Local Office Doc No.SDILIB1\HJT\348914.01(7H8201!.DOC)Addressee(s) Parties
Cause No. Signer(s) Orig Doc Path Doc Path Doc Name Client No.029280Matter
No.0001Client NamePATH ONE NETWORK TECHNOLOGIES INCMatter NameGENERALCaption
Bank Document Date FooterStore DocumentType 4
SUBSCRIPTION AGREEMENT
Path 1 Network Technologies Inc.
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▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Mr. ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇:
This Subscription Agreement (this "Agreement") is
made as of October 24, 2001 by and between Path 1 Network Technologies Inc., a
Delaware corporation (the "Company") and the undersigned, to implement the
attached Summary of Draft Terms.
1. Subscription.
1.1 The undersigned hereby irrevocably subscribes for the purchase of
700,000 Units, each Unit consisting of one share of the Company's Class A Common
Stock (the "Shares") at US$5.00 per share and one detachable two-year warrant to
purchase one share of the Company's Class A Common Stock at US$5.00 per share,
for an aggregate purchase price of US$3,500,000, in accordance with the terms
and conditions of this Agreement, and herewith agrees to deliver no later than
October 24, 2001 to the Company a Promissory Note Secured by Stock Pledge
Agreement in the amount of US$3,500,000 for 700,000 Units.
1.2 This Agreement shall not be binding unless and until the Company
accepts it in writing by countersignature below. If the Company has not accepted
this Agreement by October 24, 2001, the subscription shall be deemed rejected
and the Company shall return and cancel the Promissory Note Secured by Stock
Pledge Agreement that it has received. Also, if the undersigned's Promissory
Note Secured by Stock Pledge Agreement is not delivered by October 31, 2001,
this Agreement is null and void. If the Company accepts this Agreement before
October 31, 2001 and the undersigned provides the Promissory Note Secured by
Stock Pledge Agreement by October 31, 2001, the Company shall promptly arrange
for the stock certificate and a warrant certificate representing the securities
within the 700,000 Units for which the undersigned hereby subscribes outright to
be placed into the Company's own escrow account.
2. Representations and Warranties of Subscriber. The undersigned hereby
represents and warrants to the Company (knowing that the Company will be relying
on these matters to determine the undersigned's suitability as an investor and
the availability of securities law exemptions) that:
2.1 The undersigned has received all information requested by the
undersigned with respect to the Company. The undersigned is satisfied that it
has requested all information, which it would consider useful to enable it to
decide whether to make this investment. Additionally, the Company has afforded
the undersigned or the undersigned's representative access to and ample
opportunity to obtain other information regarding the Company. The undersigned
has had access at ▇▇▇.▇▇▇.▇▇▇ to all reports and registration statements filed
by the Company with the United States Securities and Exchange Commission via
▇▇▇▇▇. The undersigned has not relied on any oral representations of any kind.
2.2 Immediately before the undersigned's execution of this Agreement, the
undersigned had such knowledge and experience in financial and business matters
(including experience with investments of a similar nature), that the
undersigned was capable of evaluating the merits and risks of an investment in
the Shares and the Warrants.
2.3 The Shares for which the undersigned hereby subscribes and the Warrants
are being, and will be, acquired solely for the undersigned's own account for
investment only and not with a view to or for any resale or distribution thereof
or with any present intention of distributing or selling all or any part of such
securities or the underlying Class A Common Stock. The undersigned agrees that
the Shares and the Warrants and the underlying Class A Common Stock may not be
transferred except upon registration under the United States Securities Act, and
under any applicable state securities or "blue sky" laws, or upon receipt by the
Company of evidence in form and substance reasonably satisfactory to the
Company, to the effect that such transfer may be made without registration under
the United States Securities Act and applicable state securities or "blue sky"
laws. The securities will bear a written legend to that effect. The Shares and
the Warrants shall carry piggyback registration rights effective for any
registration filed by the Company after June 30, 2002.
2.4 The undersigned recognizes that the purchase of the Shares and the
Warrants is a speculative investment that involves a high degree of risk, and is
suitable only for persons with the financial capability of making and holding
long-term investments not readily reducible to cash. The undersigned is aware of
the limited transferability of the Shares and the Warrants and has no need for
liquidity in the investment in the Shares and the Warrants. Furthermore, the
undersigned agrees to hold the Shares and Warrants for a minimum of one year
from the time ownership of those Shares or exercise of those Warrants becomes
effective.
2.5 The undersigned is an "accredited investor" as defined in United States
Securities Act Rule 501.
2.6 The undersigned acknowledges that no information furnished by the
Company constitutes investment, accounting, legal or tax advice. The undersigned
is relying solely upon itself and its professional advisors, if any, for such
advice.
2.7 The undersigned understands and acknowledges that the Shares, the
Warrants and the underlying shares are "restricted securities," as defined by
the United States Securities Act, and agrees to resell the Shares only (a)
pursuant to a registration statement under the United States Securities Act, or
(b) pursuant to a written opinion of legal counsel for the Company stating that
such resale is exempt from registration.
2.8 The undersigned understands and acknowledges that no federal or state
agency, governmental authority, regulatory body, stock exchange or other entity
in the United States, or any other jurisdiction, has made any finding or
determination as to the merits of this investment, nor have any such agencies,
governmental authorities, regulatory bodies, stock exchanges or other entities
made any recommendation or endorsement with respect to the Shares, the Warrants
or the underlying shares.
2.9 All statements made by the undersigned in the Questionnaire are true,
complete and correct.
3. Continuing Obligation to Furnish Information. These representations and
warranties of the undersigned are true, complete and accurate as of the date
hereof and shall be true, complete and accurate as of the date of delivery of
funds to the Company and shall survive such delivery. If, in any respect, such
representations and warranties shall not be true and accurate prior to receipt
of notice of acceptance of this Agreement, the undersigned shall give written
notice of such fact to the Company, specifying which representations and
warranties are not true and accurate and the reasons therefor. 4.
Representations and Warranties of the Company. By accepting this Agreement, the
Company represents and warrants to the undersigned that:
4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, to issue and sell the Shares and the Warrants and to carry out
the provisions of this Agreement, and to carry on its business as presently
conducted and as presently proposed to be conducted. The Company is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in California.
4.2 Capitalization; Voting Rights. The rights, preferences, privileges and
restrictions of the Shares and of the Company's other stock are as stated in the
Company's Certificate of Incorporation. As of September 30, 2001, before this
investment, the Company's fully diluted equity was: 10,019,374 shares of
outstanding Class A Common Stock, including outstanding options to buy 1,762,336
shares of Class A Common Stock and excluding outstanding options to buy
2,798,330 shares of Class B Common Stock. Other than such options, on such date
there were no outstanding options, warrants, rights (other than preemptive
rights and rights of first refusal), proxy or shareholder agreements (other than
in favor of the Company), or agreements of any kind for the purchase or
acquisition from the Company of any of its securities. When issued in compliance
with the provisions of this Agreement and the Certificate of Incorporation, the
Shares and the Warrants will be validly issued, fully paid and nonassessable,
and will be free of any liens or encumbrances other than liens and encumbrances
created by or imposed upon the undersigned; provided, however, that the Shares
and the Warrants may be subject to restrictions on transfer under state and/or
federal securities laws as required by such laws at the time a transfer is
proposed.
4.3 Authorization; Binding Obligations. All corporate action on the part of
the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder and the authorization, sale, issuance and delivery of the
Shares and Warrants pursuant hereto has been taken. This Agreement, when
executed and delivered, will be a valid and binding obligation of the Company
enforceable in accordance with its terms, except as limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights; and (b) general
principles of equity that restrict the availability of equitable remedies. The
sale of the Shares and Warrants are not subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
4.4 Litigation. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened in writing against
the Company that questions the validity of this Agreement, or the right of the
Company to enter into this Agreement, or to consummate the transactions
contemplated hereby, nor is the Company aware that there is any basis for the
foregoing.
4.5 Compliance with Laws; Permits. To its knowledge, the Company is not in
violation of any applicable statute, rule, regulation, order or restriction of
any domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties which
violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement and the
issuance of the Shares or the Warrants, except such as has been duly and validly
obtained or filed, or with respect to any filings that must be made after the
Closing, as will be filed in a timely manner. The Company has all franchises,
permits, licenses and any similar authority necessary for the conduct of its
business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects or financial condition of
the Company and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
4.6 Full Disclosure. This Agreement and all other documents delivered by
the Company or made available by the Company the undersigned or its attorneys or
agents in connection herewith or with the transactions contemplated hereby do
not contain any untrue statement of a material fact nor, to the Company's
knowledge, omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading. Notwithstanding the
foregoing, any financial projections provided to the undersigned were prepared
by the management of the Company in a good faith effort to describe the
Company's presently proposed business and products and the markets therefor. The
assumptions applied in preparing any such financial projections appeared
reasonable to management as of the date thereof; however, there is no assurance
that these assumptions will prove to be valid or that the objectives set forth
in any such financial projections will be achieved. To the Company's knowledge,
there are no facts which (individually or in the aggregate) materially adversely
affect the business, assets, liabilities, financial condition, prospects or
operations of the Company that have not been set forth in the Agreement or in
other documents delivered or made available to the undersigned or its attorneys
or agents in connection herewith.
5. Survival. The representations and warranties made herein shall survive
the consummation of the transaction contemplated hereby.
6. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, without regard
to principles of conflicts of laws.
7. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes all other prior or contemporaneous written or oral agreements,
understandings and negotiations. This Agreement may not be amended except by a
writing signed by both the Company and the undersigned.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Subscription Agreement as of the 24th day of October, 2001.
Mr. ▇▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇▇
By: ------------------------------------------------------
Name: ----------------------------------------------------
Title: ---------------------------------------------------
SUBSCRIPTION ACCEPTED:
PATH 1 NETWORK TECHNOLOGIES INC.
a Delaware corporation
By: -----------------------------------------
Name: ---------------------------------------
Title: --------------------------------------
Date: ---------------------------------------, 2001