

Investors are cautioned that the Company’s Securities have not been registered under the Securities Act or under any state securities laws.  No state authority has reviewed the accuracy or adequacy of the information contained herein nor has any regulatory authority made a merit review of the Notes offered to investors in this Offering.  Therefore, investors must recognize that they do not have all the protections afforded by securities laws to register or qualify offerings in states with merit reviews, and must therefore judge for themselves the adequacies of the disclosures, the pricing, dilution and fairness of the terms of this Offering without benefit of prior merit review by authorities.

 

IN ADDITION TO THE ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT.

 

  

Page 27

  

 

ADDENDUM C

 

Form of Promissory Note

 

See Exhibit 10.17.

 

  

Page 28

  

 

ADDENDUM D

 

Digi Outdoor Media, Inc. 2014 Executive Summary

 

DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS:

 

The financial forecasts and other information contained in the Company’s Executive Summary are “forward-looking statements” as defined by Section 27A of the Securities Act.  They relate to future results, performance, plans, events and other matters, and were developed by management of the Company based upon assumptions made by the Company.  You should not rely on forward-looking statements in the Executive Summary or elsewhere in this Agreement.  We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends” “may,” “will,” “should,” “estimates,” “predicts,” “potential,” “continue” and similar expressions to identify such forward-looking statements.  These forward-looking statements involve numerous risks and uncertainties, including, but not limited to, risks and uncertainties pertaining to development of the Company’s services and markets for such services, the extent to which customers purchase and utilize the Company’s services, competitive services and pricing, and changes in economic conditions and market demand for the Company’s services.  Although the Company believes that its assumptions are reasonable, they may be incomplete or incorrect, and unanticipated events and circumstances are likely to occur.  The Executive Summary also contains forward-looking statements attributed to certain third parties relating to their estimates regarding the growth of certain markets.  Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, achievements and prospects to be materially different from those expressed or implied by such forward-looking statements.  These risks, uncertainties and other factors include, among others, those identified under “Risk Factors” in Addendum B and elsewhere in this Agreement.

The Company makes no representation or warranty as to the accuracy or completeness of the assumptions, forecasts or other forward-looking information contained in the Executive Summary.  Such information is presented only as of the date of the Executive Summary and this Agreement, as applicable.  We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  In light of these risks, uncertainties, and assumptions, the forward-looking events discussed in the Executive Summary or elsewhere in this Agreement might not occur.  Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described above and elsewhere in this Agreement.  See Addendum B, “Risk Factors.”

 

  

Page 29domi_ex1019.htm

Exhibit 10.17

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

DIGI OUTDOOR MEDIA, INC.

 

FORM OF Promissory Note

	
Note No. 2015-____

	
February ____, 2015

	
USD $___________

	
Seattle, Washington

 

For value received, Digi Outdoor Media, Inc., a Nevada corporation (the “Company”), promises to pay to _______________________________ (“Holder”), in lawful money of the United States, the principal sum of ______________________________ and no/100 Dollars ($__________), or such lesser amount as shall equal the outstanding principal amount hereof, together with simple interest from the date of this Note on the unpaid principal balance at a rate equal to twelve percent (12%) per annum, computed on the basis of the actual number of days elapsed and a year of 365 days.  Accrued interest on this Note shall not compound.

 

This Promissory Note (this “Note”) is one of a series of Promissory Notes (together with this Note, the “Notes”) having serial numbers 2015-1 et seq., with an aggregate principal amount not to exceed One Million Dollars (USD $1,000,000) issued by the Company in accordance with the terms of that certain Note Purchase Agreement dated February 2, 2015 (the “Purchase Agreement”), by and among the Company, Holder and the other parties named therein.  The Notes shall rank equally without preference or priority of any kind over one another, and all payments on account of principal and interest with respect to any of the Notes shall be applied ratably and proportionately on all outstanding Notes in this series on the basis of the principal amount of outstanding indebtedness represented thereby.

 

The following is a statement of the rights of Holder and the conditions to which this Note is subject, and to which Holder, by the acceptance of this Note, agrees:

 

1. Definitions.  As used in this Note, the following capitalized terms have the following meanings:

 

(a) “Company” includes the company initially executing this Note and any Person who shall succeed to or assume the obligations of the Company under this Note.

 

(b) “Event of Default” has the meaning given in Section 5 hereof.

 

(c) “Holder” shall mean the Person specified in the introductory paragraph of this Note or any Person who shall at the time be the registered holder of this Note.

 

  

  

  

 

(d) “Obligations” shall mean and include all loans, advances, debts, liabilities and obligations for the payment of money owed by the Company to Holder, now existing or hereafter arising under or pursuant to the terms of this Note, payable by the Company hereunder.

 

(e) “Person” shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity.

 

2.           Payments on Note.  No monthly or other periodic payments of principal or interest shall be required or due on this Note.

 

3.           Maturity Date; Extension.  The unpaid principal amount of this Note, together with all unpaid and accrued interest thereon, shall be due and payable in full six (6) months from the date of this Note (the “Maturity Date”); provided, however, that the Company shall have the option and right to extend the Maturity Date of this Note for an additional period of six (6) months (the “Extended Maturity Date”) subject to payment of an extension fee equal to one percent (1%) of the unpaid principal amount of this Note, which extension fee will be due and payable on the Extended Maturity Date.  The Company shall give Holder written notice of the Company’s election to extend the Maturity Date not less than fifteen (15) days prior to the original Maturity Date.

 

4.           Prepayment.  The Company, in its sole discretion, may prepay this Note in full at any time prior to the Maturity Date (or Extended Maturity Date, if applicable) without penalty or premium.

 

5.           Events of Default.  The occurrence of any of the following events shall constitute an “Event of Default” under this Note:

 

(a)           Failure to Pay.  The Company shall fail to make any payment on the Note when due hereunder; provided, however, that in each such instance Holder shall give written notice to the Company of such failure and payment shall not have been made within ten (10) days of Company’s receipt of Holder’s written notice to the Company of such failure to pay.

 

(b)           Voluntary Bankruptcy or Insolvency Proceedings.  The Company shall: (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or substantially all of its property and assets; (ii) make a general assignment for the benefit of its creditors; (iii) be dissolved or liquidated; (iv) become insolvent (as such term may be defined or interpreted under any applicable statute); (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it; or (vi) take any action for the purpose of effecting any of the foregoing.

 

(c)           Involuntary Bankruptcy or Insolvency Proceedings.  Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or of all or substantially all of the property thereof, or an involuntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Company or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced against the Company, and such proceeding is not dismissed or discharged within sixty (60) days of commencement.

 

  

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6.           Rights of Holder upon Default.  Upon the occurrence or existence of any Event of Default described in Section 5(a) and at any time thereafter during the continuance of such Event of Default, Holder may, by written notice to the Company following the expiration of the ten (10) day cure period, declare all outstanding Obligations payable by the Company hereunder to be immediately due and payable.  Upon the occurrence or existence of any Event of Default described in Sections 5(b) and 5(c), the Holder may, upon giving thirty (30) days advance written notice to the Company, declare all outstanding Obligations payable by the Company hereunder to be immediately due and payable.

7.           No Collateral.  The Obligations of the Company under this Note are not secured by any collateral.

 

8.           Representations and Warranties of Holder.  Holder hereby represents and warrants to the Company with respect to the purchase of the Note as follows:

 

(a)           Binding Obligation.  Holder has full legal capacity, power and authority to execute and deliver this Note and to perform his/her obligations hereunder.  This Note issued to Holder is a valid and binding obligation of Holder, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity.

 

(b)           Investment; Accredited Investor.  Holder understands that the investment in this Note and the shares of common stock of the Company (the “Shares”) issued to Holder as additional consideration for Holder’s investment in this Note (the Note and Shares collectively referred to as the “Securities”) is a speculative investment, and Holder represents that he/she is aware of the business affairs and financial condition of the Company and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities, and that Holder is purchasing the Securities for investment for his/her own account only and not with a view to, or for resale in connection with, any “distribution” within the meaning of the U.S. Securities Act of 1933, as amended (the “Securities Act”) or applicable state securities laws.  Holder further represents that he/she understands that the Securities have not been registered under the Securities Act or applicable state securities laws by reason of specific exemptions therefrom, which exemptions depend upon, among other things, the bona fide nature of Holder’s investment intent as expressed herein.  Holder acknowledges and understands that the Securities must be held indefinitely unless subsequently registered under the Securities Act and qualified under applicable state securities laws or unless exemptions from such registration and qualification requirements are available, and that the Company is under no obligation to register or qualify the Securities.  If Holder has not separately provided the Company with an executed Investor Questionnaire certifying whether such Investor is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated pursuant to the Securities Act, Holder hereby represents and warrants that he/she is an “accredited investor.”

 

  

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(c)           Access to Information.  Holder acknowledges that he/she has reviewed the terms of this Note, the Company’s 2014 Business Plan or Executive Summary, and the Risk Factors set forth in the Purchase Agreement, and that Holder has had an opportunity to discuss the Company’s business, management and financial affairs with the Company’s officers and/or directors.  Holder understands that such discussions as well as any written information issued by the Company were intended to describe the aspects of the Company’s business and prospects which it believes to be material but were not necessarily a thorough or exhaustive description.

 

(d)           Finder’s Fees.  Holder represents and warrants that no person is entitled, directly or indirectly, to compensation from Holder by reason of any contract or understanding or contact with Holder, as a finder or broker in connection with the sale and purchase of this Note.  Holder agrees to indemnify and hold the Company harmless from and against and in respect of any claim for brokerage or other commissions or similar fees relative to this Note or the transactions contemplated hereby that may arise as a result of a contract or understanding made by Holder with any such broker or finder in connection with the sale and purchase of this Note.

 

9.           Successors and Assigns.  Subject to the restrictions on transfer described in Section 11 below, the rights and obligations of the Company and the Holder of this Note shall be binding upon and inure to the benefit of the successors, assigns, heirs, administrators and transferees of the parties.

 

10.           Waiver and Amendment.  Any provision of this Note may be amended, waived or modified upon the written consent of the Company and the holders of a majority of the aggregate principal amount of all then outstanding Notes issued in this series of Notes pursuant to the Purchase Agreement.

 

11.           Transfer of Note and Shares.  With respect to any offer, sale or other disposition of this Note or the Shares, Holder shall give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of Holder’s counsel, or other evidence if reasonably satisfactory to the Company, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any applicable federal or state law then in effect).  Upon receiving such written notice and reasonably satisfactory opinion, if so requested, or other evidence, the Company, as promptly as practicable, shall notify Holder that Holder may sell or otherwise dispose of this Note or the Shares, all in accordance with the terms of the notice delivered to the Company.  If a determination has been made pursuant to this Section 11 that the opinion of counsel for Holder, or other evidence, is not reasonably satisfactory to the Company, the Company shall so notify Holder promptly after such determination has been made.  Each Note thus permitted to be transferred and each certificate representing the Shares thus permitted to be transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities Act.  The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.  Subject to the foregoing, transfers of the Securities shall be registered upon the registration books maintained for such purpose by or on behalf of the Company.  Prior to presentation of this Note for registration of transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue, and the Company shall not be affected by notice to the contrary.

 

  

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12.           Assignment by Company.  This Note and any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by the Company to any affiliate or successor in interest to the Company without the prior written consent of Holder.

 

13.           Notices.  All notices and other communications required or permitted hereunder shall be in writing.  Each such notice or other communication shall for all purposes of this Note be treated as effective or having been given: (i) if delivered personally, by messenger or by confirmed facsimile, when delivered; (ii) if sent by mail, at the earlier of its receipt or three (3) business days after same has been deposited, postage prepaid, in a regularly maintained receptacle for the deposit of the United States mail; or (iii) if sent by overnight delivery by Federal Express or similar courier, one business day after the business day of deposit with such courier, and shall be addressed (x) if to Holder, at Holder’s address as set forth on the register maintained by Company, and (y) if to Company, at the address of its principal corporate offices (Attention: CEO), or at such other address as a party may designate by ten (10) days’ advance written notice to the other parties pursuant to the provisions above.

 

14.           Usury.  In the event any interest is paid on this Note which is deemed to be in excess of the then applicable legal maximum rate, then that portion of the interest payment representing an amount in excess of the then applicable legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

 

15.           Governing Law.  This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of Washington, without regard to the conflict of laws provisions of the State of Washington, or of any other state.

 

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

 

[Signature page follows]

 

  

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IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the date first written above.

 

Digi Outdoor Media, Inc.

A Nevada Corporation

 

 

__________________________________________

 

By: _______________________________________                                                               

 

Title: ______________________________________                                                               

 

 

 

Agreed To and Acknowledged:

 

Holder:

 

____________________________________________

(Signature)

 

Print Name: __________________________________

 

Title: _______________________________________

    (If Holder is an entity)

 

Address:  ___________________________________

 

     ___________________________________

 

       ___________________________________

 

 

 

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