EXHIBIT 4.01
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT ("AGREEMENT") dated as of
February 16, 2001 by and among HYBRID NETWORKS, INC., a Delaware corporation
(the "COMPANY"), and each person or entity listed as a Purchaser on SCHEDULE I
attached to this Agreement (each individually a "PURCHASER" and collectively the
"PURCHASERS").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the
Purchasers, and the Purchasers, severally, but NOT jointly, wish to purchase
from the Company, (i) an aggregate of up to $7.5 million in principal amount of
the Company's 6% Convertible Debentures in the form attached hereto as Annex A
(the "DEBENTURES"), which are convertible into shares of the Company's Common
Stock, $0.001 par value ("COMMON STOCK"), (ii) five (5) year warrants, in the
form attached hereto as Annex B, to purchase an aggregate of up to 833,333
shares of Common Stock at an initial exercise price of $9.00 per share (the
"PURCHASE WARRANTS"), and (iii) warrants, in the form attached hereto as Annex
C, to purchase a number of shares of Common Stock calculated pursuant to a
formula set forth therein (the "ADJUSTMENT WARRANTS," and together with the
Purchase Warrants, the "WARRANTS"), all on the terms and conditions described
below;
WHEREAS, the shares of Common Stock issuable upon conversion
of the Debentures and exercise of the Warrants (collectively being the
"REGISTRABLE SECURITIES") will carry registration rights, pursuant to the terms
of that certain Registration Rights Agreement to be entered into between the
Company and the Purchasers substantially in the form annexed hereto as Annex D
(the "REGISTRATION RIGHTS AGREEMENT").
NOW, THEREFORE, in consideration of the foregoing premises and
the covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND WARRANTS
Section 1.1 ISSUANCE OF DEBENTURES AND WARRANTS. Upon the following
terms and conditions, the Company shall issue and sell to the Purchasers, and
the Purchasers, severally, NOT jointly, shall purchase from the Company, the
principal amount of Debentures and number of Purchase Warrants indicated next
to the Purchasers' names on Schedule I attached hereto, together with the
Adjustment Warrants.
(a) PURCHASE PRICE. The purchase price for the Debentures and
Warrants to be acquired by each Purchaser (the "PURCHASE PRICE") shall be the
Purchase Price set forth next to such Purchaser's name on Schedule I.
(b) THE CLOSING.
(i) The closing of the purchase and sale of the
Debentures and Warrants (the "CLOSING") shall take place on or
about the date hereof (the "CLOSING DATE"). On the Closing
Date the parties shall deliver all the items described in
Section 4.3 below. In connection therewith, (1) the Company
shall deliver original executed Debentures and Warrants to
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C. ("KKWC") on or before
the Closing Date to hold for Closing, (2) the Company and the
Purchasers shall exchange signature pages to this Agreement
and the Registration Rights Agreement by facsimile on the date
hereof (with originals to be forwarded to KKWC by overnight
courier), and (3) the certificate, Sprint Consent and opinion
of counsel referenced in Section 4.2 below, respectively,
shall be delivered to KKWC on or before the Closing Date to
hold for Closing (which certificate, Sprint Consent and
opinion may be by facsimile with originals to follow).
(ii) On the Closing Date, the Company shall deliver
to each Purchaser all the Debentures and Warrants purchased
hereunder by such Purchaser, each registered in the name of
such Purchaser or its nominee. On the Closing Date, each
Purchaser shall deliver its Purchase Price by wire transfer to
an account designated in writing by the Company. In addition,
each party shall deliver all documents, instruments and
writings required to be delivered by such party pursuant to
this Agreement at or prior to the Closing. Additionally, at
the Closing the Company shall pay (or Halifax Fund, L.P.
shall, at its option, pay for the account of the Company, with
such payments being credited towards Halifax Fund, L.P.'s
payment of its Purchase Price) to KKWC its legal fees and
disbursements as set forth in Section 3.4, and to Cardinal
Capital Management ("CCM") its fee of $100,000.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchasers as of the date hereof and the Closing Date except as may be set
forth in a Schedule attached hereto bearing the subsection number of the
subsection modified by such Schedule (it being agreed that the disclosure set
forth in any Schedule shall only apply to the specified subsection of this
Section 2.1 referred to in the caption of such Schedule):
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT.
The Company is a corporation duly incorporated and existing in good standing
under the laws of the State of Delaware and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company does not have any direct or indirect subsidiaries (defined
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as any entity of which the Company owns, directly or indirectly, 50% or more of
the equity or voting power). Except where specifically indicated to the
contrary, all references in this Agreement to subsidiaries shall be deemed to
refer to all direct and indirect subsidiaries of the Company. Except where
specifically indicated to the contrary, all references in this Article II to the
Company shall be deemed to refer to the Company and its consolidated
subsidiaries. Each of the Company and its subsidiaries 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 other than those in which the failure so to qualify
would not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any
adverse effect on the business, operations, prospects, properties or condition
(financial or otherwise) of the entity with respect to which such term is used
and which is (either alone or together with all other adverse effects) material
to such entity and other entities controlling or controlled by such entity taken
as a whole, and any material adverse effect on the transactions contemplated
under this Agreement, the Registration Rights Agreement or any other agreement
or document contemplated hereby or thereby.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Debentures, the Warrants and the Registration Rights Agreement
(the "TRANSACTION DOCUMENTS") and to issue the Debentures, Warrants and
Registrable Securities (collectively, the "SECURITIES") in accordance with the
terms hereof and thereof, (ii) the execution and delivery of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including the issuance of the Registrable
Shares, have been duly authorized by all necessary corporate action, and no
further consent or authorization of the Company or its Board of Directors (or
any committee or subcommittee thereof) or stockholders is required, (iii) the
Transaction Documents have been duly executed and delivered by the Company and
(iv) the Transaction Documents constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) CAPITALIZATION. The authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock, of which there are 21,972,866 shares of Common Stock and no
shares of preferred stock issued and outstanding; no shares of Common Stock and
no shares of preferred stock were reserved for issuance to persons other than
the Purchasers. All of the outstanding shares of the Company's Common Stock and,
if issued, preferred stock have been validly issued and are fully paid and
non-assessable. No shares of capital stock are entitled to preemptive rights
and, there are no outstanding options or outstanding warrants for shares of
Common Stock (excluding the Warrants). There are no other scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights exchangeable for or convertible into, any shares of capital
stock of the Company, or contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue additional shares of
capital stock of the Company or options, warrants, scrip, rights to subscribe
to, or commitments to purchase or acquire, any shares, or securities or rights
convertible or exchangeable into shares, of capital stock of the Company. The
Company has furnished the Purchasers with a true and correct copy
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of the Company's Amended and Restated Certificate of Incorporation (the
"CHARTER"), as in effect on the date hereof, and a true and correct copy of the
Company's By-Laws, as in effect on the date hereof (the "BY-LAWS").
(d) ISSUANCE OF REGISTRABLE SECURITIES. The Securities are
duly authorized and reserved for issuance, and, when issued upon conversion
and/or exercise of the Debentures or Warrants, respectively, in accordance
therewith, the Registrable Securities will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, claims and encumbrances,
and, subject to the registration of such shares in accordance with the
applicable provisions of the Securities Act of 1933, as amended (the "SECURITIES
ACT" or the "ACT") and the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), will be entitled to be quoted and/or listed (as the case may
be) on the Nasdaq National Market System, the American Stock Exchange, the New
York Stock Exchange or Nasdaq Small Cap Market (each an "APPROVED MARKET"), and
the holders of such Registrable Securities shall be entitled to all rights and
preferences then accorded to a holder of Common Stock. The outstanding shares of
freely tradable Common Stock are currently quoted on the Nasdaq National Market
System.
(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 and the issuance of the
Securities do not and will not (i) result in a violation of the Company's
Charter or By-Laws 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, patent, patent license or instrument
to which the Company is a party and the loss of which could reasonably be
expected to have a Material Adverse Effect on the Company (collectively,
"COMPANY AGREEMENTS"), or (iii) result in a violation of any federal, state,
local or foreign law, 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 is bound or affected, except (other than in the case of
clause (i) above) where such violation would not reasonably be expected to have
a Material Adverse Effect. The business of the Company and its direct and
indirect subsidiaries is being conducted in material compliance with (i) its
Charter and By-Laws, (ii) all Company Agreements and (iii) all applicable laws,
ordinances or regulations of any governmental entity, except (other than in the
case of clause (i) above) where such violation would not reasonably be expected
to have a Material Adverse Effect. Except for filings, consents and approvals
required under applicable state and federal securities laws, rules or
regulations, or the rules and regulations of the Approved Markets and covered by
the Registration Rights Agreement, the Company is not required under federal,
state, local or foreign law, rule or regulation, or under any agreement, to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or third party in order for
it to execute, deliver or perform any of its obligations under the Transaction
Documents, or to issue and sell the Securities, except for the registration
provisions provided in the Registration Rights Agreement, the written consent
("SPRINT CONSENT") of Sprint to the Transaction Documents and the transactions
contemplated thereby, and compliance with the "piggy-back" registration rights
provisions of the Company's outstanding registration rights agreements described
in Schedule 2.1(f) hereto (and disclosing the names of the potential selling
stockholders and the maximum number of shares that they could require to be
registered).
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(f) SEC DOCUMENTS; NO NON-PUBLIC INFORMATION; FINANCIAL
STATEMENTS. The Common Stock is registered pursuant to Section 12(g) of the
Exchange Act and since June 30, 1999 the Company and its subsidiaries have filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the Exchange
Act, including all such proxy information, solicitation statement and
registration statements, and any amendments thereto required to have been filed
as of the Closing Date (all of the foregoing including filings incorporated by
reference therein being referred to herein as the "SEC DOCUMENTS"). The Company
has not directly or indirectly provided, and will not directly or indirectly
provide, to the Purchasers any material non-public information or any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed
(except for information which will be publicly disclosed on or before March 7,
2001). As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the Securities Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
and other federal, state and local laws, rules and regulations applicable to
such SEC Documents, and none of the SEC Documents contained 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. No event or
circumstance has occurred prior to the date hereof or will have occurred as of
or on the Closing Date which would require the Company to disclose such event or
circumstance in order to make the statements in the SEC Documents not misleading
but which has not, or will have not, been so disclosed.
(g) FINANCIAL STATEMENTS. The financial statements of the
Company and its subsidiaries included in the SEC Documents comply as to form and
substance in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with United States generally accepted accounting principles
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). The occurrence of any potential event described in
Schedule 2.1(g) will not cause a default, breach or violation of any material
agreement of the Company, including, without limitation, any loan agreement or
any agreement with a customer or supplier (or constitute an event which with
notice or lapse of time or both would become a default, breach or violation).
(h) PRINCIPAL EXCHANGE/MARKET. The principal market on which
the Common Stock is currently quoted is the Nasdaq National Market System.
(i) NO MATERIAL ADVERSE CHANGE. Except as disclosed in the
Pre-Agreement SEC Documents, since December 31, 1999, no Material Adverse Effect
has occurred or exists, and no event or circumstance has occurred that with
notice or the passage of time or both is reasonably likely to result in a
Material Adverse Effect with respect to the Company or its subsidiaries on a
consolidated basis.
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(j) NO UNDISCLOSED LIABILITIES. The Company and its
subsidiaries have no liabilities or obligations not disclosed in the
Pre-Agreement SEC Documents (as defined below), other than those liabilities
incurred in the ordinary course of the Company's or its subsidiaries' respective
businesses since December 31, 1999, which liabilities, individually or in the
aggregate, do not have a Material Adverse Effect on the Company or its direct or
indirect subsidiaries.
(k) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. To the best
knowledge of the Company, no material event or circumstance has occurred or
exists with respect to the Company or its direct or indirect 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.
(l) NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, or, to its knowledge, 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 the Securities.
(m) NO INTEGRATED OFFERING. Neither the Company, nor any of
its affiliates, nor to its knowledge any person acting on its or their behalf,
has directly or indirectly (i) issued any securities of any kind, other than
upon the exercise of outstanding stock options, during the six month period
immediately prior to the date hereof, or (ii) made any other offers or sales of
any security or solicited any offers to buy any security under circumstances
that would require registration of the Securities.
The issuance of the Securities to the Purchasers will not be
integrated with any other issuance of the Company's securities (past, current or
future) which requires stockholder approval under the rules of the NASDAQ
National Market System.
(n) FORM S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) on Form S-3 under
the Act and rules promulgated thereunder, and Form S-3 is permitted to be used
for the transactions contemplated hereby under the Act and rules promulgated
thereunder.
(o) INTELLECTUAL PROPERTY. The Company and its subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, patent applications, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and confidential business
information, computer software, and all other proprietary or intellectual
property rights, and all goodwill associated with the foregoing (collectively,
"INTELLECTUAL PROPERTY") necessary or desirable to conduct their respective
businesses as now conducted or currently contemplated to be conducted in the
future. Except for such expirations and terminations that would not individually
or in the aggregate have a Material Adverse Effect on the Company, none of the
Company's Intellectual Property rights have expired or terminated, or are
expected to expire or terminate within three (3) years from the date of this
Agreement. Except as would not individually or in the aggregate have a Material
Adverse Effect, the Company and its subsidiaries do not have any knowledge of
any infringement, interference or misappropriation by
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the Company or its subsidiaries of or with Intellectual Property or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others, and there is no claim, action
or proceeding being made or brought against, or to the Company's knowledge,
being threatened against, the Company or its subsidiaries regarding Intellectual
Property or other infringement, interference or misappropriation. The Company
and its subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their Intellectual Property.
(p) POISON PILL PROVISIONS. Neither the Company nor any of its
subsidiaries have a stockholder rights plan. None of the acquisition of the
Securities nor the deemed beneficial ownership of shares of Registrable
Securities prior to, or the acquisition of Registrable Securities pursuant to,
the conversion or exercise of the Debentures or Warrants, respectively, will in
any event under any circumstance, but without giving effect to the ownership of
any other securities of the Company, trigger the poison pill provisions of any
other or subsequently adopted plan or agreement, or a substantially similar
occurrence under any successor or similar plan.
(q) NO LITIGATION. Except as set forth in the reports or
documents filed at least 5 Trading Days prior to the Closing Date by the Company
pursuant to Section 13(a) or 15(d) of the Exchange Act (the "PRE-AGREEMENT SEC
DOCUMENTS"), no litigation or claim (including those for unpaid taxes) against
the Company or any of its subsidiaries is pending or, to the Company's
knowledge, threatened, and no other event has occurred, which if determined
adversely could reasonably be expected to have a Material Adverse Effect on the
Company or could reasonably be expected to materially and adversely affect the
transactions contemplated hereby. There is no legal proceeding described in the
Pre-Agreement SEC Documents that could reasonably be expected to have a Material
Adverse Effect on the Company.
(r) BROKERS. The Company has taken no action which would give
rise to any claim by any person, other than CCM and Chase Securities, Inc., for
brokerage commissions, finder's fees or similar payments by the Company or any
Purchaser relating to this Agreement or the transactions contemplated hereby.
The Company shall be responsible for all payments to CCM and all payments
required to Chase Securities, Inc.
(s) OTHER SECURITIES. There are no outstanding securities
issued by the Company that are entitled to registration rights under the Act.
There are no outstanding securities issued by the Company that are directly or
indirectly convertible into, exercisable into, or exchangeable for, shares of
Common Stock of the Company, or that have anti-dilution or similar rights that
would be affected by the issuance of any of the Securities.
(t) CERTAIN TRANSACTIONS. Except as disclosed in the
Pre-Agreement SEC Documents, none of the officers, directors, or key employees
of the Company is presently a party to any transaction with the Company or any
of its subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
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(u) INSURANCE. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as reasonably prudent and customary in the
businesses in which the Company and its direct and indirect subsidiaries are
engaged. Neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant increase in cost.
(v) NO RELIANCE ON PURCHASERS. The Company acknowledges and
agrees that each Purchaser is acting solely in the capacity of an arm's length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
performance hereunder and thereunder and the transactions contemplated hereby
and thereby. The Company further represents to the Purchasers that the Company's
decision to enter into the Transaction Documents and the performance hereunder
and thereunder has been based solely on the independent evaluation by the
Company and its representatives.
(w) FOREIGN CORRUPT PRACTICES ACT. Neither the Company, nor
any director, officer, agent, employee or other person acting on behalf of the
Company or any subsidiary has, in the course of acting for, or on behalf of, the
Company, directly or indirectly used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; directly or indirectly made any direct or indirect unlawful
payment to any foreign or domestic government or party official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or any similar treaties of
the United States; or directly or indirectly made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.
(x) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any anti-takeover provision contained in the Company's Certificate
of Incorporation or By-Laws or Delaware law which is or could become applicable
to the Purchasers as a result of the transactions contemplated by the
Transaction Documents, including, without limitation, the Company's issuance of
the Common Stock and the Purchasers' ownership of Common Stock.
(y) ACKNOWLEDGEMENT OF DILUTION. The number of shares of
Common Stock issuable upon conversion of the Debentures and exercise of the
Warrants may increase substantially in certain circumstances. The Company
acknowledges that its obligation to issue shares of Common Stock in accordance
with the Transaction Documents is absolute and unconditional, regardless of the
dilution that such issuance may have on other shareholders of the Company.
(z) CURRENT DEBT. In the absence of the occurrence after the
date hereof of any event of default or other event causing the acceleration of
such indebtedness (which the Company does not reasonably expect), the Company is
not obligated (and will not become obligated with notice or the passage of time
or both) to pay any amounts to London Pacific (under the convertible debentures
issued to it or otherwise) until April 30, 2002.
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Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
Purchaser as to itself only, hereby makes the following representations and
warranties to the Company as of the date hereof and the Closing Date:
(a) ORGANIZATION. Such Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
(b) AUTHORIZATION; ENFORCEMENT. (i) Such Purchaser has the
requisite power and authority to enter into and perform the Transaction
Documents and to purchase the Securities being sold to it hereunder, (ii) the
execution and delivery of the Transaction Documents by such Purchaser and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary corporate or partnership action, and (iii) the
Transaction Documents constitute valid and binding obligations of such Purchaser
enforceable against such Purchaser in accordance with their terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents and the consummation by such Purchaser of the
transactions contemplated thereby do not and will not (i) result in a violation
of such Purchaser's organizational documents, or (ii) conflict with any
agreement, indenture or instrument to which such Purchaser is a party, or (iii)
result in a material violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to such
Purchaser.
(d) SECURITIES PURCHASE REPRESENTATIONS.
(i) ACCESS TO OTHER INFORMATION. Such Purchaser
acknowledges that the Company has made available to such
Purchaser the opportunity to examine the SEC Documents and
such additional documents from the Company and to ask
questions of, and receive full answers from, the Company
concerning, among other things, the Company, its financial
condition, its management, its prior activities and any other
information which such Purchaser considers relevant or
appropriate in connection with entering into this Agreement.
(ii) RISKS OF PURCHASE. Such Purchaser acknowledges
that the Securities have not been registered under the Act.
Such Purchaser is capable of assessing the risks of purchasing
the Securities and is fully aware of the economic risks
thereof.
(iii) PURCHASE REPRESENTATION. Such Purchaser is
purchasing the Debentures and Warrants, and may purchase the
Registrable Securities, for its own account and not with a
view to distribution in violation of any securities laws;
provided, however, that by making the representations herein,
such Purchaser does not agree to hold the Securities for any
minimum or other specific term
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and reserves the right to dispose of the Securities at any
time in accordance with federal and state securities laws
applicable to such disposition.
(iv) RESTRICTED SECURITIES. Such Purchaser
acknowledges and understands that the terms of issuance have
not been reviewed by the SEC or by any state securities
authorities and that the Securities have been issued in
reliance on the certain exemptions for non-public offerings
under the Act, which exemptions depend upon, among other
things, the representations made and information furnished by
such Purchaser.
(v) ABILITY TO BEAR ECONOMIC RISK. Such Purchaser is
an "accredited investor" as defined in Rule 501 of Regulation
D, as amended, under the Act, and that it (i) is able to bear
the economic risk of purchasing the Securities, (ii) is able
to hold the Securities for an indefinite period of time, and
(iii) can afford a complete loss of its purchase of the
Securities.
(e) BROKERS. Except for the broker's fee of CMM described
herein and payable by the Company, such Purchaser has taken no action which
would give rise to any claim by any person for brokerage commissions, finder's
fees or similar payments by the Company relating to the Transaction Documents or
the transactions contemplated thereby. All fees and amounts payable to the
brokers listed in Section 2.1(r) shall be solely the responsibility of the
Company.
ARTICLE III
COVENANTS
Section 3.1 REGISTRATION AND LISTING; EFFECTIVE REGISTRATION. Until
the earlier of (i) five (5) years from the Closing Date and (ii) the date on
which the Purchasers neither hold any Registrable Securities nor have the
right to acquire any Registrable Securities, the Company will cause the
Common Stock to continue at all times to be registered under Section 12(b) or
Section 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take
any action or file any document (whether or not permitted by the Exchange Act
or the rules thereunder) to terminate or suspend such reporting and filing
obligations. Until the earlier of (i) five (5) years from the Closing Date
and (ii) the date on which the Purchasers neither hold any Registrable
Securities nor have the right to acquire any Registrable Securities, the
Company shall continue the listing and/or quoting of the Registrable
Securities on the Nasdaq National Market System or one of the other Approved
Markets and comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Approved Market on which
the Registrable Securities are listed and/or quoted, as the case may be. The
Company shall cause the Registrable Securities to be quoted on the Nasdaq
National Market System no later than the registration of the Registrable
Securities under the Act, and at all times shall continue such listing(s)
and/or quoting on one of the Approved Markets. As used herein and in the
other Transaction Documents, the term "EFFECTIVE REGISTRATION" shall mean:
(i) the Company has complied with its material obligations
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under all the Transaction Documents in all material respects and has not made
any material misrepresentations under any of the Transaction Documents or under
any other agreements between the Company and the Purchaser, except for those
breaches or defaults which are capable of being cured and have been so cured
within a reasonable time following notice of such breach or default (not to
exceed 5 business days); (ii) the resale of all Registrable Securities (as
defined in the Registration Rights Agreement) is covered by an effective
registration statement in accordance with the terms of the Registration Rights
Agreement and such registration statement is not subject to any suspension or
stop orders; (iii) the resale of such Registrable Securities may be effected
pursuant to a current and deliverable prospectus that is not subject to any
blackout or similar circumstance (including a prospectus supplement filed with
the SEC in accordance with the terms of the Purchase Warrant following any
Issuer Notice); (iv) such Registrable Securities are listed, or approved for
listing prior to issuance, on an Approved Market and are not subject to any
trading suspension (nor shall trading generally have been suspended on such
exchange or market), and the Company shall not have been notified of any pending
or threatened proceeding or other action to delist or suspend the Common Stock
on the Approved Market on which the Common Stock is then traded or listed; (v)
the requisite number of shares of Common Stock shall have been duly authorized
and reserved for issuance as required by the terms of the Transaction Documents;
(vi) no Interfering Event (as described in the Registration Rights Agreement)
then exists; and (vii) none of the Company or any direct or indirect subsidiary
of the Company is subject to any Bankruptcy Event. For purposes hereof,
"BANKRUPTCY EVENT" means any of the following events: (a) the Company or any
subsidiary commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any subsidiary thereof; (b) there is commenced against the Company or
any subsidiary any such case or proceeding that is not dismissed within 60 days
after commencement; (c) the Company or any subsidiary is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any subsidiary suffers any appointment
of any custodian or the like for it or any substantial part of its property that
is not discharged or stayed within 60 days; (e) the Company or any subsidiary
makes a general assignment for the benefit of creditors; (f) the Company or any
subsidiary fails to pay, or states that it is unable to pay or is unable to pay,
its debts generally as they become due; (g) the Company or any subsidiary calls
a meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) the Company or any subsidiary, by any act or
failure to act, expressly indicates its consent to, approval of or acquiescence
in any of the foregoing or takes any corporate or other action for the purpose
of effecting any of the foregoing.
Section 3.2 WARRANTS ON EXERCISE. Upon any partial exercise by a
Purchaser (or then holder of the Warrants) of the Warrants, the Company shall
issue and deliver to such Purchaser (or holder) within five Trading Days of
the date on which such Warrants are exercised, a new Warrant or Warrants
representing the adjusted number of shares of Common Stock issuable upon
exercise of such Warrants.
Section 3.3 REPLACEMENT CERTIFICATES. The certificate(s) or
instrument(s) representing the Securities held by any Purchaser (or then
holder) may be exchanged by such Purchaser (or such holder) at any time and
from time to time for certificates or instruments with different
denominations representing an equal aggregate number of Securities as
requested by such
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Purchaser (or such holder) upon surrendering the same. The Company will deliver
such substitute certificates or instruments within 3 Trading Days. No service
charge will be made for such registration or transfer or exchange.
Section 3.4 EXPENSES. The Company shall pay to KKWC in immediately
available funds, at the Closing and promptly upon receipt of any further
invoices relating to the same, all reasonable legal fees and expenses
incurred by the Purchasers in connection with the transactions contemplated
by this Agreement, the Registration Rights Agreement, the Debentures and the
Warrants, provided that any such amounts in excess of $35,000 shall be paid
by Purchasers. At the Closing, the Company shall pay the amount due for such
fees and expenses (which may include fees and expenses estimated to be
incurred for the completion of the transaction, including post-closing
matters), provided that any such amounts in excess of $35,000 shall be paid
by Purchasers. In the event any amount paid by or on behalf of the Company is
ultimately less than actual fees and expenses, the Company shall (subject to
the $35,000 cap) promptly pay such deficiency to KKWC upon receipt of an
invoice therefor. In lieu thereof, Halifax Fund, L.P. may pay such amounts
due to KKWC, with the amount of such payment being credited towards the
payment of its Purchase Price.
Section 3.5 SECURITIES COMPLIANCE. The Company shall notify the
SEC, in accordance with their requirements, of the transactions contemplated
by 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. Without
limiting the foregoing, the Company shall, within one (1) Trading Day
following the Closing Date file a Form 8-K with the SEC and/or issue a press
release describing in detail the transactions contemplated in the Transaction
Documents. Within one (1) Trading Day following any delivery of an Issuer
Notice (as defined in and pursuant to the Purchase Warrant), the Company
shall file with the SEC a prospectus supplement to the prospectus included in
the Registration Statement (as defined in the Registration Rights Agreement)
as required by the terms of the Purchase Warrant and Registration Rights
Agreement. Such Form 8-K and any other Form 8-K and/or press release, and/or
prospectus supplement, or other publicity concerning the Transaction
Documents, shall contain such information as is reasonably requested by the
Purchaser and be approved by the Purchaser in writing prior to issuance. No
Form 8-K and/or press release shall name the Purchaser except as shall be
required by law or consented to in writing by the Purchaser, which consent
will not be unreasonably withheld. If the Company fails to so file a Form
8-K, press release or prospectus supplement as required herein within the
requisite time period, the Purchaser at any time may issue a press release
covering the transactions contemplated by the Transaction Documents or such
Issuer Notice, as the case may be (provided that the Company shall not be
relieved of its obligations to so file a prospectus supplement).
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Section 3.6 DIVIDENDS OR DISTRIBUTIONS; PURCHASES OF EQUITY
SECURITIES. For so long as any Debentures or Adjustment Warrants remain
outstanding, the Company agrees that it shall not (a) declare or pay any
dividends or make any distributions to any holder or holders of Common Stock
(other than dividends payable in Common Stock) in their capacity as
shareholders, or (b) purchase or otherwise acquire for value, directly or
indirectly, any shares of Common Stock or other equity security of the
Company, other than repurchases of Common Stock or other equity securities
from employees of or consultants to the Company upon the termination of their
employment or consulting relationship to the extent required by the terms of
their written agreements with the Company.
Section 3.7 NOTICES. The Company agrees to provide all holders of
Warrants with copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to the holders of shares of Common Stock, contemporaneously with
the delivery of such notices or information to such Common Stock holders.
Section 3.8 USE OF PROCEEDS. The Company agrees that the proceeds
received by the Company from the sale of the Debentures and Warrants
hereunder and the sale of the shares of Common Stock issuable upon exercise
of the Purchase Warrants shall be used only for legally permitted general
corporate purposes and shall not be used to repay or prepay any indebtedness
of the Company except for trade payables incurred in the ordinary course of
business.
Section 3.9 NOTIFICATION OF ADDITIONAL FINANCINGS; ADJUSTMENTS. The
Company agrees that until the first anniversary of the Closing Date, the
Purchasers shall have a right of first offer with respect to all non-public
capital raising transactions as set forth in this Section 3.9. The Company
shall give advance written notice to the Purchasers of its intention to
complete any such financing so that the Purchasers may, to the extent they in
their sole discretion determine to do so, propose to provide such financing,
in which case they must propose such financing within three Trading Days
following such notice by the Company. After any such proposal by one or more
Purchasers is made, the Company shall negotiate in good faith with such
Purchasers in order to attempt to agree on a financing transaction; provided,
however, that if no such agreement in principle is reached within three
Trading Days following the proposal, the Company shall not be precluded from
seeking such financing from any other sources or from accepting such
financing from any other sources. This right of first offer shall continue
even if the Purchasers elect not to participate in one or more such
financings. Notwithstanding anything herein to the contrary, this right of
first offer shall not apply to issuances of the Company's securities pursuant
to (i) the Company's current or future employee, director or bona fide
consultant options plans and/or compensation arrangements, (ii) strategic
corporate alliances not undertaken principally for financing purposes, and
(iii) revolving or term loans provided to the Company by federal or state
chartered banks or thrifts.
Section 3.10 RESERVATION OF STOCK ISSUABLE UPON EXERCISE OF THE
WARRANTS. The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of Debentures and exercise of the Warrants, such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the full conversion of all Debentures and the full exercise of all
the Warrants, and if at any time the number of authorized but unissued shares
of Common Stock shall not be
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sufficient to effect the full conversion of all Debentures and the full exercise
of the Warrants, the Company will take such corporate action as may be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including without limitation
engaging in best efforts to obtain the requisite shareholder approval. Without
in any way limiting the foregoing, the Company agrees to reserve and at all
times keep available solely for purposes of the conversion of Debentures and
exercise of the Warrants such number of authorized but unissued shares of Common
Stock that is at least equal to 200% of the aggregate shares issuable upon full
conversion of the Debentures plus 100% of the number of shares of Common Stock
issuable upon exercise of the Warrants in full (assuming for such purpose that
the Adjustment Warrants are exercisable for the maximum number of shares
issuable thereunder, without regard to any ownership limitations contained
therein), which numbers shall be appropriately adjusted for any stock split,
reverse split, stock dividend or reclassification of the Common Stock. If the
Company falls below the reserves specified in the immediately preceding sentence
and does not cure such non-compliance within 30 days of its start, then the
Purchasers will be entitled to the compensatory payments specified in Section
2(b)(i) of the Registration Rights Agreement. If at any time the number of
authorized but unissued shares of Common Stock is not sufficient to effect the
full conversion of the Debentures and the full exercise of the Warrants, the
Purchasers shall be entitled to, INTER ALIA, the premium price redemption rights
provided in the Registration Rights Agreement. All calculations pursuant to this
paragraph shall be performed without regard to any restrictions or limitations
on beneficial ownership of Common Stock contained in the Debentures or Warrants.
Section 3.11 BEST EFFORTS. The parties shall use their best efforts
to satisfy timely each of the conditions described in Article 4 of this
Agreement.
Section 3.12 LIMITATIONS ON TRANSFERS. The Company shall not
contribute or transfer its assets to any of its subsidiaries, other than a
subsidiary that has delivered its guarantee to the Purchasers in form and
substance satisfactory to the Purchasers.
Section 3.13 FORM D; BLUE SKY LAWS. The Company agrees to file a
Form D with respect to the Securities, as required under Regulation D of the
Act and to provide a copy thereof to each Purchaser promptly after such
filing. The Company shall, on or before the Closing Date, take such action as
the Company shall have reasonably determined is necessary to qualify the
applicable Securities for sale to the Purchasers at the Closing pursuant to
this Agreement under applicable securities or "blue sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to each Purchaser on or
prior to the Closing Date.
Section 3.14 NASDAQ RULE. Notwithstanding anything contained
herein, the Debentures and Warrants shall not be convertible and exercisable
to the extent that in excess of 4,372,600 shares of Common Stock (19.9% of
the Common Stock issued and outstanding on the date hereof, which number
shall be subject to readjustment for any stock split, stock dividend or
reclassification of the Common Stock) (the "20% CAP") would be issued
thereon, unless the Company receives stockholder approval for such issuance.
Each Purchaser shall be entitled to receive the number of Registrable
Securities equal to such Purchaser's pro rata share of the 20% Cap (based
upon its aggregate Purchase Price hereunder). A Purchaser shall have the
right to receive cash payments from the Company for all shares of Common
Stock that this Section 3.14
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renders the Company incapable of issuing to such Purchaser ("Deficiency Shares")
at the Premium Redemption Price (as defined in the Registration Rights
Agreement) for such Deficiency Shares. If a Purchaser has received all
Registrable Securities to which it is entitled to receive but has not depleted
the total number of pro rata shares allocated to it, its remaining pro rata
shares shall be reallocated amongst the Purchasers still to receive Registrable
Securities on a pro rata basis. If applicable, the restrictions and redemption
obligations set forth in this Section 3.14 shall cease to apply if (a) the
Company obtains written shareholder approval to issue Common Shares in excess of
the 20% Cap pursuant to the rules and regulations of the Nasdaq National Market
System or (b) the Company provides the Purchasers with irrevocable written
notice, based upon the written advice of its counsel, that any such issuance of
Common Shares is not subject to the 20% Cap pursuant to the rules and
regulations of the Nasdaq National Market System. The Company will use its best
efforts promptly to obtain either the shareholder approval or the irrevocable
notice described in the preceding sentence and to provide the Purchasers with a
copy of same. Without limiting the foregoing, in the event at any time the
number of Registrable Securities then issued or issuable upon full conversion
and exercise of the Debentures and Warrants is 85% of the 20% Cap (assuming full
conversion and exercise without regard to any beneficial ownership limitations
set forth therein and assuming the Adjustment Date under the Adjustment Warrant
occurs at such time if it has not already occurred), then the Company shall
within 60 days hold a stockholders meeting and shall solicit the aforementioned
shareholder approval by soliciting proxies in favor of issuing Common Shares in
excess of the 20% Cap and will use its best efforts to have all affiliates of
the Company which own or control shares of Common Stock to vote their shares in
favor of such resolution.
Section 3.15 TRANSACTIONS WITH AFFILIATES. The Company agrees that
any transaction or arrangement between it or any of its subsidiaries and any
affiliate or employee of the Company shall be effected on an arms' length
basis in accordance with customary commercial practice and, except with
respect to grants of options and stock to service providers, including
employees and directors, shall be approved by a majority of the Company's
outside directors.
Section 3.16 PRESS RELEASE. Purchasers shall have the opportunity
to review any press release in connection with the transactions contemplated
hereby prior to its issuance.
Section 3.17 REPORTING LACK OF EFFECTIVE REGISTRATION. The Company
shall promptly notify each Purchaser in writing if there shall ever be a lack
of Effective Registration, as well as when Effective Registration is
re-established.
Section 3.18 RULE 144. With a view to making available to the
Purchasers the benefits of Rule 144 promulgated under the 1933 Act or any
other similar rule or regulation of the SEC that may at any time permit the
Purchasers to sell securities of the Company to the public without
registration ("RULE 144"), the Company agrees, until such time as all of the
Securities may be freely sold to the public under Rule 144(k) (or any
successor thereto), to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit any of the Company's other
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obligations under this Agreement and the filing of such reports and other
documents is required for the applicable provisions of Rule 144); and
(c) furnish to each Purchaser so long as such Purchaser owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Purchasers to sell such securities pursuant to Rule 144 without
registration.
Section 3.19 SUBORDINATION. So long as any Debentures remain
outstanding, the Company shall not, and shall cause each of its subsidiaries
not to, without the prior written consent of the Purchasers which may be
withheld for any reason in Purchasers' sole discretion, permit, create,
incur, assume, guarantee or otherwise become directly or indirectly liable
for, any indebtedness which is senior to the Debentures hereunder, other than
(a) the convertible debentures issued to London Pacific for up to $5.5
million in aggregate principal amount outstanding, (b) indebtedness under
commercial bank lines of credit, and (c) indebtedness outstanding under
senior debt (collectively, "SENIOR DEBT") issued by the Company which (1) is
not directly or indirectly convertible into, exercisable for or exchangeable
into any capital stock or other equity of the Company and (2) does not
directly or indirectly provide for or contemplate the issuance of capital
stock or equity of the Company or any securities convertible into,
exercisable for or exchangeable into such capital stock or equity. So long as
any Debentures remain outstanding and until the Adjustment Period (as defined
in the Adjustment Warrants) has expired, the Company shall not, and shall
cause each of its subsidiaries not to, repay any indebtedness of the Company
except for trade payables incurred in the ordinary course of business.
Section 3.20 REPORTING EVENTS DESCRIBED IN SCHEDULE 2.1(f). The
Company agrees that any discounts, expenses or liabilities which may need to
be recorded as and to the extent described in Schedule 2.1(f) shall be so
recorded on or prior to the end of the Company's first fiscal quarter for
2001, and any deferral of revenues as and to the extent described in Schedule
2.1(f) shall only be deferred until a date which is on or prior to March 31,
2001.
ARTICLE IV
CONDITIONS TO CLOSINGS
Section 4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
TO SELL. The obligation hereunder of the Company to issue and/or sell the
Debentures and Warrants to the Purchasers at the Closing is subject to the
satisfaction at or before the Closing of each of the applicable 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.
(a) ACCURACY OF THE PURCHASERS' REPRESENTATIONS AND
WARRANTIES. The representations and WARRANTIES of the Purchasers will be true
and correct as of the date when made and as of the Closing Date.
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(b) PERFORMANCE BY THE PURCHASERS. The Purchasers shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by the Purchasers at or prior to the Closing including payment of
the applicable purchase price.
(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 the Transaction Documents.
Section 4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
PURCHASERS TO PURCHASE. The obligation hereunder of the Purchasers to acquire
and pay for the Debentures and Warrants at the Closing is subject to the
satisfaction, at or before the Closing, of each of the applicable conditions
set forth below. These conditions are for the Purchasers' benefit and may be
waived by the Purchasers at any time in their sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and correct as
of the date when made and as of the Closing date as though made at that time
(except for representations and warranties expressly as of an earlier 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 all agreements and satisfied all conditions required to be performed
or satisfied by the Company at or prior to the Closing, including, without
limitation, delivery of the Debentures and Warrants.
(c) TRADING AND/OR QUOTATION. Trading in and/or quotation of
the Company's Common Stock shall not have been suspended by the SEC and trading
in securities generally as reported by the Nasdaq National Market System (or
other Approved Market) shall not have been suspended or limited, and the Common
Stock shall be listed on an Approved Market.
(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 Transaction Documents. The NASD shall not have objected or
indicated that it may object to the consummation of any of the transactions
contemplated by this Agreement. The Company shall have delivered a copy of the
Sprint Consent to the Purchasers.
(e) OPINION OF COUNSEL. The Purchasers shall have received an
opinion of counsel to the Company in the applicable form attached hereto as
EXHIBIT 4.2(e) and such other opinions, certificates and documents as the
Purchasers or their counsel shall reasonably require incident to the closing.
(f) REGISTRATION RIGHTS AGREEMENT. The Company and the
Purchasers shall have executed and delivered the Registration Rights Agreement
in the form and substance of ANNEX D attached hereto.
(g) OFFICER'S CERTIFICATE. The Company shall have delivered to
the Purchasers a certificate in form and substance satisfactory to the
Purchasers and the Purchasers' counsel,
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executed by an officer of the Company, certifying as to satisfaction of
applicable closing conditions, incumbency of signing officers, and the true,
correct and complete nature of the Certificate of Incorporation, By-laws, good
standing and authorizing resolutions of the Company.
(h) MISCELLANEOUS. The Company shall have delivered to the
Purchasers such other documents relating to the transactions contemplated by
this Agreement as the Purchasers or their counsel may reasonable request.
Section 4.3 CLOSING DATE DELIVERIES.
(a) On the Closing Date, the Company shall deliver to the
Purchaser:
(i) Debentures in the form of Annex A;
(ii) Warrants in the form attached as Annex B and
Annex C;
(iii) The certificate referred to in Section 4.2(g)
above;
(iv) The executed Registration Rights Agreement;
(v) The opinion of counsel referred to in Section
4.2(e) above; and
(vi) A copy of the duly executed Sprint Consent.
(b) On the Closing Date, the Purchasers shall deliver to the
Company:
(i) The Purchase Price set forth on Schedule I
hereto; and
(ii) The executed Registration Rights Agreement.
ARTICLE V
LEGEND AND STOCK
The Debentures and Warrants issued hereunder shall be stamped
or otherwise imprinted with a legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
-18-
Each certificate representing the shares of Common Stock
issued upon conversion or exercise of Debentures or Warrants, prior to such
shares being registered under the Act for resale or available for resale under
Rule 144(k) under the Act, shall be stamped or otherwise imprinted with a legend
in substantially the above form.
The Company agrees to reissue shares of Common Stock issued
upon conversion or exercise of Debentures or Warrants without the legend set
forth above at such time as (i) the holder thereof is permitted to dispose of
such shares issuable upon conversion of the Debentures or exercise of the
Warrants pursuant to Rule 144(k) under the Act or has disposed of such
securities pursuant to Rule 144 under the Act, or (ii) such shares are sold to a
purchaser or purchasers who (in the opinion of counsel to the seller or such
purchaser(s), in form and substance reasonably satisfactory to the Company and
its counsel) are able to dispose of such shares publicly without registration
under the Act, or (iii) such securities have been registered under the Act.
Prior to the Registration Statement (as defined in the
Registration Rights Agreement) being declared effective, any shares of Common
Stock issued upon conversion or exercise of Debentures or Warrants shall bear a
legend in the same form as the legend indicated above; provided that such legend
shall be removed from such shares and the Company shall issue new certificates
without such legend if (i) the holder has sold or disposed of such shares
pursuant to Rule 144 under the Act, or the holder is permitted to dispose of
such shares pursuant to Rule 144(k) under the Act, (ii) such shares are
registered for resale under the Act, or (iii) such shares are sold to a
purchaser or purchasers who (in the opinion of counsel to the seller or such
purchaser(s), in form and substance reasonably satisfactory to the Company and
it counsel) are able to dispose of such shares publicly without registration
under the Act. Upon such Registration Statement becoming effective, the Company
agrees to promptly, but no later than three (3) business days after any
Purchaser's written request therefor (and surrender of legended stock
certificates), issue new certificates representing such shares without such
legend. Any shares issued after the Registration Statement has become effective
shall be free and clear of any legends, transfer restrictions and stop orders.
The Purchasers agree to sell the Common Stock issued upon conversion of
Debentures or exercise of Warrants in accordance with the applicable prospectus
delivery requirements or in accordance with an exemption from the registration
requirements of the Act (including without limitation Rule 144). Purchaser
acknowledges, and will cause any transferee of such Common Stock to whom such
Common Stock was transferred other than as registered shares under the
Registration Statement or pursuant to Rule 144 to acknowledge, that the Common
Stock issued on conversion and exercise of the Debenture and Warrants has been
issued pursuant to the exemption from registration provided by Regulation D
under the Act and that the availability of such exemption is dependent upon the
Purchaser's not disposing of such shares in an unregistered distribution in
violation of securities laws, and Purchaser agrees, and will cause any such
transferee to agree, not to dispose of any such Common Stock in an unregistered
distribution in violation of securities laws.
Nothing herein shall limit the right of any holder to pledge
these securities pursuant to a bona fide margin account or lending arrangement
entered into in compliance with law, including applicable securities laws.
-19-
ARTICLE VI
INDEMNIFICATION
In consideration of the Purchasers' execution and delivery of
this Agreement and the Registration Rights Agreement and in addition to all of
the Company's other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless the Purchasers and all of
their partners, officers, directors, employees, members and direct or indirect
Purchasers and any of the foregoing persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents or any other
certificate or document contemplated hereby or thereby, (c) any cause of action,
suit or claim brought or made against such Indemnitee by a third party and
arising out of or resulting from (i) the execution, delivery, performance,
breach by the Company or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (iii) the
status of the Purchaser or holder of the Securities or Warrants as Purchasers in
the Company, and (d) the enforcement of this Section.
ARTICLE VII
GOVERNING LAW; MISCELLANEOUS.
Section 7.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS TO BE EXECUTED AND PERFORMED EXCLUSIVELY IN NEW YORK. EACH PARTY
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, OR SAN
JOSE, CALIFORNIA, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE
OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH
NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT
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IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH PARTY
HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY.
Section 7.2 COUNTERPARTS. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party; provided that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
Section 7.3 HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
Section 7.4 SEVERABILITY. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
Section 7.5 ENTIRE AGREEMENT; AMENDMENTS; WAIVERS.
(a) This Agreement supersedes all other prior oral or written
agreements between the Purchasers, the Company, their affiliates and persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein (including the other Transaction
Documents) contain the entire understanding of the parties with respect to the
matters covered herein and therein. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the
Purchasers, and no provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. Notwithstanding
the above, this Agreement shall not supersede or terminate the rights and
obligations granted under a certain confidentiality agreement dated January 24,
2001 (accepted on January 30, 2001), as amended, by and between the Company and
The Palladin Group, L.P.
(b) Any Purchaser may at any time elect, by notice to the
Company, to waive (whether permanently or temporarily, and subject to such
conditions, if any, as such Purchaser may specify in such notice) any of their
respective rights (but not obligations) under any of the Transaction Documents
to acquire shares of Common Stock from the Company, in which event such waiver
shall be binding against such Purchaser in accordance with its terms.
Section 7.6 NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing, must be delivered by (i) courier, mail or hand
delivery or (ii) facsimile, and will be deemed to have been delivered upon
receipt. The addresses and facsimile numbers for such communications shall be:
If to the Company:
-00-
Xxxxxx Xxxxxxxx, Inc.
0000 Xxxxxxxxx Xxxxx Xxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: President and CEO
with a copy to:
Fenwick and West LLP
0 Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxx Xxxxxxx, Esq.
If to the Purchasers:
To each Purchaser at the address and/or fax number
set forth in Schedule I of this Agreement.
with a copy to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-986-8866
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Each party shall provide five (5) days prior written notice to
the other party of any change in address, telephone number or facsimile number.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date and
recipient facsimile number or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
Section 7.7 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns. A Purchaser may assign
some or all of its rights hereunder without the consent of the Company in
connection with any sale or transfer of all or any portion of the Securities
held by such Purchaser. The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Purchasers, including by merger or consolidation.
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Section 7.8 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 7.9 SURVIVAL. The representations, warranties and
agreements of the Company and the Purchasers contained in the Agreement shall
survive the Closing.
Section 7.10 FURTHER ASSURANCES. Each party shall do and perform,
or cause to be done and performed, all such further acts and things, and
shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
Section 7.11 REMEDIES. Each Purchaser and each permitted assignee
shall have all rights and remedies set forth in this Agreement, the
Debentures, the Warrants and the Registration Rights Agreement and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any person having any rights under any provision of this Agreement shall
be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision
of this Agreement and to exercise all other rights granted by law. Each
Purchaser and each permitted assignee without prejudice may withdraw, revoke
or suspend its pursuit of any remedy at any time prior to its complete
recovery as a result of such remedy.
Section 7.12 DAYS. Unless the context refers to "business days" or
"Trading Days," all references herein to "days" shall mean calendar days.
"TRADING DAY" shall mean (x) if the Common Stock is listed on the New York
Stock Exchange or the American Stock Exchange, a day on which there is
trading on such stock exchange, or (y) if the Common Stock is not listed on
either of such stock exchange but sale prices of the Common Stock are
reported on an automated quotation system, a day on which trading is reported
on the principal automated quotation system on which sales of the Common
Stock are reported, or (z) if the foregoing provisions are inapplicable, a
day on which quotations are reported by National Quotation Bureau
Incorporated.
Section 7.13 RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding
anything to the contrary contained in (and without limiting any similar
provisions of) the Transaction Documents, wherever the Purchasers exercise a
right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods
therein provided, then the Purchasers may rescind or withdraw, in their sole
discretion from time to time upon written notice to the Company, any such
notice, demand or election in whole or in part without prejudice to its
future actions and rights.
Section 7.14 OBLIGATIONS ABSOLUTE. The Company's obligations under
the Transaction Documents are unconditional and absolute and not subject to
any right of set off, counterclaim, delay or reduction.
Section 7.15 PUBLICITY. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of any
Purchaser without the express written
-23-
agreement of such Purchaser, which consent will not be unreasonably withheld,
unless and until such disclosure is required by law or applicable regulation,
and then only to the extent of such requirement. The Company agrees that it will
deliver a copy of any public announcement regarding the matters covered by this
Agreement or any agreement and document executed herewith to each Purchaser and
any public announcement including the name of a Purchaser to such Purchaser,
reasonably in advance of the release of such announcements.
Section 7.16 LIKE TREATMENT OF PURCHASERS AND HOLDERS. Neither the
Company nor any of its affiliates shall, directly or indirectly, pay or cause
to be paid any consideration (immediate or contingent), whether by way of
interest, fee, payment for the redemption, conversion of Debentures or
exercise of the Securities, or otherwise, to any Purchaser or holder of
Securities, for or as an inducement to, or in connection with the
solicitation of, any consent, waiver or amendment of any terms or provisions
of the Transaction Documents, unless such consideration is required to be
paid to all Purchasers or holders of Securities bound by such consent, waiver
or amendment. The Company shall not, directly or indirectly, redeem any
Securities unless such offer of redemption is made pro rata to all Purchasers
or holders of Securities, as the case may be, on identical terms.
Section 7.17 ACTIONS OF PURCHASERS. Notwithstanding anything herein
to the contrary, the actions and obligations of the Purchasers hereunder
shall at all times be considered several and NOT joint, and the Purchasers
are not, under any circumstances, agreeing to act jointly with respect to the
Securities or any of their actions or obligations under the Transaction
Documents.
* * * * *
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed as of the date and year first above
written.
HYBRID NETWORKS, INC.
By:
--------------------------------------
Name:
Title:
PURCHASERS:
HALIFAX FUND, L.P.
By:
--------------------------------------
Name:
Title:
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT
LIST OF SCHEDULES
-----------------
Schedule I List of Purchasers
Schedule 2.1(c) Reservation of Common Shares and Preemptive Rights
Schedule 2.1(c)(i) Convertible Securities
Schedule 2.1(f) SEC Documents; Non-Public Information; Financial Statements
Schedule 2.1(g) Financial Statements
Schedule 2.1(j) No Undisclosed Liabilities
Schedule 2.1(m) No Integrated Offering
Schedule 2.1(o) Intellectual Property
Schedule 2.1(s)(i) Outstanding securities entitled to registration rights
Schedule 2.1(s)(ii) Outstanding securities affected by the issuance of Securities
Schedule 2.1(t) Certain Transactions
LIST OF EXHIBITS
----------------
Exhibit 4.2(e) Opinion of Counsel
ANNEXES
-------
Annex A Debenture
Annex B Purchase Warrant
Annex C Adjustment Warrant
Annex D Registration Rights Agreement
26
SCHEDULE I
PRINCIPAL
AMOUNT OF NUMBER OF
PURCHASER ADDRESS DEBENTURES PURCHASE WARRANTS PURCHASE PRICE
--------- ------- ---------- ----------------- --------------
Halifax Fund, L.P. c/o The Palladin Group, L.P. $7,500,000 833,333 shares $7,500,000
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, X.X. 00000
Attention: Xxxxx Xxxxxx
Telephone: (000) 000-0000
