HYPERLIGHT NETWORK CORPORATION
SUBSCRIPTION AGREEMENT
This Subscription Agreement is entered into for the purpose of
TELECOM WIRELESS CORPORATION purchasing 250 shares of Series C Common Stock
of HyperLight Network Corporation ("HyperLight"), subject to Telecom paying
the consideration described below. In offering and selling these shares to
Telecom, HyperLight is relying on exemptions from registration provided by
Sections 4(2) and 4(6) of the Federal Securities Act of 1933 and Rule 506 of
Regulation D thereunder, as well as exemptions from registration under
applicable state law.
HYPERLIGHT NETWORK CORPORATION HAS NOT REGISTERED THE SERIES C COMMON
STOCK UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE BLUE SKY OR
SECURITIES LAWS.
IF YOU PURCHASE THESE SHARES, YOU WILL NOT BE ABLE TO SELL, TRANSFER,
ASSIGN OR OTHERWISE DISPOSE OF THESE SHARES EXCEPT IN COMPLIANCE WITH THE
RESTRICTIONS ON TRANSFER CONTAINED IN THIS STOCK SUBSCRIPTION AGREEMENT AND
APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
TELECOM WIRELESS CORPORATION will pay the following to HyperLight as
payment for the 250 shares of Series C Common Stock:
500,000 shares of restricted common stock of Telecom Wireless
Corporation, which shares will be included in a registration
statement on Form S-3 for resale by HyperLight. Telecom will
file that registration statement no later than October 15,
1999, and will use its best efforts to obtain effectiveness of
such registration statement as soon as possible thereafter.
Telecom will deliver a certificate for these shares no later
than September 15, 1999, Telecom represents that these shares
have a fair market value of not less than $5,000,000, and such
valuation will be supported by an independent appraisal if
requested by HyperLight. If the independent appraisal reflects
that the value of the 500,000 shares of Telecom Wireless
Corporation common stock is less than $5,000,000, or the
shares are not included in an effective registration statement
by not later than December 1, 1999, Telecom Wireless will
promptly (but not later than December 15, 1999) pay HyperLight
additional consideration (which must be cash or a
cash-equivalent) equal to $5,000,000, so that the total
consideration is equal to $5,000,000.
Although HyperLight will issue a certificate for the Series C
Common Stock, it will retain such certificate until the
earlier of: (i) Telecom completing its payment obligations
described in the preceding paragraph and in the Interim
Funding Agreement being entered into between the parties on
this date, or (ii) HyperLight selling more than 50,000 shares
of the Telecom common stock pursuant to the
HYPERLIGHT NETWORK CORPORATION SUBSCRIPTION AGREEMENT PAGE 1
contemplated registration statement. If Telecom defaults in
any obligation described in the immediately preceding
paragraph before HyperLight delivers the certificate to
Telecom, HyperLight may (in its discretion) cancel such
certificate upon the return to Telecom of 500,000 shares of
Telecom common stock. In such event, HyperLight may retain all
cash paid to it pursuant to the preceding paragraphs.
Alternatively, HyperLight may treat this agreement as being in
full force and effect and may bring legal action to enforce
the payment obligations contemplated by the preceding
paragraphs, together with any consequential damages that might
result from such default and interest on the amount due at the
rate of 1% per month.
Telecom agrees that such investment is being made entirely on the
terms and conditions stated herein. It is understood that this Subscription
Agreement is not binding until HyperLight accepts it in writing and then only
in accordance with the terms of this Subscription Agreement.
In connection with Telecom's proposed purchase of the shares of
Series C Common Stock, Telecom represents as follows:
1. Telecom understands that an investment in HyperLight is one of
high risk, and a significant possibility exists that Telecom may lose its
entire investment. Without limiting the generality of the foregoing, Telecom
specifically understands that:
The proceeds to be received from Telecom will not be
sufficient for HyperLight to accomplish its corporate objectives as
outlined in the due diligence information received by Telecom.
HyperLight does not yet own the intellectual property
underlying the broadband communications technology which underlies
HyperLight's business plan, but HyperLight expects to acquire such
intellectual property in the near future in exchange for the issuance
of 2,500 shares of Series B Common Stock.
Any additional capital which may be raised by HyperLight will
dilute Telecom's interest in HyperLight;
HyperLight has entered or will shortly enter into an agreement
by which an unaffiliated entity by which that entity will have an
option to acquire 817 shares of Series A Preferred Stock to be issued
by HyperLight for a total investment of $8,170,000, a portion of which
investment will include the reimbursement of expenses previously
incurred by such entity. That entity will also obtain an option to
enter into an exclusive manufacturing agreement for the broadband
communications units, as well as obtaining certain marketing rights.
The Series A Preferred Stock will be created with voting rights,
liquidation and dividend rights, and other rights and preferences which
will be senior to the Series C Common Stock.
HYPERLIGHT NETWORK CORPORATION SUBSCRIPTION AGREEMENT PAGE 2
HyperLight can offer no assurance that its technology will
ever result in a broadband communications unit of the type witnessed by
representatives of Telecom becoming available commercially or, if it
becomes commercially available, that it will become a commercial
success.
The Series C Common Stock has not yet been authorized pursuant
to a certificate of designation filed with the Delaware Secretary of
State, but will be authorized within fifteen days of Telecom's purchase
of the shares pursuant to this agreement by filing a certificate of
designation for the Series C Common Stock which will provide for the
same rights and preferences as currently exist for the Series B Common
Stock, plus the following:
The shares of Series C Common Stock will be entitled to one
vote, in person or by proxy, for each share of Series C Common
Stock standing in his name on the books of HyperLight to be
cast at any meeting of shareholders of HyperLight;
After the time that HyperLight has issued 10,000 shares of its
capital stock, and unless the holdes of a majority of the
outstanding shares of Series C Common Stock agree to waive
their pre-emptive rights as to any transaction, the holders of
Series C Common Stock will have the pre-emptive right to
purchase shares of any capital stock being offered by
HyperLight to any other person on the most favorable terms and
conditions then being offered. This pre-emptive fight will
expire on the earlier of the date HyperLight first completes
an offering of its shares to the public pursuant to a
registration statement effective under the Securities Act of
1933, as amended.
HyperLight is in the process of negotiating certain
compensation arrangements with four persons who are, and who will
continue to be, key employees of HyperLight. Telecom will not be
required to approve such compensation arrangements. The key employees
of HyperLight are as follows:
J. Xxxx Xxxxxx, President, Director
Xxxxx X. Xxxxxx, Chairman, Vice President, Treasurer,
Assistant Secretary, and Director
Xxxxx X. Xxxxxxx, Secretary and Director
Madison X. Xxxxxx, employee
HyperLight and its predecessor are involved in certain
litigation involving its intellectual property, which is in the
preliminary stages and, although HyperLight believes it has good claims
and meritorious defenses, there can be no assurance with regard to the
possible outcome of the litigation.
Telecom has the right to ask for and obtain further
information regarding the foregoing or any other information about
HyperLight, which Telecom deems to be relevant to its decision to
subscribe to purchase the Units being offered hereby.
HYPERLIGHT NETWORK CORPORATION SUBSCRIPTION AGREEMENT PAGE 3
2. The shares of Series C Common Stock are being acquired by Telecom
for its own account and not on behalf of any subsidiary or any other person or
entity. The shares of Series C Common Stock are being acquired for investment
purposes and not for resale or distribution.
CAVEAT: CERTAIN STATEMENTS CONTAINED HEREIN AND WHICH HAVE BEEN GIVEN TO
TELECOM IN OTHER DOCUMENTS USING THE TERMS "MAY", "EXPECTS TO", AND OTHER
TERMS DENOTING FUTURE POSSIBILITIES, ARE FORWARD-LOOKING STATEMENTS. THE
ACCURACY OF THESE STATEMENTS CANNOT BE GUARANTEED AS THEY ARE SUBJECT TO A
VARIETY OF RISKS, WHICH ARE BEYOND HYPERLIGHT'S ABILITY TO PREDICT OR
CONTROL. THESE RISKS MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
PROJECTIONS OR ESTIMATES CONTAINED IN THIS REPORT. THESE RISKS INCLUDE, BUT
ARE NOT LIMITED TO, THE POSSIBILITY THAT THE DESCRIBED OPERATIONS OR OTHER
ACTIVITIES WILL NOT BE COMPLETED ON ECONOMIC TERMS, IF AT ALL. THE OPERATIONS
CONTEMPLATED BY HYPERLIGHT ARE ATTENDANT WITH HIGH RISK. THERE CAN BE NO
ASSURANCE THAT HYPERLIGHT WILL SUCCEED IN OPERATING THE CONTEMPLATED
BUSINESS, AND IT IS IMPORTANT THAT EACH PERSON CONSIDERING AND INVESTMENT
PURSUANT TO THIS SUBSCRIPTION AGREEMENT UNDERSTANDS THE SIGNIFICANT RISKS
WHICH ACCOMPANY THE PROPOSED CONDUCT OF HYPERLIGHT'S FUTURE OPERATIONS.
3. Neither Telecom nor HyperLight is aware of the payment of any
commission or other remuneration to any person in connection with the
execution of this transaction or the purchase of the Series C Common Stock.
4. The undersigned acknowledges receipt of documents defining the
Series A and B Common Stock and the Series A Preferred Stock (which preferred
stock has not yet been formally created), and such additional information
disclosing the business, financial condition, and management of HyperLight as
the undersigned has deemed necessary or appropriate for the purposes of
considering this investment.
5. HyperLight has given Telecom the opportunity to ask questions of
and to receive answers from persons acting on HyperLight's behalf concerning
the terms and conditions of this transaction and the opportunity to obtain
any additional information regarding HyperLight, its business and financial
condition which HyperLight possesses or can acquire without unreasonable
effort or expense including (without limitation) all minutes of meetings of
the Boar Directors of HyperLight or committees thereof, and other relevant
documents requested by Telecom. In addition, Telecom has made such other
financial or other inquiry as Telecom deems necessary or appropriate in the
conduct of Telecom's due diligence investigation and has not relied on due
diligence of any other party in connection herewith.
6. Telecom acknowledges and understands, however, that HyperLight
has not authorized any person to make any statements on its behalf which
would in any way contradict any of the information which HyperLight has
provided to Telecom in writing, including the information set forth in this
Subscription Agreement, and Telecom further represents to HyperLight that
Telecom has not relied upon any such representations regarding HyperLight,
its business or financial condition, or this transaction in making any
decision to acquire the Series C Common Stock. If Telecom becomes aware of
conflicting information, Telecom will discuss this with management of
HyperLight.
HYPERLIGHT NETWORK CORPORATION SUBSCRIPTION AGREEMENT PAGE 4
7. Telecom's present financial condition is such that it is unlikely
that it would be necessary for Telecom to dispose or leverage of the Series C
Common Stock in the foreseeable future.
8. Telecom acknowledges and understands that there is no market for
any class of HyperLight's capital stock and there can be no assurance that
any such market will ever develop.
9. Telecom understands that the Series C Common Stock being acquired
hereby are and will continue to be restricted securities within the meaning
of Rule 144 of the General Rules and Regulations promulgated under the
Securities Act of 1933, as amended (the "Act"), and applicable state
statutes, and consents to the placement of an appropriate restrictive legend
or legends on any certificates evidencing the Series C Common Stock and any
certificates issued in replacement or exchange therefor and acknowledges that
HyperLight will cause its stock transfer records to note such restrictions,
10. Telecom understands that the Series C Common Stock being
acquired hereby will be subject to the following co-sale rights and rights of
first refusal:
Each holder of outstanding equity securities of HyperLight has (and by
executing this Subscription Agreement Telecom specifically grants) a
right of first refusal with respect to any transfer by it of any shares
of any class or series of equity securities of HyperLight. In addition,
any person seeking to purchase shares of any class or series of equity
security from Telecom must offer and be prepared to purchase all shares
held by all other holders of equity securities on the same price and
terms. The foregoing rights will expire upon the completion of an
initial public offering by HyperLight. The following transactions are
specifically excepted from the foregoing provision:
(i) Transfers of shares for estate planning purposes; and
(ii) Transfers of common stock by a shareholder which
aggregate less than I% of the total number of shares
of common stock outstanding during any twelve month
period unless transfer of a larger amount has been
approved by the Board of Directors of HyperLight.
(NOTE THAT HYPERLIGHT IS ATTEMPTING TO AMEND THE
FOREGOING PROVISION SO THAT THE PROVISION WILL READ:
"TRANSFERS OF COMMON STOCK BY A SHAREHOLDER WHICH
AGGREGATE NOT MORE THAN 1% OF THE TOTAL NUMBER OF
SHARES OF COMMON STOCK OUTSTANDING DURING ANY TWELVE
MONTH PERIOD UNLESS TRANSFER OF A LARGER AMOUNT HAS
BEEN APPROVED BY THE BOARD OF DIRECTORS OF
HYPERLIGHT." THERE CAN BE NO ASSURANCE THAT THIS
CHANGE WILL BE ACCEPTED THE BY REQUISITE PARTIES.)
11. Telecom agrees to disclose to any proposed buyer or transferee
of the Series C Common Stock the restrictions relating to the sale or
transfer of the Series C Common Stock.
HYPERLIGHT NETWORK CORPORATION SUBSCRIPTION AGREEMENT PAGE 5
12. By Telecom's execution below, it is acknowledged and understood
that HyperLight is relying upon the accuracy and completeness hereof in
complying with certain obligations under applicable securities laws.
13. Telecom has reviewed the terms of this Subscription Agreement
and all of the documents attached hereto, delivered in connection herewith or
otherwise referenced herein with its legal, investment tax, and financial
advisors to the extent Telecom, deems such consultation appropriate, and
Telecom has also consulted with such advisors with regard to the advisability
of this investment to the extent Telecom deems such consultation to be
appropriate. Telecom acknowledges that HyperLight has advised Telecom that it
recommends that Telecom obtain such advice and consultation, Telecom further
acknowledges that it has neither sought nor received any advice from
HyperLight or any of its agents or affiliates with respect to any aspect of
this Subscription Agreement or the Investment under this Subscription
Agreement.
14. Telecom acknowledges that an investment in the Series C Common
Stock of HyperLight is a suitable investment for it, taking into
consideration the restrictions on transferability and the other
considerations affecting the Series C Common Stock and HyperLight as
described herein and in the documents attached hereto, and in the
investigation that Telecom has made.
15. This Agreement may be amended or modified only in writing signed
by the parties hereto. No evidence shall be admissible in any court
concerning any alleged oral amendment hereof. This Agreement fully integrates
all prior agreements and understandings between the parties concerning its
subject matter.
16. This Agreement binds and inures to the benefit of the
representatives, successors and permitted assigns of the respective parties
hereto.
17. Each party hereto agrees for itself, its successors and its
permitted assigns to execute any and all instruments necessary for the
fulfillment of the terms of this Agreement.
18. This Agreement is made under, shall be construed in accordance
with and shall be governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, subject to acceptance by HyperLight, the
undersigned has completed this Subscription Agreement and tendered payment as
set forth above to evidence the undersigned's commitment to purchase the
Securities as set forth above.
TELECOM WIRELESS CORPORATION
Date: , 1999
-------------------
Tax ID #: By: /s/ Xxxxx X. Xxxxxxx
-------------------- -------------------------------------------
Xxxxx X. Xxxxxxx, Ph.D., President
0000 XXX Xxxxxxxxx, Xxxxx 0000
HYPERLIGHT NETWORK CORPORATION SUBSCRIPTION AGREEMENT PAGE 6
Xxxxxxxxx, XX 00000
SUBSCRIPTION ACCEPTED SUBJECT TO THE TERMS HEREOF.
HYPERLIGHT NETWORK CORPORATION
9/13 , 1999 By /s/ J. Xxxx Xxxxxx
--------------- ---------------------------------------
J. Xxxx Xxxxxx, President
HYPERLIGHT NETWORK CORPORATION SUBSCRIPTION AGREEMENT PAGE 7
