Exhibit 10.11
Form SB-2
Skypath Networks, Inc.
---------------------------------------------------
SKYPATH NETWORKS, INC.
AND
VARIOUS LENDERS
-----------------------------
$110,000
12% Note Due March 31, 2004
-----------------------------
NOTE AND WARRANT PURCHASE AGREEMENT
Dated as of October 25, 2003
----------------------------------------------------
E-174
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
Table of Contents
Article I - Authorization and Issuance of Note and Warrant...................1
1.1 Authorization......................................................1
1.2 Issuance and Sale of Notes and Warrants............................1
Article II - Representations and Warranties of Company.......................2
2.1 Organization.......................................................2
2.2 Authorization......................................................3
2.3 Capitalization.....................................................3
2.4 No Contravention...................................................3
2.5 Litigation.........................................................3
2.6 Financials.........................................................3
2.7 Consents...........................................................4
2.8 Proceeds of Note...................................................4
2.9 Income Tax Returns.................................................4
2.10 Solvency..........................................................4
Article III - The Loans and the Note.........................................4
3.1 Commitment to Make the Loans.......................................4
3.2 Note...............................................................4
3.3 Payment............................................................4
3.4 Optional Prepayment................................................5
3.5 Mandatory Prepayment...............................................5
3.6 Loan Guarantee.....................................................5
3.7 Warrants...........................................................5
E-175
Article IV - Affirmative Covenants of Company................................5
4.1 Preservation of Franchises and Existence...........................5
4.2 Payment of Taxes and Other Charges.................................5
4.3 Notice of Certain Events...........................................5
4.4 Compliance with Laws...............................................5
4.5 Use of Proceeds of new Financings..................................6
Article V - Events of Default and Remedies...................................6
5.1 Events of Default..................................................6
5.2 Acceleration of Maturity...........................................7
5.3 Other Remedies.....................................................7
5.4 Conduct No Waiver, Collection Expenses.............................7
5.5 Remedies Cumulative................................................7
5.6 Cooperation by the Company.........................................7
Article VI - Registration and Transfer of Warrants Shares....................8
6.1 Registration.......................................................8
6.2 Request by the Purchaser...........................................8
6.3 Expenses...........................................................8
6.4 Registration Procedures............................................8
6.5 Indemnification....................................................9
Article VII - Miscellaneous.................................................11
7.1 Amendments and Waivers............................................11
7.2 Integration.......................................................11
7.3 Successors and Assigns............................................11
7.4 Reliance on and Survival of Various Provisions....................11
7.5 Notices and Other Communications..................................11
7.6 Governing Law.....................................................11
7.7 Table of Contents and Headings....................................11
7.8 Counterparts......................................................12
Article VIII - Definitions..................................................12
EXHIBITS
EXHIBIT A Form of 12% Note
EXHIBIT B Form of Warrant
EXHIBIT C Form of Pledge Agreement
E-176
NOTE AND WARRANT PURCHASE AGREEMENT
NOTE AND WARRANT PURCHASE AGREEMENT, dated as of October __, 2003 (this
"Agreement"), between SKYPATH NETWORKS, INC., a Delaware corporation (the
"Company") and each of those persons and entities executing this Agreement as a
Purchaser (the "Purchaser(s)").
RECITALS
The Company desires to borrow $110,000 for use as operating capital (the
"Loan").
The Purchasers have each agreed to lend a portion of the $110,000 to the
Company upon the terms and conditions of this Agreement (the "Loan
Transaction").
As additional consideration for the Purchasers making the Loan to the
Company, (i) the president of the Company will guaranty the loan, (ii) shares of
the Company's common stock owned by the Company's president will secure the
loan; and (iii) the Company will grant Warrants to purchase shares to the
Lenders, all as are more particularly described in this Agreement.
NOW THEREFORE, the parties agree as follows:
ARTICLE I
AUTHORIZATION AND ISSUANCE OF NOTE AND WARRANT
SS. 1.1 AUTHORIZATION. The Company has duly authorized the issuance of (i)
one or more 12% Promissory Notes due March 31, 2004 in the aggregate principal
amount of $110,000 (the "Notes") and (ii) warrants (the "Warrants") to purchase
up to 220,000 shares of Common Stock at an initial exercise price of $.50 per
share. The Notes and the Warrants shall be substantially in the form of Exhibit
A and Exhibit B hereto, respectively.
SS. 1.2 ISSUANCE AND SALE OF NOTES AND WARRANTS.
a) Sale of the Note and the Warrant. Subject to the terms hereof, the
Company agrees to sell, and each the Purchasers agree to purchase, on the
Closing Date, the Notes and the Warrants at a price equal to 100% of the
principal amount of the Note, payable in immediately available funds upon
the execution of this Agreement by a Purchaser. The amount of each Note is
set forth on the signature page of this Agreement.
(b) Closing Date; Delivery of Documents. The last date for the
purchase and sale of the Notes and the Warrants hereunder shall be November
10, 2003. Purchasers may purchase Notes and Warrants in such amounts as
agreed to by such Purchasers and the Company, and each purchase of a Note
and Warrant by a Purchaser shall have its own closing date ("Closing
Date"). The Purchase and sale of each Note and Warrant shall occur on the
E-177
Closing Date of each such Note, at such place as the parties hereto may
designate. On each Closing Date, the Company will deliver or cause to be
delivered to the Purchaser closing on such Closing Date, against payment of
the purchase price therefor, (i) a Note, duly executed by the Company and
dated the Closing Date, (ii) a Warrant, duly executed by the Company and
dated the Closing Date, (iii) a duly executed Pledge Agreement in the form
of Exhibit C hereto (the "Pledge Agreement"), (iv) a duly executed guaranty
in the Form of Exhibit D hereto (the "Guarantee") and (v) all other
documents and instruments required to be delivered hereunder or under the
documents referred to in clauses (i) through (iv) above.
(c) The Purchaser's Representation. Each Purchaser represents to the
Company that he is acquiring each of the Note and the Warrant (and the
Common Stock issuable upon exercise of the Warrant) for his own account for
investment and not with a view to any public distribution thereof and will
not sell or offer to sell the Note or the Warrant (or the Common Stock
issuable upon exercise of the Warrant) in violation of any of the
registration requirements of the Securities Act. The Purchaser hereby
consents to the imposition of legends substantially similar to the
following on the Note and the Warrant, respectively, and the Purchaser
agrees to abide by the restrictions contained therein:
"THE SECURITIES REPRESENTED BY THIS NOTE, NOR THE SHARES
INTO WHICH THIS NOTE MAY BE CONVERTED, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
OR APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY,
MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER SUCH ACT AND SUCH LAWS OR PURSUANT TO AN EXEMPTION
THEREFROM." "NEITHER THE SECURITIES REPRESENTED BY THIS
WARRANT, NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS,
AND ACCORDINGLY, MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER SUCH ACT AND SUCH LAWS OR PURSUANT TO
AN EXEMPTION THEREFROM."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby represents and warrants to each of the Purchasers as
follows:
SS. 2.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, is duly
licensed or qualified and in good standing as a foreign corporation in each
jurisdiction where the character of its properties or the nature of its
activities makes such qualification necessary, except where the failure to so
qualify would not have a material adverse effect on its properties, business or
condition (financial or otherwise), and has the corporate power and authority
and all necessary licenses and permits to carry on its present business as now
conducted, except where the failure to have any such licenses and permits would
not have a material adverse effect on its properties, business or condition
E-178
(financial or otherwise), and to enter into and perform its obligations under
this Agreement, the Note and the Warrant.
SS. 2.2 AUTHORIZATION. The Agreement, the Note and the Warrant have each
been duly authorized, executed and delivered by the Company and each of them
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
SS. 2.3 CAPITALIZATION. The authorized capital stock of the Company
consists solely of 20,000,000 shares of Common Stock, $.001 par value, of which
___________ shares are outstanding, excluding the Warrant Shares, all of which
outstanding shares have been duly authorized and validly issued by the Company
and are fully paid, nonassessable and free of preemptive rights. The authorized
capital also includes 5,000,000 shares of $.001 preferred stock, none of which
are issued. No shares of Common Stock are held on the date hereof in the
treasury of the Company. The issuance and sale of all such shares have been in
full compliance with all applicable federal and state securities laws. Other
than the Note and the Warrant and as set forth in Schedule 2.3, there are no
subscriptions, options, warrants or calls relating to the issuance by the
Company of any shares of its Common Stock, including any right of conversion or
exchange under any outstanding security or other instrument. The Company is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of Common Stock or any security convertible into or
exchangeable for any Common Stock. The Common Stock is vested with all the
voting rights in the Company. The Warrant Shares have been duly authorized and
reserved for issuance. When issued, the Conversion Shares and the Warrant Shares
will be fully paid and nonassessable and free from preemptive rights.
SS. 2.4 NO CONTRAVENTION. The execution, delivery and performance by the
Company of this Agreement, the Note and the Warrant and compliance by the
Company with all of the provisions hereof and thereof do not and will not
contravene any law or any order of any court or governmental authority or agency
applicable to or binding on the Company or any of its properties, or contravene
the provisions of, or constitute a default (or event of default) with or without
the passage of time, by the Company under, or result in the creation of any Lien
upon the property of the Company under its Certificate of Incorporation or
by-laws or any material indenture, mortgage, contract or other agreement or
instrument to which the Company is a party, or by which the Company or any of
its property is bound or affected.
SS. 2.5 LITIGATION. There are no proceedings pending or, to the knowledge
of the Company, threatened against the Company in any court or before any
governmental authority or arbitration board or tribunal. The Company is not in
default with respect to any order of any court or governmental authority or
arbitration board or tribunal.
SS. 2.6 FINANCIALS. The Company has provided to the Purchasers the audited
balance sheets and statements of income and retained earnings and cash flows of
the Company, for the fiscal year ended December 31, 2002 (the "Financial
Reports"). The Financial Reports were prepared in conformity with generally
accepted accounting principles, and fairly present the consolidated financial
position of the Company and its Subsidiaries as of such date and the results of
their consolidated operations for the period then ended. The Company has also
E-179
provided to the Purchaser an unaudited balance sheets and statement of
operations of the Company and its Subsidiaries, for the fiscal quarter ended
June 30, 2003 (the "Quarterly Report"). The Quarterly Report was prepared in
accordance with generally accepted accounting principles, and fairly presents
the consolidated financial position of the Company as of such date and the
results of its operations for the period then ended. Since June 30, 2003, there
has been no material adverse change in such financial condition or operations
other than the conditions relating to cash flow which have made the sale of the
Note and the Warrant necessary.
SS. 2.7 CONSENTS. Neither the nature of the Company or its businesses or
properties, nor any relationship between the Company and any other Person, nor
any circumstances in connection with the execution, delivery and performance of
this Agreement, the Note or the Warrant is such as to require a consent,
approval or authorization of any Person or governmental authority, or filing,
registration or qualification with, any governmental authority on the part of
the Company in connection with the execution, delivery and performance of this
Agreement, the Note or the Warrant.
SS. 2.8 PROCEEDS OF NOTE. The proceeds from the sale of the Note will be
used for the company's general operations and will not be used to repay debt to
any officer, director or shareholder or any affiliate thereof.
SS. 2.9 INCOME TAX RETURNS. The Company has timely filed all United States
Federal income tax returns and all other material tax returns which are required
to be filed by it and has paid all taxes due pursuant to such returns or
pursuant to any assessment made against the Company or any of its assets, and
all other taxes, fees or other charges imposed on the Company by any
governmental authority (other than taxes, fees or other charges the payment of
which is being contested in good faith by the Company) and no tax liens have
been filed and no claims are being asserted with respect to any such taxes, fees
or other charges.
SS. 2.10 SOLVENCY. As of each Closing Date, and after taking into account
the sale of the Note and the Warrant, the Company will be solvent.
ARTICLE III
THE LOANS AND THE NOTE
SS. 3.1 COMMITMENT TO MAKE THE LOANS. Upon the terms and subject to the
conditions set forth in this Agreement, each of the Purchasers agree to make a
loan (the "Loans") to the Company in the amount set forth on the signature page
of this Agreement. The aggregate maximum principal amount of all Loans shall be
$110,000.
SS. 3.2 NOTE. All Loans made by the Purchasers pursuant to this Agreement
shall be evidenced by a Note. On the closing of each Loan, the Company shall
deliver to the Purchaser the Note. The Note shall mature on March 31, 2004.
SS. 3.3 PAYMENT. The principal of and interest on each Note shall be
payable to the Purchaser at the address of Purchaser set forth on the signature
page of this Agreement, in lawful money of the United States of America, against
presentment of the Note.
E-180
SS. 3.4 OPTIONAL PREPAYMENT. The principal amount of the Note outstanding
from time to time shall be subject to prepayment, at the option of the Company,
in full but not in part, without premium. Any prepayment shall be made together
with accrued and unpaid interest thereon to the prepayment date.
SS. 3.5 MANDATORY PREPAYMENT. The Company intends to file a Registration
Statement on Form SB-2 to register shares of Common Stock to be sold by the
Company, shares of Common Stock on behalf of selling shareholders and the
Warrant Shares. In the event the Company receives offering proceeds in excess of
$500,000 from such offering prior to March 31, 2004, the Company shall use such
offering proceeds to prepay the Loans in full.
SS. 3.6 LOAN GUARANTEE. The Loans will be secured 200,000 shares of the
Company's common stock owned by the Company's President, Xxxxx X. Paolo. A form
of the Pledge Agreement is attached hereto as Exhibit C.
SS. 3.7 WARRANTS. As additional consideration for the Loans, the Company is
granting each Purchaser a Warrant to purchase shares of the Company's Common
Stock. The general terms of the Warrants are as follows: (i) Exercise Price
-$.50; (ii) Exercise Period-2 years. A form of the Warrant Agreement is attached
hereto as Exhibit B.
ARTICLE IV
Affirmative Covenants of Company
The Company covenants and agrees that, from the date hereof until the Note
has been paid in full:
SS. 4.1 PRESERVATION OF FRANCHISES AND EXISTENCE. Except as otherwise
permitted by this Agreement, the Company will (i) maintain its corporate
existence, rights and franchises in full force and effect.
SS. 4.2 PAYMENT OF TAXES AND OTHER CHARGES. The Company will pay, when due
(i) all taxes, assessments and other governmental charges or levies imposed upon
it or any of its properties or income.
SS. 4.3 NOTICE OF CERTAIN EVENTS. The Company agrees to provide written
notice to the Purchaser immediately upon the occurrence of any event having a
material adverse effect on the Company's business or operations or upon the
Purchaser's rights under this Agreement or the Note.
SS. 4.4 COMPLIANCE WITH LAWS. The Company will comply with all applicable
statutes, rules, regulations and orders of all governmental authorities, with
respect to the conduct of its business and the ownership of its properties, if
failure to so comply, individually or in the aggregate, may have a material
adverse effect on the condition, financial or otherwise, of the Company.
E-181
SS. 4.5 USE OF PROCEEDS OF NEW FINANCINGS. The Company agrees that it shall
use all proceeds (net of selling costs) of any equity or debt financings by it.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
SS. 5.1 EVENTS OF DEFAULT. Each of the following shall constitute an Event
of Default under this Agreement:
(a) Nonpayment of the Note. If the Company fails to pay (i) the
principal on the Note when and as the same becomes due and payable, whether
at maturity thereof, or subject to ss. 4.5 hereof in accordance with a
prepayment notice, or otherwise, or (ii) the interest on the Note when and
as the same becomes due and payable; or
(b) Other Covenants. If the Company fails to perform or observe any
other of the covenants, conditions or agreements on the part of the Company
set forth in this Agreement, the Note and such failure shall have continued
for 30 days, provided, however, that if such failure is incapable of cure
then the Event of Default shall occur upon such failure; or
(c) Misrepresentations. If any representation, warranty or statement
made by the Company in this Agreement, the Note or the Warrant, or in any
certificate or other instrument delivered to the Purchaser pursuant to this
Agreement, shall be incorrect in any material respect as of the time when
made; or
(d) Voluntary Bankruptcy and Insolvency Proceedings. If the Company
shall file a petition in bankruptcy or for reorganization or for an
arrangement or any composition, readjustment, liquidation, dissolution or
similar relief pursuant to Title 11 of the United States Code or under any
similar present or future federal law or the law of any other jurisdiction
or shall be adjudicated a bankrupt or insolvent, or consent to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the Company
or for all or any substantial part of its property, or shall make a general
assignment for the benefit of its creditors, or shall admit in writing its
inability to pay its debts generally as they become due, or shall take any
corporate action in furtherance of any of the foregoing; or
(e) Adjudication of Bankruptcy. If a petition or answer shall be filed
proposing the adjudication of the Company or any of its Subsidiaries as
bankrupt or its reorganization or arrangement, or any composition,
readjustment, liquidation, dissolution or similar relief with respect to it
pursuant to Title 11 of the United States Code or under any similar present
or future federal law or the law of any other jurisdiction, and the
Company, as the case may be, shall consent to or acquiesce in the filing
thereof, or such petition or answer shall not be discharged or denied
within 60 days after the filing thereof; or
(f) Breach of Pledge Agreement. If the Company's President shall
breach any of the obligations or covenants set forth in the Pledge
Agreement.
E-182
ss. 5.2 ACCELERATION OF MATURITY. If any Event of Default shall be
continuing, a Purchaser may, by notice to the Company, declare the entire
outstanding principal of the Note, and all accrued and unpaid interest thereon,
to be due and payable immediately, and upon any declaration the entire
outstanding principal of the Note and said accrued and unpaid interest shall
become and be immediately due and payable, without presentment, demand, protest
or other notice whatsoever, all of which are hereby expressly waived, anything
in the Note or in this Agreement to the contrary notwithstanding, provided that
if an Event of Default under clause (d) or (e) of ss. 5.1 shall have occurred,
the outstanding principal of the Note, and all accrued and unpaid interest
thereon, shall immediately become due and payable, without any declaration and
without presentment, demand, protest or other notice whatsoever, all of which
are hereby expressly waived, anything in the Note or this Agreement to the
contrary notwithstanding.
ss. 5.3 OTHER REMEDIES. If any Event of Default shall be continuing, a
Purchaser may enforce its rights by suit in equity, by action at law, or by any
other appropriate proceedings, whether for the specific performance (to the
extent permitted by law) of any covenant or agreement contained in this
Agreement or in the Note or in aid of the exercise of any power granted in this
Agreement or in the Note and may enforce the payment of the Note and any of its
other legal or equitable rights.
ss. 5.4 CONDUCT NO WAIVER, COLLECTION EXPENSES. No course of dealing on the
part of a Purchaser, nor any delay or failure on the part of a Purchaser to
exercise any of his rights, shall operate as a waiver of such right or otherwise
prejudice the Purchaser's rights, powers and remedies. If the Company fails to
pay, when due, the principal of, or the interest on a Note, or if the Company
fails to comply with any other provision of this Agreement, the Company will pay
to the Purchaser, to the extent permitted by law, on demand, such further
amounts as shall be sufficient to cover the costs and expenses, including but
not limited to reasonable attorneys' fees, incurred by the Purchaser in
collecting any sums due on the Note or in otherwise enforcing any of his rights.
ss. 5.5 REMEDIES CUMULATIVE. No right or remedy conferred upon or reserved
to the Purchaser under this Agreement is intended to be exclusive of any other
rights or remedy, and every right and remedy shall be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing
under applicable law. Every right and remedy given by this Agreement or by
applicable law to the Purchaser may be exercised from time to time and as often
as may be deemed expedient by the Purchaser, as the case may be.
ss. 5.6 COOPERATION BY THE COMPANY. To the extent that it lawfully may, the
Company agrees that it will not at any time insist upon or plead, or in any
manner whatever claim or take any benefit or advantage of any applicable present
or future stay, extension or moratorium law, which may affect observance or
performance of the provisions of this Agreement or the Note; nor will it claim,
take or insist upon any benefit or advantage of any present or future law
providing for the valuation or appraisal of any security for the Note prior to
any sale or sales thereof which may be made under or by virtue of any instrument
governing the same; nor will it, after any such sale or sales, claim or exercise
any right, under any applicable law, to redeem any portion of such security so
sold.
E-183
ARTICLE VI
REGISTRATION AND TRANSFER OF WARRANTS SHARES
ss. 6.1 REGISTRATION . The Company is preparing a Registration Statement on
Form SB-2 for an offering consisting of new shares to be issued by the Company
and shares to be registered for selling shareholders. The Company anticipates
such Registration Statement will be filed prior to November 30, 2003. The
Company will register the Warrant Shares under such Registration Statement. If
for any reason the Registration Statement is not filed or does not include the
Warrant Shares, the registration provisions of ss. 6.2 of this Agreement shall
be applicable.
ss. 6.2 REQUEST BY THE PURCHASER. If the registration of shares does not
occur pursuant to Section 6.1, and upon the written request of the Purchaser
requesting that the Company effect the registration under the Securities Act of
all or part of the Warrants Shares and specifying the intended method of
disposition thereof, the Company thereupon will, as soon as practicable but in
no event later than 60 days after such request, effect the registration under
the Securities Act of the Warrants Shares which the Company has been so
requested to register. The Company shall be obligated to effect only one
registration upon request of the Purchaser pursuant to this ss. 6.2. A
registration requested pursuant to this ss. 6.1 shall be effected by the filing
of a registration statement or such other form as may be available (other than a
Form S-8), in the sole discretion of the Company.
ss. 6.3 EXPENSES. The Company will pay all Registration Expenses in
connection with registration requested pursuant to this ss. 6.1 and 6.2.
ss. 6.4 REGISTRATION PROCEDURES. If and whenever the Company is required to
effect or cause the registration of any Warrants Shares under the Securities Act
as provided in this Agreement, the Company will, as expeditiously as possible:
(a) prepare and, in any event within 60 days after the end of the
period within which requests for registration may be given to the Company,
file with the Commission a registration statement with respect to such
Warrants Shares and, within 90 days after the date a request for
registration was first given, cause such registration statement to become
effective, provided, however, that the Company may discontinue any
registration of its securities which is being effected pursuant to ss. 6.2
herein at any time prior to the effective date of the registration
statement relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period not in excess of 120 days and to comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period
in accordance with the intended methods of disposition by the Purchaser set
forth in such registration statement;
(c) furnish to the Purchaser such number of copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the
E-184
prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as the
Purchaser may reasonably request in order to facilitate the disposition of
the Warrants Shares by the Purchaser;
(d) register or qualify such Warrants Shares covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions which apply, and do any other acts and things which may be
necessary or advisable to enable the Purchaser to consummate the
disposition in such jurisdiction of the Warrants Shares owned by the
Purchaser;
(e) cause such Warrants Shares covered by such registration statement
to be registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the Purchaser to consummate the
disposition of such Warrants Shares;
(f) immediately notify the Purchaser, at any time when a prospectus
relating to the Warrants Shares is required to be delivered under the
Securities Act within the appropriate period mentioned in clause (b) of
this ss. 6.4, of the Company becoming aware that the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and within five
days prepare and furnish to the Purchaser a reasonable number of copies of
an amended or supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Warrants Shares, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing;
(g) otherwise comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as
practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the first month
after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder;
(h) to list such Warrants Shares on any securities exchange on which
the Common Stock is then listed, if such Warrants Shares are not already so
listed and if such listing is then permitted under the rules of such
exchange, and to provide a transfer agent and registrar for such Warrants
Shares covered by such registration statement not later than the effective
date of such registration statement;
ss. 6.5 INDEMNIFICATION.
(a) Indemnification by the Company. In the event of any registration
of any securities of the Company under the Securities Act pursuant to ss.
6.1 or 6.2, the Company agrees to (i) indemnify and hold harmless, to the
extent permitted by law, the Purchaser, and any person who participates as
an underwriter in the offering or sale of the Warrants Shares against any
and all losses, claims, damages or liabilities, joint or several, and
E-185
expenses to which the Purchaser, or any such underwriter may became subject
under the Securities Act, common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (aa) any untrue statement or
alleged untrue statement contained in the registration statement or
amendment or supplement thereto under which such securities were registered
under the Securities Act, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, or (bb) any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and (ii) reimburse the Purchaser or underwriter for any legal
or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, that the Company shall not be liable in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon
any untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement or amendment or supplement
thereto or in any such preliminary, final or summary prospectus in reliance
upon and in conformity with written information furnished to the Company
through an instrument duly executed by the Purchaser specifically stating
that it is for use in the preparation thereof; and provided, further, that
the Company will not be required to indemnify any person who participates
as an underwriter in the offering or sale of Warrants Shares or any other
person, if any, who controls such underwriter within the meaning of the
Securities Act to the extent that any such loss, claim, damage or liability
for which indemnification is claimed results from such underwriter's
failure to send or give a copy of the final prospectus to the person
asserting an untrue statement or an alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of such sale, if
such statement or omission was corrected in such final prospectus and the
Company has previously furnished copies thereof to such underwriter. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Purchaser or any underwriter and
shall survive the transfer of such securities by the Purchaser.
(b) Indemnification by the Purchaser. The Company may require, as a
condition to including any Warrants Shares in any registration statement
filed in accordance with this Article VI, that the Company receive an
undertaking reasonably satisfactory to it from the Purchaser, to indemnify
and hold harmless (in the same manner and to the same extent as set forth
in this ss. 6.4(b)) the Company, any directors, officers and other
controlling persons thereof, and all other prospective sellers with respect
to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by the Purchaser specifically
stating that it is for use in the preparation of such registration
statement, preliminary, final or summary prospectus or amendment or
supplement, or a document incorporated by reference into any of the
foregoing. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Company or any of the
Company's directors, officers or controlling persons and shall survive the
transfer of such securities by the Purchaser.
E-186
ARTICLE VII
MISCELLANEOUS
ss. 7.1 AMENDMENTS AND WAIVERS. This Agreement may not be changed, modified
or discharged orally, nor may any waivers or consents be given orally hereunder,
and every such change, modification, discharge, waiver or consent shall be in
writing and signed by the person against which enforcement thereof is sought.
ss. 7.2 INTEGRATION. This Agreement, the Warrant, the Note, the Guaranty
and the Pledge Agreement embody the entire agreement and understanding between
the Purchasers, the Company and Xxxxx X. Paolo, and supersede all prior
agreements and understandings relating to the subject matter hereof.
ss. 7.3 SUCCESSORS AND ASSIGNS. All covenants, agreements, statements,
representations and warranties in this Agreement or any certificate delivered
pursuant hereto by or on behalf of the Company or by or on behalf of the
Purchaser shall bind and inure to the benefit of the respective successors and
assigns of each party hereto.
ss. 7.4 RELIANCE ON AND SURVIVAL OF VARIOUS PROVISIONS. All covenants,
agreements, statements, representations and warranties made herein or in any
certificate delivered pursuant hereto (i) shall be deemed to be material and to
have been relied upon by the Purchaser, notwithstanding any investigation
heretofore or hereafter made by the Purchaser or on the Purchaser's behalf, and
(ii) shall survive the execution and delivery of the Note and shall continue in
full force and effect so long as the Note is outstanding and unpaid provided
that all representations and warranties made herein or in any certificate
delivered hereto shall speak only as of the date made.
ss. 7.5 NOTICES AND OTHER COMMUNICATIONS. All notices, requests, consents
and other communications hereunder shall be in writing and shall be delivered,
or shall be sent by certified or registered mail, return receipt requested,
postage prepaid and addressed to the Purchaser's address set forth on the
signature page of this Agreement, or to such other address as may have been
furnished to the Company by notice from the Purchaser, (ii) if to the Company,
to 000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000X, Xxxxxxx, Xxxxx Xxxxxx 00000, or to
such other address as may have been furnished to the Purchaser. All notices
shall be deemed to have been given at the time of the delivery thereof at the
address of such persons for purposes of this ss. 7.5.
ss. 7.6 GOVERNING LAW. This Agreement, the Notes and Warrant shall be
construed in accordance with and governed by the laws of the State of Delaware,
without regard to its principles of conflicts of law. If any action or
proceeding shall be brought by a Purchaser in order to enforce any right or
remedy under this Agreement or under the Note, the Company hereby consents and
will submit to the jurisdiction of any state or federal court of competent
jurisdiction sitting within the State of Rhode Island.
ss. 7.7 TABLE OF CONTENTS AND HEADINGS. The table of contents and the
headings of the various subdivisions hereof are for convenience of reference
only and shall in no way modify any of the terms or provisions hereof.
E-187
ss. 7.8 COUNTERPARTS. This Agreement may be signed by each party hereto
upon a separate copy in which event both of said copies shall constitute a
single counterpart of this Agreement. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
ARTICLE VIII
DEFINITIONS
In addition to the terms defined elsewhere in this Agreement, except as
otherwise specified or as the context may otherwise require, the following terms
shall have the respective meanings set forth below whenever used in this
Agreement and shall include the singular as well as the plural:
"Affiliate" shall mean any person (other than the Company's Subsidiaries or
the Purchaser) which, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company or any of its Subsidiaries. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
stock, by contract or otherwise.
"Commission" shall mean the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering the
Securities Act, the Exchange Act, or the Trust Indenture Act.
"Common Stock" shall mean and include the Company's authorized common
stock, $.001 par value per share.
"Event of Default" shall mean each of the happenings or circumstances
enumerated in ss. 5.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Incur" (including the correlative terms "incurred", "incurring", "incurs",
and "incurrence"), when used with respect to any Indebtedness, shall mean
create, incur, assume, guarantee or in any manner become liable in respect of
(including, without limitation, by operation of law), such Indebtedness.
"Person" shall include any individual, a corporation, an association, a
partnership, a trust or estate, a government and any agency or political
subdivision thereof, or any other entity.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with Article VI.
E-188
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
similar or successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same may be in effect at the time.
"Solvent" shall mean with respect to any Person on a particular date, on
such date (i) the fair value of the property of such Person is greater than the
total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (ii) the present fair salable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (iii) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as such
debts and liabilities mature, and (iv) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in which
such Person is engaged. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount that,
in light of all the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured
liability.
"Warrant Shares" shall mean any Common Stock issued or issuable upon
exercise of the Warrant.
IN WITNESS WHEREOF, the Purchaser has executed and delivered this Agreement
and the Company has caused this Agreement to be executed, sealed, and delivered
by its officer thereunto duly authorized.
SKYPATH NETWORK, INC.
By: ___________________________________
Xxxxx X. Paolo, President
PURCHASERS
Loan Name and
Date Amount Warrant Shares Address
HYACINTH RESOURCES, INC.
____________ _________ ______________ By: _____________________________
____________ _________ ______________ _________________________________
E-189
____________ _________ ______________ _________________________________
____________ _________ ______________ _________________________________
____________ _________ ______________ _________________________________
____________ _________ ______________ _________________________________
____________ _________ ______________ _________________________________
____________ _________ ______________ _________________________________
____________ _________ ______________ _________________________________
____________ _________ ______________ _________________________________
E-190
