OFFERED TO:

MEMORANDUM NO:

PRIVATE PLACEMENT MEMORANDUM

NewCo, LLC
$1,500,000 of Series B Convertible Preferred Stock
This Private Placement Memorandum (the Memorandum) relates to a private offering (the
Offering) to a limited number of Accredited Investors (as that term is defined under the federal
securities laws) of $1,500,000 in shares of Series B Convertible Preferred Stock (the Series B Preferred
Shares), $.001 par value, of NewCo, Inc. (the Company), a Nevada corporation which will be formed
from the conversion of NewCo, LLC, on June 1, 2010.
The Series B Preferred Shares are being offered pursuant to exemptions from federal registration
contained in the Securities Act of 1933, as amended (the 1933 Act), and Rule 506 of Regulation D
promulgated thereunder. The Shares will consist of 15,000,000 Series B Preferred shares, and will be
offered at a purchase price of $.10 per share. Each Share will be convertible, initially at the option of the
holder and automatically under certain circumstances, into one (1) share(s) of the Companys Common
Stock, no par value (the Common Shares). All of the Shares offered hereby are being sold by the
Company. Each investor must purchase a minimum of 250,000 Series B Preferred Shares, for a
minimum investment in the company of $25,000. The closing of the sale of the Shares may take place in
one or more closings. There is no minimum amount which must be raised by the Company in order for
the Offering to close. There is currently no established trading market for any of the Companys
securities. Subscription documents are attached to this Memorandum as Exhibit C.
AN INVESTMENT IN THE SERIES B PREFERRED SHARES IS SPECULATIVE AND
INVOLVES A HIGH DEGREE OF RISK. INVESTORS MUST BE PREPARED TO BEAR THE
ECONOMIC RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME AND
BE ABLE TO WITHSTAND A TOTAL LOSS OF THEIR INVESTMENT. FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE SHARES, SEE RISK FACTORS BEGINNING ON PAGE 26.

Per Share........................................................
Total Offering.................................................

Price to
Investors (1)
$.10
$1,500,000

Expenses (2)
$.00333
$50,000

Net Proceeds to
Company (3)
$0.009667
$1,450,000

(1) The purchase price per Share is payable in full on subscription. Funds paid by Investors will be
available for use by the Company immediately upon payment.
(2) The Company estimates legal and other expenses related to the Offering to aggregate $50,000. No
commissions are payable by the Company in connection with the Offering. See Sources and Uses of
Proceeds.
(3) The net proceeds shown reflect the deduction of the estimated expenses for the offering described in
footnote 2. The Company intends to place the Series B Preferred Shares on a best efforts basis

through the services of the Companys officers and directors, but reserves the right to utilize the
services of one or more licensed broker/dealers. The Company anticipates that any such broker/dealer
would receive selling commissions in an amount not to exceed eight percent (8%) of the aggregate
price of the Shares sold, and that such broker/dealers would place the Shares on best efforts, not a
firm commitment basis. The net proceeds above do not reflect any selling commission payable to
any such broker/dealers. See Sources and Uses of Proceeds.
The date of this Memorandum is January 15, 2010.
The Company intends that the Series B Preferred Shares will only be offered to, and
purchased by, accredited investors, as that term is defined in Regulation D
promulgated under the 1933 Act, but the Company reserves the right to sell Shares
to up to thirty-five persons who are not accredited investors. The Companys offer of
the Shares hereunder will be terminated on the date that is the earlier to occur of
June 30, 2010 and the date that the 15,000,000 Series B Preferred Shares offered in
the Offering have been purchased by investors. The Company unconditionally
reserves the right to withdraw, limit or terminate this Offering at any time and to
reject any or all offers to purchase the Shares, and to amend, if necessary and
without refund of Shares previously purchased, the terms of this Memorandum to
reflect changes, developments and new information that occur or become known to
the Company while the Offering is in progress.

THE SERIES B PREFERRED SHARES OFFERED HEREBY AND THE COMMON SHARES
ISSUABLE UPON THE CONVERSION THEREOF HAVE NOT BEEN REGISTERED UNDER
THE 1933 ACT, OR ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION (THE SEC) OR ANY STATE OR
FOREIGN REGULATORY AUTHORITY PASSED ON THE ACCURACY OR ADEQUACY OF
THIS PRIVATE PLACEMENT MEMORANDUM OR ENDORSED THE MERITS OF THIS
OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE SERIES B
PREFERRED SHARES ARE OFFERED PURSUANT TO EXEMPTIONS PROVIDED BY
SECTION 4(2) OF THE SECURITIES ACT, REGULATION D THEREUNDER, CERTAIN
STATE SECURITIES LAWS AND CERTAIN RULES AND REGULATIONS PROMULGATED
PURSUANT THERETO. THE SERIES B PREFERRED SHARES MAY NOT BE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
THE DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND PROSPECTIVE

INVESTORS SHOULD CONSIDER A NUMBER OF FACTORS BEFORE INVESTING
IN THE SERIES B PREFERRED SHARES. SEE RISK FACTORS.

THE INFORMATION CONTAINED IN THIS MEMORANDUM IS CONFIDENTIAL AND

PROPRIETARY TO THE COMPANY AND IS BEING SUBMITTED TO PROSPECTIVE INVESTORS
SOLELY FOR SUCH INVESTORS CONFIDENTIAL USE AND WITH THE EXPRESS
UNDERSTANDING AND AGREEMENT OF THE INVESTORS THAT, WITHOUT THE PRIOR
EXPRESS WRITTEN PERMISSION OF THE COMPANY, SUCH INVESTORS WILL NOT RELEASE
THIS DOCUMENT OR DISCUSS THE INFORMATION CONTAINED HEREIN OR MAKE
REPRODUCTIONS OF OR USE THIS MEMORANDUM OR THE INFORMATION CONTAINED
HEREIN FOR ANY PURPOSE OTHER THAN EVALUATING A POTENTIAL INVESTMENT IN THE
SERIES B PREFERRED SHARES OFFERED HEREBY.
A PROSPECTIVE INVESTOR, BY ACCEPTING DELIVERY OF THIS MEMORANDUM, AGREES
PROMPTLY TO RETURN TO THE COMPANY OR PLACEMENT AGENT THIS MEMORANDUM
AND ANY OTHER DOCUMENTS OR INFORMATION THE COMPANY OR ITS
REPRESENTATIVES FURNISH TO SUCH INVESTOR IF THE PROSPECTIVE INVESTOR ELECTS
NOT TO PURCHASE ANY OF THE SERIES B PREFERRED SHARES OFFERED HEREBY OR IF
THE OFFERING IS TERMINATED OR WITHDRAWN.

THIS MEMORANDUM CONSTITUTES AN OFFER ONLY TO THE OFFEREE TO WHOM THIS

MEMORANDUM IS INITIALLY DISTRIBUTED BY THE COMPANY. THIS MEMORANDUM
DOES NOT PURPORT TO BE ALL-INCLUSIVE OR TO CONTAIN ALL OF THE INFORMATION
THAT A PROSPECTIVE INVESTOR MAY DESIRE IN INVESTIGATING THE COMPANY. EACH
INVESTOR MUST CONDUCT AND RELY ON ITS OWN EVALUATION OF THE COMPANY AND
THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED, IN
MAKING AN INVESTMENT DECISION WITH RESPECT TO THE SERIES B PREFERRED
SHARES. SEE RISK FACTORS FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH THE PURCHASE OF THE SERIES B PREFERRED
SHARES. CERTAIN PROVISIONS OF VARIOUS AGREEMENTS ARE SUMMARIZED IN THIS
MEMORANDUM, BUT PROSPECTIVE INVESTORS SHOULD NOT ASSUME THAT THE
SUMMARIES ARE COMPLETE. SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO THE COMPLETE TEXT OF SUCH AGREEMENTS.

THIS MEMORANDUM INCLUDES CERTAIN STATEMENTS, ESTIMATES, PROJECTIONS AND

OTHER FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE COMPANYS
ANTICIPATED FUTURE PERFORMANCE. THE COMPANYS INDEPENDENT AUDITORS HAVE
NEITHER EXAMINED NOR COMPILED THE PROJECTIONS AND, ACCORDINGLY, DO NOT
EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT THERETO.
THE STATEMENTS, ESTIMATES, PROJECTIONS AND OTHER FORWARD-LOOKING
STATEMENTS ARE BASED ON VARIOUS ASSUMPTIONS BY MANAGEMENT THAT MAY NOT
PROVE TO BE CORRECT. SUCH ASSUMPTIONS ARE INHERENTLY SUBJECT TO
SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND
THE CONTROL OF THE COMPANY. NO REPRESENTATION IS MADE, AND NO ASSURANCE
CAN BE GIVEN, THAT THE COMPANY CAN OR WILL ATTAIN SUCH RESULTS. ACTUAL
RESULTS ARE LIKELY TO VARY, PERHAPS MATERIALLY, FROM THE PROJECTIONS.

THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF

AN OFFER TO BUY THE SERIES B PREFERRED SHARES IN ANY JURISDICTION WHERE, OR
372349.1

TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN

SUCH JURISDICTION. EXCEPT AS OTHERWISE INDICATED, THIS MEMORANDUM SPEAKS
AS OF THE DATE HEREOF. NEITHER THE DELIVERY OF THIS MEMORANDUM NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
AFTER THE DATE HEREOF.

PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE ANY STATEMENTS MADE IN THIS

MEMORANDUM AS TAX OR LEGAL ADVICE. EACH INVESTOR SHOULD CONSULT HIS
PERSONAL LEGAL COUNSEL, ACCOUNTANT, OR OTHER ADVISORS AS TO THE LEGAL;
FINANCIAL AND RELATED MATTERS CONCERNING THE SUITABILITY OF AN INVESTMENT
IN THE SERIES B PREFERRED SHARES.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE

REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER THAN THE
INFORMATION AND REPRESENTATIONS CONTAINED IN THIS MEMORANDUM, AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MAY NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. PRIOR TO THE
CONSUMMATION OF THE PURCHASE AND SALE OF ANY SERIES B PREFERRED SHARES,
THE COMPANY WILL AFFORD PROSPECTIVE INVESTORS AN OPPORTUNITY TO ASK
QUESTIONS OF AND RECEIVE ANSWERS FROM THE COMPANY CONCERNING THE TERMS
AND CONDITIONS OF THE SERIES B PREFERRED SHARES, THE COMPANY OR OTHER
RELEVANT MATTERS AND TO OBTAIN ADDITIONAL INFORMATION TO THE EXTENT THAT
THE COMPANY POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT
UNREASONABLE EFFORT OR EXPENSE.

THE SALE OF THE SERIES B PREFERRED SHARES IS SUBJECT TO THE PROVISIONS OF, AND
EACH OF THE INVESTORS PURCHASING SERIES B PREFERRED SHARES WILL BE
REQUIRED TO EXECUTE, A SUBSCRIPTION AGREEMENT AND OTHER RELATED
AGREEMENTS. THE TERMS OF THE SERIES B PREFERRED SHARES WILL BE SET FORTH IN
THE COMPANYS ARTICLES OF INCORPORATION. ANY PURCHASE OF THE SERIES B
PREFERRED SHARES SHOULD BE MADE ONLY AFTER A COMPLETE AND THOROUGH
REVIEW OF THE PROVISIONS OF SUCH AGREEMENT AND THE ARTICLES OF
INCORPORATION. IF ANY OF THE TERMS, CONDITIONS OR OTHER PROVISIONS OF SUCH
AGREEMENT OR ARTICLES OF INCORPORATION ARE INCONSISTENT WITH OR CONTRARY
TO THE DESCRIPTION OR TERMS IN THIS MEMORANDUM, SUCH AGREEMENT OR
ARTICLES OF INCORPORATION WILL CONTROL.

THE COMPANY RESERVES THE RIGHT, IN ITS SOLE DISCRETION AND FOR ANY REASON
WHATSOEVER, TO MODIFY, INCREASE, AMEND AND/OR WITHDRAW ALL OR A PORTION
OF THE OFFERING AND/OR TO ACCEPT OR REJECT IN WHOLE OR IN PART ANY
PROSPECTIVE INVESTMENT IN THE SERIES B PREFERRED SHARES OR TO ALLOT TO ANY
PROSPECTIVE INVESTOR LESS THAN THE NUMBER OF SERIES B PREFERRED SHARES
THAT SUCH INVESTOR DESIRES TO PURCHASE. THE COMPANY WILL HAVE NO LIABILITY
372349.1

WHATSOEVER TO ANY OFFEREE AND/OR INVESTOR IN THE EVENT THAT ANY OF THE
FOREGOING SHALL OCCUR.

THE PROCEEDS FROM THE OFFER AND SALE OF THE SERIES B PREFERRED SHARES WILL
NOT BE DEPOSITED OR PLACED IN ANY BANK ESCROW OR OTHER SEGREGATED
ACCOUNT PENDING THE SALE OF ALL OF THE SERIES B PREFERRED SHARES OFFERED
HEREBY, AND WILL BE IMMEDIATELY AVAILABLE TO THE COMPANY FOR ITS BUSINESS
PURPOSES. THE COMPANY MAY EFFECT ONE OR MORE CLOSINGS OF THE SALE OF THE
SERIES B PREFERRED SHARES.

IT IS THE RESPONSIBILITY OF ANY INVESTOR PURCHASING SERIES B PREFERRED

SHARES TO SATISFY ITSELF AS TO FULL OBSERVANCE OF THE LAWS OF ANY RELEVANT
TERRITORY OR JURISDICTION OUTSIDE THE UNITED STATES IN CONNECTION WITH ANY
SUCH PURCHASE, INCLUDING OBTAINING ANY REQUIRED GOVERNMENTAL OR OTHER
CONSENTS OR OBSERVING ANY OTHER APPLICABLE REQUIREMENTS.

Trademarks and other intellectual property rights of entities and organizations referred to in this
Memorandum are the property of their respective holders.

372349.1

TABLEOFCONTENTS
Page

Table of Contents.........................................................................................................................................
Summary of Proposed Terms.......................................................................................................................
The Company and Its Business..................................................................................................................
Selected Financial Information..................................................................................................................
Risk Factors...............................................................................................................................................
Use of Proceeds..........................................................................................................................................
Management...............................................................................................................................................
Principal Stockholders...............................................................................................................................
Description of Capital Stock......................................................................................................................
Dividend Policy.........................................................................................................................................
Capitalization.............................................................................................................................................
Certain Transactions and Relationships.....................................................................................................
Plan of Offering.........................................................................................................................................
ERISA Considerations...............................................................................................................................
Legal Matters.............................................................................................................................................
Additional Information..............................................................................................................................

Exhibit A
Exhibit B
Exhibit C
Appendix I

372349.1

Historical Financial Statements

Investor Suitability Requirements
Subscription Agreement
Projected Financial Information

SUMMARYOFPROPOSEDTERMS
THE FOLLOWING INFORMATION IS INTENDED TO SUMMARIZE THE PRINCIPAL TERMS OF
THE OFFERING. THE INFORMATION SUMMARIZED IN THIS SECTION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE TEXT OF THE DETAILED PORTIONS OF THIS MEMORANDUM,
THE EXHIBITS ATTACHED HERETO, AND THE ACTUAL TERMS OF THE DOCUMENTS AND
AGREEMENTS CONCERNING THE RIGHTS AND PREFERENCES OF THE SERIES B PREFERRED
SHARES.
The Company is offering shares of its Series B Preferred Stock. The Company reserves the right to
approve or disapprove each investor and accept or reject any subscriptions for the Series B Preferred Shares, in
whole or in part, in its sole discretion. See Plan of Offering and the Investor Suitability Requirements included
as Exhibit A to this Memorandum. Assuming that all of the Series B Preferred Shares are sold in this Offering,
and assuming a purchase price of $0.10 per share, immediately upon completion of this Offering, the Series B
Preferred Shares will represent approximately 15% of the Companys outstanding capital stock on a fully diluted
common stock equivalent basis.

TERMS OF OFFERING
Issuer:

NewCo, LLC, to be converted to NewCo, Inc. on June 1, 2010, a

Nevada corporation

Amount of Financing:

$1,500,000

Securities Authorized

10,566,666 shares of Series A Convertible Preferred Stock,

15,000,000 shares of Series B Convertible Preferred Stock,
45,000,000 shares of Blank Check Preferred Stock, and
130,000,000 shares of Common Stock.

Total Shares of Common Stock

Outstanding Before This Offering:

60,000,000 Shares

Securities to be Issued in This

Offering:

15,000,000 shares of Series B Convertible Preferred Stock (the Series B

Preferred Shares), assuming a purchase price of $0.10 per share.
Shares
Series B Convertible Preferred Shares Offered
hereby (1)
Total Series B Preferred Shares Outstanding before
this Offering
Total Series A Preferred Shares Outstanding before
this Offering
Common Stock Outstanding Before Offering ..........
Outstanding Employee Options and Warrants ..........

372349.1

15,000,000
None
10,566,666
60,000,000
None

Total Common Equivalent Shares Outstanding

on a Fully Diluted Basis After Offering ...............

85,000,000

(1) Assuming a purchase price of $0.10 per share.

The Company reserves the right to increase or decrease the number of
Series B Preferred Shares and the price per Series B Preferred Share. Any
increase or decrease in the price per Series B Preferred Share will result in
a proportionate increase or decrease in the applicable liquidation
preference.
Issue Price:

$0.10 per Series B Preferred Share ($0.10 per share on an as converted to

Common Stock basis).

Minimum Offering:

250,000 Series B Preferred Shares for a minimum investment of $25,000

Use of Proceeds:

The Company plans to use the net proceeds from this offering for general
business purposes, including completing development of its NewCo
Network, engaging in sales, marketing and product launch efforts,
establishing strategic alliances with manufacturers, vendors and
associations, and for working capital and general corporate purposes.

TERMS OF SERIES B CONVERTIBLE PREFERRED SHARES

Dividends:

The Company does not intend to pay any dividends on the Series B
Preferred Shares.

Liquidation Preference:

Upon the liquidation, dissolution, or winding up of the Company (either

voluntary or involuntary), holders of Series B Preferred Shares are
entitled to receive out of the assets available for distribution to its
stockholders, an amount equal to $0.10 (as adjusted for any stock
dividends, combinations or splits with respect to such shares), for each
outstanding share of Series B Preferred Shares held by them, plus any
declared but unpaid dividends, prior to any distribution to the holders of
Common Stock. If, upon the occurrence of such event, the assets of the
Company are insufficient to pay the full preferential amounts to all the
holders of the Series B Preferred Shares, the entire assets of the
Company legally available for distribution shall be distributed pro rata
(on an as converted basis) among the holders of the Series B Preferred
Shares in proportion to the aggregate of the full preferential amounts to
which each such holder would be entitled if such assets of the Company
had been sufficient to permit such payment in full. After the liquidation
preference has been paid to the holders of the Series A Preferred Shares,
and Series B Preferred Shares, all remaining assets and funds shall be
distributed pro rata among the holders of the Common Stock. The
merger of the Company with or into another entity, or the sale of all or
substantially all of the capital stock or assets of the Company, or other
reorganization shall be treated as a liquidation.

Conversion:

Each share of Series B Preferred Stock will initially be convertible, at

the option of the holder thereof, at any time and from time to time. Each
share of Series B Preferred Stock will initially be convertible into one
(1) share(s) of Common Stock (subject to anti-dilution adjustments set

372349.1

forth below).
The Series B Preferred Shares will automatically convert into Common
Stock (i) upon the closing of a firm commitment underwritten public
offering of Common Stock in which the gross proceeds are at least
$25,000,000 (Qualified Public Offering), or (ii) upon consent of the
holders of not less than a majority in voting interest of the then
outstanding shares of Series B Preferred Stock.
Antidilution Adjustments:

Until the Common Stock of the Company is quoted on a national stock

exchange, the conversion ratio of the Series B Preferred Shares will be
adjusted on a customary broad-based weighted-average basis for
subsequent issuances of the Companys securities below the conversion
price of the Series B Preferred Shares, other than the issuance of shares
of Common Stock (Excluded Transactions): (i) to directors, officers,
employees and consultants pursuant to stock grants, option plans, stock
purchase plans, or other employee stock incentive programs approved by
the Board of Directors; (ii) in connection with mergers or acquisitions
(including technology, music rights, or asset acquisitions) by the
Company; and (iii) to lenders, lessors, licensors and other parties in nonequity financing transactions. The Series B Preferred Stock conversion
rate will be adjusted proportionately for stock dividends, stock splits,
combinations, subdivisions, and other similar recapitalization.

Voting Rights:

Each share of Series B Preferred Stock will be entitled to that number of

votes equal to the number of whole shares of the Companys Common
Stock into which it is convertible. Holders of Series B Preferred Shares
will vote only on certain limited matters and do not vote together with
the holders of Common Stock. The Series B Preferred Shares, voting
together as a separate class, have the right to elect one of the Companys
five directors.

Protective Provisions:

In addition to any protections required by law, so long as any shares of

the Series B Preferred Stock are outstanding, the Company shall not,
without the prior approval of a majority of the outstanding shares of
Series B Preferred Stock, voting together as a single class: (a) increase
the authorized number of shares of Series B Preferred Shares; (b) pay or
declare any dividend or distribution in respect of Common Stock or any
other junior equity security other than a dividend in Common Stock;
(c) create any new class or series of stock (i) having a preference over
the Series B Preferred Shares with respect to voting, dividends,
redemption or upon liquidation, or (ii) having protective provision rights
superior to the Series B Preferred Shares; (d) amend the Companys
Amended and Restated Articles of Incorporation or Bylaws in a manner
which materially adversely affects the Series B Preferred Shares; or
(e) effect any liquidation or winding up of the Company.

Rights of First Offer:

Each holder of Series B Preferred Stock will have the right to purchase
its pro rata share of any future offerings of equity securities by the
Company, other than in connection with Excluded Transactions, which
right will not be applicable to, and will terminate upon consummation
of, the Companys Qualified Public Offering.

372349.1

Stock Option Plan:

The Company has adopted the Incentive Plan for its employees and
consultants, and has reserved an aggregate of 20,000,000 shares of
Common Stock for issuance pursuant to the Plan. The Company will not
(a) adopt a new stock option or stock purchase plan, or (b) increase the
number of shares reserved for issuance pursuant to the Plan without
obtaining the prior consent of the holders of a majority of the Common
Stock.

Documentation:

The purchase and sale of the Series B Preferred Shares will be effected
pursuant to a Subscription Agreement attached as Exhibit C, and related
documentation prepared by counsel to the Company and containing the
terms set forth above as well as representations and warranties, closing
conditions and other provisions customary in transactions of this type.

Amendments and Waivers:

The terms and provisions of the Subscription Agreement and related

documentation may be amended or waived with the written consent of a
majority of the outstanding shares purchased thereunder or subject thereto,
as the case may be, and the Company.

Counsel to the Company:

Insert Attorney Here

372349.1

10

THECOMPANYANDITSBUSINESS
Overview.
The Company is a provider of A to Z integrated e-commerce and turnkey technology, or ERP
(Enterprise Resource Planning) solutions that are targeted towards small to mid-sized building materials
suppliers (suppliers with gross sales of $150,000 to $20,000,000 per year).
The Company delivers enabling technologies to suppliers using a low cost Applications Solutions
Provider (ASP+) model. The Companys end-to-end business management solutions and services
increase the competitive advantage of small and mid-sized suppliers by delivering world-class features
on a small suppliers budget, allowing suppliers to compete wholly and equally, with their larger
counterparts, on the "new economy" playing field.
The Company is a second generation B2B (Business-to-Business) Internet company, defined as
a provider of tools, technology, and expertise to an existing market space, giving its customers superior
tools to compete in this new economy. The Company benefits from time-tested business models
combined with the frictionless nature of Internet adaptation.
The Companys vision, like that of Wall Street analysts, is based on the simple idea that the big
winners in todays supply trade will be the businesses that offer both physical and virtual commerce to
their customers. The company offers its own vision of supporting a deeply integrated, strategically
connected business model, called ProSuite.
The Company was organized as a Utah Limited Liability Company in May of 2000, and will be
converted to a Delaware corporation at or about the time of the closing of this Offering. The Companys
executive offices are located at ____________, and its telephone number is __________. The
Companys web site can be found at www.NewCo.com. The Companys web site is not part of this
Memorandum.
Industry Background
Overview. The Internet is a global collection of millions of interconnected computer networks
that allows businesses, individuals, educational institutions and governmental agencies to communicate
electronically, access and share information and conduct business. Until the mid-1990s, the Internet was
used by only a limited number of academic institutions, defense contractors and government agencies to
provide access to host computers and to send and receive electronic mail. Since then, commercial
organizations and individuals have increasingly dominated the use of the Internet. As a result of recent
technological advances, including increases in microprocessor speed and the development of easier-touse graphical user interfaces, the Internet has become an integral part of the daily life of millions of
commercial organizations and individuals.
Much of the recent growth in the Internets use has been driven by the emergence of a global
network of servers and information caches known as the World Wide Web. The World Wide Web
consists of a wide range of corporate, product, educational, news, research and political information, as
well as customer and electronic commerce data. International Data Corporation (IDC) has estimated
372349.1

11

that the number of web pages on the World Wide Web will increase from approximately 351 million web
pages at the end of 1997 to approximately 7.7 billion in 2002. The rapid deployment of the web has
introduced fundamental changes in the way information, products and services are produced, distributed
and consumed, and has significantly lowered the cost of disseminating those items. As a result, the
Internet has become a global-wide interactive medium for communications, content and commerce. IDC
estimates that the number of web users worldwide will increase from approximately 69 million at the
end of 1997 to approximately 320 million by 2002.
In addition, business-to-business e-commerce is expected to grow rapidly as the widespread
adoption of intranets and acceptance of the Internet create an environment allowing companies to
streamline complex processes, lower costs and improve productivity. According to Forrester Research,
business-to-business e-commerce is expected to grow from an estimated $406 billion in 2000 to $2.7
trillion in 2004.
There is currently a black hole when it comes to software solution providers in the building
material industry. Presently, there are an estimated 200,000 building material dealers 1 in the US alone. Of
that number, the largest portion of business is conducted by independent building material dealers.
The US Census Bureau calculates that over $757 billion in building material procurement will be
put into place in 2000.2 Of that amount, the Company has estimated the following market niche
potentials, which correspond with the revenue streams set forth below in the section entitled Revenue
Sources, beginning on page 20 below:

Although the lists from American Business Information show there are 200,000 suppliers, other
evidence suggests that the actual number may be more than double that, at 400,000 construction-related
1 Source: American Business Information
2 United States Census Bureau Press Release on 06/01/2000
372349.1

12

building materials supply companies across the United States. This would raise the market size to
approximately $10 billion.
Target Market. Most attention in the supply chain is directed toward the builder/contractor,
who is responsible for fulfilling the vision of the project owner and/or architect. Contractors are
responsible for making most of the final purchasing from a multitude of suppliers. Suppliers buy direct
from manufacturers, or through distributors/wholesalers, associations, and exchanges. In the supply
chain, suppliers are between contractors and manufacturers and they want to keep it that way. The
suppliers and distributors in this supply chain are the Companys target market. The company will be
facilitating suppliers by offering its services to builders, and by managing communications between
distributors and manufacturers.
The software market in the building materials industry is a very unique one. Most other markets
have evolved their software needs from a Best of Breed 3 approach. This occurred because the stores, in
chains, were not integrated to a main system, in real time, which (mainly because of distant geographical
locations, phone line costs, and/or other problems) used to be cost prohibitive. New companies are
demanding new technology with real time, fully integrated systems. Older companies are now seeing the
tremendous cost benefits of having all their locations on one fully integrated system and are starting to
move away from their legacy systems. The building material industry has always had the luxury of
having a host of fully integrated solutions to choose from. The industry is accustomed to running its
entire operation on one box with little or no redundancy. Because of this, the Company believes there
will be little, if any hesitation to accept the advanced technology the Company is offering. The Company
plans to offer fully integrated ERP with complete redundancy. The Company believes its product will
enable customers to realize their ambitions of success.
Market Drivers
Traditional suppliers are embattled with many market pressures, forcing them to stay current with
technology. Just a few of these market pressures are:
Technology demands are a distraction to company owners and managers trying to run a
business.

On-line contractors and manufacturers demand rapid adoption of e-commerce to

facilitate order fulfillment.

Big box suppliers, such as Home Depot, provide competitive pressures, driving
traditional suppliers into obscurity.

Suppliers are challenged to maintain/improve profitability while maintaining the high

level of service that keeps them in business.

3 Best of Breed is defined as purchasing a system or product from a vendor that more than likely
has NOT provided other elements of the software system. This requires huge investments in
technology staff to ensure that these disparate pieces are working together.
372349.1

13

Suppliers are frustrated by the lack of existing solutions offering common databases that
can be shared by the physical and virtual store.

Certain restrictions limit physical inventory and further erode competitive advantage.

The Company believes suppliers in the building material industry are eager to take advantage of
the many tools afforded them through the Internet.
Competition
The choices for systems in the Building Material Industry have recently been seriously
consolidated, through acquisitions, leaving only a few outdated flat file system providers. The
remaining companies are scrambling to pay for the development of newer systems by redirecting
significant portions of the money collected to support existing products. Most vendors have end-oflifed their legacy systems to advance their newer applications. Service and product functionality have
dropped off significantly as the vendors maintain skeleton support teams. Because of this, the remaining
building supplier customers are caught in a dilemma.
Their vendors are using their support money to develop products that they will not be able to
afford. The Company believes the majority of suppliers are frustrated and disgruntled, when it comes to
their software, because they have nowhere to turn for the features and functionality they need for their
businesses to grow and compete.
The remaining software vendors are caught in a paradox. They are turning their backs on their
existing customer base, which is funding their future, to go after the big box suppliers who they have
determined are the only companies that might be able to afford their new software.
The vendors also have several problems with their approach to developing and implementing
new technology. All of them have chosen very pricey 4G/L products, or Fat Client systems, which
inherently have very long and expensive deployments. Because of higher costs, they are all vying for the
same segment customers with over $20 million per year in gross sales.
Another issue with the existing or developing solutions is that none offer common databases
which can be shared by both the physical and virtual store. Even if they were to offer a Shopping Cart
product by making their existing product run on the Internet, it would not be truly eCommerce capable
the two databases are separate and require daily maintenance to function. Even if they purchased
Shopping Cart software to bolt on, it still would not be integrated to the users current product.4
A sampling of competitors products and pricing, compared to the Companys follows.

4 This dilemma has manifested itself throughout commerce across every vertical market. Businesses that are adding
Shopping Cart eCommerce sites are choosing the quick and dirty approach by buying separate packages to do so and then
hiring Software Integrators to try and keep their data accurate. In other verticals, several application providers have leaped
into this mess contributing to Point Solution Pollution (where more and more Best of Breed software modules are bought
and continually attempted to be integrated to each other at great cost.)
372349.1

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Because of the nature of the competitions mindset and product, the small to mid-sized supplier,
the Companys target market, remains left out of the picture. For these reasons, the Company believes
there is an excellent window of opportunity to capture significant market share.
The Companys Solution
The Companys proposition is to deliver a fully integrated suite of mission critical software,
which will include databases and Best Business Practices, which are common to ProSuite, through the
companys ASP at a very competitive price. ProSuite offers suppliers a very robust physical store
package that shares the same database with the most advanced e-commerce site available today. Beyond
the store, NewCo will connect the business to the customer (B2C), via the Internet, from wherever the
customer wants to shop: from the office, in a catalog, at in-store kiosks, at a job site, or from home all on a single WEB based solution supported by almost any browser based device.
Enabling customers to transact business any time, anywhere, will increases business
opportunities while keeping costs of operation low. Accordingly, the Company believes its customers
will be able to offer uncommon value and convenience to their clientele; establish competitive barriers to
entry in the market by achieving a first-to-market advantage; and enhance their brand reputation in the
community. The Companys customers will also be offering an unprecedented single, consistent, branded
view to their customers, their vendors, and across their own enterprise.
The Companys products are unique with respect to their full feature quality and their low Cost
of Ownership. Many businesses that have felt they could never afford a full-featured, industry specific
system will be eager to use the cost effective products offered by the Company. Many others will switch
from their (very expensive) existing systems to enjoy the lower cost of ownership and increased
functionality.

372349.1

15

(This figure illustrates the full integration of the various elements of the NewCo solution. Each module works in concert with
every other module to provide a single, powerful ERP system.)

The Companys Application Software will manage every aspect of the store from a merchandise
and operations perspective to serve as a strategic foundation on which to build the next generation of
both physical and on-line stores. It will support the many components surrounding transaction
fulfillment functions required to support the store at the store and managerial levels.
POS/Order Entry - (Sales and Service) Real time Inventory Quantities (i.e. On Hand, On
Reserve, Net to Sell, In Transit, On PO, In Manufacturing Process), Special Pricing, Tax
Tables, RMA, Returns, Quotes, Bids, Orders, Store Transfers, in-store promotions, Credit
and Debit Cards, Shipping, Client Preferences, Configurators, and more

Daily Operations - Labor Scheduling, Accounts Receivable, Accounts Payable, Payroll,

and General Ledger.

Inventory Management Pricing, New Items, Deletion of Items, Physical Counts

File Maintenance - Managers Utilities - Inventory Control - Purchasing - Receiving

372349.1

16

and more: Sales Analysis Forecasting Labeling - Signage - Distribution & Transfers eCommerce - Support Hand Held Applications (i.e. Ordering, POS, Physical Count,
Receiving, etc.)

The Companys ASP+ Architecture.

Definition. An ASP (Application Service Provider) is a relatively new and somewhat loosely
defined term to describe software industry services which include everything from hosted personal
productivity tools like Microsoft Office applications, out-sourced Exchange-based e-mail and providing
Enterprise Resource Planning (ERP) applications. The Company will deliver the ERP solution which
contains all of the software applications found in much more expensive systems at a much lower price
through ASP architecture. Most ASPs are relatively divorced from the software vendor, simply
delivering the applications. The + indicates that the Company will be more than the ASP, acting as the
software vendor.
Function and Access. The interface between the Company and its customers is delivered over
the Internet via high speed DSL, ISDN, Frame Relay, or Wireless Connections. As an ASP, the Company
is responsible for housing client data, keeping application software, operating system, and hardware
current. The Company also keeps client data backed up. All of which is maintained entirely at the
Companys ASP site. Clients access their data and software through the Internet using browser capable
devices (such as PCs, NCs, Laptops, Kiosks, PDAs, etc.) on secure connections. This Thin Client to
Server process is also known as server-side processing. The clients view of data is according to an
individuals role. The client may view the entire enterprise, a region of stores, a store, or be limited to a
single function. Another advantage is the kiosk and shopping cart interface where the clients customer
can order directly on-line.
Savings. The ASP model creates efficiencies that significantly lower the cost of ownership to
their clients. This allows the Company to offer superior business management tools to small and
medium size businesses, once afforded only by larger suppliers. The ASP houses high speed CPUs with
high speed telecommunication circuits eliminating the need for its clients to purchase, update, and
maintain equipment (like several NT servers). Further increasing ROI (Return On Investment) is the
significant savings in the area of personnel, training and travel time spent performing software upgrades,
and backup throughout the business.
Reliability. Published communication reliability exceeds 99.97%, which is considerably higher
than the network reliability numbers of 88%. The Companys ASP consists of three processing tiers:
Client Data, Operating System, and Application Software. Each Tier has disk mirroring for redundancy.
Further redundancy is in the form of a backup dial-up line. (The backup line connects automatically if
the main circuit should temporarily go off-line.)

372349.1

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Above: NewCo ASP Architecture. Below: Comparing transfer speeds of 1MB Data through 4 different communication modes
(Courtesy Bell Atlantic).

The Companys Strategy

The Tools. As little as 4 years ago, the technical barriers to enter this market place were immense.
The Company is using Rapid Software Development tools which will allow the company to come to
market very rapidly. These tools - Rational Rose, Java 2 Enterprise Edition, Linux, and Oracle 8i Linux
Database - allow the company to easily design, implement, modify, add attributes, change fields, etc. The
key building block in this new technology is the Enterprise JavaBean (EJB), an unit of Java code that
contains all of the business logic and database mapping needed to rapidly perform a given task. The
completed product will have many, many EJBs, all working in harmony to manage the suppliers entire
enterprise.
The Know How. The Companys team knows the industry how suppliers run their businesses,
what information contractors want, why manufacturers are demanding more computer-to-computer
transactions. Most importantly, as a group, the company has previously put a successful product in the
market Dimensions.
Communications. Continual reductions in the cost of WAN (Wide Area Networking) options
(DSL, Wireless, and Frame Relay) allow the Companys customers to dramatically reduce the cost and
complexity of store technology. This byproduct of the Internet has provided more access options, greater
reliability, and wider bandwidth. The trend has been more bandwidth at less cost. Most experts foresee
this trend continuing.

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Software Support. Support will be integrated with customer files on one system. This structure
allows all the customers information to be accessed through a central point providing the big picture for
past and present dealings with support, sales, and accounting.

The Companys management, through personal experience and modeling of other premier
software companies, believes it is important to have online support. This online support is known
as the Newsgroup. Newsgroups are made up of customers and online NewCo techs with
questions and answers to very specific problems. Frequently, multiple newsgroups are available,
each with a separate focus or specialty. The customer base is filled with a wealth of information,
and most customers are happy and willing to share their knowledge. Customers can also view
indexes of past questions for immediate answers or can log a call. This method provides quick,
thorough answers to common or detailed questions saving customers time and the Companys
resources.

One of the ongoing issues existing solutions providers have with their client base is the varying
implementation of revisions their customers have loaded onto their on-site systems. The
Company, as an ASP, eliminates this huge barrier. The product enhancements are instantaneous
after testing is complete. The customer is always using the latest revision of the NewCo software.
Quality control is therefore tighter, and the same product revision exists across the customer base.
This consistency equates to an easier product to support.

An additional feature that will reduce the need for support and enhance the use of the product is
the IT Wizard. This built in feature can be turned on or off as easily as clicking a help key. It
can be used in a way that will walk an employee through their functions for the day. When an
employee needs to complete an unfamiliar routine with the system rather than calling for help
they would simply enable the wizard and follow the onscreen instruction through to completion.
This helps reduce logged support questions from new employees that are trying to figure the
system out. It also reduces the on hands training time required for new employees by experienced
employees saving the customer money in training time.

Implementation model. The Companys software is browser based, utilizing any PC or Network
Computer which will support Netscape or Microsofts Internet Explorer. This configuration lends itself
to substantially lower IT costs for a multitude of reasons:

The ASP (Application Service Provider) allows for all software, OS (Operating System), and
Business Data to reside off premises.

IT related and employee training issues are greatly simplified because of familiarity.
The ASP Host keeps the most current Hardware, OS, and Software Revisions.
Certified Network Technicians on staff.

372349.1

No CPU is required on the Business premises.

19

No need for expensive data back-ups as the ASP does the back-ups, sends a copy to the
business, and keeps a copy off premises.

Fulfillment. There are no other systems in the market place that track fulfillment from all
possible sources on one ticket and provide the customer with one statement for all transactions over all
venues.
Unprecedented Contact Database. In the Companys product, every contact set up can be any
one or all of the following; Charge Customer, Cash Customer, Internet Customer, Store in Chain,
Associate Business, Vendor, Employee, Sales Contact, or Sub-Contractor. Using heuristic 5 logic, the
Companys customers will be able to track things like product preferences. Theyll be able to store credit
card information, favorite shippers, cell phone, and picture IDs. Theyll be reminded of appointments
and be provided with contact information like phone numbers and emails.
Vertical Market Requirements. The Companys attention to the special needs of the building
material industry will be another key to success. The ability of our customers to add a Cyber-Store
where they can be open 24X7 for their customers is significant as contractors have expressed a desire to
work on bids for their jobs after normal business hours.
Revenue Sources
The Company has several complementary revenue streams:
ASP setup fees - $6,000 to $48,000 per supplier, depending on size and number of locations

User licenses - $50 to $500 per month per supplier, based on number of employees and security
access level
Transaction fees - $5 per electronic order (200+ orders per month per supplier)

Advertising - $5 to $10 per 1000 page views

Turnkey hardware - $900 per PC, $3600 per cash station, $2100 per router, etc.

Other:

Product customization

Channel partners

Collection services

Web Design services

Maintenance agreements

Consulting

Marketing Strategy

5 Heuristic describes a computer program learning about contacts to anticipate choices to provide better service.
372349.1

20

Sales. Sales of the Companys equipment, software, services, and support to the Building
Material community will be greatly enhanced by the familiarity of our employees to the industry.
WEB Services. The company is currently offering WEB page registering, search engine
submissions, and other WEB services.
Sales Staff. The Company has retained an inside salesman and outside salesman with over 25
years of experience and contacts in this industry. They have experience in taking their company from
ground zero to tremendous success.
Trade Affiliations. The Company intends to create trade affiliations.
Partners. The company has established some key Business Partners/Relationships and are
tagging partners and customers WEB sites with company banners and links. The Company has and will
continue to support and attend industry trade shows.
Branding. The Company will be leveraging its brand in trade magazines, trade shows, mailers,
phone campaigns, and from various customers and vendors with banner space and links.
Relationships with Top Salespeople. The Company has established relationships with eight
salesmen, nationwide, in the building material software industry, who have long lasting relationships
with prior customers. These salesmen are waiting, like their customers, for a new solution like the
Companys, because customers do not want to invest in old technology. For this reason the Company
plans to be successful in luring top salesmen away from old legacy software companies.
Rollout of NewCo Product Line
Buildout 1-3 months. Finish the development of the NewCo product line. Establish rigorous
performance standards and test the product to establish compliance with the standards. Roll out beta
release II to larger test market. Alliances will be sought out and created with manufactures, vendors, and
associations to help fuel potential prospect leads.
Model State (Utah) 3-10 months. The Company intends to begin offering its products to Utah
suppliers, taking advantage of existing relationships. As the product is tested, proven and enhanced, the
company will proceed with a regional rollout in the western U.S.
Regional Expansion (Western U.S.) 8-18 months. The Company will utilize an outside sales
force, an inside sales force, telemarketing and direct mail to attract potential sales. Existing customers
will also be contacted for referrals. Complementary service companies will be sought out for marketing
alliances, further enhancing the value proposition to the supplier. During this time, the company will
continue to bring on top talent as the need arises.
National Expansion 14-60 months. A national expansion will occur once the revenue streams
begin to kick in. This will be jump-started with an advertising campaign in industry trade magazines
and attendance at industry trade shows.
372349.1

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Current Company Status

The Company has accomplished a great deal in the past few months, having raised its first seed
fund from friends and family in mid-March 2000:

Presentation at Investors Choice International in Maui, Hawaii

Installed hardware, software & network infrastructure
Core team of developers, designers, and sales with over 74 years experience in the Building
Material Market
Established, working relationships with two associations with over 800 suppliers
Late alpha stage software
First beta site to be up and running by mid August
Alliance with buzzsaw.com, a leading online construction industry support company
Working with a national co-op of 5000 suppliers
Designing and hosting Web Site for Mountain States Lumber and Building Materials Dealer
Association (MSLBMDA).

Company Value Propositions

NewCos unique Business Concept contains a more robust product with lower costs of deployment
and lower on-going costs than the competition. This positions the company to be a dominant player
as a provider of ERP software to the building supply industry
Potential to have a positive cash flow by the end of the year 2001.
The company is currently generating income with two of its side products while the core product is
being completed.
Several Avenues of Revenue; Sales of Software Products, Hardware Products, Support,
Implementation, Data Transfer Fees, Services, WEB transaction fees, WEB Page Design,
Networking Design and Installation, Banner sales, and on-going Support Fees
Proprietary technologies and pending patents on advanced software design will provide a
competitive advantage
High caliber Business Partners
Experienced Industry Savvy Management team
ASP Deployment
Common Data Base
24X7
Virtual Inventory
Material Contracts, Licenses and Relationships.
The Company does not currently have any binding agreements with any other individual,
company or entity. However, the Company is in negotiations with many leading companies in the
construction industry.
Employees
As of September 1, 2000, the Company employed 5 persons, 3 of whom were engaged in
product development and the Companys technology operations, 1 in marketing and sales, and 1 in

372349.1

22

finance. None of the Companys employees is represented by a labor union, and the Company considers
its employee relations to be good.
Facilities
The Companys headquarters are located in ____ where the Company leases approximately 1200
square feet under a month to month lease. The Company expects to lease additional space in its current
building as it expands its business operations. The Company believes that its facilities are adequate for
its current business operations.
Legal Proceedings
The Company is not currently subject to any material legal proceedings. The Company may,
from time to time, become a party to various legal proceedings arising in the ordinary course of its
business.

372349.1

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SELECTEDFINANCIALINFORMATION
The summary historical statement of operations data set below for the period from March of
2000 (inception) to November 1, 2000 are derived from, and are qualified by reference to, the financial
statements of the Company attached to this Memorandum as Exhibit B. The summary projected
statement of operations data set forth below for the years ending December 31, 2000, 2001 and 2002 and
the summary projected balance sheet data at December 31, 2000, 2001, and 2002 are derived from, and
are qualified by reference to, the projected financial statements of the Company, including the
assumptions thereof, appearing in Appendix I to this memorandum. The data assume the sale of all
15,000,000 shares of Series B Preferred Stock offered hereby at an assumed price of $0.10 per share.
The foregoing data should be read in conjunction with the financial statements, notes, projections and
assumptions included in Appendix I.
The projected financial information reflects managements projections as to possible future
results based on a number of assumptions that are inherently uncertain, including assumptions as to the
timing and success of the Companys future product development, the size of the market for the
Companys products and services, the Companys market share, industry conditions and other factors.
The assumptions involve significant elements of subjective judgment and analysis, and no representation
can be made as to their attainability. The Companys independent accountants have not examined or
assisted in the compilation of the projected financial data, and accordingly assume no responsibility for
such data. The projections were not prepared with a view to the public disclosure requirements or
compliance with published guidelines of the Securities & Exchange Commission or any state securities
commission, or the guidelines established by the American Institute of Certified Public Accountants.
There can be no assurance the projections will be realized, and actual results may vary from those set
forth in the projections perhaps materially and adversely.

372349.1

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(In millions)

Period from
January 1, 2000
to
November 1, 2000

Projected Financial
Information
For the Year Ended
2000 2001 2002

Statement of Operations
Data:
Revenues ......................................................................
.00695
Cost of sales .................................................................
N/A
Gross profit ..................................................................
N/A
Operating expenses:

$2.4
.4
2.0

$10.6
.7
9.9

$28.5
1.8
26.7

4.3

9.2

15.3

($2.3)

.70

11.20

N/A

Total Expenses
.2042
Net income {loss) ........................................................
(.1972)
Net income (loss) per share
($.00000000261)
- basic and diluted ........................................................
Weighted average shares
outstanding in LLC to be
75,566,666
converted to Common
Shares outstanding in the
Corporation upon
Closingbasic and diluted .......................................................

November 1, 2000
Actual
As Adjusted (1)
$
$

Balance Sheet Data:

Cash ...............................................................................
Working capital (deficiency)...........................................
Property and equipment, net...........................................
Total assets......................................................................
Common and preferred stock..........................................
Stockholders equity (deficiency)....................................

134,166.35
119,492.90
43,968.26
987,992.53
1,119,630.76
972,360.16

16,291,666.35
1,614,492.90
43,968.26
2,482,992.53
2,614,630.76
2,467,360.16

(1) Adjusted to reflect the receipt by the Company of estimated net proceeds of $1,495,000 from the sale
of the Series B Preferred Shares offered hereby (at an assumed offering price of $0.10 per Series B
Preferred Share and after deducting estimated fees and offering expenses). See Use of Proceeds.

372349.1

25

RISKFACTORS
An investment in the Series B Preferred Shares offered hereby involves a high degree of risk and
the Series B Preferred Shares should not be purchased by persons who cannot afford the loss of their
entire investment. Prospective investors should consider carefully the following risk factors, in addition
to the other information presented in this Memorandum, in evaluating the Company and its business.
Development Stage Company; Limited Operating History; Anticipated Losses; Uncertainty of
Future Results
The Company has only a limited operating history upon which investors can evaluate the
Company and its prospects. The Companys prospects must be evaluated with a view to the risks
normally encountered by early stage companies, particularly the uncertainties relating to the new and
evolving markets in which the Company intends to operate and uncertainties regarding the acceptance of
the Companys business model. The Company will incur costs to develop, introduce, to establish
marketing and distribution relationships, to create and enhance its technology and business relationships,
and to build an administrative organization. To the extent these expenses are not subsequently followed
by commensurate revenues, the Companys business, results of operations, and financial condition could
be materially and adversely affected. There can be no assurance the Company will be able to generate
sufficient revenues to achieve or maintain profitability on a quarterly or annual basis in the future, if at
all. The Company expects negative cash flow from its operations to continue for the foreseeable future
as it continues to develop and market its business. If the cash generated by the Companys operations is
insufficient to satisfy its liquidity requirements, the Company may be required to sell additional debt or
equity securities. The sale of additional equity or convertible debt securities would result in dilution to
the Companys stockholders.
Fluctuations in Quarterly Operating Results
The Companys future quarterly operating results may fluctuate significantly as a result of a
variety of factors, many of which may be outside the Companys control, including the amount and
timing of capital expenditures and other costs relating to the expansion of the Companys operations, the
introduction of new technology by the Company or its competitors, price competition or pricing changes
in the industry, technical difficulties or system downtime, general economic conditions, and economic
conditions specific to the Internet, software industry, and building industry.
Dependence on the Internet
The Companys initial success will depend on its ability to create and deliver its technology in
order to attract users and advertisers to its website. There can be no assurance the Companys services
and products will be attractive to a sufficient number of users to generate significant revenues. There can
also be no assurance the Company will be able to anticipate, monitor, and successfully respond to
rapidly changing Internet consumer tastes and preferences so as to attract a sufficient number of users to
its products and services. If the Company is unable to develop services and products that attract, retain,

372349.1

26

and expand a loyal user base, its business, results of operations, and financial condition will be
materially adversely affected.
Proprietary Rights
The Company regards its copyrights, service marks, trademarks, trade dress, trade secrets and
proprietary software and similar intellectual property as critical to its success, and relies on trademark
and copyright law, trade secret protection, confidentiality and/or license agreements and other
contractual arrangements with its employees, customers, partners and others to protect its proprietary
rights. The Company does not currently hold any patents, but may pursue patent applications in the
future for certain portions of its proprietary rights. The Company intends to pursue the registration of
certain of its key trademarks and service marks in the United States, and internationally. Effective
trademark, service mark, copyright and trade secret protection may not be available to the Company in
every country in which the Companys products and services are made available online. There can be no
assurance the steps the Company takes to protect its proprietary rights will be adequate, or that third
parties will not infringe or misappropriate its copyrights, trademarks, trade dress or similar proprietary
rights. In addition, there can be no assurance that other parties will not seek or assert infringement
claims, including patent infringement claims, against the Company. The Company may become subject
to legal proceedings and claims of alleged infringement of trademarks and other intellectual property
rights of third parties by the Company and its licensees or licensors. Those claims, even if not
meritorious, could result in the Companys expenditure of significant financial and managerial
resources, which could result in a material adverse effect on the Companys business, financial condition
and results of operations.
The Companys services operate in part by making Internet services and software available to its
users. Litigation regarding intellectual property rights is common in the Internet and software industries,
and the Company expects that Internet technologies and software products and services may be
increasingly subject to third party infringement claims as the number of competitors in the Internet and
software industry grows and the functionality of products in different industry segments overlaps.
Although the Company is not aware of any other companies that are currently using or have
plans to use the terms NewCo, and ProSuite, and variations of those terms as part of a company name,
trademark or service mark, there can be no assurance other companies will not claim the rights in those
terms or similar terms superior to the Companys rights, or which will not subject the Company to
infringement claims. A successful infringement claim by the owner of a mark, including any of those
terms or a variation of those terms, could require the Company to change its name, which could be
expensive and disruptive to its business operations. Further, despite the Companys attempts to protect
its proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use the
Companys services, technology and other intellectual property, and the Company cannot be certain that
the steps that it has taken will prevent any misappropriation or confusion among consumers and
advertisers.

372349.1

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The Internet domain NewCo.com, is an extremely important part of the Companys business.
The acquisition and maintenance of domain names generally are regulated by governmental agencies
and their designees. For example, in the United States, the National Science Foundation has appointed
Network Solutions, Inc. as the current exclusive registrar for the .com, .net, and .org domains. The
regulation of domain names in the United States and in foreign countries is subject to change in the near
future. The Company believes that such changes in the United States may include the transition for the
current system to a system that is controlled by a non-profit corporation and the creation of additional
top-level domains. Governing bodies may establish additional top-level domains, appoint additional
domain name registrars or modify the requirements for holding domain names. As a result, the Company
may be able to acquire or maintain relevant domain names in all countries in which it conducts business.
Furthermore, the relationship between regulations governing domain names and the laws protecting
trademarks and similar proprietary rights is unclear. Therefore, the Company may be unable to prevent
third parties from acquiring domain names that are similar to, infringe upon, or otherwise decrease the
value of the Companys trademarks and other proprietary rights.
The Companys future success will depend on its ability to significantly increase revenues, which
will require, among other things, the development and widespread acceptance of the Internet as a
medium for commerce. Use of the Internet by consumers is at an early stage of development, and market
acceptance of the Internet as a medium for advertising and commerce is subject to a high level of
uncertainty. The Internet may not prove to be a viable commercial marketplace because of inadequate
development of necessary infrastructure, such as reliable network backbones, or complementary
services, such as high speed modems and security procedures for financial transactions. The viability of
the Internet may prove uncertain because of delays in the development and adoption of new standards
and protocols (for example, the next generation Internet Protocol) to handle increased levels of Internet
activity or increased government regulation. If use of the Internet does not continue to grow, or if the
necessary Internet infrastructure or complementary services are not developed to effectively support any
growth that may occur, the Companys business, results of operations, and financial condition could be
materially adversely affected.
Management of Growth
The Companys future success will depend, in part, on its ability to successfully manage the
expansion of its operations. The Companys ability to manage and support its growth effectively will be
dependent, in part, on its ability to implement adequate improvements to financial and management
controls, reporting and order entry systems, and other procedures, and to hire sufficient numbers of
marketing, sales, financial, accounting, administrative, and management personnel. The growth in the
number of the Companys employees will result in increased responsibility for both existing and new
management personnel. There can be no assurance the Company will be able to identify, attract, and
retain experienced sales, marketing and financial personnel. The Companys future operating results will
depend on the ability of its management and other key employees to implement and improve its systems
for operations, and to recruit, train, and manage its employee base. If the Company is unable to do so,
the Companys business, results of operations, and financial condition could be materially adversely
affected.
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28

Competition
The Company believes the primary competitive factors in providing Internet-based products and
services are name recognition, the variety of value-added services available, ease of use, price, quality of
service, availability of customer support, the reliability of its products and services and the technical
expertise and experience of its employees. The Companys success will depend in part on its ability to
provide high quality, cutting-edge technology and value-added services. Other factors that will affect the
Companys success will include the Companys ability to attract experienced technical, marketing, sales,
and management talent. In addition, the competition is intense for advertising revenues, both on Internet
web sites and in more traditional media.
The ASP market is new, highly competitive, and rapidly changing. In addition to competition
from new and existing ASPs, the Company faces competition from traditional companies providing
similar technology. As an example, some existing technologies allow the remote deployment of multiple
company / multiple store applications. Although not as elegant as the solutions offered by the Company,
these deployments may prove cost effective for potential customers of the Company.
Many of the Companys current and potential competitors in the ASP industry have longer
operating histories, significantly greater financial, technical and marketing resources, greater name
recognition, and larger existing customer bases than the Company. These competitors may be able to
respond more quickly to new or emerging technologies, to changes in customer requirements and may
be able to devote greater resources to the development, promotion, and sale of their products or services
than the Company. There can be no assurance the Company will be able to compete successfully against
current or future competitors.
Uncertain Acceptance and Maintenance of the Companys Brand
The Company believes that establishing and maintaining brand names is a critical aspect of its
efforts to attract and expand its customer base. If the Company is unable to or otherwise fails to
promote and maintain its brands, or if the Company incurs excessive expenses in an attempt to improve
its technology or promote and maintain its brands, the Companys business, results of operations and
financial condition will be materially adversely affected.
Dependence on Key Personnel and Hiring of Additional Personnel
The Companys performance will depend, in part, on the services of its executive personnel, as
well as on its ability to recruit, retain, and motivate its other officers and key employees. The Companys
success will also depend on its ability to attract and retain additional qualified employees, including,
financial, technical, sales and marketing personnel. Competition for qualified personnel is intense and
there are a limited number of persons with knowledge of and experience in technology industries. There
can be no assurance the Company will be able to attract and retain key personnel. The Companys loss
of one or more of its executive personnel or key employees could have a material adverse effect on its
business, results of operations and financial condition.

372349.1

29

The loss of the services of any of the key personnel, the inability to attract or retain qualified
personnel in the future, or delays in hiring required personnel, particularly technical and sales personnel,
could have a material adverse effect on the Companys business, results of operations and financial
condition. In addition, companies in the technology industry whose employees accept positions with
competitive companies frequently claim their competitors have engaged in unfair hiring practices. There
can be no assurance the Company will not receive such claims in the future as it seeks to hire qualified
personnel. The Company could incur substantial costs in defending itself against any such claims,
regardless of the merits of such claims.
Dependence On Strategic Alliances
The Company intends to rely on certain strategic alliances to attract users to its products and
services, and to provide alternative distribution channels for its products and services. The Company
will seek alliances with computer, Internet, services, and advertising companies which the Company
believes will result in increased customers. If the Company is unable or fails to enter into new, and to
maintain any one or more of its existing, strategic alliances, its business, results of operations, and
financial condition could be materially adversely affected.
Uncertain Value of Company, Absence of Professional Opinion
There have been no professional opinions concerning the value of the Companys stock, the
value of the Companys assets, the net worth of the Company, the projected financial information, or
other matters related to this Offering.
Rapid Technological Change
The Internet and technology industries are characterized by frequent new product introductions,
rapidly changing technology, and the emergence of new industry standards. The rapid development of
new technologies increases the risk that current or new competitors will develop products or services
that reduce the competitiveness and are superior to the Companys products and services. The
Companys future success will depend to a substantial degree upon its ability to develop and introduce in
a timely fashion new products and services and enhancements to its existing products and services that
meet changing customer requirements and emerging industry standards. These new products and
services include not only products and services related to the Companys core NewCo ProSuite
Technology, but ancillary products and services, such as web site design, hardware sales, internet
connectivity products and services, etc. The development of new, technologically advanced products and
services is a complex and uncertain process that requires high levels of innovation, as well as the
accurate anticipation of technological and market trends. There can be no assurance the Company will
be able to identify, develop, market, support, or manage the transition to new or enhanced products or
services successfully or on a timely basis, that the Companys new products or services will be
responsive to technological changes or will gain market acceptance, or that the Company will be able to
respond effectively to announcements by competitors, technological changes, or emerging industry
standards. The Companys business, results of operations, and financial condition would be materially

372349.1

30

and adversely affected if the Company were to be unsuccessful, or incur significant delays, in
developing and introducing new products, services, or enhancements.
Difficulties in Developing Potential Revenue Streams
The Company is subject to several constraints which may limit its ability to generate revenues.
For example, an unwillingness or slow adoption on the part of building professionals to use the internet
interface for materials purchases; a reduction in the number of companies willing to place advertising on
internet sites; hesitation in the building materials supply industry to adopt the solutions offered by the
Company; and other similar constraints.
System Interruptions and Capacity Constraints
Because the Company is an ASP, the Companys ability to successfully compete in the market
place and provide acceptable levels of service largely depends on the efficient and uninterrupted
operation of its computer and communications hardware and network systems, as well as the operation
of third parties computer communications hardware and network systems. The Company does not
possess insurance to cover losses caused by unplanned system interruptions or software defects, but
intends obtain such coverage if it can on cost effective basis. There can be no assurance that even with
those arrangements in place the Company will not suffer interruptions in its service or operations. The
Company may experience interruptions in its services in the future, and that such interruptions will
continue to occur from time to time. Those interruptions could result from hardware failures, operating
system failures, inadequate Internet infrastructure capacity and other mechanical or human causes. The
Company expects to experience occasional, temporary capacity constraints due to sharply increased
traffic, which could cause unanticipated system disruptions, slower response times, impaired quality and
degradation of its levels of customer service. If the Company experiences frequent or long term system
interruptions that reduce its ability to provide its services, the Company may experience a decrease in
the number of its users. Further, the Company may enter into service agreements with some of its
business partners that require minimum performance standards. If the Company fails to meet those
standards, its business partners could terminate their relationships with the Company.
The Companys expansion and adaptation of its network infrastructure will likely require
substantial financial, technical, operational and managerial resources. The Companys ability to continue
to connect and manage an expanding number of partners and end users on its network at high
transmission speeds is unproven and uncertain. The Company faces significant risks related to its
networks ability to operate at higher use levels while maintaining expected performance levels.
Software Defects
The Companys offerings depend in part on the use of complex software it has or may develop.
This software may contain defects, particularly when it (or new versions) is first introduced. Although
the Company anticipates it will conduct extensive testing of its software, it may not discover software
defects that affect its new or current services or enhancements until they are deployed. The Company
has not experienced any material software defects to date, but it is possible that, despite the Companys

372349.1

31

testing of its software, defects may exist in the software that it currently uses. Those defects could cause
service interruptions that could damage the Companys reputation or increase its service costs, cause the
Company to lose revenue, delay market acceptance of its services, or develop its programs and
resources, any of which could cause the Companys business to suffer. To the extent the Companys
services are based on software products provided by third parties, the Company will have no control
over the quality of such software.
Reliance on Third Party Technology
The Company will depend on certain companies to supply certain key components of its
communications infrastructure and its system and network management solutions and software. Those
key components include telecommunications services and network equipment that, in the quantities and
quality that the Company demands, are or may only be available from limited sources. If any of those
providers were to discontinue their arrangements with the Company, and alternative providers did not
quickly emerge or were to increase the cost of providing access to their equipment, the Companys
ability to conduct its business operations could be significantly affected.
Risks Associated with Acquisitions
As part of its business strategy, the Company may from time to time acquire assets and
businesses relating or complementary to its operations. These acquisitions may include acquisitions for
the purpose of obtaining existing technology or business relationships. These acquisitions would involve
risks commonly encountered in acquisitions of companies, including, among other things, exposure to
unknown liabilities of the acquired companies, acquisition costs and expenses that are higher than
anticipated, fluctuations in the Company's quarterly and annual operating results due to the costs and
expenses of acquiring and integrating the new businesses or technologies, difficulties and expenses in
assimilating the operations and personnel of the acquired businesses, disruption of the Company's
ongoing business and diversion of its management's time and attention, the Companys inability to
integrate successfully or to complete the development and application of the acquired technology or the
Companys failure to achieve anticipated financial, or other benefits from the acquisitions, difficulties in
establishing and maintaining uniform standards, and policies, impairment of the Company's
relationships with its key employees and customers of the acquired business loss of key employees and
customers as a result of changes in management and ownership of the acquired businesses, and
amortization expenses if an acquisition is accounted for as a purchase (which could result in significant
goodwill or other intangible assets). In addition, the Company's stockholders may be diluted if the
consideration for the acquisition consists of equity securities. The Company may not overcome these
risks. If the Company is unsuccessful in overcoming or solving these risks, its business, results of
operations and financial condition could be materially and adversely affected.
Security Risks
A party who is able to circumvent the Companys security measures could misappropriate
proprietary information or cause interruptions in the Companys ASP operations. The Company may be
required to expend significant capital and resources to protect against or decrease the threat of such
372349.1

32

security breaches or to alleviate problems caused by them. Consumer concern over Internet security has
been, and could continue to be, a barrier to the use and growth of commercial activities that require
consumers to send information over the Internet. Computer viruses, break-ins, or other security
problems could lead to misappropriation of proprietary information and interruptions, delays, or
cessation in service to the Companys customers. Moreover, until more comprehensive security
technologies are developed, the security and privacy concerns of existing and potential customers may
inhibit the growth of the Internet as a vehicle to provide technology.
Need for Additional Funds
The Company may require further capitalization. Although not anticipated at this time, the cost
of developing business applications, a new delivery paradigm and additional, previously unavailable
services may exceed the amount of capital on hand and outstrip anticipated cash flow. If such a need
were to arise, the Company would be forced to seek additional funds.
Dependence on Intellectual Property Rights; Dependence on Licensed Technology
The Company will rely on a combination of proprietary technology and equipment and software
currently available to other ASPs which the Company licenses from third parties to conduct its business
operations. There can be no assurance that any such third party technology licenses will be available to
the Company on acceptable commercial terms, or at all.
The Company relies on copyright, contractual agreements and trade secret laws to protect its
proprietary technologies and information. There can be no assurance those methods will provide
sufficient protection to the Company, that others will not develop technologies, information or
procedures that are similar or superior to the Companys technology, or that third parties will not copy or
otherwise obtain and use the Companys technologies without its authorization.
Governmental Regulation and Legal Uncertainties
The Company is not currently subject to direct federal, state, or local regulation, or laws
applicable to access to or commerce on the Internet, other than regulations applicable to businesses
generally. Due to the increasing popularity of the Internet and other online services, it is possible that a
number of laws and regulations may be adopted with respect to the Internet or other online services
covering issues such as user privacy, indecent materials, freedom of expression, pricing, content and
quality of products and services, taxation, advertising, intellectual property rights, and information
security. The adoption of any of those laws or regulations could decrease the rate of growth of Internet
use, which, in turn, could decrease the demand for the Companys products and services, increase the
Companys cost of doing business or in some other manner have a material adverse effect on the
Companys business, results of operations, or financial condition.
The applicability to the Internet of existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, taxation, libel, obscenity, and personal privacy is
uncertain. The vast majority of these laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues presented by the Internet

372349.1

33

and its related technologies. The Company does not believe any of those regulations govern the
Companys business, and no state has filed any claim against the Company suggesting that the Company
is subject to any such legislation. There can be no assurance, however, that a state will not attempt to
impose those regulations on the Company in the future or that, if one or more states attempt to impose
those regulations, the Companys business, results of operations, and financial condition would not be
materially adversely affected.
Several states have proposed legislation that would limit the uses of personal user information
that is gathered online or require online services to establish privacy policies. The Federal Trade
Commission has also initiated action against at least one online service regarding the manner in which
personal information was collected from users and provided to third parties. Changes to existing laws (or
the passage of new laws intended to address these issues, including some recently proposed changes),
could create uncertainty in the Internet marketplace that could reduce demand for the Companys
products and services or increase its cost of doing business as a result of litigation costs or increased
service delivery costs, or could in some other manner have a material adverse effect on the Companys
business, results of operations, or financial condition. In addition, because the Companys services will
be accessible worldwide, and the Company intends to facilitate sales of goods to users worldwide,
jurisdictions may claim that the Company is required to qualify to do business as a foreign corporation
in a particular state or foreign country. The Companys failure to qualify as a foreign corporation in a
jurisdiction where it is required to do so could subject the Company to taxes and penalties for the failure
to qualify and could result in the Company being unable to enforce contracts in those jurisdictions. Any
such new legislation or regulation, or the application of laws or regulations from jurisdictions whose
laws do not currently apply to the Companys business, could have a material adverse effect on the
Companys business, results of operations, and financial condition.
Potential Liability for Sales and Other Taxes
New state tax regulations could subject the Company to sales and income taxes in some states.
Although the Internet Tax Freedom Act prohibits, for a period of three years, the imposition of state and
local taxes that discriminate against or single out the Internet, it does not impact currently existing taxes.
Taxing authorities in a number of states are currently reviewing the appropriate tax treatment of
companies engaged in Internet retailing and are considering an agreement with certain of these
companies regarding the assessment and collection of sales taxes. The Company is not a party to any
such discussions.
Control by Management and Existing Stockholders
Upon completion of this Offering, the Companys executive officers, directors, and affiliated
entities together will continue beneficially to own a majority of the voting control of the Companys
capital stock. As a result, these stockholders, acting together, will be able to influence significantly and
control most matters requiring approval by the Companys stockholders, including the election of
directors. Such a concentration of ownership may have the effect of delaying or preventing a change in
control of the Company. See Principal Stockholders.

372349.1

34

No Public Market; Possible Volatility of Share Price; Dilution

The Companys securities are not traded over any established market, and it is unlikely that a
market will develop for the Companys securities in the foreseeable future. If a trading market for the
Companys securities was to develop, factors such as announcements by the Company or its
competitors, of technological innovations or new products, failure to meet securities analysts
expectations, government regulatory action, patent or proprietary rights developments, and market
conditions for technology stocks in general could have a material adverse effect on the market price of
the Companys securities.
The offering price of the Series B Preferred Shares is substantially higher than the net tangible
book value per share of the Series B Preferred Shares. Investors purchasing the Series B Preferred
Shares will, therefore, incur immediate and substantial net tangible book value dilution. To the extent
stock options or warrants (currently outstanding or subsequently granted) to purchase the Companys
Common Stock or Preferred Stock are exercised, investors in this Offering may become subject to
further dilution.
Protection of Intellectual Property and Proprietary Rights
The Company regards certain copyrights, service marks, trademarks, trade secrets and similar
intellectual property as critical to its success, and relies on trademark and copyright law, trade secret
protection and confidentiality or license agreements with its employees and business partners to protect
its intellectual proprietary rights. Third parties may infringe or misappropriate the Companys
copyrights, trademarks or similar proprietary rights. Although the Company has not filed any patent
applications, the Company may seek to patent certain software of other technology in the future. Any
such future patent applications may not be issued within the scope of the Companys claims, or at all.
The Company cannot be certain that its software does not infringe issued patents. In addition, because
patent applications in the United States are not publicly disclosed until the patent is issued, applications
may have been filed with the United States Patent and Trademark Office which relate to software
products the Company currently uses.
Despite the Companys precautions, unauthorized third parties may copy certain portions of the
Companys technology or reverse engineer or obtain and use information that the Company regards as
proprietary to it. End user license provisions protecting against unauthorized use, copying, transfer and
disclosure of licensed programs may be unenforceable under the laws of some jurisdictions and foreign
countries. In addition, the laws of some foreign countries do not protect proprietary rights to the same
extent as do the laws in the United States. The Companys means of protecting its proprietary rights in
the United States or abroad may not be adequate.
The Company may be subject to legal proceedings and claims regarding intellectual property
rights from time to time in the ordinary course of its business. Those proceedings may involve claims of
alleged infringement by the Company of the trademarks or other intellectual property rights of third
parties, or claims by the Company to protects its proprietary rights. Any intellectual property litigation,
regardless of whether the Company ultimately prevails, would likely be expensive and time consuming,
372349.1

35

and could divert the attention of the Companys management away from the Companys business
operations. If the Company loses any such dispute, it could be subject to substantial liabilities. The
Company could also be prevented from using technology upon which it relies or be forced to license
technology from third parties. Those licenses may not be available on commercially acceptable terms, if
at all. Even if they are available, those licenses could result in significant expenses to the Company that
could harm its operating results, financial condition or business operations. If those licenses are not
available, the Company would have to develop comparable technology itself, which could be expensive
and result in interruptions in the Companys services.

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36

USEOFPROCEEDS
The Company estimates that the net proceeds from the sale of the Series B
Preferred Shares offered hereby will be approximately $1,495,000 (assuming a
purchase price of $0.10 per share), before deducting aggregate estimated fees and
offering expenses payable by the Company of approximately $5,000. The Company
plans to use the net proceeds from this Offering for general business purposes, including
completing development of its NewCo product line, engaging in sales, marketing and product launch
efforts, establishing strategic alliances with manufacturers, vendors and associations, and for working
capital and general corporate purposes. There can be no assurance that the actual amounts
expended by the Company will not vary from the amounts set forth below, or that
the Corporation will not utilize the proceeds of the offering for other purposes. The
figures assume the sale of all 15,000,000 Shares at $0.10 per share, and further
assume that the Company will incur expenses relating to the Offering in the
approximate amount of $5,000. The Company reserves the right to increase or
decrease the number of shares and the price per share of the Series B Preferred
Shares offered hereby. Any such changes would result in concomitant changes in
the net proceeds available to the Company from this Offering.
Distribution of Funds:
Item
Software Development
Administration
Capital
Sales & Marketing
Reserve
Costs of Offering
Total Use

372349.1

Amounts
% Notes
$448,500 29.90%Rapidly complete the release version of ProSuite
$239,200 15.95%Operations and overhead
$343,850 22.92%Computers and equipment
$313,950 20.93%Marketing, advertising, and product launch
$149,500
9.97%Oversights
$5,000
.33%
$1,500,000 100.00%

37

MANAGEMENT
Executive Officers, Directors and Key Employees
The following table sets forth certain information about the executive officers, directors, key
employees, and key consultants of the Company as of the date hereof. Biographical information for each
of the listed persons is also presented below. Among the directors, executive officers and listed key
employees and consultants there is a family relationship between David Smart and Thomas Smart, who
are brothers. Thomas Smart is the representative of the Smart Family Trust, which is comprised of other
Smart family members. The Companys board of directors is currently comprised of four (4) members,
each of whom are elected for two (2) year terms. Executive officers are chosen by, and serve at the
discretion of, the Board of Directors.
Name

Age

Position(s)

33

Interim CEO and Director

35

Vice President of Sales and Director

30

Chief Information Officer

46

Director

49

Director

37

Software Development Consultant

53

Software Development Consultant

Director Compensation
Directors do not receive cash compensation for serving on the Board of Directors, or for any other
services rendered to the Company in their capacity as director of the Company, but are reimbursed for
expenses they incur in connection with attending Board meetings.
Employment/Consulting Agreements
The Company has consulting agreements with X and Y.
Limitations of Liability and Indemnification
The Companys Articles of Incorporation will limit the personal liability of directors and officers
for monetary damages to the maximum extent permitted by the Delaware General Corporation. Delware
law permits a corporation to indemnify any current or former director, officer, employee or agent if the
person acted in good faith and in a manner in which he reasonably believed to be in or not opposed to the
best interests of the corporation. In the case of a criminal proceeding, the indemnified person must also
have had no reasonable cause to believe that his conduct was unlawful.
The Companys Bylaws will provide that, to the full extent permitted by the Companys Articles of
Incorporation and the Delaware General Corporation Law, the Company will indemnify (and advance
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38

expenses to) the Companys officers, directors and employees in connection with any action, suit or
proceeding (civil or criminal) to which those persons are made party by reason of their being a director,
officer or employee. Any such indemnification is in addition to the advancement of expenses.
At present, there is no pending litigation or proceeding involving any director, officer, employee or
agent of the Company where indemnification by the Company would be required or permitted. The
Company is not aware of any threatened litigation or proceeding which would result in a claim for such
indemnification.
Employee Benefit Plans
Upon Closing, the Company will adopt its 2000 Equity Incentive Plan (the Incentive Plan). The
Company believes that the availability of stock options and other incentives that are permitted to be
awarded under the Incentive Plan will be an important factor in the Companys ability to attract and retain
qualified employees and to provide incentive for them to exert their best efforts on behalf of the Company.
All employees, officers and directors of the Company are eligible to participate in the Incentive
Plan. Also eligible are non-employee agents, consultants, advisors and independent contractors of the
Company or any subsidiary of the Company. The Incentive Plan will be administered by the Board, which
will designate from time to time the individuals to whom awards are made under the Incentive Plan, the
amount of any such award and the price and other terms and conditions of any such award. The Board has
authority for administration of the Incentive Plan. Subject to the provisions of the Incentive Plan, the
Board, may adopt and amend rules and regulations relating to the administration of the Incentive Plan.
Only the Board may amend, modify or terminate the Incentive Plan.
A total of 20,000,000 shares of Common Stock are reserved for issuance under the Incentive Plan.
At the date of this Memorandum, no options for shares have been granted. The Incentive Plan permits the
grant of incentive stock options, nonstatutory stock options, stock awards, stock appreciation rights, cash
bonus rights, dividend equivalent rights, performance-based awards and foreign qualified grants. Common
Stock awarded under the Incentive Plan may be authorized and unused Common Shares or Common Stock
acquired in the market. If any award granted under the Incentive Plan expires, terminates or is cancelled,
or if Common Stock sold or awarded under the Incentive Plan is forfeited to the Company or repurchased
by the Company, the Common Stock again becomes available for issuance under the Incentive Plan.
The Board determines the persons to whom options are granted, the option price, the number of
shares of Common Stock to be covered by each option, the period of each option, the times at which
options may be exercised and whether the option is an incentive stock option (ISO), as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the Code), or a non-statutory stock
option (NSO). An employee may be granted options or stock appreciation rights under the Incentive
Plan as determined by the Board of Directors. No monetary consideration is paid to the Company upon the
granting of options.
The Board may award Common Stock under the Incentive Plan as stock bonuses, restricted stock
awards or otherwise. The Board determines the persons to receive awards, the number of shares of
Common Stock to be awarded and the time of the award. Common Stock awarded as a stock bonus are
subject to the terms, conditions and restrictions determined by the Board at the time the bonus is awarded.
Stock appreciation rights (SARs) may be granted under the Incentive Plan. SARs may, but need
not, be granted in connection with an option grant or an outstanding option previously granted under the
Incentive Plan. An SAR gives the holder the right to payment from the Company of an amount equal in
value to the excess of the fair market value on the date of exercise of a Common Stock over its fair market
372349.1

39

value on the date of grant or, if granted in connection with an option, the option price per share under the
option to which the SAR relates.
An SAR is exercisable only at the time or times established by the Board. If an SAR is granted in
connection with an option, it is exercisable only to the extent and on the same conditions that the related
option is exercisable. Payment by the Company upon exercise of an SAR may be made in Common Stock
valued at its fair market value, in cash, or partly in stock and partly in cash, as determined by the Board.
The Board may withdraw any SAR granted under the Incentive Plan at any time and may impose any
condition upon the exercise of a SAR or adopt rules and regulations from time to time affecting the rights
of holders of SARs. No SARs have yet been granted under the Incentive Plan. The existence of SARs, as
well as certain bonus rights described below, would require charges to income over the life of the right
based upon the amount of appreciation, if any, in the market value of the shares of Common Stock over the
exercise price of shares subject to exercisable SARs or bonus rights.
The Board may grant cash bonus rights under the Incentive Plan in connection with (i) options
granted or previously granted, (ii) SARs granted or previously granted, (iii) stock awarded or previously
awarded and (iv) shares sold or previously sold under the Incentive Plan. Bonus rights may be used to
provide cash to employees for the payment of taxes in connection with awards under the Incentive Plan.
No cash bonus rights have yet been granted under the Incentive Plan.
The Board may grant awards intended to qualify as performance-based compensation under
Section 162(m) of the Code and the regulations thereunder (Performance-based Awards). Performancebased Awards may be denominated either in Common Stock or in dollar amounts. All or part of the awards
will be earned if performance goals established by the Board for the period covered by the awards are met
and the employee satisfies any other restrictions established by the Board. The performance goals will be
expressed as one or more targeted levels of performance with respect to the Company or any subsidiary,
division or other unit of the Company, including performance levels relating to earnings, earnings per
share, stock price increase, total stockholder return (stock price increase plus dividends), return on equity,
return on assets, return on capital, economic value added, revenues, operating income, cash flows or any of
the foregoing. No Performance-based Awards have been granted under the Incentive Plan.
The Incentive Plan will continue in effect for ten years from the date it was adopted by the Board,
subject to earlier termination by the Board. The Board may suspend or terminate the Incentive Plan at any
time.

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PRINCIPALSTOCKHOLDERS
The following table sets forth information as to the beneficial ownership of the Companys
Common Stock and Preferred Stock (currently consisting of 60,000,000 shares of Common Stock in the
LLC, which will be converted to Common Shares outstanding in the Corporation on January 1, 2001 and
10,566,666 shares of Series A Preferred Stock which will be converted to Series A Preferred Shares in
the Corporation on January 1, 2001) on a fully diluted basis as of November 15, 2000, and as adjusted to
reflect the sale by the Company of the Series B Preferred Shares offered hereby, by: (i) each entity or
group that is known by the Company to own more than 1% of the outstanding capital stock of the
Company (on a Common Stock equivalent basis); (ii) each director; (iii) each of the executive officers;
and (iv) all executive officers and directors as a group. Except as otherwise noted, the persons named in
the table have sole voting and investment power with respect to all shares of Common Stock shown as
owned by them, subject to community property laws where applicable.
Percentage of Shares
Owned (1)
Owner
X
Y
Z
A

Number of Shares
Owned
40,800,000
15,000,000
600,000
3,600,000

Before Offering
(1)
57.28%
21.26%
.85%
5.10%

After Offering
(1)
47.68%
17.53%
0.70%
4.21%

All officers, directors and initial

60,000,000
85.03%
70.12%
shareholders as a group (four
(4) persons)
(1) Assumes 60,000,000 shares of Common Stock outstanding and 10,566,666 shares of Series A
Preferred Stock outstanding (on a Common Stock equivalent basis) before and after the Offering. Does
not include 20,000,000 shares of Common Stock reserved for issuance under the Incentive Plan.

DESCRIPTIONOFCAPITALSTOCK

The authorized capital of the Company consists of 130,000,000 shares of Common Stock, with
no par value, 10,566,666 shares of Series A Preferred Stock, with a par value of $.001, and 15,000,000
shares of Series B Preferred Stock with a par value of $.001. As of November 15, 2000, there were
60,000,000 Common Shares and 10,566,666 Series A Preferred Shares in the LLC outstanding, which
shares shall convert to 60,000,000 Common Shares and 10,566,666 Series A Preferred Shares in the
Corporation on January 1, 2000. As of November 15, 2000, no Series B Preferred Shares were
outstanding. As of the same date, there were four holders of record of the outstanding equity in the LLC,

372349.1

41

seven (7) holders of record of the authorized Series A Preferred Shares and no holders of record of the
authorized Series B Preferred Shares.
Common Stock
Subject to the preferences that may be applicable to any then outstanding Preferred Stock,
holders of shares of Common Stock are entitled to receive, ratably, such dividends as may be declared
by the Board of Directors out of funds legally available for such purposes. In the event of a liquidation,
dissolution, or winding up of the Company, the holders of the shares of Common Stock will be entitled
to share ratably in all assets remaining after the payment of the Companys liabilities and the liquidation
preference on any then-outstanding Preferred Stock. The holders of the shares of Common Stock have
no preemptive rights, and no right to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of
Common Stock are fully paid and non-assessable. The holders of the shares of Common Stock are
entitled to one vote for each share they hold of record on all matters submitted to a vote of the
shareholders. The Company does not anticipate paying cash dividends on the Common Stock for the
foreseeable future.
Preferred Stock
The Companys Articles of Incorporation will authorize the issuance of up to 70,000,000 shares
of Preferred Stock. The Board of Directors will have the authority to issue Preferred Stock in one or
more series and to fix the rights, preferences, privileges and restrictions of the Preferred Stock, including
dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the
number of shares constituting any series, without any further vote or action by the Companys
shareholders. The issuance of Preferred Stock under certain circumstances may have the effect of
delaying or preventing a change in the control of the Company and the issuance of Preferred Stock with
voting, conversion or other rights may adversely affect the voting power and rights of the holders of the
outstanding shares of Common Stock.
As of November 15, 2000, the Companys Board of Directors had designated two series of
Preferred Stock, consisting of 10,566,666 Series A Preferred Shares and 15,000,000 Series B Preferred
Shares. As of that date, there were 10,566,666 Series B Preferred Shares outstanding. The Company has
not issued any options or warrants to acquire any Series A Preferred Shares, any Series B Preferred
Shares or any Common Shares.
Series A Preferred Shares. The rights and preferences of the Series A Preferred Shares are as
follows: (i) they have a liquidation preference of $ 0.10 per share; (ii) they carry voting rights which
entitle the holder to one vote for each share of Common Stock into which the Series A Preferred Shares
can be converted; (iii) they carry voting rights pertaining only to certain limited matters and do not vote
together with the holders of the Common Stock; (iii) they are nonredeemable; (iv) they do not pay
dividends; and (v) they are convertible into Common Stock at the election of their holder at any time,
and they automatically convert into Common Stock on the earliest to occur of (1) immediately preceding
the closing of an underwritten public offering resulting in proceeds to the Company of $25,000,000, or
(2) the date specified by a vote or written consent or agreement of at least a majority of the Series A
Preferred Shares. For purposes of the conversion rights, each Series A Preferred Share is initially
convertible into one (1) share of Common Stock, subject to adjustment for certain fundamental
corporate transactions such as stock splits, subdivisions or recapitalizations. A liquidation, for
purposes of the stock liquidation preference, is deemed to occur on any acquisition of the Company by
means of a merger or other form of corporate reorganization in which the outstanding shares of the
Company are exchanged for securities or other consideration issued, or caused to be issued, by the
372349.1

42

acquiring corporation or its subsidiary (other than a mere reincorporation transaction), or a sale of all or
substantially all of the Companys assets.
Series B Preferred Shares. The rights and preferences of the Series B Preferred Shares are as
follows: (i) they have a liquidation preference of $ 0.10 per share; (ii) they carry voting rights which
entitle the holder to one vote for each share of Common Stock into which the Series B Preferred Shares
can be converted; (iii) they carry voting rights pertaining only to certain limited matters and do not vote
together with the holders of the Common Stock; (iii) they are nonredeemable; (iv) they do not pay
dividends; (v) they are convertible into Common Stock at the election of their holder at any time, and
they automatically convert into Common Stock on the earliest to occur of (1) immediately preceding the
closing of an underwritten public offering resulting in proceeds to the Company of $25,000,000, or
(2) the date specified by a vote or written consent or agreement of at least a majority of the Series B
Preferred Shares; and (vi) they have the right, as a class, to elect one of the Companys five directors.
For purposes of the conversion rights, each Series B Preferred Share is initially convertible into one (1)
share of Common Stock, subject to adjustment for certain fundamental corporate transactions such as
stock splits, subdivisions or recapitalizations. A liquidation, for purposes of the stock liquidation
preference, is deemed to occur on any acquisition of the Company by means of a merger or other form
of corporate reorganization in which the outstanding shares of the Company are exchanged for securities
or other consideration issued, or caused to be issued, by the acquiring corporation or its subsidiary (other
than a mere reincorporation transaction), or a sale of all or substantially all of the Companys assets.
Warrants
The Company currently has warrants outstanding to purchase 666,666 shares of its Series A
Preferred Stock for 10% below the market share price of the shares to be offered in the funding round
following this Offering. The warrants may be exercised at the time of the funding round following this
Offering. The Company currently does not have any warrants outstanding to purchase its Series B
Preferred Stock or its Common Stock.

372349.1

43

DIVIDENDPOLICY
The Company has never paid cash dividends on its capital stock. The Company currently intends
to retain all available funds for use in the operation and expansion of its business, and does not
anticipate paying any cash dividends in the foreseeable future. The Company does not have an
accumulated deficit for payment of dividends.

372349.1

44

CAPITALIZATION
The following table sets forth as of November 15, 2000, (i) the total pro forma capitalization of
the Company, and (ii) the capitalization as adjusted to reflect the sale of 15,000,000 Series B Preferred
Shares pursuant to this Offering by the Company (at an assumed offering price of $0.10 per Series B
Preferred Share and after deducting estimated fees and offering expenses of approximately $5,000).
November 15, 2000
Actual
As Adjusted
(1)
Series A Preferred Stock, .001 par value; 70,000,000 shares
authorized, 10,566,666 Series A Preferred Shares outstanding at
November 15, 2000..........................................

$275,000

$275,000

$1,495,000

135,732

135,732

Additional paid-in capital....................................

Accumulated deficit.............................................

$410,732

$1,905,732

Series B Preferred Stock, .001 par value; no Series B Preferred

Shares outstanding at November 15, 2000.......
Common stock, no par value, 130,000,000 shares authorized,
60,000,000 shares outstanding at November 15, 2000

Total stockholders equity..............................

(1) Adjusted to reflect the receipt by the Company of estimated net proceeds of $1,495,000 from the sale
of 15,000,000 Series B Preferred Shares offered hereby (at an assumed offering price of $0.10 per
share and after deducting estimated fees and offering expenses). See Use of Proceeds.

372349.1

45

CERTAINTRANSACTIONSANDRELATIONSHIPS
In March of 2000, the Company raised its first seed funds from friends and family members, who
contributed cash, property and services with a total value of $888,900 in exchange for equity in the
Company. The equity owned by those friends and family members is set forth in the Section entitled
Principal Stockholders.
In August of 2000, the Company established several lines of credit with company principals
backed by those principals personal assets. These lines of credit were used to cover operating expenses
when initial seed funds were exhausted. A portion of the proceeds raised in this offering will be used to
retire these obligations and free the personal assets of company principals.
No other loans, loans with equity as collateral, transactions or employment agreements exist at
this time.

372349.1

46

PLANOFOFFERING
The Company is offering $1,500,000 of its Series B Preferred Stock, consisting of the Series B
Preferred Shares. Assuming a purchase price of $0.10 per share, the Series B Preferred Shares will
consist of 15,000,000 shares. The Company will require each investor to purchase a minimum of
250,000 Shares, for a minimum investment in the Company of $25,000. No minimum number of
Series B Preferred Shares is required to be sold in order to close the sale of the Series B Preferred
Shares, but potential investors will be provided upon request with an estimate of the total amount of
Series B Preferred Shares previously sold. The Company reserves the right to increase or decrease the
number of Series B Preferred Shares being offered or to increase or decrease the purchase price per
Series B Preferred Share. The Offering will be ongoing, and the Company will initially seek a total
investment of $500,000. An outline of the proposed terms of the Series B Preferred Shares and this
Offering is provided in the Summary of Proposed Terms included in this Memorandum. The Company
anticipates the Series B Preferred Shares will be offered and sold only to qualified institutions and to a
limited number of other accredited investors (as defined under Rule 501(a) of Regulation D under the
Securities Act).
Each investors agreement to purchase Series B Preferred Shares will be evidenced by, among
other documents, a Subscription Agreement, attached hereto as Exhibit C. Each investor will be required
to provide immediately available funds equal to the amount of the purchase price of the Series B
Preferred Shares to be bought by it. The Company may, at its discretion, (i) reject any prospective
investor, (ii) limit the number of Series B Preferred Shares to be purchased by any investor, or (iii)
terminate this Offering.
Investors will be required to represent and warrant in the Subscription Agreement, among other
things that they: (i) have reviewed, together with their professional advisers, if any, this Memorandum;
(ii) have had an opportunity to ask questions of and receive answers from representatives of the
Company with respect to the offering being made hereby; (iii) are accredited investors (as defined in
Rule 501(a) of Regulation D under the Securities Act), and together with their financial advisers, if any,
have such knowledge and experience in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Series B Preferred Shares, have adequate means to provide for
their financial needs with no expectation that their investment, including a complete loss of their
investment; and (iv) understand that the Series B Preferred Shares and Common Shares issuable on
conversion of the Series B Preferred Shares have not been registered under the Securities Act and that
they have acquired the Series B Preferred Shares for their own account, for investment, and not with a
view to distribution within the meaning of the Securities Act. See the Investor Suitability
Requirements attached as Exhibit B hereto.
Investors who are or may be deemed to be affiliates of the Company (as that term is defined in
Rule 405 of Regulation C under the Securities Act) may purchase Series B Preferred Shares in this
Offering on the same terms and conditions as those purchased by non-affiliates, for investment purposes

372349.1

47

only, and not for resale. No limit has been placed on the number of Series B Preferred Shares that may
be purchased by such persons.

372349.1

48

ERISA CONSIDERATIONS

Persons investing on behalf of employee benefit plans subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or the Internal Revenue Code of 1986, as
amended (the "Code"), are required to determine whether an investment in the Shares will satisfy the
prudence, diversification and other standards set forth in ERISA and the Code. Accordingly, such
persons are urged to consult their own advisors with respect to considerations associated with the
acquisition and ownership of the Shares under ERISA and the Code. Further, under both ERISA and
the Code, fiduciaries of employee benefit plans and individual retirement accounts should consider
whether an investment in the Company is consistent with their plan objectives, is in accordance with
the documents and instruments governing those plans and their responsibilities under ERISA, such as
the requirements that (i) investments be made in a prudent manner, (ii) plan assets be diversified unless
it is clearly prudent not to do so, and (iii) the fiduciary provides benefits for plan participants and
beneficiaries and values plan assets annually (which may be difficult in light of the absence of a
market for the resale of the Shares).
In light of the above, each prospective Investor investing in the Shares on behalf of an
employee benefit plan or individual retirement account will be required to represent that, to the best of
its knowledge (i) neither the Company nor any of its affiliates is a fiduciary within the meaning of '
3(21) of ERISA with respect to that plan or account, (ii) the Company is not a "party-in-interest" or
"disqualified person" as defined in ERISA ' 3(14) and Code ' 4975(e)(2), respectively, with respect to
that plan or account, and (iii) the investor for that plan or account has taken into account the
requirements of prudence, diversification and other fiduciary responsibilities contained in ERISA, to
the extent applicable.

372349.1

49

LEGALMATTERS
Certain legal matters with respect to the legality of the issuance of the Series B Preferred Shares
will be passed upon for the Company by its counsel, ________________________.

372349.1

50

ADDITIONALINFORMATION
The Company will make available, prior to the closing of this Offering, to each prospective
investor and such investors representatives and advisors, if any, the opportunity to ask questions of and
receive answers from the Company relating to the terms and conditions of this Offering, and to obtain
any additional information that the Company may possess or can obtain without unreasonable effort or
expense that is necessary to verify the accuracy of the information furnished to such prospective
investor.

EXHIBITA

NEWCO, INC.
FINANCIAL STATEMENTS FOR THE PERIOD FROM INCEPTION TO NOVEMBER 1, 2000.

372349.1

51

NewCo, LLC
Profit & Loss Statement
February through November 2000
Ordinary Income/Expense
Income
E-mail Fee
Hardware Items
Hourly Services
Programming Customization Fee
Web Site Development Fee
Total Income
Gross Profit
Expense
Advertising
Association Fees
Company Logo
Trade Rags
Total Advertising
Insurance
Health Insurance
Total Insurance
Legal Fees
Rent
Training
Utilities
High Speed Access Line
Phone Lines
Phone System
Utilities - Other
Total Utilities
6560 Payroll Expenses
Payroll Deferred
6560 Payroll Expenses - Other
Total 6560 Payroll Expenses
Total Expense
Net Ordinary Income
Other Income/Expense
Other Expense
Administration
Consulting
Contract Labor
Meals & Ent.
Office Supplies
Petty Cash
Travel
Total Other Expense
Net Other Income
Net Income

372349.1

20.00
70.75
812.50
6,000.00
50.00
6,953.25
6,953.25
115.00
525.00
1,173.00
1,813.00
5,792.59
5,792.59
21,848.50
9,986.93
3,854.82
1,012.07
117.00
335.14
135.27
1,599.48
33,230.76
99,290.45
132,521.21
177,416.53
-170,463.28
6,076.50
4,647.09
4,376.90
674.79
1,007.86
1,000.00
9,024.18
26,807.32
-26,807.32
-197,270.60

NewCo, LLC
Balance Sheet
February through November 2000
ASSETS
Current Assets
Checking/Savings

134,166.35

Other Current Assets

958.92

Total Current Assets

Fixed Assets

135,125.27
43,968.26

Other Assets

808,899.00

TOTAL ASSETS

987,992.53

LIABILITIES & EQUITY

Liabilities
Current Liabilities
Other Current Liabilities

15,632.37

Total Current Liabilities

15,632.37

Total Liabilities

15,632.37

Equit
y

972,360.16

TOTAL LIABILITIES & EQUITY

372349.1

987,992.53

EXHIBITB
INVESTOR SUITABILITY REQUIREMENTS
General
Investment in the Series B Preferred Shares offered by the Company involves significant risks
and is suitable only for persons of adequate financial means who have no need for liquidity with respect
to this investment and who can bear the economic risk of a complete loss of their investment. This
offering is made in reliance on exemptions from the registration requirements of the Securities Act and
applicable state securities laws or regulations.
The suitability standards discussed below represent minimum suitability standards for
prospective investors. The satisfaction of such standards by a prospective investor does not necessarily
mean that the Series B Preferred Shares are a suitable investment for such prospective investor.
Prospective investors are encouraged to consult their personal financial advisors to determine whether
an investment in the Series B Preferred Shares is appropriate. The Company may reject subscriptions, in
whole or in part, in its absolute discretion.
The Company will require each investor to represent in writing, among other things, that: (i) by
reason of the investors business or financial experience, or that of the investors professional advisor,
the investor is capable of evaluating the merits and risks of an investment in the Series B Preferred
Shares and of protecting its own interest in connection with the transaction; (ii) the investor is acquiring
the Series B Preferred Shares for its own account, for investment only and not with a view toward the
resale or distribution thereof; (iii) the investor is aware that the Series B Preferred Shares (and the
Common Shares into which they may be converted)have not been registered under the Securities Act or
any state securities laws and that transfer thereof is restricted by the Securities Act, applicable state
securities laws, and the stock purchase agreement to be entered into in connection with the purchase of
the Series B Preferred Shares and the investor is aware of the absence of a market for the Series B
Preferred Shares; and (iv) such investor meets the suitability requirements set forth below.
Suitability Requirements
Each investor must represent in writing that it qualifies as an accredited investor, as that term
is defined in Rule 501(a) of Regulation D under the Securities Act, and must demonstrate to the
satisfaction of the Company the basis for such qualification. To be an accredited investor, an investor
must fall within any of the following categories at the time of the sale of Series B Preferred Shares to
that investor:
(1)

A bank as defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of
1934; an insurance company as defined in Section 2(13) of the Securities Act; an investment company
registered under the Investment Company Act of 1940 or a business development Company as defined in
Section 2(a)(48) of that act; a Small Business Investment Company licensed by the U.S. Small Business
372349.1

Administration under Section 301(c) or (D) of the Small Business Investment Act to 1958; a plan
established and maintained by a state or its political subdivisions, 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 that 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;
(2)

A private business development company as defined in Section 202(a)(22) of the Investment Advisors Act
of 1940;

(3)

An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a

Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring
the Series B Preferred Shares, with total assets in excess of $5,000,000;

(4)

A director or executive officer of the Company;

(5)

A natural person whose individual net worth, or joint net worth with that persons spouse, at the time of
such persons purchase of the Series B Preferred Shares exceed $1,000,000;

(6)

A natural person who has an individual income in excess of $200,000 in each of the two most recent years
or joint income with that persons spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;

(7)

A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the
Series B Preferred Shares, whose purchase is directed by a sophisticated person as described in
Rule 506(b)(2)(ii) of Regulation D; and

(8)

An entity in which all of the equity owners are accredited investors (as defined above).
If the investor cannot make one of the foregoing representations, then he or she must represent that his or
her net worth is at least four times his or her proposed investment and his or her income exceeds $50,000
for the last two years.
As used in this Memorandum, the term net worth means the excess of total assets over total
liabilities. In computing net worth the principal residence of the investor must be valued at cost,
including costs of improvements, or at recently appraised value by an institutional lender making a
secured loan, net of encumbrances. In determining income, an investor should add to the investors
adjusted gross income any amounts attributable to tax exempt income received, losses claimed as a
limited partner in any limited partnership, deductions claimed for depletion, contributions to an IRA or
Keogh retirement plan, alimony payments, and any amount by which income for long-term capital gains
has been reduced in arriving at adjusted gross income.
In order to meet the conditions for exemption from the registration requirements under the
securities laws of certain jurisdictions, investors who are residents of such jurisdictions may be required
to meet additional suitability requirements.

372349.1

INCOME TAX CONSIDERATIONS

THIS MEMORANDUM DOES NOT CONSTITUTE INVESTMENT, LEGAL OR TAX
ADVICE WITH RESPECT TO AN INVESTMENT IN THE SERIES B PREFERRED SHARES.
EACH PROSPECTIVE PURCHASER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
WITH RESPECT TO THE INCOME TAX ISSUES AND CONSEQUENCES CONCERNING
PURCHASING, HOLDING AND DISPOSING OF THE SERIES B PREFERRED SHARES
OFFERED HEREBY AND THE COMMON STOCK RECEIVED UPON CONVERSION OF SUCH
STOCK, IN EACH CASE AS THEY MAY PERTAIN TO THE PURCHASERS OWN PERSONAL
SITUATION.
TRANSFER RESTRICTIONS
Offers and Sales of the Series B Preferred Share
The Shares of Series B Preferred Stock offered hereby have not been registered under the
Securities Act, and may not be offered or sold in the United States by a purchaser in this placement
except pursuant to an effective registration statement or in accordance with an exemption from the
registration requirements, as set forth below.
Investor Representations and Restrictions on Resale
Each purchaser of the Series B Preferred Shares will be deemed to have represented and agreed
as follows:
(1)

he or she is acquiring the Series B Preferred Shares for his or her own account or for an
account with respect to which he or she exercise sole investment discretion, and that he or
she or such account is an accredited investor;

(2)

he or she understands that the Series B Preferred Shares are being offered only in a
transaction not involving any public offering within the meaning of the Securities Act, and
that (0) if within two years after the date of original issuance of the Series B Preferred
Shares he or she decides to resell, pledge or otherwise transfer the Series B Preferred
Shares or any shares of Common Stock received upon conversion of the Series B Preferred
Shares on which the legend set forth below appears, such Series B Preferred Shares may be
resold, pledged or transferred only (A) to the Company (upon conversion exchange,
redemption or otherwise), (B) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 (if available), or (C) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States, and (0)0 the purchaser will, and
each subsequent holder is required to, notify any purchaser of the Series B Preferred Shares
from him or her of the resale restrictions referred to in (i) above, if then applicable; and

(3)

he or she understands that the following legend will be placed on any certificate
representing the Series B Preferred Shares unless otherwise agreed by the Company:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES
ACT). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,

372349.1

AGREES FOR THE BENEFIT OF GOODNOISE CORPORATION (THE

COMPANY) THAT THIS SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY (0) TO THE COMPANY
(UPON CONVERSION, EXCHANGE OR REDEMPTION THEREOF
OR OTHERWISE), (0) PURSUANT TO AN EXEMPTION FROM
REGISTRATION IN ACCORDANCE WITH RULE 144 (IF
AVAILABLE) UNDER THE SECURITIES ACT, OR (0) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES.

372349.1

EXHIBITC
NEWCO, INC.
SUBSCRIPTION AGREEMENT
THE SECURITIES ACQUIRED PURSUANT TO THIS SUBSCRIPTION
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (1933 ACT) IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS, NOR HAVE THE SECURITIES BEEN
REGISTERED WITH ANY STATE SECURITIES COMMISSION. IT IS UNLAWFUL
TO CONSUMMATE A SALE OR TRANSFER OF THE SECURITIES UNLESS THE
PURCHASER INTENDS TO ACQUIRE THE SECURITIES FOR PURPOSES OF
INVESTMENT RATHER THAN RESALE. THE REPRESENTATIONS MADE
HEREIN WILL BE RELIED UPON BY NEWCO, INC. IN COMPLYING WITH ITS
OBLIGATIONS UNDER APPLICABLE SECURITIES LAWS.
The undersigned hereby tenders this Subscription Agreement to
NewCo, Inc., a Delaware corporation (hereinafter the Company), to
purchase ___________ shares of Series B Preferred Stock (the
Series B Preferred Shares). Payment in full payable to NewCo,
Inc. is tendered with this subscription. The undersigned
acknowledges that this subscription shall not become effective until
it has been properly executed by the undersigned and accepted by
the Company. The Company may reject subscriptions, in whole or in
part, for any reason, and will limit the number of subscriptions
accepted.
1. The undersigned acknowledges receipt of a Private Placement
Memorandum, dated November 15, 2000 (the Memorandum)
describing the Company and the terms of the Companys offer to sell
the
Series B
Preferred
Shares.
The
undersigned
further
acknowledges that he or his representative has read carefully and
understands the Memorandum and the terms of the Offering. The
undersigned has had the opportunity to meet with the officers of the
Company to ask questions and, prior to his execution of this
Subscription Agreement, was given full access to all information
which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy or
adequacy of information furnished to the undersigned, and all such
questions, if asked, have been answered satisfactorily and such
documents, if examined, have been found to be fully satisfactory.
2. In evaluating the suitability of an investment in the Series B
Preferred Shares, the undersigned has not relied upon any

preliminary information supplied by the Company or any other

representations or other information (whether oral or written) from
the Company other than as set forth in the Memorandum. The
undersigned has carefully considered and has, to the extent the
undersigned believes such discussion necessary, discussed with the
undersigneds professional legal, tax, accounting and financial
advisors the suitability of an investment in the Series B Preferred
Shares for the undersigneds particular tax and financial condition
and has determined that the Series B Preferred Shares being
subscribed for by the undersigned are a suitable investment for the
undersigned.
3. The undersigned acknowledges that there are various
substantial risks attendant to the Companys business and an
investment in the Series B Preferred Shares, including loss of the
entire amount of such investment. The undersigned has considered
the risks associated with such an investment, including, but not
limited to, those set forth under the caption Risk Factors in the
Memorandum. No representations or warranties have been made
concerning the success of the business or the potential profit on an
investment in the Company or in the Series B Preferred Shares.
4. The undersigned acknowledges the illiquidity of the Series B
Preferred Shares. The undersigned further acknowledges that, due to
the fact that the Series B Preferred Shares will not be registered
under the 1933 Act, or state securities laws, transfer of the Series B
Preferred Shares has been significantly limited. Therefore, the
undersigned does not expect to be able to transfer his Series B
Preferred Shares. The undersigned acknowledges that he must bear
the economic risk of the investment for an indefinite period of time
and can afford a complete loss of the investment. The undersigned
will not sell, hypothecate or otherwise transfer the Series B Preferred
Shares unless (a) the Series B Preferred Shares are registered under
the 1933 Act and applicable state securities laws, or (b) in the
opinion of counsel, concurred in by counsel to the Company, an
exemption from the registration requirements of the 1933 Act and
such state laws is available. Furthermore, the undersigned
understands that any certificates evidencing the Series B Preferred
Shares will bear an appropriate legend restricting the sale,
hypothecation, or other transfer of said Series B Preferred Shares,
and the transfer records of the Company will contain appropriate
notations of such transfer restrictions.
5. The undersigned represents and warrants to the Company
that he is purchasing the herein subscribed for Series B Preferred
Shares for investment purposes only, solely for his own account and

not for fractionalization or with a view toward distribution and has no

contract, agreement, arrangement or undertaking with any person
to sell, transfer or pledge the Series B Preferred Shares. The Series B
Preferred Shares will be issued only in the name of the undersigned
and no other person has or will have a direct beneficial interest in
the Series B Preferred Shares.
6. The undersigned, if a natural person, further represents and
warrants to the Company that he is twenty-one (21) years of age or
older and that his primary residence is the same as shown below.
The undersigned was contacted in the state where he resides
regarding the potential investment in the Series B Preferred Shares,
and the Shares will be delivered in such state.
7. The undersigned represents and warrants that he is an
accredited investor as defined in Regulation D promulgated under
the 1933 Act (Regulation D) for the following reason(s) (check as
applicable):
[ ] The undersigned is a natural person whose individual
net worth or joint net worth with his spouse at the time
of purchase exceeds $1,000,000.
[ ] The undersigned is a natural person whose individual
income for each of the past two years and reasonably
expected income for the current year exceeds $200,000
or whose joint income with his spouse for such periods
exceeds $300,000.
[ ] The undersigned is a bank or savings and loan
association purchasing in its own or a fiduciary capacity.
[ ] The undersigned is a securities broker-dealer; an
insurance company; an investment company; a business
development company; a Small Business Investment
Company; or a plan with assets in excess of $5,000,000
established and maintained by a state or political
subdivision for the benefit of its employees; or an
employee benefit plan with a bank, savings and loan
association,
insurance
company
or
registered
investment advisor acting as a plan fiduciary.
[ ] The undersigned is 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

Series B Preferred Shares, with assets in excess of

$5,000,000.
[ ] The undersigned is a trust, with total assets in excess of
$5,000,000 and was not formed for the specific purpose
of acquiring the Series B Preferred Shares. The person
directing investment decisions for the trust has
completed the Purchaser Questionnaire attached hereto
as an Exhibit.
[ ] The undersigned is an employee benefit plan whose
assets exceed $5,000,000.
[ ] The undersigned is a self-directed employee benefit plan
whose investment decisions are made solely by
accredited investors as otherwise defined herein.
[ ] The undersigned is a partnership, corporation or trust,
all of the beneficial owners of which are accredited
investors as defined herein.
[ ] The undersigned is otherwise an accredited investor on
the
following
basis:___________________________________________________
____________, OR
[ ] The undersigned represents and warrants that he is not an
accredited investor under any of the foregoing
categories. If I am not an accredited investor, my proposed
investment in the Series B Preferred Shares does not
exceed [ ] 5% [ ] 10% [ ] 15% [ ] 20% of my net worth.
8. The undersigned represents and warrants that he has such
knowledge and experience in financial and business matters that he
is capable of evaluating the merits and risks of an investment in the
Company, and that the undersigned is able to bear the economic
risks of the investment for an indefinite period of time and at the
present time could afford a complete loss of such investment.
9. The undersigned hereby agrees to indemnify and hold
harmless the Company or any officer, director or control person of
the Company who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil or criminal, administrative or investigative,
by reason of or arising from any actual or alleged misrepresentation
or misstatement of facts or omission to represent or state facts

made by the undersigned to the Company concerning the

undersigned or the undersigneds financial condition in connection
with the Offering or sale of the Series B Preferred Shares, including,
without limitation, any such misrepresentation, misstatement or
omission contained herein or in the Purchaser Questionnaire.
10. The undersigned acknowledges and agrees that except as
otherwise provided herein he is not entitled to cancel, terminate or
revoke this subscription or any agreements of the undersigned
hereunder and such subscription shall survive (i) changes in the
information described in the Memorandum which in the aggregate
are not material or which are contemplated by the Memorandum
and (ii) the death or disability of the undersigned; provided,
however, that if the Company shall not have accepted this
subscription, all agreements of the undersigned hereunder shall be
canceled and this Subscription Agreement will be returned to the
undersigned together with all monies paid herewith and without
interest.
11. If this Subscription Agreement is executed and delivered
on behalf of a partnership, corporation, trust or estate or retirement
plan: (i) such partnership, corporation, trust or estate or retirement
plan has been duly authorized and is duly qualified (a) to execute
and deliver this Subscription Agreement and all other instruments
executed and delivered on behalf of such partnership, corporation,
trust or estate or retirement plan or by use of a power of attorney in
connection with the purchase of the Series B Preferred Shares, and
(b) to purchase and hold such Series B Preferred Shares; (ii) the
signature of the party signing on behalf of such partnership,
corporation, trust or estate or retirement plan is binding upon such
partnership, corporation, trust or estate or retirement plan; and (iii)
such partnership, corporation, trust or estate or retirement plan has
not been formed for the specific purpose of acquiring such Series B
Preferred Shares.
12. Neither this Subscription Agreement nor any provisions
hereof shall be waived, modified, changed, discharged, terminated,
revoked or canceled except by an instrument in writing signed by
the party against whom any change, discharge or termination is
sought.
13. This Subscription Agreement shall be enforced, governed
and construed in all respects in accordance with the laws of the
State of Delaware, as such laws are applied by Delaware courts to
agreements entered into and to be performed in Delaware by and
between residents of Delaware, and shall be binding upon the

undersigned, the undersigneds heirs, estate, legal representatives,

successors and assigns and shall inure to the benefit of the
Company, its successors and assigns. If any provision of this
Subscription Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any
other provision hereof.
14. This Subscription Agreement constitutes the entire
agreement among the parties hereto with respect to the subject
matter hereof and may be amended only by a writing executed by
all parties hereto.
15. As used herein, singular masculine pronouns shall refer to
the plural number and feminine or neuter genders as required by the
identity of the undersigned.
16. Under penalties of perjury, the undersigned certifies that
(i) the number shown on this Agreement is my correct taxpayer
identification number and (ii) the undersigned is not subject to
backup withholding either because the undersigned has not been
notified that the undersigned is subject to backup withholding as a
result of a failure to report all interest or dividends, or the Internal
Revenue Service has notified the undersigned that the undersigned
is no longer subject to backup withholding. (Strike out clause (ii) if
subject to backup withholding.)
Total purchase price of Series B Preferred Shares =
$___________
DATED this ___ day of ___________________, 2000.
_________________________________
(Signature)
_________________________________
(Name - Please Print)
_________________________________
(Signature of Spouse if Natural Persons
Purchasing
Jointly or if Community Property State)

_________________________________
(Print Name of Offerees Spouse if
Natural Persons
Purchasing
Jointly or if Community Property State)
_________________________________
(Primary Place of Residence)
_________________________________
(City, State and ZIP Code)
_________________________________
(Telephone Number - Business)
_________________________________
(Social Security or Taxpayer I.D. No.)
ACCEPTED this ___ day of ______________, 2000.
NEWCO, INC.
By: __________________________________________
Print Name: ___________________________________
Title: ________________________________________

PURCHASER QUESTIONNAIRE
[Individual]
The information contained in this Questionnaire is being
furnished in order to determine whether the undersigneds
subscription to purchase Series B Preferred Shares described in the
Private Placement Memorandum, dated November 15, 2000 (the
Memorandum) may be accepted.
If the response to any item is none or not applicable,
please so indicate. The undersigned agrees that he and his agents,
including without limitation his Purchaser Representative, if
applicable, shall provide NewCo, Inc. (the Company) such
additional information as the Company shall request in order to
satisfy itself that the undersigned meets the minimum legal
requirements under Federal and state securities laws to acquire the
Series B Preferred Shares being offered by the Memorandum.
Where multiple choices are offered, select and check only that
which is applicable.
YOUR RESPONSES WILL BE KEPT STRICTLY CONFIDENTIAL.
However, by signing this document, you agree that the Company
may present the Questionnaire to such private and/or governmental
entities as it deems appropriate, if called upon to do so, in order to
establish the availability under applicable state and federal law of
an exemption from registration.
IF YOU ARE PURCHASING SERIES B PREFERRED SHARES
WITH YOUR SPOUSE, YOU MUST BOTH SIGN THE SIGNATURE
PAGE OF THE SUBSCRIPTION AGREEMENT AND THIS
QUESTIONNAIRE.
IF YOU ARE PURCHASING SERIES B PREFERRED SHARES
WITH ANOTHER PERSON NOT YOUR SPOUSE, YOU MUST
BOTH SIGN THE SUBSCRIPTION AGREEMENT AND EACH FILL
OUT A SEPARATE QUESTIONNAIRE.
IF YOU ARE MARRIED AND LIVE IN A COMMUNITY
PROPERTY STATE, BOTH YOU AND YOUR SPOUSE MUST SIGN
THE SIGNATURE PAGE OF THE SUBSCRIPTION AGREEMENT
AND THIS QUESTIONNAIRE.
PLEASE PRINT
Name(s)_____________________________________________________

______________________________________________________
1. I am [ ] am not [ ] being advised on the merits of this
Offering by a Purchaser Representative (investment advisor).
2. For the past two years, and during the years or months
indicated, I have maintained my principal residence in the following
state or states or country:
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
___________________________________
3. I presently maintain a house or apartment, other than my
principal residence, in the state of:
______________________________________________________________
4.

a. I pay state income taxes in the state of:

__________________________
b. I hold a drivers license in the state of:
___________________________
c. I am registered to vote in the state of:
___________________________

5. My present age is:

Under 21 [ ], 21-30 [ ], 31-40 [ ], 41-50 [ ], 51-60 [ ], over 60
[ ].
6. Financial information:
a. My aggregate income from all sources for each of the
last two calendar years was (check one);
[ ] under $200,000
$300,000.

[ ] $200,000-$300,000 [

]above

b. Approximately _____ percent of my income as shown

above was derived from sources other than salary.
c. I expect that my income from all sources for the
present year will be (check one):
[ ] under $200,000

[ ] $200,000-$300,000 [

above

$300,000.
d. I expect that _____ percent of my income as shown
above will be derived from sources other than salary.
e. My approximate present net worth (including the net
worth of my spouse but excluding home, furnishings and
automobiles) is:
[ ] under $1,000,000

[ ] over $1,000,000

g. Approximately _____ percent of my net worth as shown

above is investments in marketable securities (stock, bonds,
debentures, etc.).
h. Approximately _____ percent of my net worth is readily
convertible into cash.
7.
a. I have held the following principal positions of
employment during the last ten years, or since graduation
from college, whichever is shorter:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
b. The following is a brief summary of my educational
background, including years of matriculation and degrees
obtained:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
8. Investment experience:
a. I
securities.
[ ] Yes

have

previously
[ ] No

invested

in

non-marketable

b. The principal investments from which I have derived

the experience indicated in Paragraph a., including names of
companies and amounts invested, are:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
c. Other activities, business or ventures in which I have
had investment experience include:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
d. The following additional information regarding prior
investment activities, business ventures, etc., may also be of
help to the Company in determining whether my knowledge
and experience in financial and business matters are sufficient
to enable me to evaluate the merits and risks of this
investment:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
e. I have been advised by my own investment
counselors, accountants, etc., other than representatives of
the Company concerning the suitability of this investment for
me:
[ ] Yes

[ ] No

9.
I understand that no aspect of the activities of the
Company can be guaranteed and that substantial risks are involved
in various aspects of this investment:
[ ] Yes

[ ] No

10. I understand that I may examine the original

documentation of the Company and its affairs before investing as
well as after; and to the extent that I have not done so, it was my
choice:
[ ] Yes

[ ] No

(Continued on next page)

To the best of my information and belief, the above information

supplied by me is true and correct in all respects.
Date:

.
___________________________________
(Signature of Offeree)
___________________________________
(Please Print Name)
___________________________________
(Signature of Offerees Spouse if
Purchasing Jointly or if Community
Property State)
___________________________________
(Print Name of Spouse if Purchasing
Jointly or if Community Property

State)

PURCHASER QUESTIONNAIRE
[Corporation]
The information contained in this Questionnaire is being
furnished in order to determine whether the undersigneds
subscription to purchase Series B Preferred Shares described in the
Private Placement Memorandum, dated November 15, 2000 (the
Memorandum) may be accepted.
If the response to any item is none or not applicable,
please so indicate. The undersigned agrees that he and his agents,
including without limitation his Purchaser Representative, if
applicable, shall provide NewCo, Inc. (the Company) such
additional information as the Company shall request in order to
satisfy itself that the undersigned meets the minimum legal
requirements under Federal and state securities laws to acquire the
Series B Preferred Shares being offered by the Memorandum.
Where multiple choices are offered, select and check only that
which is applicable.
YOUR RESPONSES WILL BE KEPT STRICTLY CONFIDENTIAL.
However, by signing this document, you agree that the Company
may present the Questionnaire to such private and/or governmental
entities as it deems appropriate, if called upon to do so, in order to
establish the availability under applicable state and federal law of
an exemption from registration.
I.

PLEASE CHECK ANY OF STATEMENTS 1-3 BELOW THAT

APPLY TO THE CORPORATION.
[]

G 1. Each of the stockholders of the undersigned

CORPORATION is able to certify that such
stockholder meets at least one of the following
two conditions:
(a)

The stockholder is a natural person whose

individual net worth or joint net worth with his or
her spouse exceeds $1,000,000.

(b)

The stockholder is a natural person whose

individual income was in excess of $200,000 in
each of 1998 and 1999 and who reasonably
expects an individual income in excess of
$200,000 in 2000.

[]

G 2. Each of the stockholders of the undersigned

corporation is able to certify that such stockholder
is a natural person who, together with his or her
spouse, has had a joint income in excess of
$300,000 in each of 1998 and 1999 and who
reasonably expects a joint income in excess of
$300,000 in 2000.

[]

G 3. The undersigned corporation: (a) was not formed

for the specific purpose of acquiring the Series B
Preferred Shares; and (b) has total assets in excess
of $5,000,000.

IF YOU CHECKED STATEMENT 1 OR STATEMENT 2 IN SECTION I

AND DID NOT CHECK STATEMENT 3, YOU MUST PROVIDE A LETTER
SIGNED BY AN OFFICER OF THE UNDERSIGNED CORPORATION LISTING
THE NAME OF EACH STOCKHOLDER AND THE REASON (UNDER
STATEMENT 1 OR STATEMENT 2) SUCH STOCKHOLDER QUALIFIES AS
AN ACCREDITED INVESTOR (ON THE BASIS OF NET WORTH,
INDIVIDUAL INCOME OR JOINT INCOME), OR EACH STOCKHOLDER
MUST
PROVIDE
A
COMPLETED
INDIVIDUAL
INVESTOR
QUESTIONNAIRE.
II.

OTHER CERTIFICATIONS

By signing the Signature Page, the undersigned certifies the

following:
(a)

that the corporations purchase of the Series B Preferred

Shares will be solely for the corporations own account
and not for the account of any other person;

(b)

that the corporations name, address of principal office,

place of formation and taxpayer identification number as
set forth in this Questionnaire are true, correct and
complete; and

(c)

that one of the following is true and correct (check one):

(i)

the corporation is a corporation formed in or

under the laws of the United States or any
political subdivision thereof.

(ii)

the corporation is a corporation which is

neither created nor organized in or under the

United States or any political subdivision

thereof, but which has made an election
under either Section 897(I) or 897(k) of the
United States Internal Revenue Code of
1986, as amended, to be treated as a
domestic corporation for certain purposes of
United States federal income taxation (A
COPY OF THE INTERNAL REVENUE SERVICE
ACKNOWLEDGMENT
OF
THE
UNDERSIGNEDS
ELECTION
MUST
BE
ATTACHED
TO
THIS
SUBSCRIPTION
AGREEMENT
IF
THIS
PROVISION
IS
APPLICABLE.)
(iii)
III.

neither (i) nor (ii) above is true

GENERAL INFORMATION
(a)

PROSPECTIVE PURCHASER (THE CORPORATION)

Name:
_________________________________________________________
Principal Place of Business:
_______________________________________________________________
(Number and Street)
_______________________________________________________________
(City)
(State)
(Zip Code)
Telephone Number: ________________
Address for Correspondence (if different):
_______________________________________________________________
(Number and Street)
_______________________________________________________________
(City)
(State)
(Zip Code)
State in which formed: ______________________________
Date of Formation: _________________________________
Taxpayer Identification Number: ______________________
NASD affiliation or association of the corporation, if any:

If none, check here:

Number of shareholders: _____________________________
(b)

INDIVIDUAL WHO IS EXECUTING THIS QUESTIONNAIRE

ON BEHALF OF THE CORPORATION

Name :
________________________________________________________
Position or Title:
_________________________________________________
(Continued on next page)

IV. SIGNATURE

CORPORATION SIGNATURE PAGE

Your signature on this CORPORATION SIGNATURE PAGE
evidences the agreement by the CORPORATION to be bound by the
Questionnaire and the Subscription agreement.
1.
The undersigned CORPORATION represents that (a) the
information contained in this Questionnaire is complete and accurate
and (b) the CORPORATION will notify you immediately if any material
change in any of this information occurs before the acceptance of
the undersigned CORPORATIONs subscription.
2.
The undersigned CORPORATION hereby certifies that it
has read and understands this Subscription Agreement.
3.
The undersigned CORPORATION hereby represents and
warrants that the person signing this Subscription agreement on
behalf of the CORPORATION has been duly authorized to acquire the
Series B Preferred Shares and sign this Subscription Agreement on
behalf of the CORPORATION and, further, that the undersigned
CORPORATION has all requisite authority to purchase such Series B
Preferred Shares and enter into this Subscription Agreement.
Date: ____________________________________
Name of Corporation:
______________________________
(Please Type or Print)
By:
_____________________________________________
(Signature)
Name (Print):
_____________________________________
Its:_____________________________________________
_

Sworn to before me this ___

day of ________, 2000.

Notary Public Stamp