EXECUTION COPY
Exhibit 10(b)
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT ("Subscription Agreement") made as of this 30th day
of April, 2004, between Pacific Technology, Inc., a Delaware corporation with
its principal offices at 26586 Xxxxxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 (the
"Company"), and the undersigned (the "Subscriber").
WHEREAS, the Company desires to issue, in a private placement (the
"Offering") pursuant to Regulation D promulgated under the Securities Act of
1933, as amended (the "Act'), its Units (the "Units") consisting of (i) one (1)
share of the Company's common stock, par value $0.001 per share ("Common
Stock"), and (ii) one (1) three (3) year callable warrant for each five and
three tenths (5.3) Units to purchase one (1) share of the Company's Common Stock
at an exercise price of $2.00 per share (the "Warrants"), on the terms and
conditions hereinafter set forth, and the Subscriber desires to acquire that
number of Units set forth on the signature page hereof.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
1. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY AND COVENANTS OF
SUBSCRIBER:
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company such
number of Units as is set forth upon the signature page hereof at a price of
$1.60 per Unit. The Company agrees to sell such Units to the Subscriber for said
purchase price. The purchase price is payable by wire transfer of funds directly
by the Subscriber to the Company on the Closing (as defined herein). The
certificates for the securities comprising the Units will be delivered by the
Company no later than fifteen (15) days following the Closing of the Offering as
set forth in Article III hereof.
1.2 The Subscriber recognizes that the purchase of Units involves a high
degree of risk in that (i) the Company will need additional capital but has no
assurance of additional necessary capital; (ii) an investment in the Company is
highly speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Units; (iii) an
investor may not be able to liquidate his investment; (iv) transferability of
the securities comprising the Units is extremely limited; and (v) an investor
could sustain the loss of his entire investment, as well as other risk factors,
as more fully set forth herein and in the Confidential Private Placement
Memorandum dated April, 2004 and any supplements thereto (the "Offering
Memorandum").
1.3 The Subscriber represents that he is an "accredited investor" as such
term is defined in Rule 501 of Regulation D promulgated under the Act, as
indicated by his responses to the Investor Questionnaire, the form of which is
attached hereto as EXHIBIT A, and that he is able to bear the economic risk of
an investment in the Units. The Subscriber must complete the Investor
Questionnaire to enable the Company to access the Subscriber's eligibility for
the Offering.
1.4 The Subscriber acknowledges that he has prior investment experience,
including investment in non-listed and non-registered securities, or he has
employed the services of an investment advisor, attorney or accountant to read
all of the documents furnished or made available by the Company both to him and
to all other prospective investors in the Units and to evaluate the merits and
risks of such an investment on his behalf, and that he recognizes the highly
speculative nature of this investment.
1.5 The Subscriber acknowledges receipt and careful review of the Offering
Memorandum and the attachments thereto (the "Offering Documents") and hereby
represents that he has been furnished by the Company during the course of this
transaction with all information regarding the Company which he had requested or
desired to know; that all documents which could be reasonably provided have been
made available for his inspection and review; that he has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of the Company concerning the terms and
conditions of the Offering, and any additional information which he had
requested.
1.6 The Subscriber acknowledges that this offering of Units may involve
tax consequences, and that the contents of the Offering Documents do not contain
tax advice or information. The Subscriber acknowledges that he must retain his
own professional advisors to evaluate the tax and other consequences of an
investment in the Units.
1.7 The Subscriber acknowledges that this offering of Units has not been
reviewed by the United States Securities and Exchange Commission ("SEC") because
of the Company's representations that this is intended to be a nonpublic
offering pursuant to Sections 4(2) or 3(b) of the Act. The Subscriber represents
that the Units are being purchased for his own account, for investment and not
for distribution or resale to others. The Subscriber agrees that he will not
sell or otherwise transfer any of the securities comprising the Units unless
they are registered under the Act or unless an exemption from such registration
is available.
1.8 The Subscriber understands that the Units have not been registered
under the Act by reason of a claimed exemption under the provisions of the Act
which depends, in part, upon his investment intention. The Subscriber realizes
that, in the view of the SEC, a purchase now with an intent to distribute would
represent a purchase with an intent inconsistent with his representation to the
Company, and the SEC might regard such a distribution as a deferred sale to
which such exemption is not available.
1.9 The Subscriber understands that Rule 144 (the "Rule") promulgated
under the Act requires, among other conditions, a one year holding period prior
to the resale (in limited amounts) of securities acquired in a non-public
offering, such as the Offering, without having to satisfy the registration
requirements under the Act. The Subscriber understands that the Company makes no
representation or warranty regarding its fulfillment in the future of any
reporting requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or its dissemination to the public of any current
financial or other information concerning the Company, as is required by Rule
144 as one of the conditions of its availability. The Subscriber understands and
hereby acknowledges that the Company is under no obligation to register the
securities comprising the Units under the Act, with the exception of certain
registration rights set forth in that certain Registration Rights Agreement of
even date herewith to be entered into by the Company and the Subscriber (the
"Registration Rights Agreement"), the form of which is included with the
subscription documents accompanying the Offering Memorandum. The Subscriber
consents that the Company may, if it desires, permit the transfer of the Common
Stock included in the Units or issuable upon the exercise of the Warrants out of
his name only when his request for transfer is accompanied by an opinion of
counsel reasonably satisfactory to the Company that neither the sale nor the
proposed transfer results in a violation of the Act or any applicable state
"blue sky" laws (collectively, "Securities Laws"). The Subscriber agrees to hold
the Company and its directors, officers and controlling persons and their
respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as a
result of any misrepresentation made by him contained herein or in the Investor
Questionnaire or any sale or distribution by the undersigned Subscriber in
violation of any Securities Laws.
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1.10 The Subscriber consents to the placement of one or more legends on
any certificate or other document evidencing his Units and the Common Stock
included in the Units or issuable upon the exercise of the Warrants stating that
they have not been registered under the Act and setting forth or referring to
the restrictions on transferability and sale thereof.
1.11 The Subscriber understands that the Company will review this
Subscription Agreement and the Investor Questionnaire and is hereby given
authority by the undersigned to call his bank or place of employment or
otherwise review the financial standing of the Subscriber; and it is further
agreed that the Company reserves the unrestricted right to reject or limit any
subscription and to close the offer at any time.
1.12 The Subscriber hereby represents that the address of Subscriber
furnished by him at the end of this Subscription Agreement is the undersigned's
principal residence if he is an individual or its principal business address if
it is a corporation or other entity.
1.13 The Subscriber acknowledges that if he is a Registered Representative
of a National Association of Securities Dealers, Inc. ("NASD") member firm, he
must give such firm the notice required by the NASD Conduct Rules, or any
applicable successor rules of the NASD, receipt of which must be acknowledged by
such firm on the signature page hereof.
1.14 The Subscriber hereby represents that, except as set forth in the
Offering Documents, no representations or warranties have been made to the
Subscriber by the Company or any agent, employee or affiliate of the Company and
in entering into this transaction, the Subscriber is not relying on any
information, other than that contained in the Offering Documents and the results
of independent investigation by the Subscriber.
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1.15. The Subscriber agrees that he will purchase securities in the
Offering only if his intent at such time is to make such purchase for investment
purposes and not with a view toward resale.
1.16 If the undersigned Subscriber is a partnership, corporation, trust or
other entity, such partnership, corporation, trust or other entity further
represents and warrants that: (i) it was not formed for the purpose of investing
in the Company; (ii) it is authorized and otherwise duly qualified to purchase
and hold the Units; and (iii) that this Subscription Agreement has been duly and
validly authorized, executed and delivered and constitutes the legal, binding
and enforceable obligation of the undersigned.
2. REPRESENTATIONS BY THE COMPANY.
The Company represents and warrants to the Subscriber that prior to the
consummation of this Offering and at the date of the closing of this offering
(such date, the "Closing Date"):
2.1 The Company is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware and has the corporate power to
conduct the business which it conducts and proposes to conduct.
2.2 The execution, delivery and performance of this Subscription Agreement
by the Company will have been duly approved by the Board of Directors of the
Company and all other actions required to authorize and effect the offer and
sale of the Units and the securities contained therein will have been duly taken
and approved.
2.3 The shares of Common Stock have been duly and validly authorized and
when issued paid for in accordance with the terms hereof and the terms and
conditions of the Warrants, as applicable, and delivered to the Subscriber, will
be validly issued and outstanding fully paid and non-assessable.
2.4 The Company is not in violation of or default under, nor will the
execution and delivery of this Subscription Agreement, the issuance of the
Units, and the incurrence of the obligations herein set forth and the
consummation of the transactions herein contemplated, result in a violation of,
or constitute a default under, the certificate of incorporation or by-laws, in
the performance or observance of any material obligations, agreement, covenant
or condition contained in any bond, debenture, note or other evidence of
indebtedness or in any material contract, indenture, mortgage, loan agreement,
lease, joint venture or other agreement or instrument to which the Company is a
party or by which it or any of its properties may be bound.
3. TERMS OF SUBSCRIPTION.
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3.1 The subscription period will begin as of April 30, 2004 and will
terminate (if the Closing Date has not earlier occurred) at 11:59 PM Eastern
time on October 31, 2004, unless extended by the Placement Agent (as defined
below) for up to an additional 30 days (the "Termination Date"). The Units will
be offered on a "best efforts" basis as more particularly set forth in the
Offering Memorandum.
3.2 Placement of Units will be made by Xxxxx Xxxxxx (the "Placement
Agent"), which will receive certain compensation therefor as provided in that
certain Engagement Letter, dated March 10 2004, between the Placement Agent and
the Company.
3.3 All subscription proceeds shall initially be placed into an escrow
account created for this purpose pursuant to an arrangement made by the
Placement Agent, with the Company's approval, and shall then be paid over to the
Company at the closing (the "Closing") of the purchase of the Units in the
Offering to occur on the Closing Date.
3.4 The Subscriber hereby authorizes and directs the Company to deliver
the securities to be issued to such Subscriber pursuant to this Subscription
Agreement to the residential or business address indicated in the Investor
Questionnaire.
3.5 The Subscriber acknowledges that at such time, if ever, as any of the
shares of Common Stock included in the Units or issuable upon the exercise of
the Warrants included therein (collectively, the "Securities") are registered,
sales of such Securities will be subject to state securities laws, including
those of states which may require any securities sold therein to be sold through
a registered broker-dealer or in reliance upon an exemption from registration.
3.6 If the Subscriber is not a United States person, such Subscriber
hereby represents that it has satisfied itself as to the full observance of the
laws of its jurisdiction in connection with any invitation to subscribe for the
Units or any use of this Subscription Agreement, including (i) the legal
requirements within its jurisdiction for the purchase of the Units, (ii) any
foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of the Units. Such Subscriber's
subscription and payment for, and his or her continued beneficial ownership of
the Units and of the shares of Common Stock included therein or issuable upon
the exercise of the Warrants, will not violate any applicable securities or
other laws of the Subscriber's jurisdiction.
4. MISCELLANEOUS.
4.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, addressed to the Company, at its registered office, 26586
Xxxxxxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: President, and to the
Subscriber at his address indicated on the signature page of this Subscription
Agreement. Notices shall be deemed to have been given on the date of mailing,
except notices of change of address, which shall be deemed to have been given
when received.
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4.2 Unless at least holders of 50% of the Units have given their approval,
which approval shall be binding on all holders of Units, this Subscription
Agreement shall not be changed, modified or amended and may not be discharged
except by performance in accordance with its terms.
4.3 This Subscription Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
4.4 Notwithstanding the place where this Subscription Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed in accordance with and governed
by the laws of the State of New York. The parties hereby agree that any dispute
which may arise between them arising out of or in connection with this
Subscription Agreement shall be adjudicated before a court located in New York
City and they hereby submit to the exclusive jurisdiction of the courts of the
State of New York located in New York, New York and of the federal courts in the
Southern District of New York with respect to any action or legal proceeding
commenced by any party, and irrevocably waive any objection they now or
hereafter may have respecting the venue of any such action or proceeding brought
in such a court or respecting the fact that such court is an inconvenient forum,
relating to or arising out of this Subscription Agreement or any acts or
omissions relating to the sale of the securities hereunder, and consent to the
service of process in any such action or legal proceeding by means of registered
or certified mail, return receipt requested, in care of the address set forth
below or such other address as the undersigned shall furnish in writing to the
other.
4.5 This Subscription Agreement may be executed in counterparts. Upon the
execution and delivery of this Subscription Agreement by the Subscriber, this
Subscription Agreement shall become a binding obligation of the Subscriber with
respect to the purchase of Units as herein provided; subject, however, to the
right hereby reserved to the Company to enter into the same agreements with
other subscribers and to add and/or to delete other persons as subscribers.
4.6 The holding of any provision of this Subscription Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Subscription Agreement, which shall remain in full
force and effect.
4.7 It is agreed that a waiver by either party of a breach of any
provision of this Subscription Agreement shall not operate, or be construed, as
a waiver of any subsequent breach by that same party.
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4.8 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this
Subscription Agreement.
4.9 The Company agrees not to disclose the names, addresses or any other
information about the Subscribers, except as required by law, provided that the
Company may provide information relating to the Subscriber as required in any
registration statement under the Act that may be filed by the Company pursuant
to the Registration Rights Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.
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Signature of Subscriber Signature of Co-Subscriber
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Name of Subscriber Name of Co-Subscriber
[please print]
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Address of Subscriber Address of Co-Subscriber
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Social Security or Taxpayer Social Security or Taxpayer
Identification Number of Subscriber Identification
Number of Co-Subscriber
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Number of Units Subscribed For
*IF SUBSCRIBER IS A REGISTERED REPRESENTATIVE
WITH AN NASD MEMBER FIRM, HAVE THE FOLLOWING
ACKNOWLEDGEMENT SIGNED BY THE APPROPRIATE PARTY:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Rule 3050 of the NASD Subscription Accepted:
Conduct Rules.
PACIFIC TECHNOLOGY, INC.
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Name of NASD Member Firm By:
---------------------------------
By Date:
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Authorized Officer
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Exhibit A
Investor Questionnaire
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