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Exhibit 10.17
THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS ("STATE LAWS") OR ANY SECURITIES LAWS OF JURISDICTIONS
OUTSIDE OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE UNITED STATES OR TO A "U.S. PERSON" (AS DEFINED
HEREIN) EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER
THE SECURITIES ACT COVERING THE SECURITIES, (2) UPON DELIVERY TO THE COMPANY OF
AN OPINION OF U.S. COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE
SECURITIES MAY BE TRANSFERRED WITHOUT REGISTRATION PURSUANT TO (A) RULE 144,
RULE 144A, OR RULE 904 OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT OR
(B) ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE SECURITIES ACT, OR (3) AS OTHERWISE PERMITTED UNDER THE
TERMS OF SUBSECTION 10.2 OF THIS AGREEMENT.
SUBSCRIPTION AGREEMENT
Dated for reference purposes March 21, 1997
TO: MICROTEL INTERNATIONAL, INC. PERSONAL & CONFIDENTIAL
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxx, Xxxxxxxxxx 00000
1. SUBSCRIPTION FOR UNITS. The undersigned (the "Subscriber")
hereby irrevocably subscribes for and agrees to purchase from Microtel
International, Inc. (the "Company"), subject to the terms and conditions set
forth in this Subscription Agreement, units (the "Units") consisting of one
share ("Share") of $.0033 par value common stock of the Company (the "Common
Stock") and a one-quarter non-transferable share Purchase Warrant ("Warrant")
for the total purchase price set forth next to the Subscriber's name on page 14
hereof (the "Total Purchase Price"). Each full Warrant shall entitle the
holder to purchase one (1) additional share of the Company's Common Stock at a
price equated to a 30% premium to the ten day moving average in market price of
the Company's Common Stock for the ten days immediately preceding the date of
contracting under this Subscription Agreement. The Warrants are subject to
redemption under certain circumstances as set forth in the Warrant Agreement.
All dollar amounts set forth herein refer to U.S. dollars, unless otherwise
indicated. The Units form part of a larger private placement (the "Private
Placement") of Units for an aggregate minimum offering price of $5,000,000 and
an aggregate maximum offering price of $10,000,000. The Units are being sold
by the Company pursuant to an agency agreement dated for reference purposes
March 21, 1997 (the "Agency Agreement") between Yorkton Securities Inc. (the
"Agent") and the Company pursuant to which the Agent has agreed to act as the
sole and exclusive agent of the Company to solicit offers to purchase the Units
on a best efforts basis. Subject to the terms hereof, this subscription will
be effective upon its acceptance by the Company.
2. NUMBER OF UNITS. The number of Units subscribed for herein
shall be determined by dividing the Total Purchase Price by the Price Per Share
as defined in Section 3 hereof.
3. PRICE PER UNIT. The price per Unit ("Price Per Unit") shall
be equal to 80% of the average closing bid price of the Company's Common Stock
as it trades on the Nasdaq SmallCap Market for the 10 trading days immediately
preceding the date of contracting under this subscription agreement, provided,
however, that in no event will the Price Per Unit based on this calculation be
less than $2.50 or more than $3.50.
4. SUBSCRIPTION. The Subscriber must deliver to the Agent a
fully completed and executed copy of this Subscription Agreement, including
completed registration and delivery instructions appearing after the
Subscriber's signature hereto.
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5. PAYMENT. Together with this Subscription Agreement, the
Subscriber must deliver to the Agent the Total Purchase Price of the Units
subscribed for hereunder, paid by certified check or bank draft payable to the
Agent or payable in such other manner as may be specified by the Agent.
6. TERMS OF CLOSING.
6.1 Closing. Provided that the Agent has received
Private Placement subscriptions equaling or exceeding the aggregate minimum
offering price of $5,000,000 and all other terms and conditions of this
Subscription Agreement have been satisfied, the closing of the Private
Placement (the "Closing") shall take place on such date or dates as the Company
and the Agent shall mutually agree (the "Closing Date"). The Closing shall be
held at the place or places provided for in the Agency Agreement. At the
Closing, the proceeds of the Private Placement will be delivered to the Company
(net of amounts due to the Agent under the terms of the Agency Agreement) and
certificates (the "Certificates") representing the Units (which shall contain
all legends required under the terms of this Subscription Agreement) will be
delivered to the Agent for the benefit of the Subscriber.
6.2 Failure to Close. In the event that the Agent does
not receive the aggregate minimum offering price required to close the Private
Placement, or any other condition to the Closing is not satisfied or waived in
accordance with the terms of this Subscription Agreement, the Total Purchase
Price of the Units, exclusive of any interest thereon, shall promptly be
returned by the Agent to the Subscriber.
7. SUBSCRIBER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. The
Subscriber hereby represents, warrants and covenants to the Company and the
Agent as of the date of this Subscription Agreement and at the Closing that:
7.1 Investment Intent. The Subscriber's acquisition of
the Units is solely for the Subscriber's own account, for investment, and not
with a view to, or to offer or sell for an issuer in connection with, any
distribution thereof, and the Subscriber has no present intention of selling or
distributing any of the Units. The Subscriber has no contract, arrangement or
understanding with the Company, the Agent, or any other person to participate
in a distribution of the Units, is not an affiliate of a person which has such
a contract, arrangement or understanding, and will not act on behalf of any of
the foregoing persons in any offer or sale of the Units. The Subscriber is
acquiring the Units in the ordinary course of its business.
7.2 Access to Information. The Subscriber has received a
copy of the offering memorandum for the Private Placement (the "Offering
Memorandum") and each of the following documents, which are attached as
Exhibits to the Offering Memorandum, including: (i) the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1995, (ii) the Proxy
Statement for the Company's Annual Meeting of Stockholders held on August 15,
1996, and (iii) the Company's Quarterly Report on Form 10-QSB for the quarterly
period ended September 30, 1996 (collectively referred to in this Subscription
Agreement as the "Offering Documents"), and, if desired, has sought and
obtained from management of the Company such additional information concerning
the business, management and financial affairs of the Company as the Subscriber
has deemed necessary or appropriate in determining whether or not to purchase
the Units. The Subscriber understands and acknowledges that the Agent has been
engaged solely to act as placement agent for the offering of the Units and has
not independently verified any of the information contained in the Offering
Documents and assumes no responsibility for the accuracy or completeness
thereof. The Subscriber acknowledges that it has not relied on the Agent or
any person affiliated or associated with the Agent in connection with its
investigation of the information in the Offering Documents or in connection
with its investment decision.
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7.3 Accredited Investor; Knowledge and Experience. The
Subscriber is an "accredited investor," as that term is defined in Rule 501(a)
under the Securities Act, a copy of which the undersigned has read and
understands. The Subscriber has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Units, and it is able to bear the economic risk of losing up
to the entire amount of its investment therein. Further, the individual
executing this Subscription Agreement has such knowledge and experience in
financial and business matters that he is capable of utilizing the information
made available to him in connection with the offering of the Units, of
evaluating the merits and risks of an investment in the Units, and of making an
informed investment decision with respect to the Units, including assessment of
the risk factors set forth in the Offering Documents.
7.4 Suitability. The Subscriber has carefully
considered, and has, to the extent the Subscriber deems it necessary, discussed
with the Subscriber's own professional legal, tax and financial advisers the
suitability of an investment in the Units for the Subscriber's particular tax
and financial situation, and the Subscriber has determined that the Units are a
suitable investment.
7.5 Private Offering. The offer to sell the Units was
directly communicated to the Subscriber by the Agent. At no time was the
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.
7.6 Compliance with Regulation S. The Subscriber
acknowledges that a condition to the sale of the Units to the Subscriber is
that the Company and the Agent must be satisfied that registration under the
Securities Act is not required by virtue of compliance with Regulation S
thereunder.
7.7 No Directed Selling Efforts. The Subscriber is not
aware of any Directed Selling Efforts (as hereinafter defined) having been made
in the United States with respect to the Units by the Company, the Agent, their
respective affiliates, or any person acting on behalf of any of the foregoing.
In addition, the Subscriber, its affiliates, and persons acting on behalf of
the foregoing have not made and will not make, any Directed Selling Efforts in
the United States with respect to the Units. For purposes of this Subscription
Agreement, "Directed Selling Efforts" include any activity undertaken for the
purpose of, or that could reasonably be expected to have the effect of,
conditioning the market in the United States for the Units, including, but not
limited to, the placement of an advertisement in a publication with a general
circulation in the United States that refers to the offering of the Units, the
mailing of promotional materials to persons located in the United States or the
holding of promotional meetings or seminars in the United States.
7.8 Offshore Transaction. The offer and sale of the
Units to the Subscriber qualifies as an Offshore Transaction. For purposes of
this Subscription Agreement, the term "Offshore Transaction" means that:
(1) The Subscriber was outside the United States
at the time the Units were offered for sale to the Subscriber; and
(2) The Subscriber was outside the United States
at the time the Subscriber originated the buy order for the Units,
including, but not limited to, the time when the Subscriber signed and
delivered this Subscription Agreement and otherwise subscribed for or
offered or agreed to purchase the Units.
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In this Subscription Agreement, the term "United States" means the United
States of America, its territories and possessions, any State of the United
States, and the District of Columbia. Notwithstanding the foregoing definition
of "Offshore Transaction," the offer and sale of the Units to the Subscriber
shall not constitute an "Offshore Transaction" if the Subscriber is acquiring
the Units for the account or benefit of any specifically targeted, identifiable
group of U.S. citizens abroad, such as members of the U.S. armed forces serving
overseas, but shall constitute an "Offshore Transaction" if the Subscriber is a
person excluded from the definition of "U.S. Person" pursuant to Section
7.9(2)(f) of this Subscription Agreement or is a person holding an account
excluded from the definition of "U.S. Person" pursuant to Section 7.9(2)(a) of
this Subscription Agreement, solely in its capacity as a holder of such an
account.
7.9 Non-U.S. Person. The Subscriber is not a U.S.
Person, as such term is defined below, and is not acquiring the Shares for the
account or benefit of any U.S. Person.
(1) Definition of U.S. Person. For purposes of
this Subscription Agreement, the term "U.S. Person" means:
(a) Any natural person resident in the
United States;
(b) Any partnership or corporation
organized or incorporated under the laws of the United States;
(c) Any estate of which any executor or
administrator is a U.S. Person;
(d) Any trust of which any trustee is a
U.S. Person;
(e) Any agency or branch of a foreign
entity located in the United States;
(f) Any non-discretionary account or
similar account (other than an estate or trust) held by a
dealer or other fiduciary for the benefit or account of a U.S.
Person;
(g) Any discretionary account or similar
account (other than an estate or trust) held by a dealer or
other fiduciary organized, incorporated, or (if an individual)
resident in the United States; and
(h) Any partnership or corporation if
organized or incorporated under the laws of any foreign
jurisdiction, and formed by a U.S. Person principally for the
purpose of investing in securities not registered under the
Securities Act, unless it is organized or incorporated, and
owned, by accredited investors (as defined in Rule 501(a)
under the Securities Act), who are not natural persons,
estates or trusts.
(2) Exclusions from Definition. Notwithstanding
the foregoing definition of "U.S. Person":
(a) Any discretionary account or similar
account (other than an estate or trust) held for the benefit
or account of a non-U.S. Person by a dealer or other
professional fiduciary organized, incorporated, or (if an
individual) resident in the United States shall not be deemed
a U.S. Person.
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(b) Any estate of which any professional
fiduciary acting as executor or administrator is a U.S. Person
shall not be deemed a U.S. person if an executor or
administrator of the estate who is not a U.S. Person has sole
or shared investment discretion with respect to the assets of
the estate, and the estate is governed by foreign law.
(c) Any trust of which any professional
fiduciary acting as trustee is a U.S. Person shall not be
deemed a U.S. Person if a trustee who is not a U.S. Person has
sole or shared investment discretion with respect to the trust
assets, and no beneficiary of the trust (and no settlor if the
trust is revocable) is a U.S. Person.
(d) An employee benefit plan established
and administered in accordance with the law of a country other
than the United States and customary practices and
documentation of such country shall not be deemed a U.S.
Person.
(e) Any agency or branch of a U.S.
Person located outside the United States shall not be deemed a
U.S. Person if the agency or branch operates for valid
business reasons, and the agency or branch is engaged in the
business of insurance or banking and is subject to substantive
insurance or banking regulation, respectively, in the
jurisdiction where located.
(f) The International Monetary Fund, the
International Bank for Reconstruction and Development, the
Inter-American Development Bank, the Asian Development Bank,
the African Development Bank, the United Nations, and their
agencies, affiliates and pension plans, and any other similar
international organizations, their agencies, affiliates and
pension plans shall not be deemed U.S. Persons.
7.10 No Fairness Determination. The Subscriber
understands that no governmental or other agency has reviewed or approved the
terms of the Subscriber's investment in the Units or the accuracy or adequacy
of the Offering Documents, nor has any such agency made any finding or
determination as to the fairness of an investment in the Units or made any
recommendation or endorsement of the Units.
7.11 Truth and Accuracy. All representations and
warranties made by the Subscriber in this Subscription Agreement are true and
accurate as of the effective date of this Subscription Agreement and shall be
true and accurate as of the Closing Date. If such representations and
warranties shall not be true and accurate in any respect, the Subscriber will,
prior to the Closing, give written notice of such fact to the Company
specifying which representations and warranties are not true and accurate and
the reasons therefor.
7.12 Authority. The individual executing and delivering
this Subscription Agreement on behalf of the Subscriber has been duly
authorized and is duly qualified to execute and deliver this Subscription
Agreement on behalf of the Subscriber in connection with the purchase of the
Units; the signature of such individual is binding upon the Subscriber; the
Subscriber is duly organized and subsisting under the laws of the jurisdiction
in which is was organized; and the Subscriber was not formed for the specific
purpose of acquiring the Units.
7.13 No Violation. The execution and delivery of this
Subscription Agreement and the consummation of the transactions or performance
of the obligations contemplated by this Subscription Agreement do not and will
not violate any term of the Subscriber's charter or bylaws and will not result
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in a breach of any term of, or constitute a default under, any statute,
indenture, mortgage, other agreement or instrument to which the Subscriber is a
party or by which it is bound, or any order, writ, judgment or decree.
7.14 Enforceability. The Subscriber has duly executed and
delivered this Subscription Agreement and (subject to acceptance by the
Company) it constitutes a valid and binding agreement of the Subscriber
enforceable in accordance with its terms against the Subscriber, except as such
enforceability may be limited by principles of public policy, and subject to
laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief
or other equitable remedies.
7.15 Acceptance by Company Required. The Subscriber
acknowledges that this Subscription Agreement is not enforceable by the
Subscriber unless it has been accepted by the Company.
7.16 Notice of Company's Acceptance Waived. The
Subscriber waives any requirement for the Company to communicate its acceptance
of this Subscription Agreement to the Subscriber.
7.17 Reliance on Own Advisers. In connection with the
Subscriber's investment in the Units, the Subscriber has not relied upon the
Company or the Agent or their respective legal and tax advisers for legal or
tax advice, and has, if desired, in all cases sought the advice of the
Subscriber's own personal legal counsel and tax advisers.
7.18 Confidentiality of Information. The Subscriber
acknowledges and understands that certain information given in the Offering
Memorandum has not yet been disclosed to the public, and the Subscriber agrees
not to disclose such information or to trade in the securities of the Company
until such information has been publicly disclosed by the Company.
8. COMPANY'S REPRESENTATIONS, WARRANTIES AND COVENANTS. The
Company hereby represents, warrants and covenants as of the date of this
Subscription Agreement and at the Closing that, except as otherwise disclosed
in the Offering Documents:
8.1 Organization. The Company has been duly incorporated
and organized and is validly existing in good standing under the laws of the
State of Delaware.
8.2 Good Standing. The Company and its subsidiaries are
duly qualified to do business as foreign corporations in good standing in those
jurisdictions which require such qualification except to the extent that
failure to so qualify would not have a material adverse effect on the Company.
8.3 Authority. The Company has corporate power and
authority to enter into and perform this Subscription Agreement, to own its own
properties and assets, and to carry on its business as it is currently being
conducted. All corporate action on the part of the Company, its directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Subscription Agreement by the Company and the performance
of all of the Company's obligations hereunder has been duly taken.
8.4 Enforceability. This Subscription Agreement, when
executed and delivered by the Company and duly authorized, executed and
delivered by the Subscriber, will be a binding obligation on the Company,
enforceable in accordance with its terms, except as may be limited by
principles of public policy, and subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
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8.5 No Violation. The execution and delivery of this
Subscription Agreement and the consummation of the transactions or performance
of the obligations contemplated by this Subscription Agreement do not and will
not violate the Company's charter or bylaws and will not result in a breach of
any term of, or constitute a default under, any statute, indenture, mortgage,
other agreement or instrument to which the Company or any of its subsidiaries
is or are a party or by which any of them is or are bound, or any order, writ,
judgment or decree.
8.6 Actions and Claims. To the best of the Company's
knowledge, there are no actions or proceedings of any kind whatsoever
outstanding, pending, contemplated or threatened relating to the bankruptcy or
insolvency of the Company or any of its subsidiaries. Except as set forth in
the Offering Memorandum, to the best of its knowledge, there are no other
claims, actions, suits, judgments, investigations or proceedings of any kind
whatsoever outstanding, pending or threatened against or affecting the Company,
its subsidiaries, or the Company's directors, officers or promoters, at law or
in equity or before or by any federal, state, municipal or other governmental
department, commission, board, bureau or agency of any kind whatsoever which
could materially affect its business or financial condition and, to the best of
its knowledge, there is no basis therefor.
8.7 Disclosure. The Company's Offering Documents do not,
as of the respective dates thereof, contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein, in light of the circumstances under which they have been made,
not misleading.
8.8 Authorized and Validly Issued Shares. The authorized
and issued capital stock of the Company as of the dates set forth in the
Offering Documents is as disclosed in the Offering Documents, and the issued
and outstanding shares of Common Stock of the Company are fully paid and
non-assessable. The Company has sufficient authorized and unissued shares of
Common Stock to provide for the issuance and delivery of the Shares and will
maintain sufficient authorized and unissued shares of Common Stock to provide
for the issuance and delivery of shares of Common Stock upon exercise of the
Warrants ("Warrant Shares"). The Shares and the Warrant Shares, when issued in
the manner contemplated by the provisions of this Subscription Agreement and
the Warrants, will be duly authorized and validly issued and will be fully paid
and non-assessable.
8.9 Convertible Securities. Except as set forth in the
Offering Memorandum, no securities convertible or exchangeable into Common
Stock of the Company or agreements, warrants, options, rights or privileges for
the purchase or other acquisition of any unissued securities of the Company are
outstanding as of the date hereof.
8.10 Intellectual Property Rights. The Company or its
subsidiaries own, possess or have access to adequate rights to use all material
patents, patent rights, inventions, trademarks, service marks, trade names,
copyrights and proprietary rights necessary for the conduct of its business as
described in the Offering Documents; and the Company has no knowledge of any
infringement of or conflict with rights of others, or any claims thereof, with
respect to any patents, patent rights, inventions, trademarks, service marks,
trade names, copyrights or other proprietary rights, the effect of which
infringement, conflict or claims would be materially adverse to the Company.
8.11 Financial Statements. The financial statements
included in the Offering Documents (the "Financial Statements") are true and
correct in all material respects and present fairly and accurately the
financial position and results of the operations of the Company and its
subsidiaries for the periods shown therein, and the Financial Statements have
been prepared in accordance with accounting
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principles generally accepted in the United States applied on a consistent
basis except for normal year-end adjustments.
8.12 Change in Circumstances. Except as disclosed in the
Offering Memorandum, since September 30, 1996 there has not been any adverse
material change of any kind whatsoever in the financial position or condition
of the Company or of any of its subsidiaries, or any damage, loss or other
change of circumstances of any kind whatsoever materially affecting the
business or assets of the Company or of any subsidiaries or the right or
capacity of the Company or of any subsidiaries to carry on their business.
8.13 Defaults. Since September 30, 1996, neither the
Company nor any of its subsidiaries has defaulted, or is currently in default
(i) with respect to the payment of interest or principal on any material
indebtedness of the Company or its subsidiaries, or (ii) under any material
contract to which the Company or any of its subsidiaries is a party.
8.14 Stop Orders. No order prohibiting the sale of the
Company's securities has been issued against the Company or, to Company's
knowledge, its directors, officers or promoters, and no proceedings for this
purpose have been instituted, are pending, or, to its knowledge, contemplated
or threatened.
8.15 Transfer Agent. American Securities Transfer, Inc.,
having its principal office in Lakewood, Colorado, has been duly appointed as
the transfer agent for the Company's Common Stock.
8.16 Domestic Reporting Company. The Company is a
"domestic issuer," as such term is defined in Rule 902 of Regulation S, and has
a class of securities registered pursuant to Section 12(b) or 12(g) of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act")
or is required to file reports pursuant to Section 15(d) of the Exchange Act.
8.17 Exchange Act Reports. At the time of commencement of
the Private Placement, the Company had filed all the material required to be
filed pursuant to Section 13(a) or 15(d) of the Exchange Act for a period of at
least the twelve months immediately prior thereto, and the Company has since
remained, and continues to remain, current in satisfying such filing
obligations.
8.18 No Directed Selling Efforts. The Company, its
affiliates, and persons acting on behalf of the foregoing have not made and
will not make any Directed Selling Efforts in the United States with respect to
the Shares.
8.19 Use of Proceeds. The Company intends to use the net
proceeds of the Private Placement for working capital purposes, primarily to
assist the Company in the development, marketing and distribution of its
telephone testing and modem products as well as the development of its contract
manufacturing operations as well as other products, as more fully described in
the Offering Memorandum.
8.20 No Stockholder Approval. The Company is not required
under the National Association of Securities Dealers Bylaws to obtain
stockholder approval prior to offering or selling the Shares in the Private
Placement.
9. REGISTRATION RIGHTS. The Company agrees, on the following
terms and subject to the following conditions, to register under the Securities
Act the resale of all of the Shares purchased by the Subscriber in the Private
Placement, and all Shares issuable pursuant to the exercise of the Warrants,
any securities issued or issuable by way of stock dividend or any other
distribution with respect to or in
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exchange for, or in replacement of, such Shares, by stock split, or in
connection with a combination of shares, recapitalization, merger,
consolidation, amalgamation or other reorganization (collectively, the
"Registrable Securities"), at the Company's own expense, with the exception of
any legal and advisory fees or expenses incurred by the Subscriber in
connection with the registration.
9.1 Filing of Registration Statement. The Company shall
prepare and file with the United States Securities and Exchange Commission
("SEC") not later than 60 days after the Closing Date a registration statement
on an appropriate form (the "Registration Statement") for registration under
the Securities Act of the resale of the Registrable Securities.
9.2 Information. In connection with the preparation of
the Registration Statement:
(1) The Subscriber shall furnish to the Company
all information reasonably requested by the Company (including, for
example, information regarding the Subscriber's intended method of
disposition of the Registrable Securities) for inclusion in the
Registration Statement and response to SEC comments and questions.
(2) As the Subscriber may be deemed a statutory
underwriter of any Shares sold by the Subscriber under the
Registration Statement, the Company shall give the Subscriber and its
legal counsel and accountants such access to copies of the Company's
records and documents and such opportunities to discuss the business
of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
reasonably necessary, in the opinion of the Subscriber or its legal
counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
9.3 Effectiveness of Registration Statement. The Company
shall use its best efforts to cause the Registration Statement to become
effective within 150 days after the Closing Date (but if not effective within
such period, the Company shall continue to use its best efforts to cause the
Registration Statement to become effective as soon as possible thereafter) and
to keep the Registration Statement effective thereafter until the earlier of
(i) the date on which all Registrable Securities have been resold pursuant to
the Registration Statement or otherwise resold without restriction under the
Securities Act, or (ii) the date on which is ended the two-year period
referenced in Rule 144(k) under the Securities Act or any successor rule or
subsection relating to the resale of "restricted securities" by "non-
affiliates" of an issuer, as such terms are defined in the Securities Act and
the rules and regulations promulgated thereunder.
9.4 Amendments and Supplements. The Company shall
prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of the Registrable Securities.
9.5 Copies of Prospectuses. The Company shall furnish to
the Subscriber such numbers of copies of prospectuses or prospectus documents
conforming with the requirements of the Securities Act as the Subscriber may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by the Subscriber.
9.6 Blue Sky Registrations. The Company shall use its
best efforts to register and qualify the Registrable Securities under the state
securities or Blue Sky laws ("State Laws") of such jurisdictions as the
Subscriber reasonably requests.
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9.7 Quiet Periods. The Subscriber agrees that, upon its
receipt of any notice from the Company of the happening of any event which
makes any statement made in the Registration Statement, the prospectus or any
document incorporated therein by reference, untrue in any material respect or
which requires the making of any changes in the Registration Statement, the
prospectus or any document incorporated therein by reference, in order to make
the statements therein not misleading in any material respect, the Subscriber
will forthwith discontinue disposition of Registrable Securities under the
prospectus related to the Registration Statement until the Company provides the
Subscriber with copies of the supplemented or amended prospectus or prospectus
documents, or until the Subscriber is advised in writing by the Company that
the use of the prospectus may be resumed. The Company agrees to provide the
Subscriber with such copies of the supplemented or amended prospectus or
prospectus documents, or notice that use of the prospectus may be resumed, as
soon as reasonably practicable.
9.8 Trading Market. The Company covenants to use its
best efforts to maintain a continuous trading market for its Common Stock on
the Nasdaq SmallCap Market or National Market System or a United States
national securities exchange throughout the period that the registration rights
afforded by this Section 9 remain in effect.
9.9 Compliance with Anti-Manipulation Rules. The
Subscriber agrees that, with respect to the offering for resale of the
Registrable Securities, the Subscriber will comply with Rules 10b-6 and 10b-7
promulgated under the Exchange Act and such other or additional
anti-manipulation rules then in effect (the "Anti-Manipulation Rules") until
such offering has been completed. The Company also agrees to comply with the
Anti-Manipulation Rules with respect to the offering for resale of the
Registrable Securities until such offering has been completed.
9.10 Indemnification. To the extent permitted by law, the
Company agrees to indemnify and hold harmless the Subscriber and its affiliates
and agents, and the Subscriber agrees to indemnify and hold harmless the
Company and its affiliates and agents:
(1) against any losses, claims, damages and
liabilities and any legal or other costs and expenses reasonably
incurred by such indemnified parties in connection with investigating
or defending any such loss, claim, damage liability, or action to
which such parties may become subject under the Securities Act or
other federal or state law, insofar as such losses, claims, damages,
liabilities, costs or expenses (or actions in respect thereof) did not
arise out of and were not based upon written information furnished by
such parties expressly for use in the Registration Statement; and
(2) for amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is
effected by the indemnifying party without the prior written consent
of the other party to this Subscription Agreement, which consent shall
not be unreasonably withheld.
9.11 Enforcement. In the event of a material breach of
the terms of this Section 9 by the Company, the Subscriber will be entitled to
enforce its rights under this Section 9 specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision
hereof, and to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach by the Company of the provisions hereof, and that the Subscriber
may in its sole discretion apply to a court of competent jurisdiction for
specific performance and/or injunctive relief in order to enforce or prevent
any violation of the provisions hereof. In addition, upon the occurrence of a
material breach by the Company or by the Subscriber of this Section 9, the
breaching party shall pay all costs and expenses (including the prevailing
party's attorney's fees and
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expenses) reasonably incurred in connection with the preservation and
enforcement of such party's rights hereunder.
9.12 Subsequent Holders. Any person who acquires
Registrable Securities from the Subscriber in a transaction that is permitted
under Section 10 of this Subscription Agreement and that does not result in
such person receiving securities which are free of restrictions on transfer in
the United States and to U.S. Persons, such person shall be entitled to the
benefit of all of the rights and privileges set forth in this Section 9,
provided that such person agrees in a writing to the Company to undertake all
of the obligations of the Subscriber under this Section 9.
10. RESTRICTIONS ON TRANSFER.
10.1 Securities Act Restrictions and Legend. The
Subscriber acknowledges and agrees that:
(1) The offer and sale of the Units to the
Subscriber have not been registered under the Securities Act or under
any State Laws, and therefore may not be transferred without
registration under the Securities Act unless an exemption from such
registration requirements is available or registration is not required
pursuant to Regulation S under the Securities Act.
(2) The Subscriber will not offer, sell or
otherwise transfer any of the Shares, Warrants or Warrant Shares
directly or indirectly except:
(a) pursuant to an effective
registration statement filed under the Securities Act, as
contemplated by Section 9 of this Subscription Agreement; or
(b) upon delivery to the Company of an
opinion of U.S. counsel reasonably satisfactory to the Company
that the Shares may be transferred without registration
pursuant to (i) Rule 144, Rule 144A, or Rule 904 of Regulation
S promulgated under the Securities Act (which will not be
available unless the Company is in default with respect to its
obligations pursuant to section 9 hereof) or (ii) any other
available exemption from the registration and prospectus
delivery requirements of the Securities Act.
10.2 Restrictive Legends. The Subscriber understands and
agrees that, although Regulation S does not expressly require the placement of
a restrictive legend on the certificates representing the Units, a legend will
be placed on the Certificates noting the restrictions on transfer set forth in
Subsection 10.1 of this Subscription Agreement in order to help ensure
compliance with certain requirements of Regulation S that continue to apply
during the applicable restricted period following the Closing. Such legend
shall read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS ("STATE LAWS")
OR ANY SECURITIES LAWS OF JURISDICTIONS OUTSIDE OF THE UNITED STATES,
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE
UNITED STATES OR TO A "U.S. PERSON," AS THAT TERM IS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT, EXCEPT (1) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT
COVERING THE SECURITIES, OR (2) UPON DELIVERY TO THE COMPANY OF AN
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OPINION OF U.S. COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
THE SECURITIES MAY BE TRANSFERRED WITHOUT REGISTRATION PURSUANT TO (A)
RULE 144, RULE 144A, OR RULE 904 OF REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OR (B) ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES
ACT."
11. RELIANCE. The Subscriber understands and agrees that the
Company and the Agent and their respective officers, directors, employees and
professional advisers may, and will, rely on the accuracy of the Subscriber's
representations and warranties in this Subscription Agreement to establish
compliance with applicable securities laws. The Subscriber agrees to indemnify
and hold harmless all such parties against all losses, claims, costs, expenses
and damages or liabilities which they may suffer or incur caused or arising
from their reliance on such representations and warranties.
12. APPOINTMENT OF THE AGENT.
12.1 Related Agreements. The Subscriber hereby
irrevocably authorizes the Agent to negotiate and settle the form of any other
document or agreement to be entered into in connection with this transaction.
12.2 Agency Agreement. The Subscriber hereby acknowledges
and agrees that the Agent and the Company may vary, amend, alter or waive, in
whole or in part, any provisions of the Agency Agreement in such manner and on
such terms and conditions as they may determine, acting reasonably, without
affecting in any way the Subscriber's obligations hereunder; provided, however,
that the Agent and the Company shall not vary, amend, alter or waive any
provision where to do so would result in a material change to any of the
material terms of the Private Placement.
12.3 Closing; Termination. The Subscriber hereby
acknowledges and agrees that the Agent may waive, in whole or in part, or
extend the time for compliance with, any of the conditions for Closing in such
manner and on such terms and conditions as the Agent may determine, acting
reasonably, without in any way affecting the Subscriber's obligations, and may
terminate this Subscription Agreement on behalf of the Subscriber in the event
that any condition for Closing has not been satisfied.
13. MISCELLANEOUS.
13.1 Survival. The representations, warranties, covenants
and agreements made in this Subscription Agreement shall survive the Closing
and shall continue in full force and effect notwithstanding the completion of
the issuance of the Units to the Subscriber and notwithstanding any subsequent
disposition by the Subscriber of any of Shares or Warrants.
13.2 Assignment. This Subscription Agreement is not
transferable or assignable.
13.3 Execution and Delivery of Subscription Agreement.
The Company and the Agent shall be entitled to rely on delivery by facsimile
machine of an executed copy of this Subscription Agreement, and acceptance by
the Company of such facsimile copy shall be equally effective to create a valid
and binding agreement between the Subscriber and the Company in accordance with
the terms hereof.
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13.4 Execution and Delivery of Other Documents. The
Subscriber agrees that it will execute and deliver such other documents as may
be necessary or desirable to complete the transactions contemplated hereby.
13.5 Titles and Subtitles. The titles and subtitles of
the sections and subsections of this Subscription Agreement are for the
convenience of reference only and are not to be considered in construing this
Subscription Agreement.
13.6 Severability. The invalidity or unenforceability of
any particular provision of this Subscription Agreement shall not affect or
limit the validity or enforceability of the remaining provisions of this
Subscription Agreement.
13.7 Termination. If, prior to Closing, the Agent
exercises its right of termination as contained in the Agency Agreement, this
Subscription Agreement and the obligations of the parties hereto (other than
the terms of Subsection 6.2 governing the return to the Subscriber of
subscription funds, exclusive of interest) are deemed to have terminated as at
the effective date of such termination.
13.8 Entire Agreement. This Subscription Agreement
constitutes the entire agreement and understanding between the parties with
respect to the subject matters herein, and supersedes and replaces any prior
agreements and understandings, whether oral or written, between them with
respect to such matters. Except as otherwise provided herein, the provisions
of this Subscription Agreement may be waived, altered, amended or repealed, in
whole or in part, only upon the mutual written agreement of the Company and the
Subscriber.
13.9 Counterparts. This Subscription Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one and the same instrument.
13.10 Governing Law. This Subscription Agreement is
governed by and shall be construed in accordance with the laws of the State of
California, except that the authority to award damages (including punitive
damages) shall be interpreted under New York law.
IN WITNESS WHEREOF, the Subscriber has duly executed this Subscription
Agreement as of the date first above mentioned.
Total Purchase Price:
$______________________ _____________________________________________
Name of Subscriber (please type or print)
_____________________________________________
Signature and, if applicable, office
_____________________________________________
Street address of Subscriber
_____________________________________________
City, state/province, country and postal code
of Subscriber
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REGISTRATION AND DELIVERY INSTRUCTIONS
(TO BE COMPLETED BY SUBSCRIBER)
1. REGISTRATION. Please register the Subscriber's Share Certificates and
Warrants as follows:
Name:_________________________________________________________________
Address:______________________________________________________________
2. DELIVERY. Please deliver the Subscriber's Share Certificates and
Warrants to the following address:
______________________________________________________________________
______________________________________________________________________
ACCEPTANCE
The above subscription is hereby accepted by MICROTEL INTERNATIONAL,
INC. at San Jose, California on the ___________ day of _____________, 1997.
MICROTEL INTERNATIONAL, INC.
By:__________________________________
Authorized signing officer
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