EXHIBIT 10.1
PREFERRED STOCK INVESTMENT AGREEMENT
PREFERRED STOCK INVESTMENT AGREEMENT ("AGREEMENT") dated as of December
17, 1999 between Secure Computing Corporation, a Delaware corporation (the
"COMPANY"), and Westgate International, L.P.(the "INVESTOR").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Investor, and
the Investor wishes to purchase from the Company, an aggregate of 5,000 shares
of the Company's Series D Preferred Stock, liquidation preference $1,000 per
share (all of such shares being the"PREFERRED SHARES"), having the rights,
designations and preferences set forth in the Certificate of Designations (the
"CERTIFICATE") in the form of Exhibit 1.1A attached hereto, on the terms and
conditions set forth herein; and
WHEREAS, the Preferred Shares will be convertible into shares
("COMMON SHARES") of common stock, par value $0.01, of the Company ("COMMON
STOCK"), pursuant to the terms of the Certificate, and the Investor will have
registration rights with respect to such Common Shares, pursuant to the terms of
that certain Registration Rights Agreement to be entered into between the
Company and the Investor substantially in the form of Exhibit 5.2(f) hereto
("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
agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
Section 1.1 Issuance of Preferred Shares. Upon the following terms and
conditions, the Company shall issue and sell to the Investor, and the Investor
shall purchase from the Company, the number of Preferred Shares indicated next
to the Investor's name on Schedule I attached hereto.
(a) PURCHASE PRICE. The purchase price for the Preferred Shares to
be acquired by the Investor (the "PURCHASE PRICE") shall be the Purchase Price
set forth next to the Investor's name on Schedule I.
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EXHIBIT 10.1
(b) THE CLOSING.
(i) Subject to the fulfillment or waiver of the conditions set
forth in Article V hereof, the closing of the purchase and sale of the Preferred
Shares (the "CLOSING") shall take place at the offices of Kleinberg, Kaplan,
Xxxxx & Xxxxx, P.C. ("KKWC"), on or about December 17, 1999 or earlier if the
Investor so determine, or such other date as the Investor and the Company may
agree upon (the "CLOSING DATE").
(ii) On the Closing Date, the Company shall deliver to the
Investor stock certificates (with the number of and denomination of such
certificates requested by the Investor) representing the Preferred Shares
purchased hereunder by the Investor at the Closing registered in the name of the
Investor or its nominee. The delivery of payment by wire transfer to an account
designated by the Company by the Investor of the Purchase Price applicable to it
as set forth in Section 1.1 and Schedule I shall constitute a payment delivered
to the Company in satisfaction of the Investor's obligation to pay the Purchase
Price hereunder. 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.
Section 1.2 Additional Financing.
(a) At the option of the Investor, the Investor may purchase up to
an additional 2,500 Preferred Shares (the "ADDITIONAL PREFERRED SHARES") for a
purchase price equal to the aggregate Liquidation Preference (as defined in the
Certificate) of the shares purchased.
(b) This option may be exercised in whole or in part, from time to
time commencing with the Closing Date until the Mandatory Conversion Date of the
Preferred Shares acquired on the Closing Date. Upon delivery of a notice by the
Investor exercising its option hereunder, the Company shall be obligated to sell
and deliver to the Investor, and the Investor shall be obligated to purchase,
the Additional Preferred Shares specified in the option exercise notice. Closing
of such purchase and sale ("OPTION CLOSING") shall take place at the office of
KKWC within 3 business days of the delivery of the option exercise notice. At
the Closing, the Company shall deliver certificates evidencing the Additional
Preferred Shares being purchased against the payment of the purchase price
therefor.
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EXHIBIT 10.1
(c) For the avoidance of doubt:
(i) The Mandatory Conversion Date of the Additional Preferred
Shares shall be four (4) months after the Common Shares into which they are
convertible become registered pursuant to the Registration Rights Agreement.
(ii) The Fixed Price of the Additional Preferred Shares shall be
determined as if the Additional Preferred Shares had been issued on the Closing
Date, (i.e., shall be subject to all of the adjustments to the Fixed Price
applicable between the Closing Date to the date of issuance of the Additional
Preferred Shares).
(iii) The Registration Rights Agreement shall apply to the
Common Shares underlying the Additional Preferred Shares, MUTATIS MUTANDIS, with
the time periods for filing and effectiveness of the registration statement
covering such Common Shares running from the date of the Option Closing.
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 Investor as of
the date hereof, on the Closing Date and on the date of any Option Closing:
(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 subsidiaries other than the subsidiaries listed on Schedule
2.1(a) attached hereto ("SUBSIDIARIES"). 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. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary 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,
properties, prospects or financial condition of the Company and its
subsidiaries, if any, and which is (either alone or together with all other
adverse effects) material to the Company and its Subsidiaries, if any, taken as
a whole, and any material adverse effect
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EXHIBIT 10.1
on the transactions contemplated under this Agreement, the Certificate and 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
Certificate and the Registration Rights Agreement ("TRANSACTION DOCUMENTS") and
to issue the Preferred Shares and Additional Preferred Shares in accordance with
the terms hereof, (ii) the execution and delivery of this Agreement and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including the issuance of the
Preferred Shares and Additional Preferred Shares and the resolutions contained
in the Certificate, 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)
this Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Company, (iv) this Agreement, the Certificate and the
Registration Rights Agreement constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
(A) 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, and (B) to the extent the
indemnification provisions contained in this Agreement and the Registration
Rights Agreement may be limited by applicable federal or state securities laws
and (v) the Preferred Shares and Additional Preferred Shares have been duly
authorized and, upon issuance thereof and payment therefor in accordance with
the terms of this Agreement, the Preferred Shares and Additional Preferred
Shares will be validly issued, fully paid and non-assessable, free and clear of
any and all liens, claims and encumbrances.
(c) CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of (i) 50,000,000 shares of Common Stock, of which
as of the date hereof, 22,522,758 shares are issued and outstanding, 8,444,131
shares are issuable and reserved for issuance pursuant to the Company's stock
option and purchase plans and 1,841,744 shares are issuable and reserved for
issuance pursuant to securities exercisable or exchangeable for, or convertible
into, shares of Common Stock, and (ii) 2,000,000 shares of preferred stock, of
which as of the date hereof, (A) 16,000 shares were designated as Series C
Preferred Stock and no shares of Series C Preferred Stock were issued and
outstanding and (B) 7,500 shares were designated as Series D Preferred Stock,
none of such shares were issued, and all of such were reserved for issuance
hereunder. All of such outstanding shares have been, or upon issuance will be,
validly issued, fully paid and nonassessable. As of the date hereof, except as
contemplated by the Common Stock Investment Agreement (defined below) or as
disclosed in Schedule 2.1(c), (i) no shares of the Company's capital stock are
subject to preemptive rights or any other
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EXHIBIT 10.1
similar rights or any liens or encumbrances suffered or permitted by the
Company, (ii) there are no outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the Securities Act of 1933, as amended ("SECURITIES ACT" or "1933 ACT") (except
the Registration Rights Agreement and that certain registration rights
agreements entered into with Manchester Securities Corp. ("MANCHESTER") pursuant
to the Common Stock Investment Agreement with Manchester dated as of October 4,
1999 ("COMMON STOCK INVESTMENT AGREEMENT")), (v) there are no outstanding
securities of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Shares as described in this Agreement and (vii) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to the Investor true and
correct copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the
terms of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
(d) ISSUANCE OF SHARES. Upon issuance in accordance with this
Agreement and the Certificate, the Preferred Shares, Additional Preferred Shares
and Common Shares will be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof.
(e) NO CONFLICTS. Except as disclosed in Schedule 2.1(e), 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 will not (i) result in a violation of the Certificate of Incorporation,
any Certificate of Designations, Preferences and Rights of any outstanding
series of preferred stock of the Company or the By-laws; (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
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EXHIBIT 10.1
result in a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws and regulations and
the rules and regulations of the Nasdaq National Market ("PRINCIPAL MARKET") or
principal securities exchange or trading market on which the Common Stock is
traded or listed) 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 as disclosed in Schedule 2.1(e), neither the Company nor its
Subsidiaries is in violation of any term of, or in default under, (x) its
Certificate of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock or By-laws or their
organizational charter or by-laws, respectively, (y) any material contract,
agreement, mortgage, indebtedness, indenture, instrument, or (z) any judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, the non-compliance with which (in the case of (z) only), would
be material to the Company or interfere with the performance of its obligations
under the Transaction Documents. Except as specifically contemplated by this
Agreement and as required under the 1933 Act, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under, or contemplated by, the Transaction Documents in accordance
with the terms hereof or thereof. Except as disclosed in Schedule 2.1(e), all
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company complies with and is not in
violation of the listing requirements of the Principal Market as in effect on
the date hereof and on each of the Closing Dates and is not aware of any facts
which would reasonably lead to delisting or suspension of the Common Stock by
the Principal Market in the foreseeable future.
(f) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31, 1997,
the Company has 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 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC DOCUMENTS"). The Company has delivered to the Investor
or its representatives true and complete copies of any SEC Documents that were
not filed electronically via XXXXX. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, 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. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the
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EXHIBIT 10.1
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, 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 exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other written information provided by or on behalf of the
Company to the Investor which is not included in the SEC Documents, including,
without limitation, information referred to in Section 2.2(b) of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading. Neither the
Company nor any of its Subsidiaries or any of their officers, directors,
employees or agents have provided the Investor with any material, nonpublic
information which was not publicly disclosed prior to the date hereof.
(g) ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule
2.1(g) or the SEC Documents filed at least five (5) days prior to the date
hereof, since December 31, 1998 there has been no adverse change or adverse
development in the business, properties, assets, operations, financial
condition, prospects, liabilities or results of operations of the Company or its
Subsidiaries which has had or, to the knowledge of the Company or its
Subsidiaries, is reasonably likely to have a Material Adverse Effect. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
its Subsidiaries have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings.
(h) ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
(i) except as set forth in Schedule 2.1(h) and (ii) except which individually
and in the aggregate, respectively, would be reasonably likely to result in
liability to the Company in excess of $50,000 and $100,000, respectively.
(i) ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated hereby and thereby. The Company further
acknowledges that the Investor is not acting as a financial advisor or fiduciary
of the Company (or in any similar
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EXHIBIT 10.1
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by the Investor or any of
its respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to the Investor's purchase of the Preferred Shares. The Company
further represents to the Investor that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
(j) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has occurred or
exists with respect to the Company or its Subsidiaries or their respective
business, properties, prospects, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws on a
registration statement filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly disclosed.
(k) NO INSIDE INFORMATION. The Company has not provided and, the
Company shall not provide, any Investor with any non-public information.
(l) NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of
Preferred Shares to the Investor to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable shareholder approval
provisions, including, without limitation, under the rules and regulations of
the Principal Market, nor will the Company or any of its Subsidiaries take any
action or steps that would cause the offering of the Shares to be integrated
with other offerings.
(m) EMPLOYEE RELATIONS. Neither the Company nor any of its
Subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened, the effect
of which would be reasonably likely to result in a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement. The Company and its Subsidiaries believe that relations
between the Company and its Subsidiaries and their respective employees are
good. No executive officer (as defined in Rule 501(f) of the 0000 Xxx) whose
departure would be adverse to the Company has notified the Company that such
officer intends to leave the Company or otherwise terminate such officer's
employment with the Company.
(n) INTELLECTUAL PROPERTY RIGHTS. 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, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule
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EXHIBIT 10.1
2.1(n), none of the Company's trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets or
other intellectual property rights have expired or terminated, or are expected
to expire or terminate within two (2) years from the date of this Agreement. The
Company and its Subsidiaries do not have any knowledge of any infringement by
the Company or its Subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
xxxx registrations, trade secret or other similar rights of others, or of any
such development of similar or identical trade secrets or technical information
by others and, except as set forth on Schedule 2.1(n), 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 trademarks,
trade name rights, patents, patent rights, inventions, copyrights, licenses,
service names, service marks, service xxxx registrations, trade secrets or other
infringement. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.
(o) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS", (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where such noncompliance or
failure to receive permits, licenses or approvals referred to in clauses (i),
(ii) or (iii) above could have, individually or in the aggregate, a Material
Adverse Effect.
(p) TITLE. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 2.1(p) or such as do not
materially and adversely affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or any
of its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(q) 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 management of the Company believes to be prudent and
customary in the
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EXHIBIT 10.1
businesses in which the Company and its Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and 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 at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries taken as a whole.
(r) REGULATORY PERMITS. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities, necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(s) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(t) 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 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.
(u) TAX STATUS. Except as set forth on Schedule 2.1(u), the Company
and each of its Subsidiaries has made or filed all United States federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
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EXHIBIT 10.1
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the Company is not aware of any basis
for any such claim.
(v) CERTAIN TRANSACTIONS. Except as set forth on Schedule 2.1(v) and
in the SEC Documents filed on XXXXX at least five (5) Trading Days prior to the
date hereof and except for arm's length transactions pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than the
grant of stock options disclosed on Schedule 2.1(c), none of the officers,
directors or 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.
(w) DILUTIVE EFFECT. The Company understands and acknowledges that
the number of Shares issuable upon conversion of Preferred Shares and Additional
Preferred Shares purchased pursuant to this Agreement will increase in certain
circumstances. The Company further acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents, its
obligation (x) to issue Additional Preferred Shares on exercise of the option
contained in Section 1.2 hereof, and (y) to issue Conversion Shares upon
conversion of Preferred Shares and Additional Preferred Shares purchased
pursuant to this Agreement, is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.
(x) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its board
of directors have taken all necessary action, if any, in order to render
inapplicable Section 203 of the Delaware General Corporation Law, or any other
similar anti-takeover provision contained in the Company's Certificate of
Incorporation or otherwise which is or could become applicable to the Investor
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company's issuance of the Shares and the Investor's
ownership of the Shares.
(y) RIGHTS PLAN. Except for the Amended and Restated Share Rights
Agreement dated July 24, 1997, as amended through the date of this Agreement,
neither the Company nor any of its Subsidiaries has adopted a shareholder rights
plan or similar arrangement relating to accumulations of beneficial ownership of
Common Stock or a change in control of the Company. The Company confirms that no
provision of such
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EXHIBIT 10.1
plan will, under any present or future circumstances, delay, prevent or
interfere with the performance of any of the Company's obligations under the
Transaction Documents and such plan will not be "triggered" by such performance.
(z) MARKET CAPITALIZATION. As of the date hereof, the aggregate
market value of the voting common equity of the Company held by non-affiliates
of the Company is greater than $100 million and on the date of the filing of the
Registration Statement, such aggregate market value shall be greater than $100
million as of a date within 60 days prior to such filing.
(aa) OBLIGATIONS ABSOLUTE. Each of the Company and the Investor
agrees that, subject only to the conditions, qualifications and exceptions (if
any) specifically set forth in the Transaction Documents, its obligations under
the Transaction Documents are unconditional and absolute. Except to the extent
(if any) specifically set forth in the Transaction Documents, each party's
obligations thereunder are not subject to any right of set off, counterclaim,
delay or reduction.
(bb) ISSUANCE OF COMMON SHARES. The Common Shares are duly
authorized and reserved for issuance and, upon conversion of Preferred Shares or
Additional Preferred Shares in accordance with the Certificate (including
receipt by the Company of the Preferred Shares or Additional Preferred Shares
being converted or a lost stock affidavit), such Common Shares will be validly
issued, fully paid and non-assessable, free and clear of any and all liens,
claims and encumbrances, and entitled to be traded on the Principal Market or
the New York Stock Exchange or the American Stock Exchange, or the Nasdaq small
cap market (collectively with the Principal Market, the "APPROVED MARKETS"), and
the holders of such Common Shares shall be entitled to all rights and
preferences accorded to a holder of Common Stock. As of the date of this
Agreement, the outstanding shares of Common Stock are currently listed on the
Principal Market.
(cc) FORM S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) for secondary
offerings on Form S-3 (as in effect on the date of this Agreement) under the
1933 Act and rules promulgated thereunder, and Form S-3 (as in effect on the
date of this Agreement) is permitted to be used for the transactions
contemplated hereby under the 1933 Act and rules promulgated thereunder.
Section 2.2 Representations and Warranties of the Investor. The Investor,
hereby makes the following representations and warranties to the Company as of
the date hereof, on the Closing Date and on the date of any Option Closing:
(a) ACCREDITED INVESTOR STATUS; SOPHISTICATED INVESTOR. The Investor
is an "accredited investor" as that term is defined in Rule 501(a) of Regulation
D under the 1933 Act. The Investor has such knowledge and experience in
financial and business
12
EXHIBIT 10.1
matters that it is capable of evaluating the merits and risks of investment in
the Preferred Shares, Additional Preferred Shares and Common Shares.
(b) INFORMATION. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company which have been requested and materials relating to the offer and
sale of the Preferred Shares, the Additional Preferred Shares and Common Shares
which have been requested by the Investor. The Investor and its advisors, if
any, have been afforded the opportunity to ask questions of the Company. The
Investor has not received any material, non-public information concerning the
Company. Neither such inquiries nor any other due diligence investigations
conducted by the Investor or its advisors, if any, or its representatives shall
modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in Section 2.1 above. The Investor
understands that its investment in the Preferred Shares, Additional Preferred
Shares and Common Shares involves a high degree of risk. The Investor has sought
such accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Preferred
Shares, Additional Preferred Shares and Common Shares.
(c) NO GOVERNMENTAL REVIEW. The Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Preferred Shares,
Additional Preferred Shares and Common Shares or the fairness or suitability of
the investment in the Preferred Shares, Additional Preferred Shares and Common
Shares nor have such authorities passed upon or endorsed the merits of the
offering of the Preferred Shares, Additional Preferred Shares and Common Shares.
(d) LEGENDS. The Company shall issue certificates for the Preferred
Shares, Additional Preferred Shares and Common Shares to the Investor without
any legend except as described in Article VI below. The Investor covenants that,
in connection with any transfer of Common Shares by the Investor pursuant to the
registration statement contemplated by the Registration Rights Agreement, it
will comply with the applicable prospectus delivery requirements of the 1933
Act, provided that copies of a current prospectus relating to such effective
registration statement are or have been supplied to the Investor.
(e) AUTHORIZATION; ENFORCEMENT. This Agreement, and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of the Investor and is a valid and binding agreement of the Investor
enforceable against the Investor in accordance with their terms, subject as to
enforceability to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors'
rights and remedies. The Investor has the requisite corporate power and
authority to enter into and perform its obligations under this
13
EXHIBIT 10.1
Agreement, the Registration Rights Agreement and each other agreement entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement.
(f) RESIDENCY. The Investor is a resident of the jurisdiction
indicated on Schedule 1.
(g) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Investor and the
consummation by the Investor of the transactions contemplated hereby and thereby
will not result in a violation of the certificate of incorporation, by-laws or
other documents of organization of the Investor.
(h) INVESTMENT REPRESENTATION. The Investor is purchasing the
Preferred Shares (and if applicable, Additional Preferred Shares) for its own
account and not with a view to distribution in violation of any securities laws.
The Investor has been advised and understands that neither the Preferred Shares,
Additional Preferred Shares nor the shares of Common Stock issuable upon
conversion thereof have been registered under the 1933 Act or under the "blue
sky" laws of any jurisdiction and may be resold only if registered pursuant to
the provisions of the 1933 Act or if an exemption from registration is
available, except under circumstances where neither such registration nor such
an exemption is required by law. The Investor has been advised and understands
that the Company in issuing the Preferred Shares and Additional Preferred Shares
is relying upon, among other things, the representations and warranties of the
Investor contained in this Section 2.2 in concluding that such issuance is a
"private offering" and is exempt from the registration provisions of the 1933
Act.
(i) RULE 144. The Investor understands that there is no public
trading market for the Preferred Shares and Additional Preferred Shares that
none is expected to develop, and that the Preferred Shares and Additional
Preferred Shares must be held indefinitely unless and until such Preferred
Shares, Additional Preferred Shares or Common Shares received upon conversion
thereof are registered under the 1933 Act or an exemption from registration is
available. The Investor has been advised or is aware of the provisions of Rule
144 promulgated under the 1933 Act.
(j) BROKERS. The Investor 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 or the Investor relating to this Agreement or the
transactions contemplated hereby.
(k) RELIANCE BY THE COMPANY. The Investor understands that the
Preferred Shares and Additional Preferred Shares are being offered and sold in
reliance on a transactional exemption from the registration requirements of
Federal and state securities laws and that the Company is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgments and
understandings of the Investor set forth
14
EXHIBIT 10.1
herein in order to determine the applicability of such exemptions and the
suitability of the Investor to acquire the Preferred Shares and Additional
Preferred Shares.
ARTICLE III
COVENANTS
Section 3.1 Registration and Listing; Effective Registration. Until such
time as no Preferred Shares or Additional Preferred Shares are outstanding, the
Company will cause the Common Stock to continue at all times to be registered
under Sections 12(b) or (g) of the Exchange Act, will comply in all material
respects with its reporting and filing obligations under the Securities Exchange
Act of 1934, as amended (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
such time as no Preferred Shares or Additional Preferred Shares are outstanding,
the Company shall continue the listing or trading of the Common Stock on the
Principal or one of the other Approved Markets and comply in all material
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Approved Market on which the Common Stock is listed. The
Company shall cause the Common Shares to be listed on the Principal or one of
the other Approved Markets no later than the effectiveness of the registration
of the Common Shares under the Act, and shall continue such listing(s) on one of
the Approved Markets, for so long as any Preferred Shares or Additional
Preferred Shares are outstanding.
Section 3.2 Certificates on Conversion. Upon any conversion by the
Investor (or then holder of Preferred Shares or Additional Preferred Shares) of
the Preferred Shares or Additional Preferred Shares pursuant to the Certificate,
the Company shall issue and deliver to the Investor (or holder) within three (3)
trading days of the conversion date a new certificate or certificates for the
number of Preferred Shares or Additional Preferred Shares which the Investor (or
holder) has not yet elected to convert but which are evidenced in part by the
certificate(s) submitted to the Company in connection with such conversion (with
the denominations of such new certificate(s) designated by the Investor or
holder).
Section 3.3 Replacement Certificates. The certificate(s) representing the
Preferred Shares or Additional Preferred Shares held by any Investor (or then
holder) may be exchanged by the Investor (or such holder) at any time and from
time to time for certificates with different denominations representing an equal
aggregate number of Preferred Shares or Additional Preferred Shares, as
requested by the Investor (or such holder) upon surrendering the same. No
service charge will be made for such registration or transfer or exchange.
15
EXHIBIT 10.1
Section 3.4 Securities Compliance. The Company shall notify the SEC and
the Principal Market, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Certificate and the Registration Rights
Agreement, 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 Preferred Shares or Additional Preferred Shares hereunder
and the Common Shares issuable upon conversion thereof.
Section 3.5 Notices. The Company agrees to provide all holders of
Preferred Shares or Additional Preferred Shares 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 3.6 Use of Proceeds. The Company agrees that the net proceeds
received by the Company from the sale of the Preferred Shares and Additional
Preferred Shares hereunder shall be used for legally permitted corporate
purposes.
Section 3.7 Reservation of Additional Preferred Shares; Stock Issuable
Upon Conversion.
(a) The Company shall reserve all authorized but unissued Series D
Preferred Stock for issuance to the Investor pursuant to the terms of this
Agreement.
(b) 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 the Preferred Shares and Additional Preferred
Shares, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all Preferred Shares and Additional
Preferred Shares, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
the then Preferred Shares (whether then outstanding or issuable pursuant to
Section 1.2 above), the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, 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
conversion of Preferred Shares and Additional Preferred Shares, such number of
authorized but unissued shares of Common Stock that is at least equal to 200% of
the number of Common Shares issuable upon conversion of all Preferred Shares and
Additional Preferred Shares (computed as if all Additional Preferred Shares were
then issued). If at any time the number of authorized but unissued shares of
Common Stock is not sufficient to effect the conversion, up to the Maximum
Common Stock Issuance (as defined in Section 3.16 below), of all the then
outstanding Preferred
16
EXHIBIT 10.1
Shares, the Investor shall be entitled to, INTER ALIA, the redemption rights
provided in the Registration Rights Agreement.
Section 3.8 Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article V of this Agreement.
Section 3.9 Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Preferred Shares and Common Shares, as required under
Regulation D and to provide a copy thereof to the Investor 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
Preferred Shares and Common Shares for sale to the Investor 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 the Investor on or prior to the Closing Date; provided,
however, that the Company shall not be required in connection therewith to
register or qualify as a foreign corporation in any jurisdiction where it is not
now so qualified or to take any action that would subject it to service of
process in suits or taxation, in each case, in any jurisdiction where it is not
now so subject.
Section 3.10 Materiality. The Company, after consultation with its outside
counsel, has determined that: (i) the execution, delivery and performance of the
Transaction documents (including, without limitation, the purchase of any
Additional Preferred Shares by the Investor) (the "Transaction Information") do
not constitute "material information" for purposes of the 1933 Act, the 1934 Act
or the rules of any self regulatory organization or market on which the Common
Stock is traded; and (ii) the Company is not required pursuant to applicable
law, or the rules of any self-regulatory organization or market on which the
Common Stock is traded, to issue any press release or make any other public
disclosure (other than in periodic reports required by the 0000 Xxx) disclosing
any of the Transaction Information. Insofar as the Company has concluded that
the Transaction Information is not material, the Company acknowledges that any
trading by the Investor in the Company's securities, while in possession of the
Transaction Information will not, by virtue of such possession: (1) violate any
duty of the Investor to the Company; or (2) constitute misappropriation of
information from the Company.
Section 3.11 Shareholder Rights Plan. None of the acquisitions of
Preferred Shares, Additional Preferred Shares or Common Shares nor the deemed
beneficial ownership of shares of Common Stock prior to, or the acquisition of
such shares pursuant to, the conversion of Preferred shares will in any event
under any circumstances trigger the poison pill provisions of any stockholders'
rights or similar agreements, or a substantially similar occurrence under any
successor or similar plan.
Section 3.12 Future Issuances of Preferred Shares. For so long as any
outstanding Preferred Shares are held by the Investor or Additional Preferred
Shares are issueable to
17
EXHIBIT 10.1
the Investor upon exercise of the option under Section 1.2 above, the Company
shall not, without the prior written consent of the Investor, issue any
Preferred Shares or Additional Preferred Shares to any persons other than the
Investor.
Section 3.13 Financial Information. The Company agrees to send the
following to the Investor for so long as any Preferred Shares or Additional
Preferred Shares are outstanding: (i) on the same day as the release thereof,
facsimile or e-mail copies of all press releases issued by the Company or any of
its Subsidiaries; and (ii) copies of any notices and other information made
available or given to the shareholders of the Company generally,
contemporaneously with the making available or giving thereof to the
shareholders.
Section 3.14 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, shall be
approved by a majority of the Company's outside directors.
Section 3.15 Restrictions On Short Sales. So long as the Investor owns
Preferred Shares or Additional Preferred Shares, the Investor will not sell
short the Company's Common Stock if as a result of such sale the Investor's net
short position in the Company's Common Stock would exceed the Investor's good
faith estimate of the amount of Common Shares that the Investor then has the
right to acquire pursuant to conversion of any Preferred Shares owned by the
Investor or Additional Preferred Shares owned or issuable to the Investor upon
exercise of the option contained in Section 1.2 above (or would have such right
to acquire but for the limitations contained in Section 5(j) in the Certificate)
or pursuant to the exercise of the warrants issued pursuant to the Common Stock
Investment Agreement held by the Investor or any affiliate of the Investor.
Section 3.16 Overall Limit on Common Stock Issuable. Notwithstanding
anything contained herein to the contrary, the number of Common Shares issuable
by the Company and acquirable by the Investor hereunder pursuant to conversion
of the Preferred Shares and Additional Preferred Shares shall not exceed
4,504,551 shares of Common Stock outstanding as of the date hereof, subject to
appropriate adjustment for stock splits, stock dividends, combinations or other
similar recapitalization affecting the Common Stock (the "MAXIMUM COMMON STOCK
ISSUANCE"), unless the issuance of shares hereunder in excess of the Maximum
Common Stock Issuance shall first be approved by the Company's shareholders in
accordance with applicable law and the By-laws and Articles of Incorporation of
the Company. Without limiting the generality of the foregoing, such
shareholders' approval must duly authorize the issuance by the Company of shares
of Common Stock totaling 4,504,551 or more of the shares of Common Stock
outstanding on the date hereof. The parties understand and agree that the
18
EXHIBIT 10.1
Company's failure to seek or obtain such shareholder approval shall in no way
adversely affect the validity and due authorization of the issuance and sale of
Preferred Shares or Additional Preferred Shares hereunder, and that such
approval pertains only to the applicability of the Maximum Common Stock Issuance
limitation provided in this Section.
ARTICLE IV
TRANSFER AGENT INSTRUCTIONS
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of the Investor or its respective nominee(s), for the Common Shares in
such amounts as specified from time to time by the Investor to the Company upon
delivery of a conversion notice (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS").
The Company warrants that no instruction relating to the Common Shares other
than the Irrevocable Transfer Agent Instructions referred to in this Article IV
will be given by the Company to its transfer agent and that the Common Shares
shall be freely transferable on the books and records of the Company as
contemplated by Article VI below when the legend referred to therein may be
removed. Nothing in this Article IV shall affect in any way the Investor's
obligations and agreements set forth in Section 2.2(d) to comply with all
applicable prospectus delivery requirements, if any, upon resale of the Common
Shares. The Company shall instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by the Investor
and without any restrictive legends. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Investor by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this Section,
that the Investor shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
ARTICLE V
CONDITIONS TO CLOSINGS
Section 5.1 Conditions Precedent to the Obligation of the Company to Sell
the Preferred Shares. The obligation hereunder of the Company to issue and/or
sell the
19
EXHIBIT 10.1
Preferred Shares to the Investor at the Closing and to issue and/or sell the
Additional Preferred Shares at an Option Closing is subject to the satisfaction,
at or before the Closing, or Option Closing, as the case may be, 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 INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Investor will be true and correct in all
material respects as of the date when made and as of the Closing Date, or date
of the Option Closing, as the case may be, as though made at that time.
(b) PERFORMANCE BY THE INVESTOR. The Investor shall have performed
all agreements and satisfied all conditions required to be performed or
satisfied by the Investor at or prior to the Closing, or Option Closing, as the
case may be, including payment of the purchase price set forth on Schedule I
hereto in the case of the Closing, and payment of the applicable consideration,
in the case of an Option Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement or the Certificate.
(d) CERTIFICATE. The Investor shall have delivered a certificate to
the Company certifying that the representations and warranties of the Investor
contained in Section 2.2 are true and correct in all material respects as of the
Closing Date in the case of the Closing, and as of the date of the Option
Closing, in the case of an Option Closing.
Section 5.2 Conditions Precedent to the Obligation of the Investor to
Purchase the Preferred Shares. The obligation hereunder of the Investor to
acquire and pay for the Preferred Shares 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 Investor's benefit and may be waived
by the Investor at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties 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 certificates representing the Preferred Shares issued to Investor.
20
EXHIBIT 10.1
(c) NASDAQ TRADING. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the SEC
and trading in securities generally as reported by the Principal Market (or
other Approved Market) shall not have been suspended or limited, and the Common
Stock shall be listed on the Principal Market or another 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 this
Agreement or the Registration Rights Agreement or the Certificate. The NASD
shall not have objected or indicated that it may object to the consummation of
any of the transactions contemplated by this Agreement.
(e) OPINION OF COUNSEL. At the Closing, the Investor shall have
received an opinion of counsel to the Company in the form attached hereto as
Exhibit 5.2(e) and such other opinions, certificates and documents as the
Investor or their counsel shall reasonably require incident to the Closing.
(f) REGISTRATION RIGHTS AGREEMENT. The Company and the Investor
shall have executed and delivered the Registration Rights Agreement in the form
and substance of Exhibit 5.2(f) attached hereto.
(g) OFFICER'S CERTIFICATE. The Company shall have delivered to the
Investor a certificate in form and substance satisfactory to the Investor and
the Investor's Counsel, executed by an officer of the Company, certifying as to
satisfaction of 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) CERTIFICATE. The Certificate shall have been accepted for filing
by the Secretary of State of the State of Delaware and a stamped copy thereof
shall have been provided to the Investor's Counsel.
(i) MISCELLANEOUS. The Company shall have delivered to the Investor
such other documents relating to the transactions contemplated by this Agreement
or the Investor or its counsel may reasonable request.
Section 5.3 Closing Deliveries.
(a) On the Closing Date, the Company shall deliver to the Investor:
(i) Certificates representing the Preferred Shares issued to
Investors;
21
EXHIBIT 10.1
(ii) A stamped copy of the filed Certificate;
(iii) The certificate referred to in Section 5.2(g) above;
(iv) The executed Registration Rights Agreement;
(v) The opinion of counsel referred to in Section 5.2(e) above.
(b) On the Closing Date, the Investor shall deliver to the Company:
(i) The Purchase Price set forth on Schedule I hereto;
(ii) The executed Registration Rights Agreement; and
(iii) The certificate referred to in Section 5.1(d) above.
Section 5.4 Conditions Precedent to the Obligation of the Investor to
Purchase the Additional Preferred Shares. The obligation of the Investor to
acquire and pay for the Additional Preferred Shares at an Option Closing is
subject to the satisfaction, at or before each Option Closing, of each of the
applicable conditions set forth below. The conditions are for the Investor's
benefit and may be waived by the Investor at any tine in its sole discretion.
(a) CONDITIONS IN SECTION 5.2. The Company shall have complied with
the conditions set forth in Section 5.2(a), (b), (c), (d), (e), (g) and (i) with
respect to the Option Closing, the date of such Option Closing and the closing
conditions for the Option Closing.
(b) COMPLIANCE WITH TRANSACTION DOCUMENTS. The Company shall be in
compliance with all of its obligations under the Transaction Documents.
Section 5.5 Closing Deliveries at Option Closing.
(a) On the date of each Option Closing, the Company shall deliver to
the Investor:
(i) certificates representing the Additional Preferred Shares
issued to the Investor;
(ii) the certificate referred to in Section 5.2 (g) above (as
modified by 5,4(a));
22
EXHIBIT 10.1
(iii) the opinion of counsel referred to in Section 5.2(e) above
(as modified by Section 5.4(a)).
(b) On the date of each Option Closing, the Investor shall deliver
to the Company:
(i) The purchase price for the Additional Preferred Shares
(determined by multiplying the number of Additional Preferred Shares purchased
by the Liquidation Preference (as deferred in the Certificate) per share; and
(ii) the certificate referred to in Section 5.1(d) above.
ARTICLE VI
LEGEND AND STOCK
Upon payment therefor as provided in this Agreement, the Company
will issue one or more certificates representing the Preferred Shares and
Additional Preferred Shares in the name the Investor or its designees and in
such denominations to be specified by the Investor prior to (or from time to
time subsequent to) Closing or Option Closing. Each certificate representing the
Preferred Shares or Additional Preferred Shares and any Common Shares issued
upon conversion thereof, prior to such Common Shares being registered under the
1933 Act for resale or available for resale under Rule 144 under the 1933 Act,
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.
The Company agrees to reissue Preferred Shares or Additional
Preferred Shares without the legend set forth above at such time as (i) the
holder thereof is permitted to dispose of such Preferred Shares or Additional
Preferred Shares and/or Common Shares issuable upon conversion thereof pursuant
to Rule 144 under the Act, or (ii) such Preferred 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.
23
EXHIBIT 10.1
Prior to the Registration Statement (as defined in the
Registration Rights Agreement) being declared effective, any Common Shares
issued pursuant to conversion of Preferred Shares or Additional Preferred Shares
shall bear a legend in the same form as the legend indicated above; provided
that such legend shall be removed from the Common Shares and the Company shall
issue new certificates without such legend if (i) the holder thereof is
permitted to dispose of such Common Shares pursuant to Rule 144 under the 1933
Act, (ii) such Common Shares are registered for resale under the 1933 Act, or
(iii) such Common 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 1933 Act. Upon such
Registration Statement becoming effective, the Company agrees to promptly, but
no later than three (3) business days thereafter, issue new certificates
representing such Common Shares without such legend. Any Common Shares issued
after the Registration Statement has become effective shall be free and clear of
any legends, transfer restrictions and stop orders. Notwithstanding the removal
of such legend, the Investor agrees to sell the Common Shares represented by the
new certificates in accordance with the applicable prospectus delivery
requirements (if copies of a current prospectus are provided to the Investor by
the Company) or in accordance with an exemption from the registration
requirements of the 1933 Act.
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.
ARTICLE VII
TERMINATION
Section 7.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of the
Company and the Investor.
Section 7.2 Other Termination. This Agreement may be terminated by action
of the Board of Directors of the Company or by the Investor at any time if the
Closing shall not have been consummated by the fifth business day following the
date of this Agreement; provided, however, that the party (or parties) prepared
to close shall retain its (or their) right to xxx for any breach by the other
party (or parties).
24
EXHIBIT 10.1
ARTICLE VIII
INDEMNIFICATION
In consideration of the Investor's execution and delivery of the this
Agreement and the Registration Rights Agreement and acquiring the Preferred
Shares hereunder 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 Investor and all of its partners, officers, directors, employees,
members and direct or indirect investors and any of the foregoing person's
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 Preferred Shares or (iii) the status of the Investor or holder of the
Preferred Shares or Additional Preferred Shares as the Investor in the Company
and (d) the enforcement of this Section. Notwithstanding the foregoing,
Indemnified Liabilities shall not include any liability of any Indemnitee
arising solely out of such Indemnitee's willful misconduct or fraudulent
action(s). To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this
Article VIII shall be the same as those set forth in Section 6 (other than
Section 6(b)) of the Registration Rights Agreement, including, without
limitation, those procedures with respect to the settlement of claims and
Company's right to assume the defense of claims.
25
EXHIBIT 10.1
ARTICLE IX
GOVERNING LAW, MISCELLANEOUS.
Section 9.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. 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, 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 IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
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. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY.
Section 9.2 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.
26
EXHIBIT 10.1
Section 9.3 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 9.4 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 9.5 Entire Agreement; Amendments; Waivers.
(a) This Agreement supersedes all other prior oral or written
agreements between the Investor, 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 and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Investor, and no provision hereof may be waived other than
by an instrument in writing signed by the party against whom enforcement is
sought.
(b) The Investor may at any time elect, by notice to the Company, to
waive (whether permanently or temporarily, and subject to such conditions, if
any, as the Investor may specify in such notice) any of its rights under any of
the Transaction Documents to acquire shares of Common Stock from the Company, in
which event such waiver shall be binding against the Investor in accordance with
its terms; provided, however, that the voluntary waiver contemplated by this
sentence may not reduce the Investor's obligations to the Company under the
Transaction Documents.
Section 9.6 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:
Secure Computing Corporation
000 Xxxxxx Xxxxx Xxxxx, Xxxxx 0
Xxx Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxx Xxxxx and
27
EXHIBIT 10.1
Secure Computing Corporation
Xxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxxxx Xxxxxxxx
With a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx
0000 Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxx
If to the Transfer Agent:
NorWest Shareowner Services
000 Xxxxx Xxxxxxx Xxxxxxxx Xxxxxx
Xxxxx Xx. Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Transfer Agent
If to the Investor:
Westgate International, L.P.
c/o Stonington Management Corporation
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000 and (000) 000-0000
Attention: Xxxx Xxxxxxx and Xxxxx Xxxxx
With a copy to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-986-8866
Attention: Xxxxxxx X. Xxxxxxx and Xxxxxxxxxxx X. Xxxxx
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
28
EXHIBIT 10.1
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, recipient facsimile number and an
image of the first page of such transmission 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 9.7 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, including any Permitted Assignee (as
defined below). The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investor,
including by merger or consolidation. The Investor may assign some or all of its
rights hereunder to an affiliate or associate of the Investor or an entity or
fund which has the same principal investment adviser as the Investor, without
the consent of the Company, and to others, with the written consent of the
Company (in each case, a "PERMITTED ASSIGNEE"); provided, however, that any such
assignment shall not release the Investor from its obligations hereunder unless
such obligations are assumed by such assignee and the Company has consented to
such assignment and assumption. Notwithstanding anything to the contrary
contained in the Transaction Documents, the Investor shall be entitled to pledge
the Preferred Shares, Additional Preferred Shares or Common Shares in connection
with a bona fide margin account.
Section 9.8 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 9.9 Survival. The representations, warranties and agreements of
the Company and the Investor contained in the Agreement shall survive each of
the Closing and Option Closings.
Section 9.10 Publicity. The Company and the Investor shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of the Investor, to
make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations (although the
Investor shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
Section 9.11 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
29
EXHIBIT 10.1
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 9.12 Placement Agent. The Investor and the Company each
acknowledges and warrants that it has not engaged any placement agent in
connection with the sale of the Shares other than Xxxxxx Capital, whose fees
will be paid exclusively by the Company. The Company and the Investor shall each
be responsible for the payment of any fees or commissions of placement agents or
brokers engaged, directly or indirectly, by the Company or the Investor,
respectively, in connection with the purchase of the Shares by the Investor. The
Company and the Investor shall pay, and hold the other party harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses) arising in connection with any such
claim.
Section 9.13 No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
Section 9.14 Remedies. The Investor and each Permitted Assignee shall have
all rights and remedies set forth in this Agreement 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.
The Investor 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 9.15 Payment Set Aside. To the extent that the Company makes a
payment or payments to the Investor hereunder or the Registration Rights
Agreement or the Investor enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
Section 9.16 Days. Unless the context refers to "business days" or
"Trading Days", all references herein to "days" shall mean calendar days.
30
EXHIBIT 10.1
Section 9.17 Recission and Withdrawal Right. Notwithstanding anything to
the contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, wherever the Investor exercises a right, election, demand
or option under a Transaction Document and the Company does not fully perform
its related obligations within the periods therein provided, then the Investor
in its sole discretion may rescind or withdraw from time to time any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights.
* * * * *
[SIGNATURE PAGE FOLLOWS]
31
EXHIBIT 10.1
IN WITNESS WHEREOF, the parties hereto have caused this Common Stock
Investment Agreement to be duly executed as of the date and year first above
written.
COMPANY: INVESTOR:
SECURE COMPUTING CORPORATION WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.
Attorney-in-Fact
By: /s/ Xxxx XxXxxxx By: /s/ Xxxxxx Xxxxxxxxx
---------------------------------- ----------------------------------
Name: Xxxx XxXxxxx Name: Xxxxxx Xxxxxxxxx
Title: Chief Executive Officer Title: Vice President
32
EXHIBIT 10.1
LIST OF SCHEDULES
-----------------
Schedule 2.1(a) Organization and Qualification
Schedule 2.1(c) Capitalization
Schedule 2.1(e) No Conflicts
Schedule 2.1(g) Absence of Certain Changes
Schedule 2.1(h) Absence of Litigation
Schedule 2.1(n) Intellectual Property Rights
Schedule 2.1(p) Title
Schedule 2.1(u) Tax Status
Schedule 2.1(v) Certain Transactions
LIST OF EXHIBITS
----------------
EXHIBIT A Registration Rights Agreement
EXHIBIT B Officers' Certificate
EXHIBIT C Opinion of Counsel
33
EXHIBIT 10.1
SCHEDULE I
NUMBER OF PURCHASE
INVESTOR RESIDENCE PREFERRED SHARES PRICE
-------- --------- ---------------- -----
Westgate International, L.P. Cayman Islands, B.W.I. 5,000 $5,000,000
34
