Exhibit 10.23
ANCOR COMMUNICATIONS, INCORPORATED
REGULATION D SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES AUTHORITIES. THEY
MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR AN EXEMPTION TO THE REGISTRATION REQUIREMENTS OF FEDERAL AND
STATE SECURITIES LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED
HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL OR STATE SECURITIES AUTHORITIES, NOR HAVE SUCH AUTHORITIES
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SUBSCRIBERS
MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE
RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED DISCLOSURE
DOCUMENTS AS EXHIBIT E.
SEE ADDITIONAL LEGENDS AT SECTION 9.
THIS SUBSCRIPTION AGREEMENT ("Subscription Agreement") is made as of
the 21st day of March 1997, by and between Ancor Communications, Incorporated, a
corporation duly incorporated and existing under the laws of the State of
Minnesota (the "Company"), and the subscriber executing this Subscription
Agreement ("Subscriber").
THE PARTIES HEREBY AGREE AS FOLLOWS:
This Regulation D Securities Subscription Agreement (the "Subscription
Agreement") is executed by the undersigned Subscriber in connection with the
offer and purchase by the undersigned for Series B Preferred Stock, $.01 par
value (the "Preferred Stock") of the Company. The Preferred Stock is being
offered at a purchase price of Ten Thousand Dollars ($10,000), U.S., per share,
in minimum subscription amounts of at least fifteen (15) shares ($150,000), and
increments of five (5) shares ($50,000) in excess thereof, with a minimum
offering amount of Eight Hundred (800) shares of Preferred Stock, or Eight
Million Dollars ($8,000,000) (the "Minimum Amount"), and up to a maximum amount
of Nine Hundred (900) shares of Preferred Stock, or Nine Million Dollars
($9,000,000) (the "Maximum Amount") (collectively, the "Offering"). The terms of
the Preferred Stock, including the terms on which the Preferred Stock
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may be converted into common stock, $.01 par value of the Company (the "Common
Stock"), are set forth in the Certificate of Designation of Series B Preferred
Stock (the "Certificate of Designation"), in substantially the form attached
hereto as Exhibit A. The solicitation of this Subscription and, if accepted by
the Company, the offer and sale of the Preferred Stock, are being made in
reliance upon the provisions of Regulation D ("Regulation D") promulgated under
the Securities Act of 1933 (the "Act"). The Preferred Stock and the Common Stock
issuable upon conversion thereof, together with the Subscriber Warrants (as
defined in Section 5.11 below) and the Common Stock issuable upon exercise of
the Subscriber Warrants (collectively, the "Conversion Shares"), are sometimes
referred to herein collectively as the "Securities."
It is agreed as follows:
1. Offering
1.1 Offer to Subscriber; Purchase Price and Closing; and Placement Fees.
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Subject to satisfaction of the conditions to closing set forth in Section
1.2 below, the Subscriber hereby agrees to subscribe for and purchase Preferred
Stock, for the aggregate purchase price in the amount set forth in Section 10 of
this Subscription Agreement, in accordance with the terms and conditions of this
Subscription Agreement. The closing of a sale and purchase of Preferred Stock as
to each Subscriber (the "Closing") shall be deemed to occur when this
Subscription Agreement has been executed by both the Subscriber and the Company,
full payment for the Preferred Stock shall have been made by the Subscriber, by
wire transfer to the Company's designated escrow account for this Offering (the
"Escrow Account") established pursuant to the Escrow Agreement and Instructions
(the "Escrow Agreement") by and among the Company, First Union National Bank of
Georgia (the "Escrow Agent") and the Placement Agent (as defined in the
following paragraph), the Subscriber has executed an Acknowledgment ("10-K
Acknowledgment") in the Form of Exhibit J hereto stating that the Subscriber has
reviewed and accepts the Company's Form 10-K for the year ended December 31,
1996 and the conditions to Subscriber's obligations set forth in Section 1.2
have been satisfied.
The parties hereto acknowledge that Dunwoody Brokerage Services, Inc. is acting
as placement agent ("Placement Agent") for this Offering and will be compensated
by the Company in cash and warrants to purchase Common Stock of the Company.
Placement Agent has acted solely as placement agent in connection with the
Offering by the Company of the Preferred Stock pursuant to this Subscription
Agreement. The information and data contained in the Disclosure Documents (as
defined in Section 2.2.4 below) have not been subjected to independent
verification by Placement Agent, and no representation or warranty is made by
Placement Agent as to the accuracy or completeness of the information contained
in the Disclosure Documents.
1.2 Conditions to Subscriber's Obligations. The Subscriber's obligations
hereunder are conditioned upon all of the following:
(a) the following documents have been deposited with the Escrow
Agent: the 10-K Acknowledgment (executed by the Subscriber), in
substantially the Form attached hereto as Exhibit J, the
Registration Rights Agreement,
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substantially in the form attached hereto as Exhibit B (executed
by the Company), the Opinion of Counsel, substantially in the
form attached hereto as Exhibit C (signed by Company's counsel),
Irrevocable Instructions to Transfer Agent, substantially in the
form attached hereto as Exhibit D (executed by the Company and
the Transfer Agent), and the Certificate of Designation,
substantially in the form attached hereto as Exhibit A (together
with evidence showing that it has been filed with the Secretary
of State of Minnesota);
(b) the certificates representing the Preferred Stock for which the
Subscriber has subscribed have been deposited with the Escrow
Agent;
(c) the Company's Common Stock is currently being actively traded on
the Nasdaq Small Cap Market;
(d) other than as described in the Disclosure Documents (if
applicable), there have been no material adverse changes in the
Company's business prospects or financial condition since the
date of the last balance sheet included in the Disclosure
Documents including but not limited to incurring material
liabilities;
(e) the representations and warranties of the Company are true and
correct in all material respects on the Closing date as if made
on such date, and the Company shall deliver a certificate, signed
by an officer of the Company to such effect, to the Escrow Agent;
(f) the Minimum Amount and corresponding subscription agreements
accepted by the Company have been received by the Escrow Agent;
and
(g) the Company shall have reserved for issuance upon conversion of
the Preferred Stock and exercise of the Subscriber Warrants a
sufficient number of shares of Common Stock which number of
shares shall initially be equal to at least Three Million Five
Hundred Thousand (3,500,000) shares.
2. Representations, Warranties and Covenants of the Subscriber.
Subscriber hereby represents and warrants to and covenants and agrees with the
Company as follows:
2.1 Accredited Investor. Subscriber hereby represents and warrants
to the Company that it is an accredited investor, as defined in Rule 501 of
Regulation D, and has checked the applicable box set forth in Section 10 of this
Subscription Agreement.
2.2 Investment Experience; Access to Information; Independent
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Investigation.
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2.2.1 Access to Information. The Subscriber or its
professional advisor has been granted the opportunity to ask questions of and
receive answers from representatives of
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the Company, its officers, directors, employees and agents concerning the terms
and conditions of this Offering, the Company and its business and prospects, and
to seek any additional information which the Subscriber or its professional
advisor deems necessary to verify the accuracy of the information received.
2.2.2 Reliance on Own Advisors. The Subscriber has relied on
the advice of, or has consulted with, its own personal tax, investment, legal or
other advisors and has not relied on the Company or any of its affiliates,
officers, directors, attorneys, accountants or any affiliates of any thereof and
each other person, if any, who controls any of the foregoing, within the meaning
of Section 15 of the Act for any tax or legal advise, other than reliance on
information in the Disclosure Documents and on the legal opinion delivered in
connection with the Closing.
2.2.3 Capability to Evaluate. The Subscriber has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the prospective investment, which are
substantial, including without limitation those set forth in the Disclosure
Documents (as defined in Section 2.2.4 below).
2.2.4 Disclosure Documents. The Subscriber, in making its
investment decision to subscribe for the Securities hereunder, represents that
(a) it has received and had an opportunity to review (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 (the "Form 10-K") or,
if it has not yet received and reviewed the Form 10-K, acknowledges that this
Agreement may be revoked by Subscriber anytime prior to the execution by
Subscriber of a 10-K Acknowledgment in the form of Exhibit J hereto, (the "10-K
Acknowledgment"), pursuant to Section 7.1(b) hereof, (ii) Risk Factors, attached
as Exhibit E, (iii) Capitalization Schedule, attached as Exhibit F, and (iv) Use
of Proceeds, attached as Exhibit G, (b) it has (subject to the caveat in
subsection 2.2.4(a)(i) above regarding the Form 10-K) read, reviewed, and relied
solely on the documents described in (a) above, the Company's representations
and warranties and other information in this Subscription Agreement, including
the Exhibits, any other written information prepared by the Company which has
been specifically provided to the Subscriber in connection with this Offering
and is designated as a Disclosure Document (together, the "Disclosure
Documents"), and an independent investigation made by it and its
representatives, if any; (c) it has, prior to the date of this Subscription
Agreement, been given an opportunity to review material contracts and documents
of the Company which have been filed as exhibits to the Company's filings under
the Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and has had an opportunity to ask questions of and receive answers from the
Company's officers and directors; and (d) has not based its decision to invest
on any oral representation of the Company, Placement Agent or any other person,
nor any written representation or assurance from the Company other than those
contained in the Disclosure Documents or incorporated herein or therein. Also,
the Subscriber has not based its decision to invest upon statements made in the
analyst report dated on or about February 17, 1997 sent to Subscriber by
Placement Agent. Subscriber acknowledges that the Analyst Report was not
prepared by the Company and that the Company does not confirm or endorse any
information contained therein, and does not make any representation or warranty
with regard to the contents thereof, and disclaims any responsibility to comment
on, correct or update any information contained therein.
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2.2.5 Investment Experience; Fend for Self. Subscriber has
substantial experience in investing in securities of companies in the
development stage and has made investments in securities other than those of the
Company. Subscriber acknowledges that it is able to fend for itself in the
transaction contemplated by this Subscription Agreement, that it has the ability
to bear the economic risk of its investment pursuant to this Subscription
Agreement and that it is an "Accredited Investor" by virtue of the fact that it
meets the subscriber qualification standards set forth in Section 2.1 above.
Subscriber has not been organized for the purpose of investing in securities of
the Company, although such investment is consistent with its purposes. The
Subscriber's commitment to potentially illiquid investments is reasonable in
relation to such person's net worth.
2.3 Exempt Offering Under Regulation D.
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2.3.1 Investment; No Distribution. The Subscriber is acquiring
the Securities solely for the Subscriber's own account for investment purposes
as a principal and not with a view to immediate resale or distribution of all or
any part thereof; provided, however, that Subscriber does not agree to hold the
Securities for any minimum or specific term (except as otherwise required by the
Certificate of Designation and this Agreement) and reserves the right to dispose
of the Securities at any time in accordance with or pursuant to an effective
registration statement or an exemption under the Act. The Subscriber is aware
that there are legal and practical limits on the Subscriber's ability to sell or
dispose of the Securities and, therefore, that the Subscriber must bear the
economic risk of the investment for an indefinite period of time and has
adequate means of providing for the Subscriber's current needs and possible
personal contingencies and has need for only limited liquidity of this
investment. The Subscriber's commitment to potentially illiquid investments is
reasonable in relation to the Subscriber's net worth.
2.3.2 No General Solicitation. The Securities were not offered
to the Subscriber through, and the Subscriber is not aware of, any form of
general solicitation or general advertising, including, without limitation, (i)
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
2.3.3 Restricted Securities. Subscriber understands that the
Preferred Stock is and the Subscriber Warrants and the Conversion Shares will
be, characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may not be transferred or resold without registration under the
Act or pursuant to an exemption therefrom. In this connection, Subscriber
represents that it is familiar with Rule 144 under the Act, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
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2.3.4 Disposition. Without in any way limiting the
representations set forth above, Subscriber further agrees not to sell, transfer
or otherwise dispose of all or any portion of the Securities unless and until:
(a) There are then in effect registration statements under the
Act and any applicable state securities laws covering such proposed
disposition and such disposition is made in accordance with such
registration statements; or
(b) (i) Subscriber shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, and (ii) if reasonably requested by the Company,
Subscriber shall have furnished the Company with an opinion of
counsel, in form and substance customary for similar transactions,
that such disposition will not require registration of the Securities
under the Act or any applicable state securities laws. It is agreed
that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144.
2.4 Due Authorization.
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2.4.1 Authority. The person executing this Subscription
Agreement, if executing this Subscription Agreement in a representative or
fiduciary capacity, has full power and authority to execute and deliver this
Subscription Agreement and each other document included herein for which a
signature is required in such capacity and on behalf of the subscribing
individual, partnership, trust, estate, corporation or other entity for whom or
which the person executing this Subscription Agreement is executing this
Subscription Agreement. The Subscriber has reached the age of majority (if an
individual) according to the laws of the state in which he or she resides.
2.4.2 Due Authorization. If the Subscriber is a corporation, the
Subscriber is duly and validly organized, validly existing and in good tax and
corporate standing as a corporation under the laws of the jurisdiction of its
incorporation with full power and authority to purchase the Securities to be
purchased by it and to execute and deliver this Subscription Agreement.
2.4.3 Partnerships. If the Subscriber is a partnership, the
representations, warranties, agreements and understandings set forth above are
true with respect to all partners in the Subscriber (and if any such partner is
itself a partnership, all persons holding an interest in such partnership,
directly or indirectly, including through one or more partnerships), and the
person executing this Subscription Agreement has made due inquiry to determine
the truthfulness of the representations and warranties made hereby.
2.4.4 Representatives. If the Subscriber is purchasing in a
representative or fiduciary capacity, the above representations and warranties
shall be deemed to have been made on behalf of the person or persons for whom
the Subscriber is so purchasing.
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3. Acknowledgments The Subscriber is aware that:
3.1 Risks of Investment. The Subscriber recognizes that an investment
in the Company involves certain risks, including the potential loss of the
Subscriber's investment therein. The Subscriber recognizes that the Disclosure
Documents and this Subscription Agreement and the exhibits hereto do not purport
to contain all the information which would be contained in a registration
statement under the Act;
3.2 No Government Approval. No federal or state agency has passed
upon the Securities or made any finding or determination as to the fairness of
this transaction;
3.3 No Registration. The Securities have not been registered under
the Act or any applicable state securities laws in reliance upon exemptions from
the registration requirements of such laws, and may not be sold, pledged,
assigned or otherwise disposed of in the absence of an effective registration
statement for the Securities and any component thereof under the Act or unless
an exemption from such registration is available;
3.4 No Assurances of Registration. There can be no assurance that any
registration statement will become effective at the scheduled time or ever. The
Subscriber acknowledges that it may be required to bear the economic risk of the
Subscribers' investment for an indefinite period of time.
3.5 Exempt Transaction. The Subscriber understands that the Preferred
Stock is being offered and sold in reliance on specific exemptions from the
registration requirements of federal and state law and that the representations,
warranties, agreements, acknowledgments and understandings set forth herein are
being relied upon by the Company in determining the applicability of such
exemptions and the suitability of the Subscriber to acquire the Preferred Stock.
3.6 Legends. It is understood that the certificates evidencing the
Preferred Stock and, subject to the terms of Section 5.9 below, the Conversion
Shares shall bear the following legend:
"The securities represented hereby have not been registered under the
Securities Act of 1933, or applicable state securities laws, nor the
securities laws of any other jurisdiction. They may not be sold or
transferred in the absence of an effective registration statement
under those securities laws or an opinion of counsel, in form and
substance customary for similar transactions, that the sale or
transfer is pursuant to an exemption to the registration requirements
of those securities laws."
3.7 Missouri Residents. If a Missouri resident, I hereby represent
that (i) I understand that the Securities are not registered under the Missouri
Securities Act and may be disposed of only through a licensed broker-dealer and
(ii) I have been advised that it is a felony to sell securities in violation of
the Missouri Securities Act.
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4. Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Subscribers (which
shall be true at the signing of this Subscription Agreement, as of Closing), and
agrees with the Subscribers 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 Minnesota, USA and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on the business or properties of the Company. The
Company is not the subject of any pending, threatened or, to its knowledge,
contemplated investigation or administrative or legal proceeding by the Internal
Revenue Service, the taxing authorities of any state or local jurisdiction, or
the Securities and Exchange Commission, or any state securities commission, or
any other governmental entity, which have not been disclosed in the reports
referred to in Section 2.2 above.
4.2 Corporate Condition. The Company's condition is, in all material
respects, as described in the Disclosure Documents, except for changes in the
ordinary course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the Company. Other than as described in the
Disclosure Documents (if applicable), there have been no material adverse
changes in the Company's business prospects or financial condition since the
date of the last balance sheet included in the Disclosure Documents. The
financial statements contained in the Disclosure Documents have been prepared in
accordance with generally accepted accounting principles, consistently applied
(except as otherwise permitted by Regulation S-X of the Exchange Act), and
fairly present the financial condition of the Company as of the dates of the
balance sheet included therein and the consolidated results of its operations
and cash flows for the period then ended. Without limiting the foregoing, there
are no material liabilities, contingent or actual, that are not disclosed in the
Disclosure Documents (other than liabilities incurred by the Company in the
ordinary course of its business, consistent with its past practice, after the
period covered by the Disclosure Documents). The Company has paid all material
taxes which are due, except for taxes which it reasonably disputes. There is no
material claim, litigation, or administrative proceeding pending or, to the best
of the Company's knowledge, threatened against the Company, except as disclosed
in the Disclosure Documents. The Disclosure Documents do not contain any untrue
statement of a material fact and do not omit to state any material fact required
to be stated therein necessary to make the statements contained therein not
misleading in the light of the circumstances under which they were made.
4.3 Authorization. All corporate action on the part of the Company
by its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Subscription Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance and
delivery of the Preferred Stock being sold hereunder and the issuance (and
reservation for issuance) of the Conversion Shares have been taken, and this
Subscription Agreement, the Certificate of Designation, the Irrevocable
Instructions to Transfer Agent, the Escrow Agreement, the Subscriber Warrants
and the Registration Rights Agreement constitute valid and legally binding
obligations of the Company, enforceable in accordance with their
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terms. The Company has obtained all consents and approvals required for it to
execute, deliver and perform each agreement referenced in the previous sentence.
4.4 Valid Issuance of Preferred Stock and Common Stock. The Preferred
Stock, when issued, sold and delivered in accordance with the terms hereof, for
the consideration expressed herein, will be validly issued, fully paid and
nonassessable and, based in part upon the representations of the Subscriber in
this Subscription Agreement and the Placement Agent in the Placement Agent
Agreement ("Placement Agent Agreement") between the Company and the Placement
Agent, will be issued in compliance with all applicable U.S. federal and state
securities laws. The Common Stock issuable upon conversion of the Preferred
Stock, when issued in accordance with the terms of the Certificate of
Designation, and the Common Stock issuable upon exercise of the Subscriber
Warrants, when issued in accordance with the terms of the Subscriber Warrants,
shall be duly and validly issued and outstanding, fully paid and nonassessable,
and based in part on the representations and warranties of Subscriber of the
Preferred Stock and the Placement Agent in the Placement Agent Agreement, will
be issued in compliance with all applicable U.S. federal and state securities
laws. The Preferred Stock, the Subscriber Warrants and the Conversion Shares
will be issued free of any preemptive rights. The Company currently has at least
Three Million Five Hundred Thousand (3,500,000) Conversion Shares reserved for
issuance upon conversion of the Preferred Stock and upon exercise of the
Subscriber Warrants.
4.5 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Articles of Incorporation or
Bylaws as amended and in effect on and as of the date of this Subscription
Agreement or of any provision of any instrument or contract to which it is a
party or by which it is bound or, to its knowledge, of any provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to the Company, any of which singularly or in the
aggregate would have a material adverse affect on the Company's business or
prospects, except as described in the Disclosure Documents. The execution,
delivery and performance of this Subscription Agreement and the other agreements
entered into in conjunction with the Offering and the consummation of the
transactions contemplated hereby and thereby will not result in any violation or
be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision, instrument or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company, any of which singularly or in the
aggregate would have a material adverse affect on the Company's business or
prospects, except as described in the Disclosure Documents.
4.6 Reporting Company. The Company is subject to the reporting
requirements of the Exchange Act has a class of securities registered under
Section 12 or Section 15 of the Exchange Act, and has filed all reports required
by the Exchange Act since the date the Company first became a reporting company.
4.7 Capitalization. The capitalization of the Company as of
December 31, 1996, is, and the capitalization as of the Closing, after taking
into account the Offering of the Securities contemplated by this Subscription
Agreement and all other share issuances occurring
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prior to this Offering, will be, as set forth in the capitalization table and
the pro-forma capitalization table of the Company set forth in Exhibit F.
4.8 Use of Proceeds. As of the date hereof, the Company expects to
use the proceeds from this Offering (less fees and expenses) for the purposes
and in the approximate amounts set forth as Exhibit G hereto. These purposes and
amounts are estimates and are subject to change.
4.9 Intellectual Property. The Company has valid, unrestricted and
exclusive patents, trademarks, trademark registrations, trade names, copyrights,
know-how, technology and other intellectual property necessary to the conduct of
its business as set forth on Exhibit H. Company has granted such licenses or has
assigned or otherwise transferred a portion of (or all of) such valid,
unrestricted and exclusive patents, trademarks, trademark registrations, trade
names, copyrights, know-how, technology and other intellectual property
necessary to the conduct of its business as set forth on Exhibit H. Company has
been granted licenses, know-how, technology and/or other intellectual property
necessary to the conduct of its business as set forth on Exhibit H. To the best
of Company's knowledge, the Company is not infringing on the intellectual
property rights of any third party, nor is any third party infringing on the
Company's intellectual property rights nor has the Company received any notice
from any third party alleging such infringement by the Company. There are no
restrictions in any agreements, licenses, franchises, or other instruments which
preclude the Company from engaging in its business as presently conducted.
4.10 No Rights of Participation. No person or entity, including, but
not limited to, current or former shareholders of the Company, underwriters,
brokers, agents or other third parties, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the financing contemplated by this Subscription Agreement which has not been
either complied with or waived.
4.11 Termination Date of Offering. In no event shall the last
closing ("Last Closing") of a sale and purchase of a Preferred Stock occur later
than March 31, 1997, which date can be extended by up to ten (10) days upon
written approval by the Company and Placement Agent.
4.12 Underwriter's Fees and Rights of First Refusal. The Company is
not obligated to pay any compensation or other fees, costs or related
expenditures in cash or securities to any underwriter, broker, agent or other
representative other than the Placement Agent in connection with this Offering.
5. Covenants of the Company
5.1 Independent Auditors. The Company shall, until at least two (2)
years after the date of the Last Closing, maintain as its independent
auditors an accounting firm authorized to practice before the SEC.
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5.2 Corporate Existence and Taxes. The Company shall, until at least
the earlier of (i) the date that is two (2) years after the Last Closing or (ii)
the conversion or redemption of all of the Preferred Stock purchased pursuant to
this Subscription Agreement and the exercise of all Subscriber Warrants issued
in connection with the Offering, maintain its corporate existence in good
standing (provided, however, that the foregoing covenant shall not prevent the
Company from entering into any merger or corporate reorganization as long as the
surviving entity in such transaction, if not the Company, assumes the Company's
obligations with respect to the Preferred Stock and the Subscriber Warrants) and
shall pay all its taxes when due except for taxes which the Company disputes.
5.3 Registration Rights. The Company will grant Subscriber the
registration rights covering the Conversion Shares on the terms of the
Registration Rights Agreement (substantially in the form of Exhibit B).
5.4 Notification of Last Closing by Company. Within five (5)
business days after the Last Closing, the Company shall notify the Subscriber in
writing that the Last Closing has occurred, the date of the Last Closing, the
dates that the subscribers are entitled to convert their Preferred Stock, the
Fixed Conversion Price and the Minimum Conversion Price, as those terms are
defined in the Certificate of Designation, and the name and telephone number of
an administrative contact person at the Company whom the Subscriber may contact
regarding information related to conversion of the Preferred Stock as
contemplated by the Certificate of Designation.
5.5 Capital Raising Limitations; Rights of First Refusal.
5.5.1 Capital Raising Limitations. The Company shall not issue
any debt or equity securities for cash in private capital raising transactions
("Future Offerings") in excess of an aggregate of Three Million ($3,000,000)
Dollars for a period beginning on the date hereof and ending One Hundred Eighty
(180) days after the Last Closing without obtaining the prior written approval
of Subscribers holding a majority of the purchase price of Preferred Stock then
outstanding.
5.5.2 Subscriber's 180 Day Right of First Refusal. The Company
will not conduct any Future Offerings for a period beginning on the date hereof
and ending One Hundred Eighty (180) days after the Last Closing without
delivering to the Subscribers holding outstanding Preferred Stock, at least
seven (7) days prior to the closing of such issuance, written notice describing
the proposed issuance and the terms upon which such securities are being issued,
and providing the Subscriber the option during such seven (7) day period to
purchase the securities being offered in the Future Offerings on the same terms
as contemplated by such Future Offerings and in the amount set forth below (the
limitations referred to in this and the immediately preceding sentence are
collectively referred to as the "Capital Raising Limitation").
5.5.3 Amount of Subscriber's Right of First Refusal. The amount
of securities which a Subscriber is entitled to purchase in such a Future
Offering shall be a number obtained by multiplying the aggregate amount of
securities being offered in the Future Offering by a fraction, the numerator of
which is the purchase price of the Preferred Stock purchased by
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the Subscriber pursuant to this Subscription Agreement and the denominator of
which is the aggregate dollar amount of Preferred Stock placed in this Offering.
5.5.4 Exceptions to the Capital Raising Limitation. The Capital
Raising Limitation shall not apply to any borrowing by the Company from a
commercial bank or issuances of securities in connection with a merger,
consolidation or purchase or sale of assets, or in connection with or as part of
the same transaction as a joint venture or other acquisition or disposition of a
business, a product or a license by the Company or exercise of options by
employees, consultants or directors or any transaction with a strategic
corporate partner. The Capital Raising Limitation also shall not apply to the
issuance of securities upon exercise or conversion of the Company's options,
warrants, or other convertible securities outstanding as of the date of the Last
Closing of this Offering, or to the grant of additional options or warrants, or
the issuance of additional securities, under any Company stock option, or
restricted stock plan. Additionally, the Capital Raising Limitation shall not
apply to any public offerings undertaken by the Company.
5.6 Financial 10-K Statements, Etc. and Current Reports on Form 8-K.
The Company shall provide Subscriber with copies of its annual reports on Form
10-K, quarterly reports on Form 10-Q and current reports on Form 8-K for as long
as the Preferred Stock may remain outstanding, unless such documents are
available through the Electronic Data Gathering and Retrieval ("▇▇▇▇▇") system
of the Securities and Exchange Commission.
5.7 Opinion of Counsel. Subscribers shall, upon purchase of the
Preferred Stock pursuant to this Subscription Agreement, receive an opinion
letter from ▇▇▇▇▇▇ & Whitney LLP, counsel to the Company, in substantially the
form attached hereto as Exhibit C.
5.8 Payments for Late Conversion or Failure to Reserve Authorized but
Unissued Common.
(a) Payments for Late Conversion. The Company understands that
a delay in the issuance of the Conversion Shares (a "Late Conversion")
later than the Deadline, as defined in the Certificate of Designation
(the "Deadline") could result in economic loss to the Holder. As
compensation to the holder of the Preferred Stock (the "Holder") for
such loss, the Company agrees to pay Holder, at Holder"s election in
lieu of Acceleration Payments (as defined below), for late issuance
("Late Conversion Payments") of Conversion Shares upon Conversion in
accordance with the following schedule (where "No. Business Days Late"
is defined as the number of business days beyond the Deadline):
Late Payment For
Each Share of Preferred
No. Business Days Late Stock Being Converted
---------------------- -----------------------
1 $ 50
2 $100
3 $150
4 $200
5 $250
6 $300
7 $350
8 $400
9 $450
10 $500
>10 $500 + $100 for each
Business Day Late beyond 10 days
12
In the event of a Late Conversion, Subscriber may elect to
receive Late Conversion Payments under this Section in lieu of
Acceleration Payments, if applicable, under Section 11 of the
Certificate of Designation ("Acceleration Payments"). If Subscriber
elects to receive Late Conversion Payments under this Section,
Subscriber will not be entitled to request Acceleration Payments under
the Certificate of Designation with respect to the shares of Preferred
Stock for which Late Conversion Payments were received, and agrees
that such rights with respect to such late conversion will be waived
by acceptance of Late Conversion Payments hereunder. If Subscriber
receives Acceleration Payments for a Late Conversion, Subscriber shall
not be entitled to Late Conversion Payments under this Section for
such Late Conversion.
To the extent that the failure of the Company to issue the
Conversion Shares pursuant to this Section 5.8 is due to the
unavailability of authorized but unissued shares of Common Stock, the
provisions of subsection 5.8(a) shall not apply but instead the
provisions of subsection 5.8(b) shall apply.
The Company shall pay any late payments to Holder incurred under
this Section by certified check within seven (7) business days from
the date of issuance of Conversion Shares. Nothing herein shall limit
the Holder's right to pursue actual damages for the Company's failure
to issue and deliver Conversion Shares to the Subscriber in accordance
with the terms of the Certificate of Designation.
(b) Payments for Failure to Reserve Authorized but Unissued
Common Stock. Beginning on the date that is five (5) months after the
Last Closing, assuming that the Closing Bid Price of the Company's
Common Stock is less than the Soft Floor Price (as defined in the
Certificate of Designation), the Company shall calculate the number of
Conversion Shares issuable upon conversion of all outstanding
Preferred Stock then eligible for conversion under Section 5 of the
Certificate of Designation and upon exercise of all Subscriber
Warrants then eligible for exercise as of the end of such month. The
Company shall provide each Holder with a copy of such calculation
within five (5) business days after the last business day of the month
for which such calculation was made. The calculation shall be made
assuming a Conversion Price (the "Assumed Conversion Price") equal to
eighty five percent (85%) of the average Closing Bid Price for the
twenty (20) trading days ending on the last trading day of the month
13
in which the calculation was made. If, based upon such calculation,
the Company does not have at least one hundred twenty five percent
(125%) of the number of Conversion Shares necessary to effect, in
full, a conversion of all the outstanding Preferred Stock then
eligible for conversion under Section 5 of the Certificate of
Designation at the Assumed Conversion Price and an exercise of all
Subscriber Warrants then eligible for exercise, (referred to as a
"Conversion Shortfall", the date of such default being referred to
herein as the "Conversion Shortfall Date") authorized and reserved but
unissued, the Company shall take immediate action to promptly
authorize and reserve a sufficient number of Conversion Shares such
that the total number of Conversion Shares so authorized and reserved
is equal to one hundred and fifty percent (150%) of the number of
Conversion Shares required to effect, in full, a conversion of the all
outstanding Preferred Stock under Section 5 of the Certificate of
Designation at the Assumed Conversion Price as of the Conversion
Shortfall Date and an exercise of all Subscriber Warrants then
eligible for exercise. If, at any time a Holder or Holders of
Preferred Stock submits a Notice of Conversion (as defined in the
Certificate of Designation) and the Company does not have sufficient
authorized but unissued Conversion Shares available to effect, in
full, a conversion of the Preferred Stock under Section 5 of the
Certificate of Designation (referred to as a "Conversion Default", the
date of such default being referred to herein as the "Conversion
Default Date"), the Company shall issue to such Holder(s), pro rata,
all of the Conversion Shares which are available, and the Notice of
Conversion as to any shares of Preferred Stock requested to be
converted but not converted (the "Unconverted Preferred Conversion
Shares") shall become null and void. The Company shall provide notice
of such Conversion Default ("Notice of Conversion Default") to all
Holders of outstanding Preferred Stock, by facsimile, within one (1)
business day of such default (with the original delivered by overnight
or two (2) day courier). No Holder may submit a Notice of Conversion
after receipt of a Notice of Conversion Default until the date
additional Conversion Shares are authorized by the Company. The
Company will take immediate action to authorize an appropriate number
of additional shares as soon as practicable.
If the Company is unable to cure the Conversion Shortfall within
seventy five (75) days, or if the Company is unable to cure the Conversion
Default within seventy-five (75) days, then the Company agrees to pay to all
Holders of outstanding Preferred Stock payment ("Conversion Default Payments")
for a Conversion Default in the amount of (N/365) X .24 X the initial issuance
price of the outstanding Preferred Stock held by each Holder, where N = the
number of days from the Conversion Shortfall Date (or Conversion Default Date,
as applicable) to the date (the "Authorization Date") that the Company
authorizes a sufficient number of Conversion Shares to effect conversion of all
remaining Shares of Preferred Stock. The Company shall send notice
("Authorization Notice") via facsimile, with a copy by overnight or two (2) day
courier, to all Holders of outstanding Preferred Stock that additional
Conversion Shares have been authorized, the Authorization Date and the amount of
Holder's accrued Conversion Default Payments. The accrued Conversion Default
Payments for each calendar month shall be paid in cash or shall be convertible
into Common Stock at the Conversion Rate (as defined in the Certificate of
Designation) then in effect, at the Holder's
14
option, payable as follows: (i) in the event Holder elects to take such payment
in cash, cash payments shall be made to each Holder of outstanding Preferred
Stock by the fifth (5th) day of the following calendar month or (ii) in the
event Holder elects to take such payment in stock, the Holder may convert such
payment amount into Common Stock at the Conversion Rate at anytime after the
fifth (5th) day of the calendar month following the month the Authorization
Notice was received, until the automatic conversion date set forth in the
Certificate of Designation.
Nothing herein shall limit Holder's right to pursue actual damages for
the Company's failure to maintain a sufficient number of authorized Conversion
Shares.
5.9 Resale of Common Stock. The Subscriber agrees that it will only
sell shares of Common Stock issued upon Conversion of the Preferred Stock
pursuant to the Registration Statement or an available exemption and agrees to
deliver a prospectus in connection with any sale made pursuant to the
Registration Statement. Conversion Shares shall be issued to transferees thereof
without restrictive legend upon the terms set forth in the Irrevocable
Instructions to Transfer Agent. In addition, the Company will, or will instruct
the Transfer Agent to, remove the restrictive legend from Conversion Shares
provided the Conversion Shares are eligible for resale pursuant to Rule 144(k)
and the Holder thereof makes the representations necessary for counsel to the
Company to issue a legal opinion to that effect.
5.10 The Company's Instructions to Transfer Agent. Company will issue
to its Transfer Agent an irrevocable instruction letter (the "Irrevocable
Instructions to Transfer Agent") substantially in the form of Exhibit D. The
Company hereby agrees that it will not unilaterally terminate its relationship
with the Transfer Agent for any reason, without the consent of the Holders of
seventy-five percent (75%) of interest of the then outstanding Preferred Stock
prior to the earlier of (i) the conversion or redemption of all of the Preferred
Stock or (ii) the date which is two (2) years after the Last Closing Date. In
the event the Company's agency relationship with the Transfer Agent should be
terminated for any other reason prior to the earlier of (i) the conversion or
redemption of all of the Preferred Stock or (ii) the date which is two (2) years
after the Last Closing Date, the Company's Transfer Agent shall agree to
continue acting as transfer agent pursuant to the terms of the Irrevocable
Instructions to Transfer Agent until such time that a successor transfer agent
(i) is appointed by the Company; (ii) is approved by seventy-five percent (75%)
of the Subscribers of outstanding Preferred Stock; and (iii) executes and agrees
to be bound by the terms of the Irrevocable Instructions to Transfer Agent.
5.11 Subscriber Warrants. On the date that is one (1) year after the
date of the Last Closing (the "One Year Anniversary Date"), each Subscriber
shall be entitled to receive warrants ("Subscriber Warrants"), substantially in
the form attached hereto as Exhibit K, to purchase a number of shares of Common
Stock of the Company equal to twenty percent (20%) of the aggregate purchase
price of the Subscriber's Preferred Stock which is outstanding and unconverted
as of the One Year Anniversary Date, divided by the Conversion Price then in
effect at an exercise price per share equal to one hundred fifteen percent
(115%) of the average Closing Bid Price for the five (5) trading days ending on
the One Year Anniversary Date, with a two (2) year term.
15
6. Miscellaneous
6.1 Representations and Warranties Survive the Closing; Severability.
The Subscriber's and the Company's representations and warranties shall survive
the Closing of the transaction notwithstanding any due diligence investigation
made by or on behalf of the party seeking to rely on such representations and
warranties. In the event that any provision of this Subscription Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Subscription Agreement shall continue in full force
and effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Subscription
Agreement to any party.
6.2 Successors and Assigns. The terms and conditions of this
Subscription Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Nothing in this Subscription
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Subscription
Agreement, except as expressly provided in this Subscription Agreement.
Subscriber may assign its rights hereunder, in connection with any private sale
of the Preferred Stock of such Subscriber, so long as, as a condition precedent
to such transfer, the transferee executes an acknowledgment agreeing to be bound
by the applicable provisions of this Subscription Agreement in a form acceptable
to the Company and provides an original of such acknowledgment to the Company.
6.3 Governing Law. This Subscription Agreement shall be governed by
and construed under the laws of the State of Minnesota without respect to
conflict of laws.
6.4 Execution in Counterparts Permitted. This Subscription Agreement
may be executed in any number of counterparts, each of which shall be
enforceable against the parties actually executing such counterparts, and all of
which together shall constitute one (1) instrument.
6.5 Titles and Subtitles; Gender. The titles and subtitles used in
this Subscription Agreement are used for convenience only and are not to be
considered in construing or interpreting this Subscription Agreement. The use in
this Subscription Agreement of a masculine, feminine or neither pronoun shall be
deemed to include a reference to the others.
6.6 Written Notices, Etc. Any notice, demand or request required or
permitted to be given by the Company or the Subscriber pursuant to the terms of
this Subscription Agreement shall be in writing and shall be deemed given when
delivered personally, or by facsimile (with a hard copy to follow by two (2) day
courier), addressed to the parties at the addresses and/or facsimile telephone
number of the parties set forth at the end of this Subscription Agreement or
such other address as a party may request by notifying the other in writing.
6.7 Expenses. Each of the Company and the Subscriber shall pay all
costs and expenses that it respectively incurs with respect to the negotiation,
execution, delivery and performance of this Subscription Agreement.
16
6.8 Entire Agreement; Written Amendments Required. This Subscription
Agreement, the Certificate of Designation, the Preferred Stock certificates, the
Registration Rights Agreement, the Irrevocable Instructions to Transfer Agent,
the Escrow Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof, and no party shall be liable or
bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein. Except as
expressly provided herein, neither this Subscription Agreement nor any term
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.
6.9 Arbitration. Any controversy or claim arising out of or related
to this Subscription Agreement or the breach thereof, shall be settled by
binding arbitration in New York, New York in accordance with the Expedited
Procedures (Rules 53-57) of the Commercial Arbitration Rules of the American
Arbitration Association (AAA). A proceeding shall be commenced upon written
demand by Company or any Subscriber to the other. The arbitrator(s) shall enter
a judgment by default against any party which fails or refuses to appear in any
properly noticed arbitration proceeding. The proceeding shall be conducted by
one (1) arbitrator, unless the amount alleged to be in dispute exceeds two
hundred fifty thousand dollars ($250,000), in which case three (3) arbitrators
shall preside. The arbitrator(s) will be chosen by the parties from a list
provided by the AAA, and if they are unable to agree within ten (10) days, the
AAA shall select the arbitrator(s). The arbitrators must be experts in
securities law and financial transactions. The arbitrators shall assess costs
and expenses of the arbitration, including all attorneys' and experts' fees, as
the arbitrators believe is appropriate in light of the merits of the parties'
respective positions in the issues in dispute. Each party submits irrevocably to
the jurisdiction of any state court sitting in New York County, New York or to
the United States District Court for the Southern District of New York for
purposes of enforcement of any discovery order, judgment or award in connection
with such arbitration. The award of the arbitrator(s) shall be final and binding
upon the parties and may be enforced in any court having jurisdiction. The
arbitration shall be held in such place as set by the arbitrator(s) in
accordance with Rule 55.
7. Subscription and Wiring Instructions; Irrevocability.
7.1 Subscription.
(a) Wire transfer of Subscription Funds. Subscriber shall send its
signed Subscription Agreement by facsimile to Placement Agent at
(▇▇▇) ▇▇▇-▇▇▇▇, and send its subscription funds by wire transfer,
to the Escrow Agent as follows:
First Union National Bank
ABA No. ▇▇▇▇▇▇▇▇▇
Account No. 465946
ATTN: ▇▇▇▇▇▇ ▇▇▇▇▇
17
Ref: Ancor Communications, Incorporated/Dunwoody Brokerage
Services, Inc.
A/C: 3072235744
SWIFT Code: ▇▇▇▇▇▇▇▇
Contact: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Revocable Subscription. The Company hereby acknowledges and
agrees, that this Subscription Agreement is revocable and that
the Subscriber is entitled to cancel, terminate or revoke this
Subscription Agreement at any time prior to the later of (i) the
date the Subscriber executes the 10-K Acknowledgment or (ii) the
Company's acceptance hereof.
(c) Company's Right to Reject Subscription. This Subscription
Agreement shall be accepted by the Company when the Company
countersigns this Subscription Agreement. The Subscriber hereby
confirms that the Company has full right in its sole discretion
to accept or reject the subscription of the Subscriber, in whole
or in part, provided that, if the Company decides to reject such
subscription, the Company must do so promptly and in writing. In
the case of rejection, the Company will promptly return any
rejected payments and (if rejected in whole) copies of all
executed subscription documents (including without limitation
this Subscription Agreement) to Subscriber (with any earned
interest).
7.2 Acceptance of Subscription. In the case of acceptance of the
Subscriber's subscription, ownership of the number of securities being purchased
hereby will pass to the Subscriber upon the Closing.
7.3 Subscriber to Forward Original Signed Subscription Agreement to
Company. Subscriber agrees to courier to Company its original inked signed
Subscription Agreement within two (2) days after faxing said signed agreement to
Placement Agent.
8. Indemnification.
The Company agrees to indemnify and hold harmless Subscriber and each of
its officers, directors, employees and agents, and each person who controls
Subscriber within the meaning of the Act or the Exchange Act (each, an
"Indemnified Party") against any losses, claims, damages or liabilities, joint
or several, to which it, they or any of them, may become subject and not
otherwise reimbursed arising from or due to any untrue statement of a material
fact or the omission to state any material fact required to be stated in order
to make the statements not misleading in any representation or warranty made by
the Company contained in this Subscription Agreement or in any statements
contained in the Disclosure Documents.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be sought, such
Indemnified Party will, if a claim
18
in respect thereof is to be made against the other party (hereinafter
"Indemnitor") under this Section 8, deliver to the Indemnitor a written notice
of the commencement thereof and the Indemnitor shall have the right to
participate in and to assume the defense thereof with counsel reasonably
selected by the Indemnitor, provided, however, that an Indemnified Party shall
have the right to retain its own counsel, with the reasonably incurred fees and
expenses of such counsel to be paid by the Company, if representation of such
Indemnified Party by the counsel retained by the Indemnitor would be
inappropriate due to actual or potential conflicts of interest between such
Indemnified Party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the Indemnitor within a
reasonable time of the commencement of any such action, if prejudicial to the
Indemnitor's ability to defend such action, shall relieve the Indemnitor of any
liability to the Indemnified Party under this Section 8, but the omission to so
deliver written notice to the Indemnitor will not relieve it of any liability
that it may have to any Indemnified Party other than under this Section 8 to the
extent it is prejudicial.
9. Certain Additional Legends and Information.
FOR FLORIDA RESIDENTS:
THE SECURITIES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY,
THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE FLORIDA
SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE
STATE OF FLORIDA. IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF
VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF
CONSIDERATION IS MADE BY SUCH SUBSCRIBER TO THE ISSUER, AN AGENT OF THE ISSUER,
OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE
IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
FOR NEW HAMPSHIRE RESIDENTS:
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT
FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH
FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR
A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH
THE PROVISIONS OF THIS PARAGRAPH.
19
[INTENTIONALLY LEFT BLANK]
20
10. Number of Shares and Purchase Price. Subscriber subscribes for
_________ Shares of Preferred Stock (in the amount of $10,000 per Share) against
payment by wire transfer in the amount of $___________________ ("Purchase
Price").
11. Accredited Investor. The Subscriber is (check applicable box):
(a) [_] a corporation, business trust, or partnership not formed for the
specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000.
(b) [_] any trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated person who has such
knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of the
prospective investment.
(c) [_] an individual, who
[_] is a director, executive officer or general partner of the issuer
of the securities being offered or sold or a director, executive
officer or general partner of a general partner of that issuer.
[_] has an individual net worth, or joint net worth with that
person's spouse, at the time of its purchase exceeding
$1,000,000.
[_] had an individual income in excess of $200,000 in each of the two
most recent years or joint income with that person's 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.
(d) [_] an entity each equity owner of which is an entity described in
a - b above or is an individual who could check one (1) of the
first three (3) boxes under subparagraph (c) above.
(e) [_] other [specify]__________________________________________________
The undersigned acknowledges that this Subscription Agreement and the
subscription represented hereby shall not be effective unless accepted by the
Company as indicated below.
IN WITNESS WHEREOF, the undersigned Subscriber does represent and certify under
penalty of perjury that the foregoing statements are true and correct and that
Subscriber has by the following signature(s) executed this Subscription
Agreement.
Dated this ____ day of _____________, 1997.
------------------------------------ ---------------------------------------
Your Signature PRINT EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
DELIVERY INSTRUCTIONS:
------------------------------------ ----------------------
Name: Please Print Please type or print address where your
security is to be delivered
------------------------------------ ATTN.:
Title/Representative Capacity --------------------------------
(if applicable)
------------------------------------ ---------------------------------------
Name of Company You Represent Street Address
(if applicable)
------------------------------------ ---------------------------------------
Place of Execution of this City, State or Province, Country,
Subscription Agreement Offshore Postal Code
---------------------------------------
Phone Number (For Federal Express) and
Fax Number (re: Notice)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE ____ DAY OF
_______________________, 1997.
ANCOR COMMUNICATIONS, INCORPORATED
By:
------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇, Chief Executive Officer
21
NOTICE OF CONVERSION AND RESALE
(To be Executed by the Registered Holder
in order to Convert the Preferred Stock)
The undersigned hereby irrevocably elects to convert _____________ shares of
Series B Preferred Stock, represented by stock certificate No(s).
________________ (the "Preferred Stock Certificates") into shares of common
stock ("Common Stock") of Ancor Communications, Incorporated (the "Company")
according to the conditions of the Certificate of Designation of Series B
Preferred Stock, as of the date written below [in connection with the resale of
the underlying Common Stock unless otherwise indicated below]. If shares are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates. No fee will be charged to the Holder for any
conversion, except for transfer taxes, if any. A copy of each of the Preferred
Stock Certificates being converted is attached hereto or shall be delivered as
soon as practicable. The undersigned agrees to deliver a Prospectus in
connection with any sale made pursuant to the Registration Statement, as
provided in Section 5.10 of the Subscription Agreement.
____ Check here if this conversion is not being made in connection with the
resale of the Common Stock.
Date of Conversion:_________________
Applicable Conversion Price:___________
Number of Shares of
Common Stock to be Issued:____________
Signature:__________________________
Name:_____________________________
Address: ___________________________
* No shares of Common Stock will be issued until the original Series B Preferred
Stock Certificate(s) to be converted and the Notice of Conversion are received
by the Company's designated Transfer Agent for the Series B Preferred Stock
("Transfer Agent"). The Holder shall (i) fax, on or prior to 11:59 p.m., New
York City time, on the date of conversion, a copy of this completed and fully
executed Notice of Conversion to the Company at the office of the Transfer Agent
that the Holder elects to convert and (ii) surrender or cause to be surrendered,
to a common courier for either
23
overnight or two (2) day delivery to the office of the Transfer Agent, the
original Series B Preferred Stock Certificate(s) representing the Series B
Preferred Stock being converted, duly endorsed for transfer. The Transfer Agent
shall issue shares of Common Stock and surrender them to a common courier for
delivery to the shareholder, no later than three (3) business days following
receipt by the Transfer Agent of this Notice of Conversion and the original
Series B Preferred Stock Certificate(s) to be converted, duly endorsed for
transfer, all in accordance with the terms of the Certificate of Designation and
the Subscription Agreement, and shall make payments (if required) for the number
of business days such issuance and delivery is late, if any, pursuant to the
terms of the Subscription Agreement.
EXHIBIT I
24