EXHIBIT 10.7
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (the "AGREEMENT") is made as of this ___
day of ____________ 2005, by and between Century Pacific Financial Corporation,
a Delaware corporation (the "COMPANY"), and the investor identified on the
signature page to this Agreement (the "INVESTOR").
W I T N E S S E T H:
WHEREAS, the Investor desires to subscribe for, purchase and acquire
from the Company and the Company desires to sell to the Investor the aggregate
number of shares (the "SHARES") of the Company's Series A Convertible Preferred
Stock, $0.001 par value per share (the "PREFERRED STOCK"), set forth on the
signature page of this Agreement, upon the terms and conditions and subject to
the provisions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual premises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF THE SHARES AND WARRANTS. Subject to the
terms and conditions of this Agreement, the Investor subscribes for and agrees
to purchase and acquire from the Company and the Company agrees to sell to the
Investor the Shares, in the manner set forth in SECTION 2 hereof, at the
purchase price equal to $13.5135 per Share (the "PURCHASE Price"). Concurrent
with the issuance of the Shares to the Investor at the Closing, the Company will
issue a warrant to purchase shares of Common Stock, par value $0.001 per share,
of the Company (the "COMMON STOCK") in substantially the form attached hereto as
EXHIBIT A to the Investor (the "WARRANTS"). The Warrants will have an exercise
price of $0.216 per share, subject to adjustments, and will authorize the
purchase of 40 shares of Common Stock for each one Share of Preferred Stock
being purchased by the Investor pursuant to this Agreement at the Closing.
2. TERMS OF PURCHASE AND SALE OF THE SHARES. The closing of the
transactions contemplated hereby (the "CLOSING") shall take place on or before
the fifth full business day after the Notice Date (as such term is defined in
the Placement Agent Agreement dated as of November [__], 2005 (the "PLACEMENT
AGENT AGREEMENT"), between the Company, as assignee of Versatile Entertainment,
Inc., and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Inc. (the "PLACEMENT AGENT")), at the offices of
the Placement Agent, or at such other time and place as the Company and the
Placement Agent may agree upon. Contemporaneously with the delivery of this
Agreement, the Investor shall deliver to Sterling Bank (the "ESCROW AGENT") the
Purchase Price by wire transfer of immediately available funds pursuant to wire
transfer instructions given to the Investor by the Company. At the Closing, the
Escrow Agent shall deliver to the Company the Purchase Price by wire transfer of
immediately available funds pursuant to wire transfer instructions given to the
Escrow Agent by the Company. As soon as reasonably practicable following
Closing, the Company shall deliver to the Investor a certificate representing
the Shares and the duly executed Warrants, each registered in the name of the
Investor. Notwithstanding the foregoing, the obligations of the Company and the
Investor hereunder are subject to the Company's receipt of aggregate
subscriptions for a minimum of $4,500,000 in aggregate proceeds for shares of
Preferred Stock on or prior to November 21, 2005 (or such earlier closing date
as may be agreed by the Company and the Placement Agent), which date may be
extended by the Company and the Placement Agent pursuant to the terms of the
Placement Agent Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In order to
induce the Investor to enter into this Agreement, the Company represents and
warrants to the Investor the following:
(a) AUTHORITY. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, and has all requisite right, power, and authority to execute, deliver
and perform this Agreement other than, with respect to the issuance of the
shares of Common Stock issuable upon conversion of the Shares (the "CONVERSION
SHARES"), the approval by the Company's stockholders and the filing of an
amendment to the Company's Certificate of Incorporation, which shall be in the
form attached hereto as Exhibit C and which will be completed after the Closing,
to effect a 9.25-to-1 reverse stock split of the Common Stock so that the
Company has a sufficient number of authorized and unissued shares of Common
Stock so as to permit the conversion of all outstanding shares of the Preferred
Stock (the "REVERSE SPLIT").
(b) SUBSIDIARIES. The Company has no direct or indirect
subsidiaries other than Versatile Entertainment, Inc. ("VERSATILE") and ▇▇▇▇▇
▇▇▇▇, LLC ("BELLA") (the "SUBSIDIARIES"). Except as disclosed in SCHEDULE 3(b),
the Company owns, directly or indirectly, all of the capital stock of each
Subsidiary free and clear of any and all liens, and all the issued and
outstanding shares of capital stock of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights.
(c) ENFORCEABILITY. The execution, delivery, and
performance of this Agreement by the Company have been duly authorized by all
requisite corporate action. This Agreement has been duly executed and delivered
by the Company, and, upon its execution by the Investor, shall constitute the
legal, valid, and binding obligation of the Company, enforceable in accordance
with its terms, except to the extent that its enforceability is limited by
bankruptcy, insolvency, reorganization, or other laws relating to or affecting
the enforcement of creditors' rights generally and by general principles of
equity.
(d) NO VIOLATIONS. The execution, delivery, and
performance of this Agreement by the Company do not and will not violate or
conflict with any provision of the Company's Certificate of Incorporation or
Bylaws and do not and will not, with or without the passage of time or the
giving of notice, result in the breach of, or constitute a default, cause the
acceleration of performance, or require any consent under (except such consents
as have been obtained as of the date hereof), or result in the creation of any
lien, charge or encumbrance upon any property or assets of the Company pursuant
to, any material instrument or agreement to which the Company is a party or by
which the Company or its properties are bound, except such consents as have been
obtained as of the date hereof.
(e) CAPITALIZATION. The authorized capital stock of the
Company consists of: (i) 150,000,000 shares of Common Stock, and (ii) 10,000,000
shares of preferred stock, of which 3,500,000 have been designated as Series A
Convertible Preferred Stock. Immediately prior to the Closing, the Company has
13,775,021 shares of Common Stock issued and outstanding and 2,460,106.34 shares
of Preferred Stock issued and outstanding. Except as set forth on SCHEDULE 3(e),
as of immediately prior to the Closing, the Company has no outstanding options
or warrants to purchase shares of Common Stock. Upon issuance in accordance with
the terms of this Agreement against payment of the Purchase Price therefore, the
Shares will be duly and validly issued, fully paid, and nonassessable with no
personal liability attaching to the ownership thereof and free and clear of all
liens imposed by or through the Company, and, assuming the accuracy
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of the representations and warranties of the Investor and all other purchasers
of shares of Preferred Stock in the offering contemplated by the Placement Agent
Agreement, will be issued in accordance with a valid exemption from the
registration or qualification provisions of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), and any applicable state securities laws (the
"STATE ACTS"). Subject to the approval of the Reverse Split and filing of an
amendment to the Company's Certificate of Incorporation in connection therewith
(to be filed by the Company following Stockholder Approval and mailing of the
Information Statement as described in SECTION 7, each of which will occur after
the Closing), (i) the Conversion Shares have been duly authorized, and upon
issuance of the Conversion Shares upon proper conversion of the Shares following
the Reverse Split, in accordance with the terms thereof, the Conversion Shares
will be validly issued, fully paid, and non-assessable, and (ii) the shares of
Common Stock issuable upon exercise of the Warrants (the "WARRANT Shares") have
been duly authorized, and upon issuance of the Warrant Shares in accordance with
the terms of the Warrants, the Warrants Shares will be validly issued, fully
paid, and non-assessable.
(f) EXCHANGE ACT FILING. During the twelve (12) calendar
months immediately preceding the date of this Agreement, all reports and
statements required to be filed by the Company with the Securities and Exchange
Commission ("SEC") under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and the rules and regulations thereunder, have been timely
filed. Such filings, together with all documents incorporated by reference
therein, are referred to as "EXCHANGE ACT DOCUMENTS." Each Exchange Act
Document, as amended, conformed in all material respects to the requirements of
the Exchange Act and the rules and regulations thereunder, and no Exchange Act
Document, as amended, at the time each such document was filed, included any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(g) FINANCIAL STATEMENTS. The audited financial
statements, together with the related notes of Versatile at December 31, 2004
and December 31, 2003, and for the years then ended, and the unaudited combined
financial statements of Versatile and Bella at September 30, 2005, and for the
nine months then ended, copies of which have been provided to the Investor
(collectively, the "FINANCIAL STATEMENTS"), respectively, fairly present in all
material respects, on the basis stated therein and on the date thereof, the
financial position of Versatile and Bella at the respective dates therein
specified and its results of operations and cash flows for the periods then
ended (provided that the unaudited financial statements are subject to normal
year-end audit adjustments and lack footnotes and other presentation items).
Such statements and related notes have been prepared in accordance with
generally accepted accounting principles in the United States applied on a
consistent basis except as expressly noted therein.
(h) NO MATERIAL LIABILITIES. Except for liabilities or
obligations not individually in excess of $1,000,000, and as set forth on
SCHEDULE 3(h), since September 30, 2005, the Company and the Subsidiaries have
not incurred any material liabilities or obligations, direct or contingent,
except in the ordinary course of business and except for liabilities or
obligations reflected or reserved against on their respective balance sheets as
of September 30, 2005, and there has not been any change, or to the knowledge of
the Company, development or effect (individually or in the aggregate) that is or
is reasonably likely to be, materially adverse to the condition (financial or
otherwise), business, prospects, or results of operations of the Company and the
Subsidiaries considered as a whole (a "MATERIAL ADVERSE EFFECT") or any
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change in the capital or material increase in the long-term debt of the Company,
nor has the Company declared, paid, or made any dividend or distribution of any
kind on its capital stock.
(i) NO DISPUTES AGAINST COMPANY. Except as disclosed in
the Exchange Act Documents or set forth set forth on SCHEDULE 3(i), there is no
material pending or, to the knowledge of the Company, threatened (a) action,
suit, claim, proceeding, or investigation against the Company, at law or in
equity, or before or by any Federal, state, municipal, or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (b) arbitration proceeding against the Company, (c) governmental
inquiry against the Company, or (d) any action or suit by or on behalf of the
Company pending or threatened against others.
(j) APPROVALS. Other than (A) the approval of the Reverse
Split and filing of an amendment to the Company's Certificate of Incorporation
in connection therewith (to be filed by the Company following Stockholder
Approval and mailing of the Information Statement as described in SECTION 7) and
(B) the filing of the Certificate of Designation of Preferences, Rights and
Limitations of the Series A Convertible Preferred Stock, which the Company
undertakes to file with the Delaware Secretary of State prior to the Closing,
(i) the execution, delivery, and performance by the Company of this Agreement
and the Registration Rights Agreement (as hereinafter defined), (ii) the offer
and sale of the Shares and Warrants, and (iii) the issuance of the Conversion
Shares upon due conversion of the Shares and Warrant Shares upon due exercise of
the Warrants require no consent of, action by or in respect of, or filing with,
any Person, governmental body, agency, or official other than those consents
that have been obtained and filings that have been made pursuant to applicable
state securities laws and post-sale filings pursuant to applicable state and
federal securities laws, which the Company undertakes to file within the
applicable time period.
(k) COMPLIANCE. Except as set forth on SCHEDULE 3(k),
neither the Company nor any Subsidiary (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of a
claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement, or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not such
default or violation has been waived), (ii) is in violation of any order of any
court, arbitrator, or governmental body, or (iii) is or has been in violation of
any statute, rule, or regulation of any governmental authority, including
without limitation all foreign, federal, state, and local laws relating to
taxes, environmental protection, occupational health and safety, product quality
and safety and employment and labor matters, except in each case as could not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect. The Company is in compliance with the applicable
requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended, and the rules and
regulations thereunder, except where such noncompliance could not have or
reasonably be expected to result in a Material Adverse Effect.
(l) PATENTS AND TRADEMARKS. The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses, and other similar rights that are necessary or material for use in
connection with their respective businesses as described in the Exchange Act
Documents and which the failure to so have could, individually or in the
aggregate, have or reasonably be
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expected to result in a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. Except as set
forth in the Exchange Act Documents, to the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another person of any of the Intellectual Property Rights,
except where such infringement could not have or reasonably be expected to
result in a Material Adverse Effect.
(m) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as
set forth in the Exchange Act Documents or as set forth on SCHEDULE 3(m), none
of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers, and directors), including any contract, agreement, or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director, or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee, or partner.
(n) INTERNAL ACCOUNTING CONTROLS. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act rules 13a-14 and 15d-14) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company's Form 10-KSB or 10-QSB, as the case may be, is being
prepared. The Company's certifying officers have evaluated the effectiveness of
the Company's controls and procedures as of a date within 90 days prior to the
filing date of the Form 10-QSB for the Company's most recently ended fiscal
quarter (such date, the "EVALUATION DATE"). The Company presented in its most
recently filed Form 10-KSB or Form 10-QSB the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company's internal controls (as such
term is defined in Item 307(b) of Regulation S-B under the Exchange Act) or, to
the Company's knowledge, in other factors that could significantly affect the
Company's internal controls.
(o) SOLVENCY. Based on the financial condition of the
Company and the Subsidiaries (on a consolidated basis) as of the Closing Date
(and assuming that the Closing shall have occurred), (i) the fair saleable value
of its consolidated assets exceeds the amount that will be required to be paid
on or in respect of its consolidated existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the consolidated
assets do not
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constitute unreasonably small capital to carry on the business of the Company
and the Subsidiaries for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company and the
Subsidiaries, and projected capital requirements and capital availability
thereof; and (iii) the current cash flow of the Company and the Subsidiaries,
together with the proceeds the Company and the Subsidiaries would receive, were
it to liquidate all of their assets, after taking into account all anticipated
uses of the cash, would be sufficient to pay all amounts on or in respect of its
consolidated debt when such amounts are required to be paid. The Company and the
Subsidiaries do not intend to incur debts beyond their ability to pay such debts
as they mature (taking into account the timing and amounts of cash to be payable
on or in respect of such debt).
(p) CERTAIN FEES. Except as may be due to the Placement
Agent from the Company and/or the Subsidiaries, no brokerage or finder's fees or
commissions are or will be payable by the Company or the Subsidiaries to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank, or other person with respect to the transactions contemplated by
this Agreement. The Investor shall have no obligation with respect to any
Placement Agent fees or with respect to any claims (other than such fees or
commissions owed by an Investor pursuant to written agreements executed by the
Investor which fees or commissions shall be the sole responsibility of such
Investor) made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
(q) CERTAIN REGISTRATION MATTERS. Assuming the accuracy
of the Investor's representations and warranties set forth in SECTION 4, no
registration under the Securities Act is required for the offer and sale of the
Shares and Warrants by the Company to the Investor hereunder.
(r) LISTING AND MAINTENANCE REQUIREMENTS. The Company is,
and has no reason to believe that it will not in the foreseeable future continue
to be, in compliance with the maintenance requirements for continued quotation
of the Common Stock on the NASD's OTC Bulletin Board.
(s) INVESTMENT COMPANY. The Company is not, and is not an
"affiliate" of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(t) NO ADDITIONAL AGREEMENTS. The Company does not have
any agreement or understanding with any Investor with respect to the
transactions contemplated by this Agreement and the Registration Rights
Agreement on terms that differ from those set forth in this Agreement and the
Registration Rights Agreement.
(u) DISCLOSURE. Except as set forth in the Schedules to this
Agreement, the Company confirms that neither it nor any person acting on its
behalf has provided the Investor or its agents or counsel with any information
that the Company believes would constitute material, non-public information
following the announcement of the Closing. The Company understands and confirms
that the Investor will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company. All disclosure provided to
the Investor
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regarding the Company and the Subsidiaries, their businesses and the
transactions contemplated hereby, furnished by or on behalf of the Company and
the Subsidiaries (including the Company's representations and warranties set
forth in this Agreement) are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. In order to
induce the Company to enter into this Agreement, the Investor represents and
warrants to the Company the following:
(a) AUTHORITY. If a corporation, partnership, limited
partnership, limited liability company, or other form of entity, the Investor is
duly organized or formed, as the case may be, validly existing, and in good
standing under the laws of its jurisdiction of organization or formation, as the
case may be. The Investor has all requisite individual or entity right, power,
and authority to execute, deliver, and perform this Agreement.
(b) ENFORCEABILITY. The execution, delivery, and
performance of this Agreement by the Investor have been duly authorized by all
requisite partnership or corporate action, as the case may be. This Agreement
has been duly executed and delivered by the Investor, and, upon its execution by
the Company, shall constitute the legal, valid, and binding obligation of the
Investor, enforceable in accordance with its terms, except to the extent that
its enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium, or other laws relating to or affecting the enforcement of creditors'
rights generally and by general principles of equity.
(c) NO VIOLATIONS. The execution, delivery, and
performance of this Agreement by the Investor do not and will not, with or
without the passage of time or the giving of notice, result in the breach of, or
constitute a default, cause the acceleration of performance, or require any
consent under, or result in the creation of any lien, charge or encumbrance upon
any property or assets of the Investor pursuant to, any material instrument or
agreement to which the Investor is a party or by which the Investor or its
properties may be bound or affected, and, do not or will not violate or conflict
with any provision of the articles of incorporation or bylaws, partnership
agreement, operating agreement, trust agreement, or similar organizational or
governing document of the Investor, as applicable.
(d) KNOWLEDGE OF INVESTMENT AND ITS RISKS. The Investor
has knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of Investor's investment in the Shares and
Warrants. The Investor understands that an investment in the Company represents
a high degree of risk and there is no assurance that the Company's business or
operations will be successful. The Investor has considered carefully the risks
attendant to an investment in the Company, and that, as a consequence of such
risks, the Investor could lose Investor's entire investment in the Company.
(e) INVESTMENT INTENT. The Investor hereby represents and
warrants that (i) the Shares and Warrants are being acquired for investment for
the Investor's own account, and not as a nominee or agent and not with a view to
the resale or distribution of all or any part of the Shares or Warrants, and the
Investor has no present intention of selling, granting any participation in, or
otherwise distributing any of the Shares or Warrants within the meaning of the
Securities Act, (ii) the Shares and Warrants are being acquired in the ordinary
course of the Investor's business, and (iii) the Investor does not have any
contracts, understandings,
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agreements, or arrangements, directly or indirectly, with any person and/or
entity to distribute, sell, transfer, or grant participations to such person
and/or entity with respect to, any of the Shares or Warrants. The Investor is
not purchasing the Shares and Warrants as a result of any advertisement,
article, notice or other communication regarding the Shares or Warrants
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(f) INVESTOR STATUS. The Investor is an "accredited
investor" as that term is defined by Rule 501 of Regulation D promulgated under
the Securities Act and the information provided by the Investor in the
Investor's Questionnaire, a copy of which is attached hereto as EXHIBIT B, is
truthful, accurate, and complete. The Investor is not registered as a
broker-dealer under Section 15 of the Exchange Act.
(g) DISCLOSURE. The Investor has reviewed information
provided by the Company in connection with the decision to purchase the
Shares and Warrants, consisting of the Company's publicly available filings with
the SEC, the Financial Statements and the information contained therein. The
Company has provided the Investor with all the information that the Investor has
requested in connection with the decision to purchase the Shares and Warrants.
The Investor further represents that the Investor has had an opportunity to ask
questions and receive answers from the Company regarding the business,
properties, prospects, and financial condition of the Company. All such
questions have been answered to the full satisfaction of the Investor. Neither
such inquiries nor any other investigation conducted by or on behalf of the
Investor or its representatives or counsel shall modify, amend, or affect the
Investor's right to rely on the truth, accuracy, and completeness of the
disclosure materials and the Company's representations and warranties contained
herein.
(h) NO REGISTRATION. The Investor understands that
Investor may be required to bear the economic risk of Investor's investment in
the Company for an indefinite period of time. The Investor further understands
that (i) neither the offering nor the sale of the Shares and Warrants has been
registered under the Securities Act or any applicable State Acts in reliance
upon exemptions from the registration requirements of such laws, (ii) the
Shares, the Warrants, the Conversion Shares and the Warrant Shares
(collectively, the "SECURITIES") must be held by he, she or it indefinitely
unless the sale or transfer thereof is subsequently registered under the
Securities Act and any applicable State Acts, or an exemption from such
registration requirements is available, (iii) except as set forth in the
Registration Rights Agreement between the Company and the Investor, the Company
is under no obligation to register any of the Securities on the Investor's
behalf or to assist the Investor in complying with any exemption from
registration, and (iv) the Company will rely upon the representations and
warranties made by the Investor in this Subscription Agreement in order to
establish such exemptions from the registration requirements of the Securities
Act and any applicable State Acts.
(i) TRANSFER RESTRICTIONS. The Investor will not transfer
any of the Securities unless such transfer is registered or exempt from
registration under the Securities Act and such State Acts, and, if requested by
the Company in the case of an exempt transaction, the Investor has furnished an
opinion of counsel reasonably satisfactory to the Company that such transfer is
so exempt. The Investor understands and agrees that (i) the certificates
evidencing the Securities will bear appropriate legends indicating such transfer
restrictions placed upon the Securities, (ii) the Company shall have no
obligation to honor transfers of any of the Securities in violation of
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such transfer restrictions, and (iii) the Company shall be entitled to instruct
any transfer agent or agents for the securities of the Company to refuse to
honor such transfers.
(j) PRINCIPAL ADDRESS. The Investor's principal
residence, if an individual, or principal executive office, if an entity, is set
forth on the signature page of this Subscription Agreement.
5. INDEPENDENT NATURE OF INVESTOR'S OBLIGATIONS AND RIGHTS. The
obligations of the Investor under this Agreement, the Registration Rights
Agreement, and any other documents delivered in connection herewith and
therewith (collectively, the "TRANSACTION DOCUMENTS") are several and not joint
with the obligations of any other purchaser of Shares and Warrants, and the
Investor shall not be responsible in any way for the performance of the
obligations of any other purchaser of Shares and Warrants under any Transaction
Document. The decision of the Investor to purchase Shares and Warrants pursuant
to the Transaction Documents has been made by the Investor independently of any
other purchaser of Shares and Warrants. Nothing contained herein or in any
Transaction Document, and no action taken by any purchaser of Shares and
Warrants pursuant thereto, shall be deemed to constitute such purchasers as a
partnership, an association, a joint venture, or any other kind of entity, or
create a presumption that the purchasers of Shares and Warrants are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Document. The Investor acknowledges
that no other purchaser of Shares and Warrants has acted as agent for the
Investor in connection with making its investment hereunder and that no other
purchaser of Shares and Warrants will be acting as agent of the Investor in
connection with monitoring its investment in the Shares and Warrants or
enforcing its rights under the Transaction Documents. The Investor shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other purchaser of
Shares and Warrants to be joined as an additional party in any proceeding for
such purpose.
6. PROSPECTUS DELIVERY REQUIREMENT. The Investor hereby covenants
with the Company not to make any sale of the Securities without complying with
the provisions hereof and of the Registration Rights Agreement, and without
effectively causing the prospectus delivery requirement under the Securities Act
to be satisfied (unless the Investor is selling such Securities in a transaction
not subject to the prospectus delivery requirement).
7. REVERSE STOCK SPLIT; STOCKHOLDER APPROVAL.
(a) As soon as practicable following the Closing, the
Company agrees that it shall prepare and file with the SEC a preliminary
information statement (as amended and supplemented, the "INFORMATION STATEMENT")
in connection with the stockholder approval by written consent in lieu of a
meeting ("STOCKHOLDER APPROVAL") of the Reverse Split. The Company shall use its
reasonable efforts to respond to written comments of the SEC and its staff, and,
to the extent permitted by law, to cause the Information Statement to be mailed
to the Company's stockholders as promptly as practicable after responding to all
such comments to the satisfaction of the SEC staff. The Investor shall cooperate
with the Company is preparation of the Information Statement or any amendment or
supplement thereto and shall furnish the Company with all information required
to be included therein with respect to the Investor, this subscription, and this
offering.
(b) Without limiting the generality of the foregoing, the
Investor shall correct as promptly as practicable any information provided by it
to be used specifically in the Information
8
Statement, if required by applicable law, that shall have become false or
misleading in any material respect. The Company shall take all reasonable steps
necessary to file with the SEC and have declared effective or cleared by the SEC
any amendment or supplement to the Information Statement so as to correct the
same and cause the Information Statement as so corrected to be disseminated to
the stockholders of the Company, in each case to the extent required by
applicable law.
(c) As a condition to Closing the beneficial owners of at
least a majority of the issued and outstanding shares of Common Stock and
Preferred Stock of the Company shall have entered into a Voting Agreement
pursuant to which such owners agree to vote such shares in favor of the proposal
set forth in paragraph (a) above.
(d) The Company shall take all necessary steps to enact
and effect the Reverse Split as soon as practicable following the Closing,
pursuant to which each 9.25 shares of Common Stock will be combined into one
share of Common Stock so that the total number of shares of Common Stock issued
and outstanding immediately after the Reverse Split (not including shares of
Common Stock issuable upon conversion of the Preferred Stock) shall equal
approximately 1,489,192.
8. EXCHANGE AGREEMENT AND RELATED MATTERS.
(a) EXCHANGE. As a condition to Closing, the Company shall have
completed the acquisition of all the outstanding equity interests of Versatile
and Bella in exchange for issuance of capital stock of the Company to the
Versatile stockholders and Bella members (the "EXCHANGE") pursuant to the terms
of that certain Exchange Agreement dated October 28, 2005 by and among the
Company, Bella, each member of Bella, Versatile and each stockholder of
Versatile ("EXCHANGE AGREEMENT"). A copy of the Exchange Agreement has been made
available to the Investor.
(b) APPROVALS. As a condition to Closing, the board of directors
of the Company, as constituted the Company immediately following the closing of
the Exchange, shall have approved the terms and conditions of the sale of
Securities to Investors as contemplated under this Agreement and shall have
accepted this Agreement on behalf of the Company.
(c) COVENANT NOT TO ▇▇▇. From and after the Closing, the Investor
agrees, on behalf of itself and its officers, directors, shareholders and
affiliates, that none of the Investor or its officers, directors, shareholders
and affiliates will assert, or assist in the assertion of, any claim or action
before any federal, state, local or foreign judicial, arbitration,
administrative, executive or other type of body or tribunal against the
officers, directors and advisors of the Company in such positions prior to the
Exchange and each of their respective affiliates, subsidiaries, partners,
successors and assigns and all of their respective employees, officers,
directors, agents and representatives (collectively, "COMPANY PERSONS") that is
based in whole or in part on their actions as an officer, director or advisor of
the Company or by reason of their conduct in respect of the business of the
Company, unless such claim or action is based on the gross negligence or
commission of fraud. The grants of immunity set forth in this Section: (i) are
irrevocable and (ii) shall survive indefinitely, and (iii) are binding on all
successors and assigns of the Investor.
9
(d) RELEASE. The Investor hereby agrees to
unconditionally and irrevocably release, exonerate, acquit and discharge the
Company Persons, from any and all actions, causes of action, suits, debts, dues,
sums of money, accounts, reckonings, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, variances, trespasses,
judgments, executions, claims, demands, counterclaims, rights to damages and
liabilities (collectively, "CLAIMS"), that the Investor ever had, now has, or
hereafter might, can or shall have against the Company Persons under statute,
common law or otherwise, for or by reason of any matter, cause or thing
whatsoever from the beginning of the world to, and including, the date of the
consummation of the Exchange, other than Claims that are for gross negligence or
the commission of fraud as an officer, director or advisor in their conduct of
the business of the Company.
(e) THIRD PARTY BENEFICIARIES. The Company Persons are
third-party beneficiaries with respect to this SECTION 9 and may enforce the
foregoing provisions as if they were a signatory hereto.
9. INDEMNIFICATION OF INVESTOR. In addition to the indemnity
provided in the Registration Rights Agreement, the Company will indemnify and
hold the Investor and its directors, officers, shareholders, partners, employees
and agents (each, an "INVESTOR PARTY") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs, and
reasonable attorneys' fees and costs of investigation (collectively, "LOSSES")
that any such Investor Party may suffer or incur as a result of or relating to
any misrepresentation, breach, or inaccuracy of any representation, warranty,
covenant, or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation, and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
10. NON-PUBLIC INFORMATION. Subsequent to the Closing, the Company
covenants and agrees that neither it nor any other person acting on its behalf
will provide Investor or its agents or counsel with any information that the
Company believes constitutes material non-public information, unless prior
thereto Investor shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that Investor shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
11. FURTHER ASSURANCES. The parties hereto will, upon reasonable
request, execute and deliver all such further assignments, endorsements and
other documents as may be necessary in order to perfect the purchase by the
Investor of the Shares and Warrants.
12. ENTIRE AGREEMENT; NO ORAL MODIFICATION. This Agreement
contains the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
with respect thereto and may not be amended or modified except in a writing
signed by both of the parties hereto.
13. BINDING EFFECT; BENEFITS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
successors and assigns; however, nothing in this Agreement, expressed or
implied, is intended to confer on any other person other than the parties
hereto, or their respective heirs, successors or assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
10
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
15. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the United States of
America and the State of Delaware, both substantive and remedial. Any judicial
proceeding brought against either of the parties to this agreement or any
dispute arising out of this Agreement or any matter related hereto shall be
brought in the courts of the State of Texas, ▇▇▇▇▇▇ County, or in the United
States District Court for the Southern District of Texas and, by its execution
and delivery of this agreement, each party to this Agreement accepts the
jurisdiction of such courts.
16. PREVAILING PARTIES. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the prevailing party shall be entitled to receive
and the nonprevailing party shall pay upon demand reasonable attorneys' fees in
addition to any other remedy.
17. NOTICES. All communication hereunder shall be in writing and,
if sent to you shall be mailed, delivered, telegraphed or sent by facsimile or
electronic mail, and confirmed to an Investor at the address set forth on the
signature page of this Agreement, or if sent to the Company, shall be mailed,
delivered, telegraphed or sent by facsimile or electronic mail and confirmed to
the Company at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, , Attention: CEO,
telephone number: (▇▇▇) ▇▇▇-▇▇▇▇. fax number: (▇▇▇) ▇▇▇-▇▇▇▇.
18. HEADINGS. The section headings herein are included for
convenience only and are not to be deemed a part of this Agreement.
[SIGNATURE ON FOLLOWING PAGE]
11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
CENTURY PACIFIC FINANCIAL CORPORATION,
a Delaware corporation
By:
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Its: Chief Executive Officer
[INVESTOR SIGNATURE PAGE FOLLOWS]
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INVESTOR
----------------------------------------
By:
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Print Name and Title
----------------------------------------
----------------------------------------
----------------------------------------
Principal Residence or Executive Office
----------------------------------------
IRS Tax Identification No.
----------------------------------------
Telephone Number
----------------------------------------
Fax Number
----------------------------------------
E-mail Address
Subscription Amount = $
---------------------------------------------------------
Shares of Preferred Stock
(Subscription Amount / $13.5135) =
---------------------------------------------
Shares of Common Stock underlying Preferred Stock (after giving effect to the
Reverse Split) (Subscription Amount / $1.25) =
--------------------------------
Shares of Common Stock underlying Warrants (after giving effect to the Reverse
Split) (40% x Shares of Common Stock underlying Preferred Stock) =
--------------
[INVESTOR SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT]
13
EXHIBIT A
COMMON STOCK PURCHASE WARRANT
EXHIBIT B
INVESTOR QUESTIONNAIRE
EXHIBIT C
AMENDMENT TO CERTIFICATE OF INCORPORATION