Exhibit 4.4
NOTE AND WARRANT PURCHASE
AGREEMENT
Dated as of April 13, 2001
among
SPEEDCOM WIRELESS CORPORATION
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
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ARTICLE I Purchase and Sale of Notes and Warrants................................................1
Section 1.1 Purchase and Sale of Notes and Warrants................................................1
Section 1.2 Purchase Price and Closing.............................................................1
Section 1.3 Warrants...............................................................................1
Section 1.4 The Warrant Shares.....................................................................2
ARTICLE II Representations and Warranties.........................................................2
Section 2.1 Representations and Warranties of the Company..........................................2
Section 2.2 Representations and Warranties of the Purchasers......................................12
ARTICLE III Covenants.............................................................................14
Section 3.1 Securities Compliance.................................................................14
Section 3.2 Registration and Listing..............................................................14
Section 3.3 Inspection Rights.....................................................................14
Section 3.4 Compliance with Laws..................................................................14
Section 3.5 Keeping of Records and Books of Account...............................................14
Section 3.6 Reporting Requirements................................................................15
Section 3.7 Amendments............................................................................15
Section 3.8 Other Agreements......................................................................15
Section 3.9 Distributions.........................................................................15
Section 3.10 Subsequent Financings; Right of First Refusal.........................................15
Section 3.11 Reservation of Shares.................................................................16
Section 3.12 Transfer Agent Instructions...........................................................17
Section 3.13 Disposition of Assets.................................................................17
ARTICLE IV Conditions............................................................................17
Section 4.1 Conditions Precedent to the Obligation of the Company to
Close and to Sell the Notes and Warrants..............................................17
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Close and to Purchase the Notes and Warrants..........................................18
ARTICLE V Certificate Legend....................................................................20
Section 5.1 Legend................................................................................20
ARTICLE VI Termination...........................................................................21
Section 6.1 Termination by Mutual Consent.........................................................21
Section 6.2 Effect of Termination.................................................................21
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Table of Contents
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(continued)
Page
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ARTICLE VII Indemnification.......................................................................21
Section 7.1 General Indemnity.....................................................................21
Section 7.2 Indemnification Procedure.............................................................21
ARTICLE VIII Miscellaneous.........................................................................22
Section 8.1 Fees and Expenses.....................................................................22
Section 8.2 Specific Enforcement; Consent to Jurisdiction.........................................23
Section 8.3 Entire Agreement; Amendment...........................................................23
Section 8.4 Notices...............................................................................23
Section 8.5 Waivers...............................................................................24
Section 8.6 Headings..............................................................................24
Section 8.7 Successors and Assigns................................................................25
Section 8.8 No Third Party Beneficiaries..........................................................25
Section 8.9 Governing Law.........................................................................25
Section 8.10 Survival..............................................................................25
Section 8.11 Counterparts..........................................................................25
Section 8.12 Publicity.............................................................................25
Section 8.13 Severability..........................................................................25
Section 8.14 Further Assurances....................................................................25
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NOTE AND WARRANT PURCHASE AGREEMENT
This NOTE AND WARRANT PURCHASE AGREEMENT is dated as of April 13, 2001
(this "Agreement") by and among Speedcom Wireless Corporation, a Delaware
corporation (the "Company"), and the entities listed on Exhibit A hereto (each a
"Purchaser" and collectively, the "Purchasers").
The parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Notes and Warrants
Section 1.1 Purchase and Sale of Notes and Warrants. Upon the following
terms and conditions, the Company shall issue and sell to the Purchasers, and
the Purchasers shall purchase from the Company, subordinated promissory notes in
the aggregate principal amount of Three Million Dollars ($3,000,000.00) bearing
interest at the rate of nine percent (9%) per annum for the first ninety (90)
days after issuance, and twelve percent (12%) per annum thereafter, due April
13, 2002, in substantially the form attached hereto as Exhibit B (the "Notes")
and warrants to purchase shares of the Company's common stock, par value $.001
per share (the "Common Stock"), in substantially the form attached hereto as
Exhibit C (the "Warrants"). The Company and the Purchasers are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded by Section 4(2) of the U.S. Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), including Regulation D ("Regulation D"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
Section 1.2 Purchase Price and Closing. The Company agrees to issue and
sell to the Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers agree to purchase the Notes and Warrants for an aggregate
purchase price of Three Million Dollars ($3,000,000.00) (the "Purchase Price").
The closing of the sale and purchase of the Notes and Warrants (the "Closing")
shall take place at the offices of Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP, The
Chrysler Building, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00
a.m., New York time (i) on the date on which the last to be fulfilled or waived
of the conditions set forth in Article IV hereof and applicable to such Closing
shall be fulfilled or waived in accordance herewith or (ii) at such other time
and place or on such date as the Purchasers and the Company may agree upon
(each, a "Closing Date"). Notwithstanding anything to the contrary contained
herein, the aggregate principal amount of Notes to be sold by the Company and
purchased by the Purchasers hereunder shall not exceed Three Million Dollars
($3,000,000.00).
Section 1.3 Warrants. At the Closing, the Company shall have issued to
the Purchasers Warrants to purchase in the aggregate 333,333 shares of Common
Stock. Each of the Warrants shall be exercisable for five (5) years from the
date of issuance and shall have an
exercise price equal to the Warrant Price (as defined in the Warrant). On each
of October 13, 2001 and February 13, 2002, the Company shall issue Warrants
under the same terms as the Warrants issued at the Closing, each for the
purchase of a number of shares of Common Stock equal to twenty percent (20%) of
the quotient of (x) the principal amount of the Notes outstanding on the
relevant anniversary of the Closing divided by (y) $4.50.
Section 1.4 The Warrant Shares. The Company has authorized and has
reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, a sufficient number of its
authorized but unissued shares of its Common Stock to effect the exercise of the
Warrants. Any shares of Common Stock issuable upon exercise of the Warrants (and
such shares when issued) are herein referred to as the "Warrant Shares". The
Notes, the Warrants and the Warrant Shares are sometimes collectively referred
to herein as the "Securities".
ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. In order to
induce the Purchasers to enter into this Agreement and to purchase the Notes,
the Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted. The Company does not have any Subsidiaries (as defined in Section
2.1(g)) or own securities of any kind in any other entity except as set forth in
the Commission Documents (as defined in Section 2.1(f)) or on Schedule 2.1(g)
hereto. The Company and each such Subsidiary is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect. For the purposes of this Agreement, "Material Adverse Effect"
means any adverse effect on the business, operations, properties, prospects or
financial condition of the Company or its Subsidiaries and which is material to
such entity or other entities controlling or controlled by such entity or which
is likely to materially hinder the performance by the Company of its obligations
hereunder and under the other Transaction Documents (as defined in Section
2.1(b) hereof).
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement, the Registration
Rights Agreement attached hereto as Exhibit D (the "Registration Rights
Agreement") and the Irrevocable Transfer Agent Instructions (as defined in
Section 3.12) (collectively, the "Transaction Documents") and to issue and sell
the Securities in accordance with the terms hereof and the Notes and the
Warrants, as applicable. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by it of the
transactions
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contemplated thereby have been duly and validly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its
Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Company. The other Transaction Documents will have
been duly executed and delivered by the Company at the Closing. Each of the
Transaction Documents constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and the
shares thereof currently issued and outstanding as of September 30, 2000 are set
forth on Schedule 2.1(c) hereto. All of the outstanding shares of the Company's
Common Stock and any other security of the Company have been duly and validly
authorized. Except as set forth in this Agreement and the Registration Rights
Agreement and as set forth in the Commission Documents or on Schedule 2.1(c)
hereto, no shares of Common Stock or any other security of the Company are
entitled to preemptive rights or registration rights and there are no
outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and the Registration Rights Agreement and
as set forth on in the Commission Documents or on Schedule 2.1(c) hereto, there
are no contracts, commitments, understandings, or arrangements by which the
Company is or may become bound to issue additional shares of the capital stock
of the Company or options, securities or rights convertible into shares of
capital stock of the Company. Except for customary transfer restrictions
contained in agreements entered into by the Company in order to sell restricted
securities or as provided in the Commission Documents or on Schedule 2.1(c)
hereto, the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any person with respect to any
of its equity or debt securities. Except as set forth on Schedule 2.1(c), the
Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital
stock of the Company. Except as set forth on Schedule 2.1(c) hereto, the offer
and sale of all capital stock, convertible securities, rights, warrants, or
options of the Company issued prior to the Closing complied with all applicable
federal and state securities laws, and no holder of such securities has a right
of rescission or claim for damages with respect thereto which could have a
Material Adverse Effect. The Company has furnished or made available to the
Purchasers true and correct copies of the Company's Certificate of Incorporation
as in effect on the date hereof (the "Certificate"), and the Company's Bylaws as
in effect on the date hereof (the "Bylaws").
(d) Issuance of Securities. The Notes and the Warrants to be issued at
the Closing have been duly authorized by all necessary corporate action and,
when paid for or issued in accordance with the terms hereof, the Notes shall be
validly issued and outstanding, free and clear of all liens, encumbrances and
rights of refusal of any kind. When the Warrant Shares are issued and paid for
in accordance with the terms of this Agreement and as set forth in the Warrants,
such shares will be duly authorized by all necessary corporate action and
validly issued and outstanding, fully paid and nonassessable, free and clear of
all liens, encumbrances
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and rights of refusal of any kind and the holders shall be entitled to all
rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) violate any
provision of the Company's Certificate or Bylaws or any Subsidiary's comparable
charter documents, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries' respective properties or assets are bound, (iii) create or impose
a lien, mortgage, security interest, charge or encumbrance of any nature on any
property or asset of the Company or any of its Subsidiaries under any agreement
or any commitment to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound or by which any of
their respective properties or assets are bound, or (iv) result in a violation
of any federal, state, local or foreign statute, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries are bound or affected, except,
in all cases other than violations pursuant to clauses (i) or (iv) above, for
such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its Subsidiaries is not being
conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in the
aggregate do not and will not have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is required under federal, state, foreign or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under the
Transaction Documents or issue and sell the Notes and the Warrant Shares in
accordance with the terms hereof or thereof (other than any filings which may be
required to be made by the Company with the U.S. Securities and Exchange
Commission (the "Commission"), the Nasdaq SmallCap Market ("Nasdaq"), or state
securities administrators subsequent to the Closing, or any registration
statement which may be filed pursuant hereto).
(f) Commission Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, except as disclosed
on Schedule 2.1(f) hereto, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of
the foregoing including filings incorporated by reference therein being referred
to herein as the "Commission Documents"). The Company has delivered or made
available to the Purchasers true and complete copies of the Commission Documents
filed with the Commission since September 30, 2000. The Company has not provided
to the Purchasers any material non-public information or other information
which, according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so disclosed, other
than
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with respect to the transactions contemplated by this Agreement. The Form 10-QSB
for the fiscal quarter ended September 30, 2000 (the "Form 10-QSB") complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder and other federal,
state and local laws, rules and regulations applicable to such documents, and
Form 10-QSB did not contain any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Commission Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements), and fairly present in all material respects the financial position
of the Company and its Subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 2.1(g) hereto
set forth each Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person's
ownership of the outstanding stock or other interests of such Subsidiary. For
the purposes of this Agreement, "Subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by the Company and/or any of its other
Subsidiaries. All of the outstanding shares of capital stock of each Subsidiary
have been duly authorized and validly issued, and are fully paid and
nonassessable. There are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any
Subsidiary for the purchase or acquisition of any shares of capital stock of any
Subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any Subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence except as set forth
on Schedule 2.1(g) hereto. Neither the Company nor any Subsidiary is party to,
nor has any knowledge of, any agreement restricting the voting or transfer of
any shares of the capital stock of any Subsidiary.
(h) No Material Adverse Change. Since September 30, 2000, the Company
has not experienced or suffered any Material Adverse Effect, except as disclosed
in the Commission Documents or on Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed in the Commission
Documents or on Schedule 2.1(i) hereto, neither the Company nor any of its
Subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) other than those incurred in the ordinary
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course of the Company's or its Subsidiaries respective businesses since
September 30, 2000 and which, individually or in the aggregate, do not or would
not have a Material Adverse Effect on the Company or its Subsidiaries.
(j) No Undisclosed Events or Circumstances. Since September 30, 2000,
except as disclosed on Schedule 2.1(j) hereto, no event or circumstance has
occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness. The Commission Documents or Schedule 2.1(k) hereto
set forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the Company or any
Subsidiary has commitments. For the purposes of this Agreement, "Indebtedness"
shall mean (a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $100,000 due under leases required to
be capitalized in accordance with GAAP. Except as disclosed on Schedule 2.1(k),
neither the Company nor any Subsidiary is in default with respect to any
Indebtedness.
(l) Title to Assets. Each of the Company and the Subsidiaries has good
and marketable title to all of its real and personal property, free and clear of
any mortgages, pledges, charges, liens, security interests or other encumbrances
of any nature whatsoever, except for those indicated in the Commission Documents
or on Schedule 2.1(l) hereto or such that, individually or in the aggregate, do
not have a Material Adverse Effect. All said leases of the Company and each of
its Subsidiaries are valid and subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim, investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of the other
Transaction Documents or any of the transactions contemplated hereby or thereby
or any action taken or to be taken pursuant hereto or thereto. Except as set
forth in the Commission Documents or on Schedule 2.1(m) hereto, there is no
action, suit, claim, investigation, arbitration, alternate dispute resolution
proceeding or other proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any Subsidiary or any of their
respective properties or assets. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any Subsidiary or any officers or
directors of the Company or Subsidiary in their capacities as such.
(n) Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission
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Documents or on Schedule 2.1(n) hereto or such that, individually or in the
aggregate, the noncompliance therewith would not have a Material Adverse Effect.
The Company and each of its Subsidiaries have all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless
the failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except as set forth on Schedule 2.1(o) hereto, the Company
and each of the Subsidiaries has accurately prepared and filed all federal,
state and other tax returns required by law to be filed by it, has paid or made
provisions for the payment of all taxes shown to be due and all additional
assessments, and adequate provisions have been and are reflected in the
financial statements of the Company and the Subsidiaries for all current taxes
and other charges to which the Company or any Subsidiary is subject and which
are not currently due and payable. Except as disclosed on Schedule 2.1(o)
hereto, none of the federal income tax returns of the Company or any Subsidiary
have been audited by the Internal Revenue Service. The Company has no knowledge
of any additional assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or threatened
against the Company or any Subsidiary for any period, nor of any basis for any
such assessment, adjustment or contingency.
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the
Company has not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders' structuring fees,
financial advisory fees or other similar fees in connection with the Transaction
Documents.
(q) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchasers by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
(r) Operation of Business. The Company and each of the Subsidiaries
owns or possesses all patents, trademarks, domain names (whether or not
registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service
marks, trade names, copyrights, licenses and authorizations, including, but not
limited to, those listed in the Commission Documents or on Schedule 2.1(r)
hereto, and all rights with respect to the foregoing, which are necessary for
the conduct of its business as now conducted without any conflict with the
rights of others.
(s) Environmental Compliance. Except as disclosed on Schedule 2.1(s)
hereto, the Company and each of its Subsidiaries have obtained all material
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws. Schedule 2.1(s)
hereto sets forth all material permits, licenses and other authorizations issued
under any Environmental Laws to the Company or its Subsidiaries.
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"Environmental Laws" shall mean all applicable laws relating to the protection
of the environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except as set
forth on Schedule 2.1(s) hereto, the Company has all necessary governmental
approvals required under all Environmental Laws and used in its business or in
the business of any of its Subsidiaries. The Company and each of its
Subsidiaries are also in compliance with all other limitations, restrictions,
conditions, standards, requirements, schedules and timetables required or
imposed under all Environmental Laws. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect, there are no
past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company or its Subsidiaries
that violate or may violate any Environmental Law after the Closing or that may
give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including, without
limitation, underground storage tanks), disposal, transport or handling, or the
emission, discharge, release or threatened release of any hazardous substance.
"Environmental Liabilities" means all liabilities of a person (whether such
liabilities are owed by such person to governmental authorities, third parties
or otherwise) whether currently in existence or arising hereafter which arise
under or relate to any Environmental Law.
(t) Books and Records; Internal Accounting Controls. The records and
documents of the Company and its Subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and the
Subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. The Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate actions are taken
with respect to any differences.
(u) Material Agreements. Except for the Transaction Documents and as
set forth in the Commission Documents or on Schedule 2.1(u) hereto, neither the
Company nor any Subsidiary is a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the Commission (collectively, "Material
Agreements") if the Company or any Subsidiary were registering securities under
the Securities Act. The Company and each of its Subsidiaries has in all material
respects performed all the obligations required to be performed by them to date
under the foregoing agreements, have received no notice of default and, to the
best of the
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Company's knowledge are not in default under any Material Agreement now in
effect, the result of which could cause a Material Adverse Effect. No written or
oral contract, instrument, agreement, commitment, obligation, plan or
arrangement of the Company or of any Subsidiary limits or shall limit the
payment of interest on the Notes, or dividends on its Common Stock.
(v) Transactions with Affiliates. Except as set forth in the Commission
Documents or on Schedule 2.1(v) hereto, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions exceeding $100,000 between (a) the Company, any
Subsidiary or any of their respective customers or suppliers on the one hand,
and (b) on the other hand, any officer, employee, consultant or director of the
Company, or any of its Subsidiaries, or any person owning any capital stock of
the Company or any Subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder.
(w) Securities Act of 1933. The Company has complied and will comply
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Notes, the Warrants and the Warrant Shares
hereunder. Neither the Company nor anyone acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to buy any of the
Securities, or similar securities to, or solicit offers with respect thereto
from, or enter into any preliminary conversations or negotiations relating
thereto with, any person, or has taken or will take any action so as to bring
the issuance and sale of any of the Securities under the registration provisions
of the Securities Act and applicable state securities laws. Neither the Company
nor any of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the offer
or sale of any of the Securities.
(x) Governmental Approvals. Except as set forth in the Commission
Documents or on Schedule 2.1(x) hereto, and except for the filing of any notice
prior or subsequent to the Closing that may be required under applicable state
and/or federal securities laws (which if required, shall be filed on a timely
basis), no authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the execution or delivery of the Notes and the
Warrants, or for the performance by the Company of its obligations under the
Transaction Documents.
(y) Employees. Neither the Company nor any Subsidiary has any
collective bargaining arrangements or agreements covering any of its employees.
Except as set forth in the Commission Documents or on Schedule 2.1(y) hereto,
neither the Company nor any Subsidiary has any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such Subsidiary. Since
September 30, 2000, no officer, consultant or key employee of the Company or any
Subsidiary whose termination, either individually or in the aggregate, could
have a Material Adverse Effect, has terminated or, to the
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knowledge of the Company, has any present intention of terminating his or her
employment or engagement with the Company or any Subsidiary.
(z) Absence of Certain Developments. Except as set forth in the
Commission Documents or on Schedule 2.1(z) hereto, since September 30, 2000,
neither the Company nor any Subsidiary has:
(i) issued any stock, bonds or other corporate securities or
any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such Subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;
(v) sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
(vii) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(x) entered into any other transaction other than in the
ordinary course of business, or entered into any other material transaction,
whether or not in the ordinary course of business;
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(xi) made charitable contributions or pledges in excess of
$25,000;
(xii) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment;
(xiv) effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company or its Subsidiaries; or
(xv) entered into an agreement, written or otherwise, to take
any of the foregoing actions.
(aa) Use of Proceeds. The proceeds from the sale of the Notes and the
Warrant Shares will be used by the Company for working capital and general
corporate purposes.
(bb) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(cc) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company or any of its
Subsidiaries which is or would be materially adverse to the Company and its
Subsidiaries. The execution and delivery of this Agreement and the issue and
sale of the Notes and the Warrant Shares will not involve any transaction which
is subject to the prohibitions of Section 406 of ERISA or in connection with
which a tax could be imposed pursuant to Section 4975 of the Internal Revenue
Code of 1986, as amended, provided that, if any Purchaser, or any person or
entity that owns a beneficial interest in any Purchaser, is an "employee pension
benefit plan" (within the meaning of Section 3(2) of ERISA) with respect to
which the Company is a "party in interest" (within the meaning of Section 3(14)
of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(cc), the term "Plan" shall mean
an "employee pension benefit plan" (as defined in Section 3 of ERISA) which is
or has been established or maintained, or to which contributions are or have
been made, by the Company or any Subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any Subsidiary, is
under common control, as described in Section 414(b) or (c) of the Code.
(dd) Dilutive Effect. The Company understands and acknowledges that the
number of Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue Warrant Shares upon exercise of the Warrants in accordance with this
Agreement, is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interest of other stockholders of the
Company.
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Section 2.2 Representations and Warranties of the Purchasers. Each of
the Purchasers hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:
(a) Organization and Standing of the Purchaser. If the Purchaser is an
entity, such Purchaser is a corporation, limited liability company or
partnership duly incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization and Power. The Purchaser has the requisite power and
authority to enter into and perform this Agreement and to purchase the Notes and
Warrants being sold to it hereunder. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Purchaser and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and no further
consent or authorization of the Purchaser or its Board of Directors,
stockholders, or partners, as the case may be, is required. Each of this
Agreement and the Registration Rights Agreement has been duly authorized,
executed and delivered by the Purchaser. Each of this Agreement and the
Registration Rights Agreement constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Purchaser enforceable against
the Purchaser in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the consummation by the
Purchaser of the transactions contemplated hereby and thereby or relating hereto
do not and will not (i) result in a violation of the Purchaser's charter
documents or bylaws or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which the Purchaser is
a party, or result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to the
Purchaser or its properties (except for such conflicts, defaults and violations
as would not, individually or in the aggregate, have a material adverse effect
on the Purchaser). The Purchaser is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or the Registration Rights Agreement, or
relating hereto or thereto, or to purchase the Notes in accordance with the
terms hereof, provided that for purposes of the representation made in this
sentence, the Purchaser is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.
(d) Acquisition for Investment. The Purchaser is purchasing the Notes
and acquiring the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with distribution.
The Purchaser does not have a present intention to sell any of the Securities,
nor a present arrangement (whether or not legally binding) or intention to
effect any distribution of any of the Securities to or through any person or
entity;
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provided, however, that by making the representations herein and subject to
Section 2.2(f) below, the Purchaser does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of any
of the Securities at any time in accordance with federal and state securities
laws applicable to such disposition. The Purchaser acknowledges that it (i) has
such knowledge and experience in financial and business matters such that
Purchaser is capable of evaluating the merits and risks of Purchaser's
investment in the Company and is (ii) able to bear the financial risks
associated with an investment in the Securities and (iii) that it has been given
full access to such records of the Company and the Subsidiaries and to the
officers of the Company and the Subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation.
(e) Rule 144. The Purchaser understands that the Securities must be
held indefinitely unless such Securities are registered under the Securities Act
or an exemption from registration is available. The Purchaser acknowledges that
such person is familiar with Rule 144 of the rules and regulations of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that the Purchaser has been advised that Rule 144 permits resales only under
certain circumstances. The Purchaser understands that to the extent that Rule
144 is not available, the Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.
(f) General. The Purchaser understands that the Securities are being
offered and sold in reliance on a transactional exemption from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order to
determine the applicability of such exemptions and the suitability of the
Purchaser to acquire the Securities. Purchaser understands that no United States
federal or state agency or any government or governmental agency has passed upon
or made any recommendation or endorsement of the Securities.
(g) Opportunities for Additional Information. The Purchaser
acknowledges that the Purchaser has had the opportunity to ask questions of and
receive answers from, or obtain additional information from, the executive
officers of the Company concerning the financial and other affairs of the
Company, and to the extent deemed necessary in light of the Purchaser's personal
knowledge of the Company's affairs, the Purchaser has asked such questions and
received answers to the full satisfaction of the Purchaser, and the Purchaser
desires to invest in the Company.
(h) No General Solicitation. The Purchaser acknowledges that the
Securities were not offered to the Purchaser by means of any form of general or
public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which the Purchaser was invited by any of the foregoing means of communications.
(i) Accredited Investor. The Purchaser is an accredited investor (as
defined in Rule 501 of Regulation D), and the Purchaser has such experience in
business and financial
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matters that it is capable of evaluating the merits and risks of an investment
in the Securities. The Purchaser acknowledges that an investment in the
Securities is speculative and involves a high degree of risk.
ARTICLE III
Covenants
The Company covenants with the Purchasers as follows, which covenants
are for the benefit of the Purchasers and their respective permitted assignees.
Section 3.1 Securities Compliance. The Company shall notify the
Commission in accordance with their rules and regulations, of the transactions
contemplated by any of the Transaction Documents and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Securities to
the Purchasers, or their respective subsequent holders.
Section 3.2 Registration and Listing. The Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement and the Registration Rights
Agreement, and will not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock on Nasdaq or any successor market. The
Company will promptly file the "Listing Application" for, or in connection with,
the issuance and delivery of the Warrant Shares.
Section 3.3 Inspection Rights. The Company shall permit, during normal
business hours and upon reasonable request and reasonable notice, the Purchasers
or any employees, agents or representatives thereof, so long as the Purchasers
shall be obligated hereunder to purchase the Notes or shall beneficially own any
Notes, or shall own Warrant Shares or Warrants to purchase Warrant Shares which,
in the aggregate, represent more than two percent (2%) of the total combined
voting power of all voting securities then outstanding, to examine and make
reasonable copies of and extracts from the records and books of account of, and
visit and inspect, during the term of the Notes, the properties, assets,
operations and business of the Company and any Subsidiary, and to discuss the
affairs, finances and accounts of the Company and any Subsidiary with any of its
officers, consultants, directors, and key employees.
Section 3.4 Compliance with Laws. The Company shall comply, and cause
each Subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
Section 3.5 Keeping of Records and Books of Account. The Company shall
keep and cause each Subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all
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financial transactions of the Company and its Subsidiaries, and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
Section 3.6 Reporting Requirements. The Company shall furnish the
following to the Purchasers so long as the Purchasers shall be obligated
hereunder to purchase the Notes or shall beneficially own any Notes or Warrants,
or shall own Warrant Shares which, in the aggregate, represent more than two
percent (2%) of the total combined voting power of all voting securities then
outstanding, provided, however, that the Company shall not be obligated to
furnish the following, if the following reports have been filed by the Company
with the Commission pursuant to the Commission's "electronic data gathering and
retrieval" (XXXXX) service:
(a) Quarterly Reports filed with the Commission on Form 10-QSB as soon
as available, and in any event within forty-five (45) days after the end of each
of the first three (3) fiscal quarters of the Company;
(b) Annual Reports filed with the Commission on Form 10-K as soon as
available, and in any event within one hundred six (106) days after the end of
each fiscal year of the Company; and
(c) Copies of all notices and information, including without limitation
notices and proxy statements in connection with any meetings, that are provided
to holders of shares of Common Stock, contemporaneously with the delivery of
such notices or information to such holders of Common Stock.
Section 3.7 Amendments. The Company shall not amend or waive any
provision of the Certificate or Bylaws of the Company or the Registration Rights
Agreement in any way that would adversely affect the exercise rights, voting
rights, prepayment rights or redemption rights of the holders of the Notes or
the Warrants.
Section 3.8 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any Subsidiary under any
Transaction Document.
Section 3.9 Distributions. So long as any Securities remain
outstanding, the Company agrees that it shall not, without the prior written
consent of the Purchasers, which consent may be granted or denied in the sole
discretion of the Purchasers (i) declare or pay any dividends (other than a
stock dividend or stock split) or make any distributions to any holder(s) of
Common Stock or (ii) purchase or otherwise acquire for value, directly or
indirectly, any Common Stock or other equity security of the Company.
Section 3.10 Subsequent Financings; Right of First Refusal. (a) So long
as the Notes remain outstanding, the Company covenants and agrees that it will
not, without the prior written consent of the Purchasers, enter into any
subsequent offer or sale to, or exchange with (or other type of distribution
to), any third party (a "Subsequent Financing"), of Common Stock or any
securities convertible, exercisable or exchangeable into Common Stock, including
debt securities (collectively, the "Financing Securities") other than a
Permitted Financing (as defined
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hereinafter). For purposes of this Agreement, "Permitted Financing" shall mean
any transaction involving the Company's (i) issuance of any Financing Securities
(other than for cash) in connection with a Strategic Merger (as defined in
Section 7(e) of the Notes), (ii) issuance of Common Stock or the issuance of
options to purchase Common Stock as such is related to any employee stock
ownership plan, or (iii) any transaction where the first use of the proceeds
from such transaction would be used to redeem all of the Notes in accordance
with Section 7 of the Notes.
(b) So long as the Notes remain outstanding and commencing ninety (90)
days after the date hereof, the Company covenants and agrees to promptly notify
(in no event later than five (5) days after making or receiving an applicable
offer) in writing (a "Rights Notice") the Purchasers of the terms and conditions
of any proposed Subsequent Financing. The Rights Notice shall describe, in
reasonable detail, the proposed Subsequent Financing, the proposed closing date
of the Subsequent Financing, which shall be within thirty (30) calendar days
from the date of the Rights Notice, including, without limitation, all of the
terms and conditions thereof. The Rights Notice shall provide the Purchasers an
option (the "Rights Option") during the thirty (30) calendar day period
following delivery of the Rights Notice (the "Option Period") to purchase such
amount as the Company and the Purchasers may agree to up to such Purchaser's pro
rata portion of the Purchase Price, of the securities being offered in such
Subsequent Financing on the same, absolute terms and conditions as contemplated
by such Subsequent Financing (the "First Refusal Rights"). Delivery of any
Rights Notice constitutes a representation and warranty by the Company that
there are no other material terms and conditions, arrangements, agreements or
otherwise except for those disclosed in the Rights Notice, to provide additional
compensation to any party participating in any proposed Subsequent Financing,
including, but not limited to, additional compensation based on changes in the
Purchase Price or any type of reset or adjustment of a purchase or conversion
price or to issue additional securities at any time after the closing date of a
Subsequent Financing. If the Company does not receive notice of exercise of the
Rights Option from the Purchasers within the Option Period, the Company shall
have the right to close the Subsequent Financing on the scheduled closing date
with a third party; provided that all of the terms and conditions of the closing
are the same as those provided to the Purchasers in the Rights Notice. If the
closing of the proposed Subsequent Financing does not occur on that date, any
closing of the contemplated Subsequent Financing or any other Subsequent
Financing shall be subject to all of the provisions of this Section 3.10,
including, without limitation, the delivery of a new Rights Notice.
(c) If the Company fails to complete a Strategic Merger within ninety
(90) days of the date hereof, the Company shall use its best efforts to enter
into a Subsequent Financing which will provide that the first use of the
proceeds from such transaction will be applied to prepay the Notes in full.
Section 3.11 Reservation of Shares. As of each Warrant issuance date,
the Company shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting the exercise of the Warrants, a sufficient
number of shares of Common Stock to effect the issuance of the Warrant Shares
issuable upon exercise of such Warrants. So long as any of the Warrants remain
outstanding, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to effect the issuance of the Warrant Shares.
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Section 3.12 Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of the Purchasers or their
respective nominee(s), for the Warrant Shares in such amounts as specified from
time to time by the Purchasers to the Company upon exercise of the Warrants, in
the form of Exhibit E attached hereto (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Warrant Shares under the Securities
Act, all such certificates shall bear the restrictive legend specified in
Section 5.1 of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
3.12 will be given by the Company to its transfer agent and that the Securities
shall otherwise be freely transferable on the books and records of the Company
as and to the extent provided in this Agreement. Nothing in this Section 3.12
shall affect in any way the Purchasers' obligations and agreements set forth in
Section 5.1 to comply with all applicable prospectus delivery requirements, if
any, upon the resale of the Warrant Shares. If a Purchaser provides the Company
with an opinion of counsel, in a generally acceptable form, to the effect that a
public sale, assignment or transfer of the Securities may be made without
registration under the Securities Act or the Purchaser provides the Company with
reasonable assurances that the Securities can be sold pursuant to Rule 144
without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Warrant Shares, promptly instruct its transfer
agent to issue one or more certificates in such name and in such denominations
as specified by the Purchaser and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations under this Section 3.12 will
cause irreparable harm to the Purchasers by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this Section 3.12 will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 3.12, that the Purchasers shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
Section 3.13 Disposition of Assets. So long as the Notes remain
outstanding, neither the Company nor any Subsidiary shall sell, transfer or
otherwise dispose of any of its properties, assets and rights including, without
limitation, its software and intellectual property, to any person except for
sales to customers in the ordinary course of business or with the prior written
consent of the Purchasers.
ARTICLE IV
Conditions
Section 4.1 Conditions Precedent to the Obligation of the Company to
Close and to Sell the Notes and Warrants. The obligation hereunder of the
Company to close and issue and sell the Notes and the Warrants to the Purchasers
at the Closing is subject to the satisfaction or waiver, at or before the
Closing of the conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion.
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(a) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of the Purchasers shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) Performance by the Purchasers. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Close and to Purchase the Notes and Warrants. The obligation hereunder of the
Purchasers to consummate the transactions contemplated by this Agreement is
subject to the satisfaction or waiver, at or before the Closing Date, of each of
the conditions set forth below. These conditions are for the Purchasers' sole
benefit and may be waived by the Purchasers at any time in their sole
discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time, except for representations and warranties that speak
as of a particular date, which shall be true and correct in all material
respects as of such date.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to such Closing Date.
(c) No Suspension, Etc. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the
Commission (except for any suspension of trading of limited duration agreed to
by the Company, which suspension shall be terminated prior to the Closing), and,
at any time prior to such Closing Date, trading in securities generally as
reported by Bloomberg Financial Markets ("Bloomberg") shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by Bloomberg, or on the New York Stock
Exchange, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international
calamity or crisis of such magnitude in its effect on, or any material adverse
change in any financial market which, in each case, in the judgment of the
Purchasers, makes it impracticable or inadvisable to purchase the Notes.
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(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company or any Subsidiary, or any of the officers, directors or affiliates
of the Company or any Subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
(f) Opinion of Counsel, Etc. At the Closing, the Purchasers shall have
received an opinion of counsel to the Company, dated the date of such Closing,
in the form of Exhibit F hereto and such other certificates and documents as the
Purchasers or their counsel shall reasonably require incident to such Closing.
(g) Registration Rights Agreement. At the Closing, the Company shall
have executed and delivered the Registration Rights Agreement to the Purchasers.
(h) Certificates. At the Closing, the Company shall have delivered to
the Purchasers originally executed Notes and Warrants (each in such
denominations as the Purchasers may request) being acquired by the Purchasers at
such Closing.
(i) Resolutions. Prior to the Closing Date, the Board of Directors of
the Company shall have adopted resolutions consistent with Section 2.1(b) hereof
in a form reasonably acceptable to the Purchasers (the "Resolutions").
(j) Reservation of Shares. As of the Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the exercise of the Warrants, a sufficient number of shares
of Common Stock to effect the issuance of the Warrant Shares issuable upon
exercise of the Warrants outstanding on such Closing Date (assuming all such
Warrants were fully exercisable on such date regardless of any limitation on the
timing or amount of such exercises).
(k) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in the form of Exhibit E attached hereto, shall have been
delivered to and acknowledged in writing by the Company's transfer agent.
(l) Secretary's Certificate. The Company shall have delivered to the
Purchasers a secretary's certificate, dated as of the Closing Date, as to (i)
the Resolutions, (ii) the Certificate, (iii) the Bylaws, each as in effect at
the Closing, and (iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other documents required to
be executed or delivered in connection therewith.
(m) Officer's Certificate. At the Closing, the Company shall have
delivered to the Purchasers a certificate of an executive officer of the
Company, dated as of the Closing Date, confirming the accuracy of the Company's
representations, warranties and covenants as of the
-19-
Closing Date and confirming the compliance by the Company with the conditions
precedent set forth in this Section 4.2 as of the Closing Date.
ARTICLE V
Certificate Legend
Section 5.1 Legend. Each certificate representing the Notes, the
Warrants and the Warrant Shares shall be stamped or otherwise imprinted with a
legend substantially in the following form (in addition to any legend required
by applicable state securities or "blue sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR SPEEDCOM
WIRELESS CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
The Company agrees to reissue certificates representing any of the
Securities, without the legend set forth above if at such time, prior to making
any transfer of any such Securities, such holder thereof shall give written
notice to the Company describing the manner and terms of such transfer and
removal as the Company may reasonably request. Such proposed transfer will not
be effected until: (a) the Company has notified such holder that either (i) in
the opinion of Company counsel, the registration of such Notes, Warrants or
Warrant Shares under the Securities Act is not required in connection with such
proposed transfer; or (ii) a registration statement under the Securities Act
covering such proposed disposition has been filed by the Company with the
Commission and has become effective under the Securities Act; and (b) the
Company has notified such holder that either: (i) in the opinion of Company
counsel, the registration or qualification under the securities or "blue sky"
laws of any state is not required in connection with such proposed disposition,
or (ii) compliance with applicable state securities or "blue sky" laws has been
effected. The Company will use its best efforts to respond to any such notice
from a holder within five (5) days. In the case of any proposed transfer under
this Section 5, the Company will use reasonable efforts to comply with any such
applicable state securities or "blue sky" laws, but shall in no event be
required, in connection therewith, to qualify to do business in any state where
it is not then qualified or to take any action that would subject it to tax or
to the general service of process in any state where it is not then subject. The
restrictions on transfer contained in Section 5.1 shall be in addition to, and
not by way of limitation of, any other restrictions on transfer contained in any
other section of this Agreement.
-20-
ARTICLE VI
Termination
Section 6.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing Date by the mutual written consent
of the Company and the Purchasers.
Section 6.2 Effect of Termination. In the event of termination by the
Company or the Purchasers, written notice thereof shall forthwith be given to
the other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 6.1 herein, this Agreement shall become void
and of no further force and effect, except for Sections 8.1 and 8.2, and Article
VII herein. Nothing in this Section 6.2 shall be deemed to release the Company
or any Purchaser from any liability for any breach under this Agreement or the
Registration Rights Agreement, or to impair the rights of the Company and the
Purchasers to compel specific performance by the other party of its obligations
under this Agreement and the Registration Rights Agreement.
ARTICLE VII
Indemnification
Section 7.1 General Indemnity. The Company agrees to indemnify and hold
harmless the Purchasers (and their respective directors, officers, affiliates,
agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements) incurred by
the Purchasers as a result of any inaccuracy in or breach of the
representations, warranties or covenants made by the Company herein. The
Purchasers severally but not jointly agree to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, reasonable attorneys' fees, charges
and disbursements) incurred by the Company as result of any inaccuracy in or
breach of the representations, warranties or covenants made by the Purchasers
herein.
Section 7.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect to such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for
-21-
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party's costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VII to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VII shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
ARTICLE VIII
Miscellaneous
Section 8.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, provided,
however, that the Company shall pay such fees and expenses set forth on Schedule
2.1(p) hereto, and all reasonable attorneys' fees and expenses (exclusive of
disbursements and out-of-pocket expenses) incurred by the Purchasers in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Transaction Documents and the transactions contemplated
thereunder up to $25,000. In addition, the Company shall pay all reasonable fees
and expenses incurred by the Purchasers in connection with the filing and
declaration of effectiveness by the Commission of the Registration Statement (as
defined in the Registration Rights Agreement), any amendments, modifications or
waivers of
-22-
this Agreement or any of the other Transaction Documents or incurred in
connection with the enforcement of this Agreement and any of the other
Transaction Documents, including, without limitation, all reasonable attorneys'
fees, disbursements and expenses.
Section 8.2 Specific Enforcement; Consent to Jurisdiction.
(a) The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Documents were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchasers (i) hereby irrevocably
submits to the jurisdiction of the United States District Court sitting in the
Southern District of New York and the courts of the State of New York located in
New York county for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement or any of the other Transaction Documents or
the transactions contemplated hereby or thereby and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the
Purchasers consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section 8.2 shall affect or limit any right to serve process in any other manner
permitted by law.
Section 8.3 Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding and agreement of the
parties with respect to the matters covered hereby and, except as specifically
set forth herein or in the other Transaction Documents, neither the Company nor
the Purchasers make any representation, warranty, covenant or undertaking with
respect to such matters, and they supersede all prior understandings and
agreements with respect to said subject matter, all of which are merged herein.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the holders of at least two-thirds (2/3) of
the principal amount of the Notes then outstanding, and no provision hereof may
be waived other than by a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought. No such amendment shall
be effective to the extent that it applies to less than all of the holders of
the Notes then outstanding. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration is also offered to
all of the parties to the Transaction Documents or holders of Notes, as the case
may be.
Section 8.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated
-23-
below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company: Speedcom Wireless Corporation
0000 Xxxxxxxxxxxx Xxxxxxxxx, X-0
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxx Xxxxxx, Chief Financial Officer
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
with copies (which copies
shall not constitute notice
to the Company) to: Xxxxx & Lardner
One IBM Plaza
000 X. Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No: (000) 000-0000
If to any Purchaser: At the address of such Purchaser set forth on
Exhibit A to this Agreement
with copies to: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Telephone Number: (000) 000-0000
Fax: (000) 000-0000
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 8.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 8.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
-24-
Section 8.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
After the Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.
The Purchasers may assign the Notes, the Warrants and their rights under this
Agreement, the Registration Rights Agreement, the other Transaction Documents
and any other rights hereto and thereto without the consent of the Company.
Section 8.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 8.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions. This Agreement shall not be
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.
Section 8.10 Survival. The representations and warranties of the
Company and the Purchasers contained in Sections 2.1(o) and 2.1(s) should
survive indefinitely and those contained in Article II, with the exception of
Sections 2.1(o) and 2.1(s), shall survive the execution and delivery hereof and
the Closing until the date three (3) years from the Closing Date, and the
agreements and covenants set forth in Articles I, III, V, VII and VIII of this
Agreement shall survive the execution and delivery hereof and the Closing
hereunder.
Section 8.11 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart.
Section 8.12 Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the names of the Purchasers
without the consent of the Purchasers, which consent shall not be unreasonably
withheld, or unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
Section 8.13 Severability. The provisions of this Agreement and the
Registration Rights Agreement are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of the provisions contained in this Agreement or the Registration Rights
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement or the Registration
Rights Agreement, and this Agreement and the Registration Rights Agreement shall
be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the maximum extent
possible.
Section 8.14 Further Assurances. From and after the date of this
Agreement, upon the request of any Purchaser or the Company, each of the Company
and the Purchasers
-25-
shall execute and deliver such instrument, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement, the Registration Rights
Agreement, the Notes and the Warrants.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-26-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
SPEEDCOM WIRELESS CORPORATION
By:_____________________________________
Name:
Title:
S.A.C. CAPITAL ASSOCIATES, LLC
By:_____________________________________
Name:
Title:
SDS MERCHANT FUND, L.P.
By:_____________________________________
Name: Xxxxx Xxxxx
Title: Managing Member
-27-
EXHIBIT A to the
NOTE AND WARRANT PURCHASE AGREEMENT
FOR SPEEDCOM WIRELESS CORPORATION
Names and Addresses of Purchasers
---------------------------------
S.A.C. Capital Associates, LLC
c/o S.A.C. Capital Advisors, LLC
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: General Counsel
Tel. no.: (000) 000-0000
Fax no.: (000) 000-0000
SDS Merchant Fund, L.P.
c/o SDS Capital Partners
Xxx Xxxxx Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
Tel. no.: (000) 000-0000
Fax no.: (000) 000-0000
Exhibit G
[FORM OF OPINION]
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has the requisite
corporate power to own, lease and operate its properties and assets, and to
carry on its business as presently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Transaction Documents and to issue
the Notes, the Warrants and the Warrant Shares. The execution, delivery and
performance of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. Each of the Transaction Documents have been duly executed and
delivered, and the Notes and the Warrants have been duly executed, issued and
delivered by the Company and each of the Transaction Documents constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its respective terms. The Warrant Shares are not
subject to any preemptive rights under the Certificate of Incorporation or the
Bylaws.
3. The Notes have been duly authorized and, when delivered against
payment in full as provided in the Purchase Agreement, will be validly issued,
fully paid and nonassessable. The Warrant Shares, have been duly authorized and
reserved for issuance, and, when delivered upon exercise or against payment in
full as provided in the Warrants, will be validly issued, fully paid and
nonassessable.
4. The execution, delivery and performance of and compliance with the
terms of the Transaction Documents and the issuance of the Notes, the Warrants
and the Warrant Shares do not (a) violate any provision of the Certificate of
Incorporation or Bylaws, (b) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Company is a party, (c) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment to which the
Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (d) result in a violation of any
Federal, state, local or foreign statute, rule, regulation, order, judgment,
injunction or decree (including Federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected, except, in all cases other than violations
pursuant to clauses (a) and (d) above, for such conflicts, default,
terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect.
5. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority on the part of the Company is required
under Federal, state or local law, rule or regulation in connection with the
valid execution, delivery and performance of the Transaction Documents, or the
offer, sale or issuance of the Notes, the Warrants or the Warrant Shares other
than filings as may be required by the Nasdaq rules and regulations.
6. There is no action, suit, claim, investigation or proceeding pending
or threatened against the Company which questions the validity of the Agreement
or the transactions contemplated thereby or any action taken or to be taken
pursuant thereto. There is no action, suit, claim, investigation or proceeding
pending, or to our knowledge, threatened, against or involving the Company or
any of its properties or assets and which, if adversely determined, is
reasonably likely to result in a Material Adverse Effect. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such.
7. Each of the Company and its subsidiaries have all franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now being conducted
by it, except for such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, the failure to possess
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
8. The offer, issuance and sale of the Notes and the Warrants and the
offer, issuance and sale of the Warrant Shares pursuant to the Agreement, the
Notes and the Warrants, as applicable, are exempt from the registration
requirements of the Securities Act.
9. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
Schedule 2.1(c)
---------------
Authorized Capital Stock: 30,000,000 common shares; 10,000,000 preferred
shares
Issued as of March 16, 2001: 9,324,523 common shares; 0 preferred shares
All issued shares as of 9/30/00 were registered shares and free trading, subject
to rules for affiliates under rules 144 and 145. Approximately 85,000 of the
outstanding shares have registration rights as of March 16, 2001.
Since March 16, 2001, SPEEDCOM has issued the following shares:
SRI International: 325,000 shares
Option exercise: approximately 10,000
Additionally, SPEEDCOM has issued $462,800 of convertible debt securities which
could result in up to 123,000 shares of additional issuance. These shares have
registration rights.
SPEEDCOM currently has senior secured debt of $1.55 million, a bridge loan from
Xxxxx Xxxxxxxxxxx of $500,000, the $462,800 of convertible debt referred to
above, approximately $300,000 of trade notes payable, plus accrued expenses and
payables in the ordinary course.
As of December 31, 2000, SPEEDCOM had outstanding contract rights, including
options and warrants as follows: Employee options granted: 2,937,978; vested
1,037,579. Publicly traded warrants are as disclosed in the company's SEC
filings and could result in approximately 2.2 million shares of dilution if the
stock price rises above $27 before October 7, 2001. Private warrants totalling
approximately 230,000 are as disclosed in the company's SEC filings except for
36,500 warrants issued to Xxxxx Xxxxxxxxxxx as partial compensation for his
$500,000 bridge loan. At $5.00 - 6.00 per share, it is estimated that potential
future dilution could total approximately (under FASB 128) 1,400,000 shares
under all vested contract rights (including certain anti-dilution rights held by
SRI and one angel investor) (the publicly traded warrants have strike prices
above $27 per share). Options are registered either on Form S-4 or S-8.
Since December 31, 2000, SPEEDCOM has issued approximately 360,200 options to
employees with market based strike prices. These options vest over the next four
years.
The XxXxxxxx family is under a "lock-up agreement" until December 2001.
Total shares for registration are approximately 533,000. Of these, about 100,000
have not vested yet under the SRI agreement.
Schedule 2.1(f)
---------------
None.
Schedule 2.1(g)
---------------
SPEEDCOM has four subsidiaries: Installguys, Inc., a Florida corporation, (100%
owned), and foreign subsidiaries in Mexico, Brazil and China. In each case,
SPEEDCOM owns at least 99.9% of the entity (less than 100% due to requirement of
two shareholders).
Schedule 2.1(h)
---------------
None.
Schedule 2.1(i)
---------------
See Schedule 2.1(c)
Schedule 2.1(j)
---------------
None.
Schedule 2.1(k)
---------------
See Schedule 2.1(c)
Schedule 2.1(l)
---------------
The senior secured debt referred to on Schedule 2.1(c) has a blanket security
interest on SPEEDCOM's assets.
Schedule 2.1(m)
---------------
None.
Schedule 2.1(n)
---------------
None.
Schedule 2.1(o)
---------------
None.
Schedule 2.1(p)
---------------
X.X. Xxxxxxxxxx is entitled to a 10% investment banking fee for this
transaction.
Schedule 2.1(r)
---------------
None.
Schedule 2.1(s)
---------------
None.
Schedule 2.1(u)
---------------
None.
Schedule 2.1(v)
---------------
See Schedule 2.1(c) for detail regarding the loan from Xxxxx Xxxxxxxxxxx.
Schedule 2.1(y)
---------------
None.
Schedule 2.1(z)
---------------
See Schedule 2.1(c). Also, the company's capex for computers, office equipment
and other ordinary course business has exceeded $100,000. The company also
finalized the SRI intellectual property arrangement.
