EXHIBIT 10.13
The following table sets forth those individuals who have executed a
Bridge Loan Subscription Agreement, a form of which is included in this Exhibit
10.13. All material terms of the Bridge Loan Subscription Agreements are
identical.
Investor
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CBP Talecom, LP
DLK Limited Partnership
O.T. Finance S.A.
Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
Xxxx Xxxxx
Xxxxxxxxx Limited Partnership
XX Xxxx Associates, LP
Xxxx X. Xxxxxxxxx
XxXxxxxxxxx Limited Partnership
Ogham Holdings, LP
Xxxxxx Xxxxx
Xxxxxx Limited Partnership
WCAL Limited Partnership
Wittenstein Limited Partnership
Xxxxxxxxx Telecom Partners, LP
Xxxxxxxx X. Xxxxxxxxx
BRIDGE LOAN SUBSCRIPTION AGREEMENT
BRIDGE LOAN SUBSCRIPTION AGREEMENT made as of this ___ day of November
2001, by and among Category 5 Technologies, Inc., a Nevada corporation (the
"Company"), and the investors named in Schedule 1 hereto (together with their
successors and assigns, collectively the "Investors," and each individually an
"Investor").
W I T N E S S E T H
WHEREAS, the Company desires to sell and issue promissory notes in a
bridge financing in order to obtain general working capital until such time as
the Company obtains permanent financing; and
WHEREAS, the Investors are willing to provide such bridge financing
pursuant to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
X. Xxxxxxxx, Sale and Terms of Notes and Warrants.
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1. The Notes. The Company has authorized the issuance and sale of
its convertible promissory notes (the "Notes" or a "Note") in an aggregate
principal amount of up to $2,000,000 to the Investors. The Investors hereby
agree to purchase the Notes from the Company in the respective amounts set forth
in Schedule 1 hereto, subject to the terms and conditions herein. The Notes
shall bear interest at a rate equal to eight percent (8%) per annum, compounded
quarterly, and all principal and accrued interest shall be due and payable one
year from the date of issuance (the "Maturity Date"), subject to the holder's
Conversion Rights (as defined below). The Notes shall be delivered to the
Investors in the form attached hereto as Exhibit A.
2. The Warrants. In further consideration of the bridge financing
being provided by the Investors hereunder, the Company shall issue to each
Investor warrants in the form attached hereto as Exhibit B (each, a "Warrant"
and, collectively, the "Warrants"). For each $1,000 principal amount of Notes
purchased by the Investor, such Warrants will entitle such investor to purchase
950 shares of the Company's Common Stock. The exercise price of the Warrants
shall be $1.69 per share.
3. The Closing. An initial closing of the purchase and sale of the
Notes and the issuance of the Warrants in respect of the Notes (the "Closing")
shall take place at the offices of TN Capital Equities. Ltd., placement agent
for the Company, at such time and date as the placement agent and the Company
may agree ("Closing Date"). At the Closing, the Company will deliver to each
Investor (a) Notes for the principal amount set forth opposite its name under
the heading "Principal Amount of Notes" in Schedule 1 and (b) a Warrant in the
form attached hereto as Exhibit B in respect of the Notes, in each case
registered in such Investor's name (or its nominee), against delivery of funds
immediately payable to the order of the Company or a transfer of funds to the
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account of the Company by wire transfer, representing the net cash consideration
for the Notes set forth opposite each such Investor's name on Schedule 1, after
deducting the placement agent's commission and the agreed expenses of the
offering.
B. Conversion Rights.
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Beginning at the end of the ninth month after the issuance of the
Notes, the Investors shall have the right, but not the obligation, to convert
all, but not less than all, of the principal amount of the Notes and accrued
interest thereon (the "Note Value") into a number of shares of the Company's
Common Stock (the "Conversion Shares") computed by dividing the Note Value by a
per-share price which shall be the lower of (i) the price per share of Common
Stock sold in the next private placement equity offering which takes place
during the life of the Notes (after this Offering) or (ii) a per-share price of
$2.00
C. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor:
1. Organization, Standing Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada. The Company has all requisite corporate power and authority to own,
lease and operate its properties and assets and to conduct its business as now
being conducted and is duly qualified to do business in good standing in those
foreign jurisdictions in which such qualification is required except where the
absence of any such qualification could not reasonably be expected to have a
Material Adverse Effect (as defined below).
2. Authority; Enforceability; No Conflict. The Company has all
requisite corporate power and authority to enter into this Agreement and to
issue the Notes and Warrants and to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
issuance of the Notes and Warrants by the Company have been, or will have been
prior to the Closing, duly and validly authorized by all requisite corporate
proceedings on the part of the Company. This Agreement and the Notes and
Warrants, when executed and delivered by the Company, will be valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, rehabilitation, liquidation,
conservatorship, receivership or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery of this Agreement
by the Company does not, and the consummation by the Company of the transactions
contemplated hereby and thereby will not, result in or constitute: (i) a
default, breach or violation of or under the Certificate of Incorporation or the
By-laws of the Company, (ii) a default, breach or violation of or under any
material mortgage, deed of trust, indenture, note, bond, license, lease,
agreement or other material instrument or obligation to which the Company or its
subsidiaries is a party or by which any of their respective properties or assets
are bound, (iii) a violation of any material statute, rule, regulation, order,
judgment or decree of any court, public body or authority by which the Company
or its subsidiaries or any of their respective properties or assets are bound,
(iv) an event which (with notice or lapse of time or both) would permit any
Person (as defined below) to terminate, accelerate the performance required by,
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or accelerate the maturity of any material indebtedness or obligation of the
Company under any agreement or commitment to which the Company is a party or by
which the Company is bound or by which any of its properties or assets are
bound, (v) the creation or imposition of any material lien, charge or
encumbrance on any property of the Company under any agreement or commitment to
which the Company is a party or by which the Company is bound or by which any of
its properties or assets are bound, or (vi) an event which would require any
material consent under any agreement to which the Company is a party or by which
the Company is bound or by which any of its properties or assets are bound.
3. Securities Act of 1933. Based upon the representations made by
the Investors in Section D of this Agreement: (i) 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 and Warrants hereunder and (ii)
neither the Company nor anyone acting on its behalf has or will sell, offer to
sell or solicit offers to buy the Notes or Warrants or similar securities to, or
solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any Person, so as to bring
the issuance and sale of the Notes or Warrants under the registration provisions
of the Securities Act (as defined below) and applicable state securities laws.
4. Small Business Concern. The Company together with its
"affiliates" (as that term is defined in Section 121.103 of Title 13 of the Code
of Federal Regulations) is a "small business concern" within the meaning of the
Small Business Act of 1958, as amended ("SBIA"), and the regulations thereunder
(the "SBIC Regulations"), including Title 13, C.F.R. ss. 121.301(c). The
information pertaining to the Company set forth in Small Business Administration
Forms 480, 652 and 1031 delivered to each Purchaser that is a Small Business
Investment Company ("SBIC") licensed by the United States Small Business
Administration (each an "SBIC Purchaser") is accurate and complete. Neither the
Company nor any subsidiary of the Company presently engages in, or shall
hereafter engage in, any activities, nor shall the Company or any subsidiary of
the Company use the proceeds of the sale of the Preferred Shares directly or
indirectly for any purpose for which an SBIC is prohibited from providing funds
by the regulations under the SBIC Regulations (including, without limitation, 13
C.F.R. ss. 107.720). To the best knowledge of the Company, no SBIC owns any
securities issued by the Company, except as contemplated herein.
5. Environmental Matters.
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(a) The Company and any other person or entity for whose
conduct it is or may be responsible has not caused or allowed, nor has the
Company contracted with any party for, the generation, use, transportation,
treatment, storage or disposal of any Hazardous Substances (as defined below) in
connection with the operations of its business or otherwise.
(b) The Company and any other person or entity for whose
conduct it is or may be responsible, the operations of its business, and any
real property that the Company owns, leases, or otherwise occupies or use (the
"Premises") have no liability under, have never violated and are in compliance
with all applicable Environmental Laws (as defined below) and orders or
directives of any governmental authorities having jurisdiction under such
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Environmental Laws including, without limitation, any Environmental Laws or
orders or directives with respect to any cleanup or remediation of any release
or threat of release of Hazardous Substances.
(c) The Company and any other person or entity for whose
conduct it is or may be responsible has not received any consent decree,
compliance order, administrative order, request for information, citation,
directive, letter or other communication, written or oral, or any notice of any
proceedings, claims or lawsuits from any person, entity or governmental
authority arising out of the ownership or occupation of the Premises, or the
conduct of its operations, nor is it aware of any basis therefore.
(d) The Company has obtained and is maintaining in full
force and effect all necessary permits, licenses and approvals required by any
Environmental Laws applicable to the Premises and the business operations
conducted thereon (including operations conducted by tenants on the Premises)
and is in compliance with all such permits, licenses and approvals.
(e) The Company and any other person or entity for whose
conduct it is or may be responsible has not caused, or allowed a release, or a
threat of release, of any Hazardous Substance on, beneath or off the Premises
nor to the best of the Company's knowledge has the Premises or any property at
or near the Premises ever been subject to a release, or a threat of a release,
of any Hazardous Substance.
(f) The term "Environmental Laws" shall mean federal, state
or local law, rule, by-law, ordinance or regulation pertaining to the protection
of human health or the environment including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Sections 9601, et seq., Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Sections 11001, et seq., and the Resource Conservation and Recovery Act,
42 U.S.C. Sections 6901, et seq., and similar statements under state laws and
regulations promulgated thereunder.
(g) The term "Hazardous Substance" includes oil and
petroleum products, asbestos, polychlorinated biphenyls and urea formaldehyde,
and any other materials classified as hazardous or toxic under any Environmental
Laws.
6. Investments Relating to Certain Foreign Countries. The Company
has not participated and is not participating in, an anti-Israeli boycott within
the scope of Chapter 7 of Part 2 of Division 4 of Title 2 of the California
Government Code as in effect from time to time.
7. Information Memorandum. The Company's Confidential Information
Memorandum dated September 14, 2001 (the "Information Memorandum") has been
delivered to the Investors and is complete and correct and does not contain any
untrue statement of material fact or omit to state a material fact necessary in
order to make the statements therein not materially misleading in light of the
circumstances which such statements are made.
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8. Rights to Intellectual Property, Etc. The Company possesses,
and owns or has other exclusive rights to, all intellectual property rights
necessary to enable it to develop and conduct its business as contemplated under
its business plan. The Company's use of such intellectual property rights does
not and will not infringe on the rights of any third party. The Company has
agreements with all key employees under which such employees are prohibited from
disclosing to third parties any proprietary confidential information of the
Company.
9. Outstanding Shares. All of the outstanding shares of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable. Except as shown in the Information Memorandum, the Company does
not have as of the date hereof, and will not have as of the Closing, any
outstanding (i) securities convertible or exchangeable for its capital stock,
(ii) rights to subscribe for or to purchase any of its shares or (iii) options
providing for the purchase of, agreements providing for the issuance (contingent
or otherwise) of, or any calls, commitments or claims of any character relating
to, its shares.
10. Warrants. The Warrants will be, then issued and delivered,
duly and validly issued and will permit the holders thereof to purchase Common
Shares of the Company in accordance with their terms.
11. Financing Proceeds. The Company intends to use the proceeds
from the sale of the Notes as set forth in the Information Memorandum.
D. Representations and Warranties of the Investors. Each of the
Investors severally but not jointly hereby represents and warrants to the
Company as follows:
1. Organization and Standing of Investors. Each Investor which is
not an individual is a corporation, partnership or limited liability company or
trust duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization.
2. Authority; Enforceability; No Conflict. Each Investor has all
requisite power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by each of the Investors have been duly and validly authorized by all requisite
proceedings on the part of each of the Investors. This Agreement when executed
and delivered by each of the Investors is a valid and binding obligation of such
Investor, enforceable against it in accordance with its terms, except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, rehabilitation, liquidation, conservatorship, receivership or other
similar laws nor or hereafter in effect relating to creditors' rights generally
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. The execution and
delivery of this Agreement by each of the Investors does not, and consummation
by such Investor of the transactions contemplated hereby will not, result in or
constitute (i) a default, breach or violation of or under the organizational
documents of such Investor, (ii) a default, breach or violation of or under any
mortgage, deed of trust, indenture, note, bond, license, lease agreement or
other instrument or obligation to which such Investor is a party or by which any
of its properties or assets are bound, except for any defaults, breaches or
violations which would not, individually or in the aggregate, have a material
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adverse effect on such Investor or prevent or materially delay the consummation
by such Investor of the transactions contemplated hereby, or (iii) a violation
of any statute, rule, regulation, order, judgment or decree of any court, public
body or authority, except for any violations which would not, individually or in
the aggregate, have a material adverse effect on such Investor or prevent or
materially delay the consummation by such Investor of the transactions
contemplated hereby.
3. Acquisition for Investment. Each Investor is an "accredited
investor" as defined in Regulation D under the Securities Act, and is acquiring
the Notes and Warrants solely for its own account for the purpose of investment
and not with a view to or for sale in connection with any distribution thereof,
and it has no present intention or plan to effect any distribution of the Notes
or Warrants. Each of the Investors acknowledges that (i) by reason of its
business and financial experience, it has such knowledge, sophistication and
experience in business and financial matters as to be capable of evaluating the
merits and risks of its investment in the Notes and Warrants, (ii) it was not
formed for the specific purpose of purchasing the Notes and Warrants, (iii) it
is able to bear the financial risks (including a complete loss of the value of
the Notes and Warrants) associated with an investment in the Notes and Warrants,
and (iv) it has been given full access to such records of the Company and to the
officers of the Company as it has deemed necessary and appropriate to conducting
its due diligence investigation. The Notes and Warrants may bear a legend to the
following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS. THIS NOTE [OR WARRANT] HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
NOT BE SOLD, MORTGAGED, PLEDGED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION THEREFROM.
Each of the Investors understands and acknowledges that the Notes and Warrants
may not be sold, transferred or otherwise disposed of without registration under
the Securities Act or an exemption therefrom and hereby agrees not to sell,
transfer or otherwise dispose of any Notes and Warrants other than pursuant to
an effective registration statement under the Securities Act or unless and until
such Investor shall have furnished to the Company, at such Investor's expense,
an opinion of counsel reasonably satisfactory to the Company to the effect that
such sale, transfer or disposition may be made without registration under the
Securities Act.
4. Adequate Resources. Each of the Investors has sufficient funds
and will have sufficient funds at all times through the Closing to consummate
the transactions contemplated hereby. None of the Investors will be rendered
insolvent by reason of its investments in the Company, nor will it be left with
unreasonably small capital for purposes of meeting its other needs.
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5. Acknowledgement of Risk. Each Investor acknowledges that
purchase of the Notes and Warrants involves significant risk, including the
risks set forth in the Information Memorandum, which the Investor has received.
E. Definitions.
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As used in this Agreement, the following terms shall have the following
meanings:
"Material Adverse Effect" shall mean any material adverse effect
on the business, profits, properties or condition of the Company and its
subsidiaries, taken as a whole.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, university, or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
F. Company Covenants.
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1. Reservation of Shares. The Company will at times reserve and
set side and hold available, out of its authorized capital stock, the number of
shares of Common Stock issuable upon (i) conversion of the Notes and (ii)
exercise of the Warrants. Such shares of Common Stock, when issued, paid for and
delivered upon such conversion or exercise, will be duly and validly issued,
fully paid and non-assessable, and will be issued and delivered free and clear
of all liens, claims or encumbrances.
2. Use of Proceeds. The Company will use the proceeds from the
purchase of Notes and Warrants hereunder as described in the Information
Memorandum.
3. Income Taxes. The Company will accurately prepare and timely
file all income tax and other tax returns required to be filed, and will pay, or
make provision for the payment of, all taxes due or to become due thereunder.
4. Registration Rights. The Company agrees that the Investor will
have the registration rights set forth in Exhibit C.
G. Miscellaneous.
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1. No Waiver; Cumulative Remedies. No failure or delay on the part
of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
2. Representations to Survive Deliver; Indemnification. The
respective representations, warranties, and agreements of the Company and of the
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Investor contained in this Agreement will remain operative and in full force and
effect and will survive the payment of the purchase price for and the delivery
of the Notes and Warrants. The parties hereby agree to indemnify and hold
harmless one another from any damages or expense, by reason of or arising from
any actual or alleged misrepresentation or misstatement of facts or omission to
represent or state facts, made by one party to the other.
3. Closing Conditions. In addition to the other terms and
conditions contained herein, the obligations of the Investors to consummate the
Closings shall be subject to (a) the representations and warranties of the
Company set forth in Section C hereof being true and correct as of the date of
each such Closing, and (b) there not having been a material adverse change in
the business, financial condition or prospects of the Company since the date of
this Agreement, and (c) the delivery by the Company of an officers certificate
to such effect, and (d) the delivery of the Notes and Warrants and the payment
of expenses and fees as contemplated by this Agreement.
4. Addresses for Notices. Any notice, demand, request, waiver or
other communication under this Agreement shall be in writing and shall be deemed
to have been duly given on the date of service if personally served or on the
third day after mailing if mailed (by first class mail, registered, return
receipt requested, postage prepaid), or one business day after deposit with an
express overnight courier, in either case addressed to the party to whom notice
is to be given as follows:
To the Company: Category 5 Technologies, Inc.
0000 Xxxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, CEO
Xxxxxxxx X. Xxxxxxx, President, CFO
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
To any Investor: At the address specified in this Agreement
5. Binding Effect; Assignment. This Agreement shall be binding
upon and insure to the benefit of each of the Company and the Investors and
their respective heirs, successors and assigns, except that the Company shall
not have the right to delegate its obligations hereunder or to assign its rights
hereunder or any interest herein without the prior written consent of each of
the Investors.
6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEVADA, AND
WITHOUT GIVING EFFECT TO CHOICE OF LAW PROVISIONS.
7. Headings. Article, section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
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8. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
9. Waiver. At any time prior to any Closing Date, any party hereto
may (i) extend the time for the performance of any of the obligations or other
acts of any other party hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party granting such waiver but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or future failure.
10. Specific Enforcement. Each of the Investors and the Company
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement 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 breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state thereof having
jurisdiction, this being in addition to any other remedy to which they may be
entitled at law or equity.
11. Consents and Waivers. Each of the Investors hereby consents,
to the extent such consent is required pursuant to the terms of any existing
agreements between the Company and such Investor, to the Company's entering into
this Agreement and the issuance of the Notes, the Warrants and the Conversion
Shares.
12. Costs, Expenses and Taxes. The Company shall pay the
reasonable fees and out of pocket expenses of legal counsel, independent public
accountants, consultants and other outside experts retained by the Investors in
connection with the negotiation and execution of this Agreement and any
amendment or waiver to this Agreement or the successful enforcement of this
Agreement by the Investors. In addition, the Company shall pay any and all
stamp, or other similar taxes payable or determined to be payable in connection
with the execution and delivery of this Agreement, the issuance of the Notes,
the Warrants or the Conversion Shares and the other instruments and documents to
be delivered hereunder or thereunder, and agrees to save the Investors harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes.
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IN WITNESS WHEREOF, the parties hereto have caused this Bridge Loan
Subscription Agreement to be duly executed as of the date and year first above
written.
INVESTOR: COMPANY:
CATEGORY 5 TECHNOLOGIES, INC.
_________________________________ By: __________________________
Name: Name:
Address:_________________________ Title:
_________________________________
_________________________________
Tax ID: _________________________
Date of Signature by Investor: __________, 2001
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SCHEDULE 1
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SCHEDULE OF INVESTORS
Name and Address of Investor Principal Amount of Notes
-------------------------------- ----------------------------
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