Subscription Agreement

Exhibit 10.23


ANCOR COMMUNICATIONS, INCORPORATED


REGULATION D SUBSCRIPTION AGREEMENT


THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES AUTHORITIES. THEY
MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR AN EXEMPTION TO THE REGISTRATION REQUIREMENTS OF FEDERAL AND
STATE SECURITIES LAWS.


THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED
HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL OR STATE SECURITIES AUTHORITIES, NOR HAVE SUCH AUTHORITIES
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.


INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SUBSCRIBERS
MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE
RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED DISCLOSURE
DOCUMENTS AS EXHIBIT E.


SEE ADDITIONAL LEGENDS AT SECTION 9.


THIS SUBSCRIPTION AGREEMENT ("Subscription Agreement") is made as of the 21st day of March 1997, by and between Ancor Communications, Incorporated, a corporation duly incorporated and existing under the laws of the State of Minnesota (the "Company"), and the subscriber executing this Subscription Agreement ("Subscriber").


THE PARTIES HEREBY AGREE AS FOLLOWS:


This Regulation D Securities Subscription Agreement (the "Subscription Agreement") is executed by the undersigned Subscriber in connection with the offer and purchase by the undersigned for Series B Preferred Stock, $.01 par value (the "Preferred Stock") of the Company. The Preferred Stock is being offered at a purchase price of Ten Thousand Dollars ($10,000), U.S., per share, in minimum subscription amounts of at least fifteen (15) shares ($150,000), and increments of five (5) shares ($50,000) in excess thereof, with a minimum offering amount of Eight Hundred (800) shares of Preferred Stock, or Eight Million Dollars ($8,000,000) (the "Minimum Amount"), and up to a maximum amount of Nine Hundred (900) shares of Preferred Stock, or Nine Million Dollars ($9,000,000) (the "Maximum Amount") (collectively, the "Offering"). The terms of the Preferred Stock, including the terms on which the Preferred Stock


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may be converted into common stock, $.01 par value of the Company (the "Common Stock"), are set forth in the Certificate of Designation of Series B Preferred Stock (the "Certificate of Designation"), in substantially the form attached hereto as Exhibit A. The solicitation of this Subscription and, if accepted by the Company, the offer and sale of the Preferred Stock, are being made in reliance upon the provisions of Regulation D ("Regulation D") promulgated under the Securities Act of 1933 (the "Act"). The Preferred Stock and the Common Stock issuable upon conversion thereof, together with the Subscriber Warrants (as defined in Section 5.11 below) and the Common Stock issuable upon exercise of the Subscriber Warrants (collectively, the "Conversion Shares"), are sometimes referred to herein collectively as the "Securities."


It is agreed as follows:


1. Offering


1.1 Offer to Subscriber; Purchase Price and Closing; and Placement Fees.
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Subject to satisfaction of the conditions to closing set forth in Section 1.2 below, the Subscriber hereby agrees to subscribe for and purchase Preferred Stock, for the aggregate purchase price in the amount set forth in Section 10 of this Subscription Agreement, in accordance with the terms and conditions of this Subscription Agreement. The closing of a sale and purchase of Preferred Stock as to each Subscriber (the "Closing") shall be deemed to occur when this Subscription Agreement has been executed by both the Subscriber and the Company, full payment for the Preferred Stock shall have been made by the Subscriber, by wire transfer to the Company's designated escrow account for this Offering (the "Escrow Account") established pursuant to the Escrow Agreement and Instructions (the "Escrow Agreement") by and among the Company, First Union National Bank of Georgia (the "Escrow Agent") and the Placement Agent (as defined in the following paragraph), the Subscriber has executed an Acknowledgment ("10-K Acknowledgment") in the Form of Exhibit J hereto stating that the Subscriber has reviewed and accepts the Company's Form 10-K for the year ended December 31, 1996 and the conditions to Subscriber's obligations set forth in Section 1.2 have been satisfied.


The parties hereto acknowledge that Dunwoody Brokerage Services, Inc. is acting as placement agent ("Placement Agent") for this Offering and will be compensated by the Company in cash and warrants to purchase Common Stock of the Company. Placement Agent has acted solely as placement agent in connection with the Offering by the Company of the Preferred Stock pursuant to this Subscription Agreement. The information and data contained in the Disclosure Documents (as defined in Section 2.2.4 below) have not been subjected to independent verification by Placement Agent, and no representation or warranty is made by Placement Agent as to the accuracy or completeness of the information contained in the Disclosure Documents.


1.2 Conditions to Subscriber's Obligations. The Subscriber's obligations hereunder are conditioned upon all of the following:


(a) the following documents have been deposited with the Escrow
Agent: the 10-K Acknowledgment (executed by the Subscriber), in
substantially the Form attached hereto as Exhibit J, the
Registration Rights Agreement,


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substantially in the form attached hereto as Exhibit B (executed
by the Company), the Opinion of Counsel, substantially in the
form attached hereto as Exhibit C (signed by Company's counsel),
Irrevocable Instructions to Transfer Agent, substantially in the
form attached hereto as Exhibit D (executed by the Company and
the Transfer Agent), and the Certificate of Designation,
substantially in the form attached hereto as Exhibit A (together
with evidence showing that it has been filed with the Secretary
of State of Minnesota);


(b) the certificates representing the Preferred Stock for which the
Subscriber has subscribed have been deposited with the Escrow
Agent;


(c) the Company's Common Stock is currently being actively traded on
the Nasdaq Small Cap Market;


(d) other than as described in the Disclosure Documents (if
applicable), there have been no material adverse changes in the
Company's business prospects or financial condition since the
date of the last balance sheet included in the Disclosure
Documents including but not limited to incurring material
liabilities;


(e) the representations and warranties of the Company are true and
correct in all material respects on the Closing date as if made
on such date, and the Company shall deliver a certificate, signed
by an officer of the Company to such effect, to the Escrow Agent;


(f) the Minimum Amount and corresponding subscription agreements
accepted by the Company have been received by the Escrow Agent;
and


(g) the Company shall have reserved for issuance upon conversion of
the Preferred Stock and exercise of the Subscriber Warrants a
sufficient number of shares of Common Stock which number of
shares shall initially be equal to at least Three Million Five
Hundred Thousand (3,500,000) shares.


2. Representations, Warranties and Covenants of the Subscriber. Subscriber hereby represents and warrants to and covenants and agrees with the Company as follows:


2.1 Accredited Investor. Subscriber hereby represents and warrants to the Company that it is an accredited investor, as defined in Rule 501 of Regulation D, and has checked the applicable box set forth in Section 10 of this Subscription Agreement.


2.2 Investment Experience; Access to Information; Independent
--------------------------------------------------------- Investigation. - --------------


2.2.1 Access to Information. The Subscriber or its professional advisor has been granted the opportunity to ask questions of and receive answers from representatives of


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the Company, its officers, directors, employees and agents concerning the terms and conditions of this Offering, the Company and its business and prospects, and to seek any additional information which the Subscriber or its professional advisor deems necessary to verify the accuracy of the information received.


2.2.2 Reliance on Own Advisors. The Subscriber has relied on the advice of, or has consulted with, its own personal tax, investment, legal or other advisors and has not relied on the Company or any of its affiliates, officers, directors, attorneys, accountants or any affiliates of any thereof and each other person, if any, who controls any of the foregoing, within the meaning of Section 15 of the Act for any tax or legal advise, other than reliance on information in the Disclosure Documents and on the legal opinion delivered in connection with the Closing.


2.2.3 Capability to Evaluate. The Subscriber has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the prospective investment, which are substantial, including without limitation those set forth in the Disclosure Documents (as defined in Section 2.2.4 below).


2.2.4 Disclosure Documents. The Subscriber, in making its investment decision to subscribe for the Securities hereunder, represents that (a) it has received and had an opportunity to review (i) the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (the "Form 10-K") or, if it has not yet received and reviewed the Form 10-K, acknowledges that this Agreement may be revoked by Subscriber anytime prior to the execution by Subscriber of a 10-K Acknowledgment in the form of Exhibit J hereto, (the "10-K Acknowledgment"), pursuant to Section 7.1(b) hereof, (ii) Risk Factors, attached as Exhibit E, (iii) Capitalization Schedule, attached as Exhibit F, and (iv) Use of Proceeds, attached as Exhibit G, (b) it has (subject to the caveat in subsection 2.2.4(a)(i) above regarding the Form 10-K) read, reviewed, and relied solely on the documents described in (a) above, the Company's representations and warranties and other information in this Subscription Agreement, including the Exhibits, any other written information prepared by the Company which has been specifically provided to the Subscriber in connection with this Offering and is designated as a Disclosure Document (together, the "Disclosure Documents"), and an independent investigation made by it and its representatives, if any; (c) it has, prior to the date of this Subscription Agreement, been given an opportunity to review material contracts and documents of the Company which have been filed as exhibits to the Company's filings under the Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") and has had an opportunity to ask questions of and receive answers from the Company's officers and directors; and (d) has not based its decision to invest on any oral representation of the Company, Placement Agent or any other person, nor any written representation or assurance from the Company other than those contained in the Disclosure Documents or incorporated herein or therein. Also, the Subscriber has not based its decision to invest upon statements made in the analyst report dated on or about February 17, 1997 sent to Subscriber by Placement Agent. Subscriber acknowledges that the Analyst Report was not prepared by the Company and that the Company does not confirm or endorse any information contained therein, and does not make any representation or warranty with regard to the contents thereof, and disclaims any responsibility to comment on, correct or update any information contained therein.


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2.2.5 Investment Experience; Fend for Self. Subscriber has substantial experience in investing in securities of companies in the development stage and has made investments in securities other than those of the Company. Subscriber acknowledges that it is able to fend for itself in the transaction contemplated by this Subscription Agreement, that it has the ability to bear the economic risk of its investment pursuant to this Subscription Agreement and that it is an "Accredited Investor" by virtue of the fact that it meets the subscriber qualification standards set forth in Section 2.1 above. Subscriber has not been organized for the purpose of investing in securities of the Company, although such investment is consistent with its purposes. The Subscriber's commitment to potentially illiquid investments is reasonable in relation to such person's net worth.


2.3 Exempt Offering Under Regulation D.
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2.3.1 Investment; No Distribution. The Subscriber is acquiring the Securities solely for the Subscriber's own account for investment purposes as a principal and not with a view to immediate resale or distribution of all or any part thereof; provided, however, that Subscriber does not agree to hold the Securities for any minimum or specific term (except as otherwise required by the Certificate of Designation and this Agreement) and reserves the right to dispose of the Securities at any time in accordance with or pursuant to an effective registration statement or an exemption under the Act. The Subscriber is aware that there are legal and practical limits on the Subscriber's ability to sell or dispose of the Securities and, therefore, that the Subscriber must bear the economic risk of the investment for an indefinite period of time and has adequate means of providing for the Subscriber's current needs and possible personal contingencies and has need for only limited liquidity of this investment. The Subscriber's commitment to potentially illiquid investments is reasonable in relation to the Subscriber's net worth.


2.3.2 No General Solicitation. The Securities were not offered to the Subscriber through, and the Subscriber is not aware of, any form of general solicitation or general advertising, including, without limitation, (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.


2.3.3 Restricted Securities. Subscriber understands that the Preferred Stock is and the Subscriber Warrants and the Conversion Shares will be, characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may not be transferred or resold without registration under the Act or pursuant to an exemption therefrom. In this connection, Subscriber represents that it is familiar with Rule 144 under the Act, as presently in effect, and understands the resale limitations imposed thereby and by the Act.


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2.3.4 Disposition. Without in any way limiting the representations set forth above, Subscriber further agrees not to sell, transfer or otherwise dispose of all or any portion of the Securities unless and until:


(a) There are then in effect registration statements under the
Act and any applicable state securities laws covering such proposed
disposition and such disposition is made in accordance with such
registration statements; or


(b) (i) Subscriber shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed
disposition, and (ii) if reasonably requested by the Company,
Subscriber shall have furnished the Company with an opinion of
counsel, in form and substance customary for similar transactions,
that such disposition will not require registration of the Securities
under the Act or any applicable state securities laws. It is agreed
that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144.


2.4 Due Authorization.
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2.4.1 Authority. The person executing this Subscription Agreement, if executing this Subscription Agreement in a representative or fiduciary capacity, has full power and authority to execute and deliver this Subscription Agreement and each other document included herein for which a signature is required in such capacity and on behalf of the subscribing individual, partnership, trust, estate, corporation or other entity for whom or which the person executing this Subscription Agreement is executing this Subscription Agreement. The Subscriber has reached the age of majority (if an individual) according to the laws of the state in which he or she resides.


2.4.2 Due Authorization. If the Subscriber is a corporation, the Subscriber is duly and validly organized, validly existing and in good tax and corporate standing as a corporation under the laws of the jurisdiction of its incorporation with full power and authority to purchase the Securities to be purchased by it and to execute and deliver this Subscription Agreement.


2.4.3 Partnerships. If the Subscriber is a partnership, the representations, warranties, agreements and understandings set forth above are true with respect to all partners in the Subscriber (and if any such partner is itself a partnership, all persons holding an interest in such partnership, directly or indirectly, including through one or more partnerships), and the person executing this Subscription Agreement has made due inquiry to determine the truthfulness of the representations and warranties made hereby.


2.4.4 Representatives. If the Subscriber is purchasing in a representative or fiduciary capacity, the above representations and warranties shall be deemed to have been made on behalf of the person or persons for whom the Subscriber is so purchasing.


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3. Acknowledgments The Subscriber is aware that:


3.1 Risks of Investment. The Subscriber recognizes that an investment in the Company involves certain risks, including the potential loss of the Subscriber's investment therein. The Subscriber recognizes that the Disclosure Documents and this Subscription Agreement and the exhibits hereto do not purport to contain all the information which would be contained in a registration statement under the Act;


3.2 No Government Approval. No federal or state agency has passed upon the Securities or made any finding or determination as to the fairness of this transaction;


3.3 No Registration. The Securities have not been registered under the Act or any applicable state securities laws in reliance upon exemptions from the registration requirements of such laws, and may not be sold, pledged, assigned or otherwise disposed of in the absence of an effective registration statement for the Securities and any component thereof under the Act or unless an exemption from such registration is available;


3.4 No Assurances of Registration. There can be no assurance that any registration statement will become effective at the scheduled time or ever. The Subscriber acknowledges that it may be required to bear the economic risk of the Subscribers' investment for an indefinite period of time.


3.5 Exempt Transaction. The Subscriber understands that the Preferred Stock is being offered and sold in reliance on specific exemptions from the registration requirements of federal and state law and that the representations, warranties, agreements, acknowledgments and understandings set forth herein are being relied upon by the Company in determining the applicability of such exemptions and the suitability of the Subscriber to acquire the Preferred Stock.


3.6 Legends. It is understood that the certificates evidencing the Preferred Stock and, subject to the terms of Section 5.9 below, the Conversion Shares shall bear the following legend:


"The securities represented hereby have not been registered under the
Securities Act of 1933, or applicable state securities laws, nor the
securities laws of any other jurisdiction. They may not be sold or
transferred in the absence of an effective registration statement
under those securities laws or an opinion of counsel, in form and
substance customary for similar transactions, that the sale or
transfer is pursuant to an exemption to the registration requirements
of those securities laws."


3.7 Missouri Residents. If a Missouri resident, I hereby represent that (i) I understand that the Securities are not registered under the Missouri Securities Act and may be disposed of only through a licensed broker-dealer and (ii) I have been advised that it is a felony to sell securities in violation of the Missouri Securities Act.


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4. Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to the Subscribers (which shall be true at the signing of this Subscription Agreement, as of Closing), and agrees with the Subscribers that:


4.1 Organization, Good Standing, and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Minnesota, USA and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the business or properties of the Company. The Company is not the subject of any pending, threatened or, to its knowledge, contemplated investigation or administrative or legal proceeding by the Internal Revenue Service, the taxing authorities of any state or local jurisdiction, or the Securities and Exchange Commission, or any state securities commission, or any other governmental entity, whi ...