COMTELCO INTERNATIONAL INC.
SUBSCRIPTION AGREEMENT
THIS AGREEMENT is made as of February 28, 1997, by and between
ComTelco International Inc., a Delaware corporation (the "Company"), having an
address c/o Xxxxxx X. Xxxxxxx, Esq., 00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx, and the subscriber signatory hereto (the "Subscriber").
1. Subscription. The Subscriber agrees with the Company to subscribe for
and agrees to purchase and pay for 2,000,000 shares (the "Shares") of the
Company's Common Stock, par value $.00001 per share (the "Common Stock"), for an
aggregate purchase price of $4,000,000 consisting of $[20.00] in cash and a
secured promissory note in the amount of $3,999,980 (the "Note"). This
subscription is submitted to the Company in accordance with and subject to the
terms and conditions described in this Subscription Agreement.
The Subscriber acknowledges that this subscription for the Shares is
subject to acceptance by the Company. The Subscriber acknowledges that the
Company reserves the right to accept or reject any subscriptions in whole or in
part. Subject to the terms hereof, this subscription will become effective upon
its acceptance by the Company.
The check of the Subscriber payable to the Company in the amount of
$20.00 and the Note manually executed by the Subscriber accompanies the delivery
of this Subscription Agreement.
In the event this subscription is not accepted by the Company, any
consideration tendered will be promptly refunded in full without interest.
2. Representations of the Subscriber. The Subscriber hereby
represents and warrants to the Company that:
(a) the subscription hereunder is being made by the Subscriber as
principal for the Subscriber's own account and not for the benefit
of any other person;
(b) the Subscriber is a resident of the jurisdiction set out on the
signature page hereof;
(c) this agreement constitutes a legal, valid, binding and enforceable
obligation of the Subscriber;
(d) the Subscriber will not make any offers to sell the Shares or sell
any of the Shares except in accordance with the terms of this
Subscription Agreement;
(e) the Subscriber has such knowledge, sophistication and experience in
business and financial matters that it is capable of evaluating the
merits and risks of an investment in the Shares, and at the present
time, it could afford a complete loss of such investment;
(f) the Subscriber acknowledges that the Company and counsel for the
Company will rely upon the accuracy and truth of the Subscriber's
representations in Sections 2 and 3 hereof and the Subscriber hereby
consents to such reliance;
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(g) the Subscriber has access to the same kind of information which
would be available in registration statements filed by the Company
under the Securities Act;
(h) neither the United States ("U.S.") Securities and Exchange
Commission (the "SEC") nor any state securities commission has
approved any of the Shares offered or passed upon or endorsed the
merits of the offering;
(i) the Subscriber acknowledges that all documents, records, and books
pertaining to the investment in the Shares have been made available
for inspection by him, his attorney, accountant, purchaser
representative or tax advisor (collectively, the "Advisors");
(j) the Subscriber and the Advisors have had a reasonable opportunity to
ask questions of and receive answers from a person or persons acting
on behalf of the Company concerning the offering of the Shares and
all such questions have been answered to the full satisfaction of
the Subscriber and his Advisors;
(k) in evaluating the suitability of an investment in the Company, the
Subscriber has not relied upon any representation or other
information (oral or written) other than as contained in documents
or answers to questions so furnished to the Subscriber or his
Advisors by the Company;
(l) the Subscriber is unaware of, and in no way relying on, any form of
general solicitation or general advertising in connection with the
offer and sale of the Shares;
(m) the Subscriber has such knowledge and experience in financial, tax,
and business matters so as to enable him to utilize the information
made available to him in connection with the offering of the Shares
to evaluate the merits and risks of an investment in the Shares and
to make an informed investment decision with respect thereto;
(n) the Subscriber is not relying on the Company respecting the tax and
other economic considerations of an investment in the Shares, and
the Subscriber has relied on the advice of, or has consulted with,
only his own Advisors;
(o) the Subscriber is acquiring the Shares solely for his own account
for investment and not with a view to distribution, other than in
accordance with the terms hereof;
(p) the Subscriber must bear the economic risk of the investment
indefinitely because none of the Shares may be sold, hypothecated or
otherwise disposed of unless subsequently registered under the Act
and applicable state securities laws or an exemption from
registration is available;
(q) the Subscriber has adequate means of providing for its current needs
and foreseeable contingencies and has no need for its investment in
the Shares to be liquid;
(r) the Subscriber has completed accurately the Subscriber Questionnaire
attached hereto as Exhibit A and meets the requirements of at least
one of the suitability standards for an "accredited investor;" and
(s) the Subscriber: (i) if a natural person represents that the
Subscriber has reached the age of 21 and has full power and
authority to execute and deliver this Subscription Agreement and all
other related agreements or certificates and to carry out the
provisions hereof and
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thereof; (ii) if a corporation, partnership, association, joint
stock company, trust, unincor porated organization or other entity
represents that such entity was not formed for the specific purpose
of acquiring the Shares, such entity is validly existing under the
laws of the state of its organization, the consummation of the
transactions contemplated hereby is authorized by, and will not
result in a violation of state law or its charter or other
organizational documents, such entity has full power and authority
to execute and deliver this Subscription Agreement and all other
related agreements or certificates and to carry out the provisions
hereof and thereof, this Subscription Agreement has been duly
authorized by all necessary action, this Subscription Agreement has
been duly executed and delivered on behalf of such entity and is a
legal, valid and binding obligation of such entity; and (iii) if
executing this Subscription Agreement in a representative or
fiduciary capacity, represents that it has full power and authority
to execute and deliver this Subscription Agreement in such capacity
and on behalf of the subscribing individual, xxxx, partnership,
trust, estate, corporation, or other entity for whom the Subscriber
is executing this Subscription Agreement, and such individual, xxxx,
partnership, trust, estate, corporation, or other entity has full
right and power to perform pursuant to this Subscription Agreement
and make an investment in the Company, and that this Subscription
Agreement constitutes a legal, valid and binding obligation of such
entity; and
3. Acknowledgments; representations and covenants of the Subscriber with
respect to U.S. securities laws; securities transfers.
(a) The Subscriber understands that the Shares have not been registered
(i) under the U.S. Securities Act of 1933, as amended (the
"Securities Act") with the SEC in reliance upon the exemption from
such registration requirements afforded by Regulation S under the
Securities Act, governing the offer and sale of securities that
occur outside the U.S., or (ii) with any state securities
commission. The Subscriber understands that the Shares may not be
offered, sold, transferred or otherwise disposed of in the U.S., its
territories or possessions, or to persons known to be residents of
the U.S. or to a "U.S. person" within the meaning of Regulation S
under the Securities Act ("U.S. Person"; see the definition of U.S.
Person annexed hereto as Exhibit B) until the earlier to occur of
the effectiveness of a registration statement registering the Shares
under the Securities Act or the expiration of the restricted period
(as defined by Regulation S under the Securities Act) and thereafter
only if the Shares are registered under the Securities Act or an
exemption from the registration requirements under the Securities
Act is available.
(b) The Subscriber hereby represents and warrants that the Subscriber is
not a resident of the U.S. and is not otherwise deemed to be a U.S.
Person.
(c) The Subscriber agrees that if it should resell or transfer the
Shares it will do so only (a) outside the United States in
compliance with Rule 904 under the Securities Act, (b) pursuant to
the exemption from registration provided by Rule 144 under the
Securities Act (if available) or other applicable exemption under
the Securities Act and state securities laws; (c) in a transaction
that does not require registration under the Securities Act or any
applicable state laws, or (d) pursuant to a registration statement
that has been declared effective under the Securities Act.
(d) The Subscriber agrees that it will give each person to whom it
transfers the Shares notice of any restrictions on transfer of such
Shares, if then applicable. If a transfer of Shares is proposed to
be made, the holder (or beneficial holder, as the case may be) will
be required to furnish to the Company or the Company's transfer
agent, such certifications, legal
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opinions, or other information as may reasonably be requested to
confirm that the proposed transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
(e) Each certificate representing the Shares will bear the following
legend (unless such Shares have been transferred pursuant to a
registration statement that has been declared effective under the
Securities Act):
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON
EXCEPT AS SET FORTH IN THE FOLLOWING SEN TENCE. THE HOLDER HEREOF
AGREES THAT: (1) IT WILL NOT RESELL OR OTHERWISE TRANSFER THE COMMON
STOCK EVIDENCED HEREBY EXCEPT (A) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (B) PURSUANT TO
THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR OTHER THEN APPLICABLE EXEMPTION
UNDER THE SECURITIES ACT AND STATE SECURITIES LAWS, (C) IN A
TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES
ACT OR ANY APPLICABLE STATE LAWS, OR (D) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT
(AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER);
(2) PRIOR TO ANY SUCH TRANSFER (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 1(D) ABOVE), IT WILL FURNISH TO THE COMPANY OR THE TRANSFER
AGENT FOR THE COMMON STOCK SUCH CERTIFICATIONS, LEGAL OPINIONS, OR
OTHER INFORMATION AS THE COMPANY OR SUCH TRANSFER AGENT MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR STATE
SECURITIES LAWS; AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE
COMMON STOCK EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER
PURSUANT TO CLAUSE 1(D) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. AS USED HEREIN, THE TERMS "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
(f) The Subscriber understands and agrees that any disposition of the
Shares in violation of this Agreement shall be null and void, and
that no transfer of the Shares likely will be made by the Company or
the Company's transfer agent upon the Company's stock transfer books
unless there has been compliance with the terms of this Agreement.
The Subscriber also understands and agrees that the Company likely
will issue stop transfer instructions to the Company's transfer
agent instructing such transfer agent not to transfer the
certificate(s) evidencing the Shares to U.S. Persons, and that any
such stop transfer instructions will only be removed to permit
transfers made in compliance with the terms of this Agreement.
(g) The Subscriber (i) acknowledges that the Shares have not been
registered under the Securities Act and that the Company has no
obligation to so register any of the Shares, (ii)
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represents and warrants that the Subscriber is acquiring beneficial
ownership of the Shares for the Subscriber's own account and not for
the account or benefit of a U.S. Person or other person, and (iii)
agrees that the Subscriber will not transfer or otherwise dispose of
any of the Shares unless such transfer or other disposition is
registered under the Securities Act or is in accordance with
Regulation S under the Securities Act or otherwise is exempt from
registration under the Securities Act.
4. Covenants. The Subscriber acknowledges that in making its decision to
subscribe for the Shares, it has not relied upon the advice of any adviser to
the Company or of any other third party.
5. Further Assurances. Each of the parties hereto agrees to execute and
deliver such documents, make such filings and do all such things as are required
by, and to comply with the provisions of the Securities Act, any other
applicable securities legislation and any orders, policies, rules or regulations
of the SEC, the National Association of Securities Dealers, Inc. or other
relevant regulatory authorities concerning the issuance by the Company and the
purchase, holding and resale by the Subscriber of the Shares.
6. Modification. This Subscription Agreement shall not be modified or
waived except by an instrument in writing signed by the party against whom any
such modification or waiver is sought.
7. Assignability. This Subscription Agreement and the rights and
obligations hereunder are not transferable or assignable by the Subscriber.
8. Blue Sky Qualification. The Subscriber's right to purchase Shares under
this Subscription Agreement are expressly conditioned upon the exemption from
qualification of the offer and sale of the Shares from applicable Federal and
state securities laws. The Company shall not be required to qualify this
transaction under the securities laws of any jurisdiction and, should
qualification be necessary, the Company shall be released from any and all
obligations to maintain its offer, and may rescind any sale contracted, in the
jurisdiction.
9. Survival; Indemnification. All of the covenants, representations and
warranties contained herein shall survive the closing of the purchase and sale
of the Shares hereunder. The Subscriber agrees to indemnify and hold harmless
the Company and each director, officer, employee, agent or representative
thereof from and against any and all loss, damage or liability and related costs
and expenses (including but not limited to, reasonable attorneys' fees and costs
of investigation) due to or arising out of a breach of any covenant,
representation or warranty made by him in this Agreement.
10. Agreement. The Subscriber agrees that by executing this subscription
agreement an irrevocable agreement of purchase and sale of the Shares shall be
created upon its acceptance by the Company. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by all parties.
11. Notices. All notices or other communications given or made hereunder
shall be in writing and shall be delivered or mailed by registered or certified
mail, return receipt requested, postage prepaid to the Subscriber at the address
set forth on the signature page hereof, and to the Company at the address set
forth in the first paragraph hereof.
12. Offering Restrictions. The Shares have not been registered under the
Securities Act and the Subscriber agrees that during the restricted period (as
such term is defined in Regulation S) it will not sell any of the Shares within
the U.S. or to, or for the account or benefit of, U.S. Persons except pursuant
to an effective registration statement registering the Shares under the
Securities Act, in accordance with
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Regulation S under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act. Neither the Subscriber, its
affiliates nor any persons acting on its behalf have engaged or will engage in
any directed selling efforts (as such term is defined in Regulation S) with
respect to the Shares and the Subscriber has complied with and will comply with
the offering restrictions requirement of Regulation S for as long as such
requirement is applicable. If any sales of the Shares are made by the Subscriber
during the restricted period (as defined in Regulation S) pursuant to Regulation
S then the Subscriber hereby agrees to make such sales in compliance with
Regulation S.
13. Governing Law. Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be governed by, and constituted in accordance
with, the laws of the State of Delaware without regard to the choice of law
principles thereof.
14. Validity. 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.
15. Time. Time shall be of the essence hereof.
16. Inurement. This agreement shall inure to the benefit of and be binding
upon the respective legal representatives and successors of the parties.
17. Counterparts. This Subscription Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this subscription by
signing any of such counterpart and delivering the same by telex, telecopy,
telegraph, cable or otherwise in writing (each delivery by any of such means to
be deemed to be "in writing" for purposes of this subscription agreement).
Subscriber:
Interfinance Inv. Co. Ltd.
By: /s/ Xxxxxx Xxxxx
----------------------------------------
Name: Xxxxxx Xxxxx
Title: President
Subscriber's Address for Notices and
Delivery of Securities:
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Subscription accepted as of February 28, 1997
COMTELCO INTERNATIONAL INC.
By: /s/ August Xxxxxxx
-------------------------------
Name: August Xxxxxxx
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Title: Chairman
Exhibit A to Subscription Agreement
INVESTOR QUESTIONNAIRE
ALL INVESTORS MUST INITIAL THE FOLLOWING:
___ The undersigned understands that the representations contained in this
Investor Questionnaire qualifying or disqualifying it as an accredited
investor as that term is defined in Rule 501 of Regulation D promulgated
under the Act are made for the purpose of inducing a sale of securities to
the undersigned. The undersigned understands and acknowledges that the
Company will rely upon such representations. The undersigned hereby
represents that the statement or statements initialed below are true and
correct in all respects, and the undersigned will notify the Company
immediately of any material change in any of the information contained in
such statement or statements. The undersigned understands that any false
representations may constitute a violation of law and that any company or
person who suffers damages as a result of such false representations may
have a claim against it for damages.
AN INVESTOR SHOULD INITIAL ANY OF THE FOLLOWING STATEMENTS THAT APPLY TO IT:
___ (a) The undersigned certifies that it is an accredited investor because it
is either (i) a bank as defined in Section 3(a)(2) of the Act, or savings
and loan association or other institution as defined in Section 3(a)(5)(a)
of the Act whether acting in its individual or fiduciary capacity, (ii) a
broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, (iii) an insurance company as defined in Section
2(13) of the Act, (iv) an investment company registered under the
Investment Company Act of 1940 or a business development company
registered under the Investment Company Act of 1940 or a business
development company as defined in Section 2(a)(48) of such Act, (v) a
small business investment company licensed by the United States Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958, (v) a plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees, if such plan
has total assets in excess of $5,00,000, or (vii) an employee benefit plan
within the meaning of the Employee Retirement Income Security Act of 1974
if investment decisions are made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or an
employee benefit plan that has total assets in excess of $5,000,000 or, if
a self-directed plan, with investment decisions made solely by persons
that are accredited investors.
___ (b) The undersigned certifies that it is an accredited investor because it
is a private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940.
___ (c) The undersigned certifies that it is an accredited investor because it
is an organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, business trust, or partnership with total assets in
excess of $5,000,000.
___ (d) The undersigned certifies that it is an accredited investor because it
is a trust, with total asses in excess of $5,000,000, whose purchases of
securities are directed by a person who has such knowledge and experience
in financial and business matters that he/she is capable of evaluating the
merits and risks of an investment in the Company.
___ (e) The undersigned certifies that it is an accredited investor because it
is an entity in which all of the equity owners are accredited investors.
Each such equity owner must also properly complete and submit a Investor
Questionnaire as if such equity owner was a shareholder. If this section
applies a questionnaire for individuals is available upon request from the
Company.
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Exhibit B to Subscription Agreement
Definition of "U.S. Person"
Regulation S. Rule 902(o) provides:
(1) "U.S. Person" means:
(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or incorporated
under the laws of the United States;
(iii) Any estate of which any executor or administrator is a
U.S. person;
(iv) Any trust of which any trustee is a U.S. person;
(v) Any agency or branch of a foreign entity located in the
United States;
(vi) 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;
(vii) 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
(viii) Any partnership or corporation if: (A) organized or
incorporated under the laws of any foreign jurisdiction; and (B)
formed by a U.S. person principally for the purpose of investing in
securities not registered under the Act, unless it is organized or
incorporated, and owned, by accredited investors (as defined in Rule
501(a) who are not natural persons, estates or trusts.
(2) Notwithstanding paragraph (o)(1), of this rule, 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."
(3) Notwithstanding paragraph (o)(1), 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:
(i) 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
(ii) The estate is governed by foreign law.
(4) Notwithstanding paragraph (o)(1), 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.
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(5) Notwithstanding paragraph (o)(1), 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.
(6) Notwithstanding paragraph (o)(1), any agency or branch of a U.S.
person located outside the United States shall not be deemed a "U.S. person" if:
(i) The agency or branch operates for valid business reasons;
and
(ii) The agency or branch is engaged in the business of
insurance or banking and is subject to substantive insurance or
banking regulations, respectively, in jurisdictions where located.
(7) The International Monetary Fund, the International Bank of
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."
For the purposes of the foregoing "United States" means the United
States of America, its territories and possessions, any State of the United
States, and the District of Columbia.
