[EXHIBIT 10.1]
SECURITIES PURCHASE AGREEMENT
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SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of April 1,
2004, by and between RAPTOR NETWORKS TECHNOLOGY, INC., a Colorado corporation
(the "Company"), and each of the entities whose names appear on the signature
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pages hereof. Such entities are each referred to herein as an "Investor" and,
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collectively, as the "Investors".
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The Company wishes to sell to each Investor, and each Investor wishes to
purchase, on the terms and subject to the conditions set forth in this
Agreement, (i) shares (the "Shares") of the Company's common stock, par value
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$.001 per share (the "Common Stock"), (ii) a Series A Warrant in the form
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attached hereto as Exhibit A (a "Series A Warrant" and, collectively, the
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"Series A Warrants") and (iii) a Series B Warrant in the form attached hereto as
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Exhibit B (a "Series B Warrant" and, collectively, the "Series B Warrants"). The
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Series A Warrants and the Series B Warrants are collectively referred to herein
as the "Warrants".
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Each Series A Warrant issued to an Investor will entitle such Investor to
purchase a number of shares of Common Stock equal to the number of Shares
purchased by such Investor at the Closing. The Series A Warrants will have an
exercise price equal to $2.25 per share (subject to adjustment as provided
therein) and will expire on the sixtieth (60th) day following the Effective Date
(as defined below). Each Series B Warrant issued to an Investor will entitle
such Investor to purchase a number of shares of Common Stock equal to the number
of Shares purchased by such Investor at the Closing. The Series B Warrants will
have an exercise price equal to $3.50 per share (subject to adjustment as
provided therein) and will expire on the fifth (5th) anniversary of the Closing
Date.
The shares of Common Stock into which the Warrants are exercisable are
referred to herein as the "Warrant Shares". The Shares and the Warrants are
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collectively referred to herein as the "Purchased Securities", and the Purchased
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Securities and the Registrable Securities (as defined below) are collectively
referred to herein as the "Securities".
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The Company has agreed to effect the registration of the Registrable
Securities under the Securities Act of 1933, as amended (the "Securities Act"),
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pursuant to a Registration Rights Agreement in the form attached hereto as
Exhibit C (the "Registration Rights Agreement"). The sale of the Securities by
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the Company to the Investors will be effected in reliance upon the exemption
from securities registration afforded by the provisions of Regulation D
("Regulation D"), as promulgated by the Securities and Exchange Commission (the
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"Commission") under the Securities Act.
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In consideration of the mutual promises made herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each Investor hereby agree as follows:
1. PURCHASE AND SALE OF SHARES, ADDITIONAL INVESTMENT RIGHTS AND WARRANTS.
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1.1 Purchase and Sale of Purchased Securities. Upon the terms and subject
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to the satisfaction or waiver of the conditions set forth herein, the Company
agrees to sell and each Investor agrees to purchase (i) the number of Shares set
forth below such Investor's name on the signature pages hereof, (ii) a Series A
Warrant and (ii) a Series B Warrant. The purchase price for the Purchased
Securities being purchased by an Investor (the "Purchase Price") shall be equal
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to (x) the number of Shares purchased by such Investor times (y) $1.75, provided
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that the Purchase Price shall be allocated among the Purchased Securities as may
be agreed to among the Company and such Investor. The date on which the closing
of the purchase and sale of the Purchased Securities occurs (the "Closing") is
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hereinafter referred to as the "Closing Date". The Closing will be deemed to
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occur when (A) this Agreement and the other Transaction Documents (as defined
below) have been executed and delivered by the Company and, to the extent
applicable, by each Investor, (B) each of the conditions to Closing described in
Section 5 hereof has been satisfied or waived as specified therein and (C)
except as otherwise provided in the following sentence, full payment of each
Investor's Purchase Price has been made by such Investor to the Company by wire
transfer of immediately available funds against physical delivery by the Company
of duly executed certificates representing the Purchased Securities purchased by
such Investor at the Closing. Notwithstanding the foregoing, Satellite Strategic
Finance Associates, LLC ("Satellite") shall withhold and apply $125,397 of its
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Purchase Price to pay the insurance premiums on the Insurance Policies (as
defined below) at Closing.
1.2 Certain Definitions. When used herein, the following terms shall have
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the respective meanings indicated:
"Affiliate" means, as to any Person (the "subject Person"), any
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other Person (a) that directly or indirectly through one or more intermediaries
controls or is controlled by, or is under direct or indirect common control
with, the subject Person, (b) that directly or indirectly beneficially owns or
holds ten percent (10%) or more of any class of voting equity of the subject
Person, or (c) ten percent (10%) or more of the voting equity of which is
directly or indirectly beneficially owned or held by the subject Person. For the
purposes of this definition, "control" when used with respect to any Person
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means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, through
representation on such Person's Board of Directors or other management committee
or group, by contract or otherwise.
"Business Day" means any day other than a Saturday, a Sunday or a
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day on which the New York Stock Exchange or commercial banks located in New York
City are authorized or permitted by law to close.
"Closing" and "Closing Date" have the respective meanings
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specified in Section 1.1 hereof.
"Common Stock" means the common stock, par value $0.001 per
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share, of the Company.
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"Debt" means, as to any Person at any time: (a) all indebtedness,
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liabilities and obligations of such Person for borrowed money; (b) all
indebtedness, liabilities and obligations of such Person to pay the deferred
purchase price of Property or services, except trade accounts payable of such
Person arising in the ordinary course of business that are not past due by more
than 90 days; (c) all capital lease obligations of such Person; (d) all Debt of
others guaranteed by such Person; (e) all indebtedness, liabilities and
obligations secured by a Lien existing on Property owned by such Person, whether
or not the indebtedness, liabilities or obligations secured thereby have been
assumed by such Person or are non-recourse to such Person; (f) all reimbursement
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, bankers' acceptances, surety or other bonds and similar
instruments; and (g) all indebtedness, liabilities and obligations of such
Person to redeem or retire shares of capital stock of such Person.
"Disclosure Documents" means all SEC Documents filed by the
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Company at least two (2) Business Days prior to the date of this Agreement via
the Commission's Electronic Data Gathering, Analysis and Retrieval system
(▇▇▇▇▇) in accordance with the requirements of Regulation S-T under the Exchange
Act.
"Effective Date" has the meaning set forth in the Registration
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Rights Agreement.
"Environmental Law" means any federal, state, provincial, local
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or foreign law, statute, code or ordinance, principle of common law, rule or
regulation, as well as any Permit, order, decree, judgment or injunction issued,
promulgated, approved or entered thereunder, relating to pollution or the
protection, cleanup or restoration of the environment or natural resources, or
to the public health or safety, or otherwise governing the generation, use,
handling, collection, treatment, storage, transportation, recovery, recycling,
discharge or disposal of hazardous materials.
"ERISA" means the Employee Retirement Income Security Act of
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1974, as amended, and the regulations and published interpretations thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as
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amended (or any successor act), and the rules and regulations thereunder (or
respective successors thereto).
"GAAP" means generally accepted accounting principles, applied on
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a consistent basis, as set forth in (i) opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants, (ii) statements
of the Financial Accounting Standards Board and (iii) interpretations of the
Commission and the Staff of the Commission. Accounting principles are applied on
a "consistent basis" when the accounting principles applied in a current period
are comparable in all material respects to those accounting principles applied
in a preceding period.
"Governmental Authority" means any nation or government, any
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state, provincial or political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including without limitation any stock exchange,
securities market or self-regulatory organization.
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"Governmental Requirement" means any law, statute, code,
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ordinance, order, rule, regulation, judgment, decree, injunction, franchise,
license or other directive or requirement of any federal, state, county,
municipal, parish, provincial or other Governmental Authority or any department,
commission, board, court, agency or any other instrumentality of any of them.
"Indemnity Agreement" means the Indemnity Agreement being
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delivered by ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ at Closing in favor of the Company
and the Investors.
"Insurance Binder" means an insurance binder that is in form and
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substance reasonably satisfactory to the Investors setting forth, among other
things, the types and amount of insurance coverage to be obtained by the
Company, and the insurance premiums payable for the first year of such coverage.
"Insurance Policies" means the insurance policies providing all
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of the coverages contemplated by the Insurance Binder.
"Intellectual Property" means any U.S. or foreign patents, patent
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rights, patent applications, trademarks, trade names, service marks, brand
names, logos and other trade designations (including unregistered names and
marks), trademark and service ▇▇▇▇ registrations and applications, copyrights
and copyright registrations and applications, inventions, invention disclosures,
protected formulae, formulations, processes, methods, trade secrets, computer
software, computer programs and source codes, manufacturing research and similar
technical information, engineering know-how, customer and supplier information,
assembly and test data drawings or royalty rights.
"Lien" means, with respect to any Property, any mortgage or
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mortgages, pledge, hypothecation, assignment, deposit arrangement, security
interest, tax lien, financing statement, pledge, charge, or other lien, charge,
easement, encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or with respect to
such Property (including, without limitation, any conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing).
"Material Adverse Effect" means an effect that has a material and
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adverse effect on (i) the consolidated business, operations, properties,
financial condition, prospects or results of operations of the Company and its
Subsidiaries taken as a whole or (ii) the transactions contemplated by this
Agreement or the other Transaction Documents (as defined below).
"Material Contracts" means, as to the Company, any agreement
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required pursuant to Item 601 of Regulation S-B or Item 601, as applicable, of
Regulation S-K under the Securities Act to be filed as an exhibit to any report,
schedule, registration statement or definitive proxy statement filed or required
to be filed by the Company with the Commission under the Exchange Act or any
rule or regulation promulgated thereunder, and any and all amendments,
modifications, supplements, renewals or restatements thereof.
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"NASD" means the National Association of Securities Dealers, Inc.
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"Outstanding Registrable Securities" means, at any time, all
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Registrable Securities outstanding, or issuable upon exercise of the Warrants
(without regard to any limitation on such exercise), at such time.
"Pension Plan" means an employee benefit plan (as defined in
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ERISA) maintained by the Company for employees of the Company or any of its
Affiliates.
"Permitted Liens" means the following:
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(a) encumbrances consisting of easements, rights-of-way, zoning
restrictions or other restrictions on the use of real Property or
imperfections to title that do not (individually or in the aggregate)
materially impair the ability of the Company or any of its Subsidiaries to
use such Property in its businesses, and none of which is violated in any
material respect by existing or proposed structures or land use;
(b) Liens for taxes, assessments or other governmental charges
that are not delinquent or which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the Property subject to such Liens, and for which
adequate reserves (as determined in accordance with GAAP) have been
established; and
(c) Liens of mechanics, materialmen, warehousemen, carriers,
landlords or other similar statutory Liens securing obligations that are
not yet due and are incurred in the ordinary course of business or which
are being contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the
Property subject to such Liens, for which adequate reserves (as determined
in accordance with GAAP) have been established.
"Person" means any individual, corporation, trust, association,
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company, partnership, joint venture, limited liability company, joint stock
company, Governmental Authority or other entity.
"Principal Market" means the principal exchange or market on
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which the Common Stock is listed or traded.
"Property" means property and/or assets of all kinds, whether
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real, personal or mixed, tangible or intangible (including, without limitation,
all rights relating thereto).
"Purchase Price" has the meaning specified in Section 1.1 hereof.
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"Purchased Securities" has the meaning set forth in the preamble
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to this Agreement.
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"Registrable Securities" means the Shares and the Warrant Shares,
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any other shares of Common Stock issuable pursuant to the terms of the Warrants,
and any shares of capital stock issued or issuable from time to time (with any
adjustments) in replacement of, in exchange for or otherwise in respect of the
Shares or the Warrant Shares; provided, however, that "Registrable Securities"
shall not include any such shares that have been sold pursuant to the
Registration Statement or Rule 144(k).
"Registration Statement" has the meaning set forth in the
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Registration Rights Agreement.
"Rule 144" means Rule 144 under the Securities Act, or any
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successor provision.
"SEC Documents" has the meaning specified in Section 3.4 hereof.
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"Securities" has the meaning specified in the preamble to this
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Agreement.
"Subsidiary" means, with respect to any Person, any corporation
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or other entity of which at least a majority of the outstanding shares of stock
or other ownership interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors (or Persons performing similar
functions) of such corporation or entity (irrespective of whether or not at the
time, in the case of a corporation, stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more of its Subsidiaries or by such Person and one or more
of its Subsidiaries.
"Trading Day" means any day on which the Common Stock is
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purchased and sold on the Principal Market.
"Transaction Documents" means (i) this Agreement, (ii) the Series
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A Warrants, (iii) the Series B Warrants, (iv) the Registration Rights Agreement,
(v) the Indemnity Agreement, and (vi) all other agreements, documents and other
instruments executed and delivered by or on behalf of the Company or any of its
officers at the Closing.
1.3 Other Definitional Provisions. All definitions contained in this
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Agreement are equally applicable to the singular and plural forms of the terms
defined. The words "hereof", "herein" and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR.
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Each Investor hereby represents and warrants to the Company and agrees with
the Company that, as of the date of this Agreement and as of the Closing Date:
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2.1 Authorization; Enforceability. Such Investor is duly and validly
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organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization as set forth below such
Investor's name on the signature page hereof with the requisite corporate power
and authority to purchase the Purchased Securities and to execute and deliver
this Agreement. This Agreement and the other transaction documents to which it
is a party each constitutes such Investor's valid and legally binding
obligation, enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) general principles of equity.
2.2 Accredited Investor. Such Investor is an accredited investor as that
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term is defined in Rule 501 of Regulation D, and is acquiring the Purchased
Securities solely for its own account (or for one or more accounts as to which
it exercises investment discretion) and not with a present view to the public
resale or distribution of all or any part thereof, except pursuant to sales that
are exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act; provided, however, that, in making such
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representation, such Investor does not agree to hold the Purchased Securities
for any minimum or specific term and reserves the right to sell, transfer or
otherwise dispose of the Purchased Securities at any time in accordance with the
provisions of this Agreement and with Federal and state securities laws
applicable to such sale, transfer or disposition.
2.3 Information. The Company has provided such Investor with information
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regarding the business, operations and financial condition of the Company, and
has granted to such Investor the opportunity to ask questions of and receive
answers from representatives of the Company, its officers, directors, employees
and agents concerning the Company and materials relating to the terms and
conditions of the purchase and sale of the Purchased Securities hereunder.
Neither such information nor any other investigation conducted by such Investor
or its representatives shall modify, amend or otherwise affect such Investor's
right to rely on the Company's representations and warranties contained in this
Agreement.
2.4 Limitations on Disposition. Such Investor acknowledges that, except as
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provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act and may not be transferred or
resold without registration under the Securities Act or unless pursuant to an
exemption therefrom.
2.5 Legend. Such Investor understands that the certificates representing
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the Securities may bear at issuance a restrictive legend in substantially the
following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, and may not be
offered or sold unless a registration statement under the Securities
Act and applicable state securities laws shall have become effective
with regard thereto, or an exemption from registration under the
Securities Act and applicable state securities laws is available in
connection with such offer or sale."
Notwithstanding the foregoing, it is agreed that, as long as (A) the resale
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or transfer (including without limitation a pledge) of any of the Securities is
registered pursuant to an effective registration statement, (B) such Securities
have been sold pursuant to Rule 144, subject to receipt by the Company of
customary documentation in connection therewith, or (C) such Securities are
eligible for resale under Rule 144(k) or any successor provision, such
Securities shall be issued without any legend or other restrictive language and,
with respect to Securities upon which such legend is stamped, the Company shall
issue new certificates without such legend to the holder upon request.
2.6 Reliance on Exemptions. Such Investor understands that the Securities
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are being offered and sold to it in reliance upon specific exemptions from the
registration requirements of federal and state securities laws and that the
Company is relying on the truth and accuracy of the representations and
warranties of such Investor set forth in this Section 2 in order to determine
the availability of such exemptions and the eligibility of such Investor to
acquire the Securities.
2.7 Non-Affiliate Status; Common Stock Ownership. Such Investor is not an
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Affiliate of the Company or of any other Investor and is not acting in
association or concert with any other Investor with regard to its purchase of
Purchased Securities or otherwise in respect of the Company. Such Investor's
investment in Purchased Securities is not for the purpose of acquiring, directly
or indirectly, control of, and it has no intent to acquire or exercise control
of, the Company or to influence the decisions or policies of the Company's Board
of Directors.
2.8 No Short Position in Company Securities. Neither such Investor nor any
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person trading on its behalf or at its direction has established or maintained a
short position in the Common Stock or any other securities of the Company as of
the Trading Day immediately preceding the Closing Date.
2.9 Fees. Such Investor is not obligated to pay any compensation or other
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fee, cost or related expenditure to any underwriter, broker, agent or other
representative in connection with the transactions contemplated hereby, other
than legal fees to its counsel.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
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represents and warrants to each Investor and agrees with such Investor
that, as of the date of this Agreement and as of the Closing Date:
3.1 Organization, Good Standing and Qualification. Each of the Company and
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its Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to carry on its business as now conducted. Each of
the Company and its Subsidiaries is duly qualified to transact business and is
in good standing in each jurisdiction in which it conducts business except where
the failure so to qualify has not had or would not reasonably be expected to
have a Material Adverse Effect.
3.2 Authorization; Consents. The Company has the requisite corporate power
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and authority to enter into and perform its obligations under this Agreement and
the other Transaction Documents, including without limitation to issue and sell
the Purchased Securities to the Investors in accordance with the terms thereof,
to issue the Warrant Shares upon exercise of the Warrants. All corporate action
on the part of the Company by its officers, directors and stockholders necessary
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for the authorization, execution and delivery of, and the performance by the
Company of its obligations under, this Agreement and the other Transaction
Documents has been taken, and no further consent or authorization of the
Company, its Board of Directors, stockholders, any Governmental Authority or
organization (other than such approval as may be required under the Securities
Act and applicable state securities laws in respect of the Registration Rights
Agreement), or any other person or entity is required (pursuant to any rule of
the NASD or otherwise). The Company's Board of Directors has determined, at a
duly convened meeting or pursuant to a unanimous written consent, that the
issuance and sale of the Purchased Securities, and the consummation of the
transactions contemplated hereby and the other Transaction Documents (including
without limitation the issuance of Warrant Shares) are in the best interests of
the Company.
3.3 Enforcement. Each Transaction Document has been duly executed and
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delivered by the Company and constitutes the valid and legally binding
obligation of the Company, enforceable against it in accordance with its terms,
subject to (i) applicable bankruptcy, insolvency, fraudulent transfer,
moratorium, reorganization or other similar laws of general application relating
to or affecting the enforcement of creditors' rights generally and (ii) general
principles of equity.
3.4 SEC Documents; Agreements; Financial Statements; Other Information.
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Except as described on Schedule 3.4 hereto, the Company has filed with the
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Commission all reports, schedules, registration statements and definitive proxy
statements that the Company was required to file with the Commission on or after
December 31, 2002 (collectively, the "SEC Documents"). The Company is not aware
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of any event occurring on or prior to the Closing Date (other than the
transactions effected hereby) that would require the filing of, or with respect
to which the Company intends to file, a Form 8-K after the Closing. Each SEC
Document, as of the date of the filing thereof with the Commission, complied in
all material respects with the requirements of the Securities Act or Exchange
Act, as applicable, and the rules and regulations promulgated thereunder and, as
of the date of such filing (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing), such SEC Document
(including all exhibits and schedules thereto and documents incorporated by
reference therein) did not contain an untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents required to be filed as exhibits to the SEC
Documents have been filed as required. Except as set forth in the SEC Documents
or any schedule or exhibit attached hereto, the Company has no liabilities,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business which, under GAAP, are not required to be reflected in the financial
statements included in the SEC Documents and which, individually or in the
aggregate, are not material to the consolidated business or financial condition
of the Company and its Subsidiaries taken as a whole. The financial statements
included in the SEC Documents have been prepared in accordance with GAAP
consistently applied at the times and 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 adjustments).
3.5 Capitalization; Debt Schedule. The capitalization of the Company as of
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the date hereof, including its authorized capital stock, the number of shares
issued and outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company's stock option plans and agreements, the number of
shares issuable and reserved for issuance pursuant to securities (other than the
Purchased Securities) exercisable for, or convertible into or exchangeable for
any shares of Common Stock and the number of shares initially to be reserved for
issuance upon exercise of the Warrants is set forth on Schedule 3.5 hereto. All
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issued and outstanding shares of capital stock of the Company have been validly
issued, fully paid and non-assessable. No shares of the capital stock of the
Company are subject to preemptive rights or any other similar rights of security
holders of the Company or any Liens created by or through the Company. Except as
disclosed on Schedule 3.5, or as contemplated herein, as of the date of this
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Agreement and as of the date of the Closing, 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 or exercisable
or exchangeable for, any shares of capital stock of the Company or any of its
Subsidiaries, 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 (whether pursuant to anti-dilution, "reset" or other
similar provisions). Except as described on Schedule 3.5 hereto, the Company has
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no material Debt outstanding as of the date hereof.
3.6 Due Authorization; Valid Issuance. The Shares and the Warrants are
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duly authorized and, when issued, sold and delivered in accordance with the
terms hereof, will be duly and validly issued, fully paid and non-assessable,
free and clear of any Liens imposed by or through the Company and, assuming the
accuracy of each Investor's representations in this Agreement, will be issued,
sold and delivered in compliance with all applicable Federal and state
securities laws. The Warrant Shares are duly authorized and reserved for
issuance and, when issued in accordance with the terms of the Warrants, will be
duly and validly issued, fully paid and non-assessable, free and clear of any
Liens imposed by or through the Company.
3.7 No Conflict with Other Instruments. Neither the Company nor any of its
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Subsidiaries is in violation of any provisions of its charter, bylaws or any
other governing document or in default (and no event has occurred which, with
notice or lapse of time or both, would constitute a default) under any provision
of any instrument or contract to which it is a party or by which it or any of
its Property is bound, or in violation of any provision of any Governmental
Requirement applicable to it, except for violations of any provision of a
Governmental Requirement that has not had or would not reasonably be expected to
have a Material Adverse Effect (any such violation or default, a "Current
Violation"). The execution, delivery and performance of this Agreement and the
other Transaction Documents, and the consummation of the transactions
contemplated hereby and thereby (including without limitation, the issuance of
the Purchased Securities and the reservation and issuance of the Warrant Shares)
will not result in a Current Violation or result in the creation of any Lien
upon any assets of the Company or of any of its Subsidiaries or the triggering
of any preemptive or anti-dilution rights (including without limitation pursuant
to any "reset" or similar provisions) or rights of first refusal or first offer,
or any other rights that would allow or permit the holders of the Company's
securities or other Persons to purchase shares of Common Stock or other
securities of the Company (whether pursuant to a shareholder rights plan
provision or otherwise).
3.8 Financial Condition; Taxes; Litigation.
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3.8.1 The Company's financial condition is, in all material respects,
as described in the Disclosure Documents, except for changes in the ordinary
course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the consolidated business or financial
condition of the Company and its Subsidiaries taken as a whole. There has been
no (i) material adverse change to the Company's business, operations,
properties, financial condition, prospects or results of operations since the
date of the Company's most recent audited financial statements contained in the
Disclosure Documents or (ii) change by the Company in its accounting principles,
policies and methods except as required by changes in GAAP.
3.8.2 Each of the Company and its Subsidiaries (i) has prepared in
good faith and duly and timely filed all tax returns required to be filed by it
and such returns are complete and accurate in all material respects (ii) has
paid all taxes required to have been paid by it, except for taxes which it
reasonably disputes in good faith or the failure of which to pay has not had or
would not reasonably be expected to have a Material Adverse Effect, and has no
liability with respect to accrued taxes in excess of the amounts that are
described as accrued in the financial statements included in the Disclosure
Documents.
3.8.3 Neither the Company nor any of its Subsidiaries is the subject
of any pending or, to the Company's knowledge, threatened inquiry, investigation
or administrative or legal proceeding by the Internal Revenue Service, the
taxing authorities of any state or local jurisdiction, the Commission, the NASD,
any state securities commission or other Governmental Authority.
3.8.4 Except as described in Schedule 3.8.4, there is no material
---------------
claim, litigation or administrative proceeding pending or, to the Company's
knowledge, threatened or contemplated, against the Company or any of its
Subsidiaries, or against any officer, director or employee of the Company or any
such Subsidiary in connection with such person's employment therewith. Neither
the Company nor any of its Subsidiaries is a party to or subject to the
provisions of, any order, writ, injunction, judgment or decree of any court or
Governmental Authority which has had or would reasonably be expected to have a
Material Adverse Effect.
3.9 Form SB-2. The Company is eligible to register the Registrable
---------
Securities for resale by each Investor on a registration statement on Form SB-2
under the Securities Act. To the Company's knowledge, there exist no facts or
circumstances (including without limitation any required approvals or waivers of
any circumstances that may delay or prevent the obtaining of accountant's
consents) that could reasonably be expected to prohibit or delay the preparation
and filing of such registration statement.
3.10 Acknowledgement of Dilution. The Company acknowledges that the
----------------------------
issuance of the Warrant Shares upon exercise of the Warrants may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Warrant Shares upon exercise of the Warrants in
accordance with the terms thereof is unconditional regardless of the effect of
any such dilution.
3.11 Intellectual Property. The Company and its Subsidiaries each owns or
---------------------
11
possesses, licenses or can acquire or make use of, without undue expense, all
Intellectual Property that is necessary or appropriate for the operation of its
businesses as presently conducted and as proposed to be conducted, without any
known conflict with the rights of others. The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents will not
materially alter or impair, individually or in the aggregate, any of such rights
of the Company. To the Company's knowledge, (i) none of its current products or
services infringes upon any Intellectual Property of any other Person, and no
claim or litigation is pending or, to the knowledge of the Company, threatened
against the Company contesting its right to sell or otherwise use any product or
material or service which has had or would reasonably be expected to have a
Material Adverse Effect and (ii) the use by the Company of any Intellectual
Property does not infringe the rights of any third party to such Intellectual
Property. There is no violation by the Company with respect to any Intellectual
Property owned or used by the Company and the Company's rights to such
Intellectual Property are valid and enforceable and no registration relating
thereto has lapsed, expired or terminated or is the subject of any claim or
proceeding that could result in any such lapse, expiration or termination. The
Company and its Subsidiaries each has complied in all material respects with its
obligations pursuant to any agreement relating to Intellectual Property rights
that are the subject of licenses granted by third parties.
3.12 Registration Rights. Except as described on Schedule 3.12 hereto,
-------------------
the Company has not granted or agreed to grant to any person or entity any
rights (including "piggy-back" registration rights) to have any securities of
the Company registered with the Commission or any other governmental authority
which has not been satisfied in full prior to the date hereof.
3.13 Fees. Except as described on Schedule 3.13 hereto, the Company is not
---- -------------
obligated to pay any compensation or other fee, cost or related expenditure to
any underwriter, broker, agent or other representative in connection with the
transactions contemplated hereby. The Company will indemnify and hold harmless
such Investor from and against any claim by any person or entity alleging that
such Investor is obligated to pay any such compensation, fee, cost or related
expenditure in connection with the transactions contemplated hereby.
3.14 Foreign Corrupt Practices. Neither the Company, nor any of its
---------------------------
Subsidiaries nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary, has (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity, (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee (including
without limitation any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment), or (iii) violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
3.15 Employees. Each of the Company's executive officers (as defined in
---------
Rule 501(f) of the Securities Act) (each, a "Key Employee") is currently serving
------------
in the capacity indicated in Schedule 3.15 hereto. The Company has no knowledge
-------------
of any fact or circumstance (including without limitation (i) the terms of any
agreement to which such person is a party or any litigation in which such person
is or may become involved and (ii) any illness or medical condition that could
reasonably be expected to result in the disability or incapacity of such person)
that would limit or prevent any such person from serving in such capacity on a
full-time basis in the foreseeable future, or of any intention on the part of
12
any such person to limit or terminate his or her employment with the Company. No
Key Employee has borrowed money pursuant to a currently outstanding loan that is
secured by Common Stock or any right or option to receive Common Stock. There is
no strike, labor dispute or union organization activities pending or, to the
knowledge of the Company, threatened between it and its employees. None of the
Company's employees belong to any union or collective bargaining unit. The
Company has complied in all material respects with all applicable federal and
state equal opportunity and other laws related to employment.
3.16 Environment. The Company and its Subsidiaries have no liabilities
-----------
under any Environmental Law, nor do any factors exist that are reasonably likely
to give rise to any such liability, affecting any of the properties owned or
leased by the Company or any of its Subsidiaries that, individually or in the
aggregate, have had or would reasonably be expected to have a Material Adverse
Effect. Neither the Company nor any of the Subsidiaries has violated any
Environmental Law applicable to it now or previously in effect, other than such
violations or infringements that, individually or in the aggregate, have not had
and would not reasonably be expected to have a Material Adverse Effect.
3.17 ERISA. Except as described on Schedule 3.17, the Company does not
----- --------------
maintain or contribute to, or have any obligation under, any Pension Plan. The
Company is in compliance in all material respects with the presently applicable
provisions of ERISA and the United States Internal Revenue Code of 1986, as
amended, except for matters that, individually or in the aggregate, have not
had, and would not reasonably be expected to have, a Material Adverse Effect.
3.18 Disclosure. No written statement, information, report, representation
----------
or warranty made by the Company in this Agreement or any other Transaction
Document or furnished to such Investor by or on behalf of the Company in
connection with the Transaction Documents or such Investor's due diligence
investigation of the Company contains any untrue statement of a material fact or
omits to state any material fact necessary to make the statements herein or
therein, in light of the circumstances in which made, not misleading. The
Company has not disclosed to such Investor any event, circumstance or fact that
would constitute material non-public information as of the date of this
Agreement or the Closing Date. Following the issuance of the press release and
Form 8-K in accordance with Section 4.1(c) hereof, such Investor will not
possess any material non-public information concerning the Company. The Company
acknowledges that such Investor is relying on the representations,
acknowledgements and agreements made by the Company in this Section 3.18 in
making trading and other decisions concerning the Company's securities.
3.19 Insurance. Except as described in Schedule 3.19 hereto, the Company
--------- -------------
maintains insurance for itself and its Subsidiaries in such amounts and covering
such losses and risks as the Company believes to be reasonably prudent in
relation to the businesses in which the Company and its Subsidiaries are
engaged. No notice of cancellation has been received for any of such policies
and the Company is in compliance with all of the terms and conditions thereof.
The Company has no reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost. Without limiting the generality
of the foregoing, the Company maintains Director's and Officer's insurance in an
amount not less than $5 million for each covered occurrence.
13
3.20 Property. The Company and its Subsidiaries have good and marketable
--------
title in fee simple to all of its 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, except
for Permitted Liens. Any Property held under lease by the Company and its
Subsidiaries is held by them under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the use made or
proposed to be made of such Property by the Company and its Subsidiaries.
Neither the Company nor any of its Subsidiaries own any real Property.
3.21 Regulatory Permits. The Company and its Subsidiaries possess all
------------------
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses other than where the failure to possess such certificates,
authorizations or permits, individually or in the aggregate, has not had and
would not reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any such Subsidiary has received any notice or otherwise become
aware of any proceedings, inquiries or investigations relating to the revocation
or modification of any such certificate, authorization or permit.
3.22 Exchange Act Registration. The Company's Common Stock is registered
-------------------------
pursuant to Section 12(g) of the Exchange Act and the Company has taken no
action designed to, or which, to the knowledge of the Company, is likely to have
the effect of, terminating the registration of the Common Stock under the
Exchange Act.
3.23 Investment Company Status. The Company is not, and immediately after
-------------------------
receipt of payment for the Purchased Securities issued under this Agreement will
not be, an "investment company" or an entity "controlled" by an "investment
------------------- ---------- ----------
company" within the meaning of the Investment Company Act of 1940, as amended
-------
(the "Investment Company Act"), and shall conduct its business in a manner so
-----------------------
that it will not become subject to the Investment Company Act.
3.24 Transfer Taxes. No stock transfer or other taxes (other than income
--------------
taxes) are required to be paid in connection with the issuance and sale of any
of the Securities, other than such taxes for which the Company has established
appropriate reserves and intends to pay in full on or before the Closing.
3.25 Internal Controls and Procedures. The Company maintains internal
----------------------------------
accounting controls, policies and procedures and such books and records as are
reasonably designed to provide reasonable assurance that (i) all transactions to
which the Company or any Subsidiary is a party or by which its properties are
bound are effected by a duly authorized employee or agent of the Company,
supervised by and acting within the scope of the authority granted by the
Company's senior management; (ii) the recorded accounting of the Company's
consolidated assets is compared with existing assets at regular intervals; and
(iii) all transactions to which the Company or any Subsidiary is a party, or by
which its properties are bound, are recorded (and such records are maintained)
in accordance with all material Government Requirements and as may be necessary
or appropriate to ensure that the financial statements of the Company are
prepared in accordance with GAAP.
14
3.26 Embargoed Person. None of the funds or other assets of the Company
----------------
shall constitute property of, or shall be beneficially owned, directly or
indirectly, by any person subject to trade restrictions under United States law,
including, but not limited to, the International Emergency Economic Powers Act,
50 U.S.C. ss. 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et
seq., and any Executive Orders or regulations promulgated under any such United
States laws (each, an "Embargoed Person"), with the result that the investments
----------------
evidenced by the Purchased Securities are or would be in violation of law; (b)
no Embargoed Person shall have any interest of any nature whatsoever in the
Company with the result that the investments evidenced by the Purchased
Securities are or would be in violation of law; and (c) none of the funds of the
Company shall be derived from any unlawful activity with the result that the
investments evidenced by the Purchased Securities are or would be in violation
of law.
3.27 No Other Agreements. The Company has not, directly or indirectly,
-------------------
entered into any agreement with or granted any right to any Investor relating to
the terms or conditions of the transactions contemplated by this Agreement or
the other Transaction Documents, except as expressly set forth in the
Transaction Documents.
4. COVENANTS OF THE COMPANY AND EACH INVESTOR.
------------------------------------------
4.1 The Company agrees with each Investor that it will, following the
Closing:
(a) file a Form D with respect to the Securities issued at the
Closing as and when required under Regulation D and to provide a copy thereof to
such Investor promptly after such filing;
(b) take such action as the Company reasonably determines upon the
advice of counsel is necessary to qualify the Purchased Securities issued at the
Closing for sale and resale under applicable state or "blue-sky" laws or obtain
an exemption therefrom, and shall provide evidence of any such action to such
Investor at such Investor's request; and
(c) (i) on or prior to 9:30 a.m. (eastern time) on the Business Day
immediately following the date on which this Agreement is executed and delivered
by the Company, issue a press release disclosing the material terms of this
Agreement and the other Transaction Documents and the transactions contemplated
hereby and thereby and (ii) on the Business Day immediately following the
Closing Date, file with the Commission a Current Report on Form 8-K disclosing
the material terms of this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby and including as exhibits this
Agreement and the other Transaction Documents; provided, however, that Satellite
Strategic Finance Associates, LLC and each Investor named therein shall have a
reasonable opportunity to review and comment on any such press release or Form
8-K prior to the issuance or filing thereof. Thereafter, the Company shall
timely file any filings and notices required by the Commission or applicable law
with respect to the transactions contemplated hereby.
4.2 The Company agrees that it will, as long as any Investor or any
Affiliate of such Investor beneficially owns any Securities:
15
(a) maintain its corporate existence in good standing;
(b) maintain, keep and preserve all of its Properties necessary in
the proper conduct of its businesses in good repair, working order and condition
(ordinary wear and tear excepted) and make all necessary repairs, renewals and
replacements and improvements thereto, except where the failure to do so would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;
(c) pay or discharge before becoming delinquent (a) all taxes,
levies, assessments and governmental charges imposed on it or its income or
profits or any of its Property and (b) all lawful claims for labor, material and
supplies, which, if unpaid, might become a Lien upon any of its Property, except
where the failure to do so would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; provided, however,
-------- -------
that the Company shall not be required to pay or discharge any tax, levy,
assessment or governmental charge, or claim for labor, material or supplies,
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings being diligently pursued and for which adequate reserves
have been established under GAAP;
(d) comply with all Governmental Requirements applicable to the
operation of its business, except for instances of noncompliance that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;
(e) comply with all agreements, documents and instruments binding on
it or affecting its Properties or business, including, without limitation, all
Material Contracts, except for instances of noncompliance that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;
(f) provide such Investor with copies of all materials sent to its
stockholders, in each such case at the same time as delivered to such
stockholders;
(g) timely file with the Commission all reports required to be filed
pursuant to the Exchange Act and refrain from terminating its status as an
issuer required by the Exchange Act to file reports thereunder even if the
Exchange Act or the rules or regulations thereunder would permit such
termination;
(h) until the Effective Date of the Registration Statement, restrict
Key Employees from selling shares of Common Stock other than as may be agreed in
writing by the Company and Satellite Strategic Finance Associates, LLC in
connection with any 10b-5(1) trading plans; and
(i) keep all of the Insurance Policies in full force and effect.
4.3 Reservation of Common Stock. The Company shall authorize and reserve
---------------------------
16
for issuance to the Investors, free from any preemptive rights, a number of
shares of Common Stock (the "Reserved Amount") that, on the Closing Date, is not
---------------
less than the sum of (A) the aggregate number of Shares issued to the Investors
at the Closing plus (B) the aggregate number of Warrant Shares issuable upon
----
exercise of the Series A Warrants plus (C) one hundred and fifty percent (150%)
----
of the aggregate number of Warrant Shares issuable upon exercise of the Series B
Warrants (without regard to any limitation or restriction on such exercise that
may be set forth in the Series B Warrants). If, on any date following the
Closing Date, the Reserved Amount is less than the sum of (i) the aggregate
number of Warrant Shares issuable under the Series A Warrants plus (ii) one
----
hundred and twenty five percent (125%) of the aggregate number of Warrant Shares
issuable upon exercise of the Series B Warrants (without regard to any
limitation or restriction on such exercise that may be set forth in the
Warrants), the Company shall take action (including without limitation seeking
stockholder approval for the authorization or reservation of additional shares
of Common Stock) as soon as practicable (but in no event later than the fifth
(5th) Business Day or, in the event that stockholder approval is required, the
forty-fifth (45th) day following such date) to increase the Reserved Amount to
not less than the sum of (x) the number of Warrant Shares issuable upon exercise
of the Series A Warrants plus (y) one hundred and fifty percent (150%) of the
----
number of Warrant Shares issuable under the Series B Warrants. The initial
Reserved Amount shall be allocated pro rata among the Investors based on the
number of Shares issued to each Investor at the Closing. Each increase in the
Reserved Amount shall be allocated pro rata among the Investors based on the
number of Outstanding Registrable Securities. In the event that an Investor
shall sell or otherwise transfer any of such Investor's Registrable Securities,
each transferee shall be allocated a pro rata portion of such transferor's
Reserved Amount. Any portion of the Reserved Amount allocated to any Investor or
other Person which no longer holds any Registrable Securities shall be
reallocated to the remaining Investors pro rata based on the number of
Outstanding Registrable Securities.
4.4 Use of Proceeds. The Company shall use the proceeds from the sale of
---------------
the Purchased Securities for general corporate purposes only, in the ordinary
course of its business and consistent with past practice; provided, however,
-------- -------
that the Company shall not use such proceeds (i) to pay down, repurchase or
redeem any notes or securities issued by the Company or any Subsidiary, (ii) to
pay any dividend or make any distribution on any such securities, or (iii) to
repay any loan made to or incurred by any Key Employee or Affiliate of the
Company.
4.5 Use of Investor Name. Except as may be required by applicable law, the
--------------------
Company shall not use, directly or indirectly, any Investor's name or the name
of any of its affiliates in any advertisement, announcement, press release or
other similar communication unless it has received the prior written consent of
such Investor for the specific use contemplated or as otherwise required by
applicable law or regulation.
4.6 Company's Instructions to Transfer Agent. On or prior to the Closing
------------------------------------------
Date, the Company shall execute and deliver irrevocable written instructions to
the transfer agent for its Common Stock (the "Transfer Agent"), and provide each
--------------
Investor with a copy thereof, directing the Transfer Agent (i) to issue
certificates representing Warrant Shares upon exercise of the Warrants, in the
name and amount specified by such Investor and (ii) to deliver such certificates
to such Investor no later than the close of business on the third (3rd) Business
Day following the related Exercise Date (as defined in the Series A Warrants or
Series B Warrants, as the case may be). Warrant Shares shall not contain any
17
restrictive legend except as may be required by the terms of this Agreement. The
Company shall instruct the transfer agent that, in lieu of delivering physical
certificates representing shares of Common Stock to an Investor upon exercise of
a Warrant, and as long as (x) the Transfer Agent is a participant in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, (y)
---
such Investor has not informed the Company that it wishes to receive physical
certificates therefor, and (z) no legend is required to appear on any physical
certificate when issued, the transfer agent may effect delivery of Warrant
Shares by crediting the account of such Investor or its nominee at DTC for the
number of shares for which delivery is required hereunder within the time frame
specified above for delivery of certificates. The Company represents to and
agrees with each Investor that it will not give any instruction to the Transfer
Agent that will conflict with the foregoing instruction or otherwise restrict
such Investor's right to exercise a Warrant or to receive Warrant Shares upon
such exercise. In the event that the Company's relationship with the Transfer
Agent should be terminated for any reason, the Company shall use its best
efforts to cause the Transfer Agent to continue acting as transfer agent
pursuant to the terms hereof until such time that a successor transfer agent is
appointed by the Company and receives the instructions described above.
4.7 No Adverse Action. The Company and its Subsidiaries shall refrain,
------------------
while any Registrable Securities are outstanding, from taking any action or
entering into any arrangement which in any way materially and adversely violates
the terms of this Agreement or the Warrants.
4.8 Limitations on Disposition. No Investor shall sell, transfer, assign
--------------------------
or dispose of any Securities, unless:
(a) there is then in effect an effective registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(b) such Investor has notified the Company in writing of any such
disposition and furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such Securities under the Securities Act; provided, however, that no such
-------- -------
opinion of counsel will be required (A) if the sale, transfer or assignment
complies with federal and state securities laws and is made to an Affiliate of
such Investor which is also an "accredited investor" as that term is defined in
Rule 501 of Regulation D, (B) if the sale, transfer or assignment is made
pursuant to Rule 144 and such Investor provides the Company with evidence
reasonably satisfactory to the Company that the proposed transaction satisfies
the requirements of Rule 144 or (C) in connection with a bona fide pledge or
hypothecation of any Securities under a margin arrangement with a broker-dealer
or other financial institution.
4.9 Disclosure of Information. The Company agrees that it will not at any
-------------------------
time disclose material non-public information to any Investor without first
receiving such Investor's written consent to such disclosure.
4.10 Put Option. If the Company fails to file a Form 10-KSB that conforms
----------
with the requirements of the Commission and the Exchange Act on or prior to 4
pm, eastern time, on April 15, 2004 (such failure, a "10-KSB Filing Default"),
----------------------
each Investor shall have the right (the "Put Option") to require the Company to
----------
18
repurchase all or any of its Securities at a put price equal to the Purchase
Price paid by such Investor for such Securities (the "Put Price"). If a 10-KSB
---------
Filing Default occurs, the Put Option shall be exercisable from April 16, 2004
until 8 pm, eastern time, on May 14, 2004 (the "Put Period"). In order to
-----------
exercise the Put Option, an Investor must deliver written notice (a "Put
---
Notice") to the Company specifying the number of Securities (the "Put
------ ---
Securities") that it is electing to put to the Company and the wiring
----------
instructions for the payment of the Put Price. If an Investor does not deliver a
Put Notice prior to the expiration of the Put Period, such Investor shall be
deemed to have waived its Put Option. Upon receipt of a Put Notice from an
Investor, the Company shall pay such Investor the applicable Put Price on or
prior to the later of (i) the date that is two (2) Business Days after the
Company receives such Put Notice and (ii) the date on which such Investor
delivers the Securities to the Company, provided that if such Investor elects to
put less than all of is Securities, the Company shall promptly issue new
Securities with terms identical in all respects to the Put Securities (except
such new Securities shall represent the portion of the Securities retained by
such Investor). Any amount of the Put Price that is not paid when due shall bear
interest at the lower of fifteen percent (15%) and the maximum rate permitted by
applicable law.
5. CONDITIONS TO CLOSING.
---------------------
5.1 Conditions to Investors' Obligations at the Closing. Each Investor's
----------------------------------------------------
obligations to effect the Closing, including without limitation its obligation
to purchase the Purchased Securities at the Closing, are conditioned upon the
fulfillment or waiver by such Investor of each of the following events as of the
Closing Date:
5.1.1 the representations and warranties of the Company set forth
in this Agreement and in the other Transaction Documents
shall be true and correct in all material respects as of
such date as if made on such date (except that to the extent
that any such representation or warranty relates to a
particular date, in which case such representation or
warranty shall be true and correct in all respects as of
that particular date);
5.1.2 the Company shall have complied with or performed in all
material respects all of the agreements, obligations and
conditions set forth in this Agreement and in the other
Transaction Documents that are required to be complied with
or performed by the Company on or before the Closing;
5.1.3 the Closing Date shall occur on a date that is not later
than April 1, 2004;
5.1.4 the Company shall have delivered to such Investor a
certificate, signed by the Chief Executive Officer and Chief
Financial Officer of the Company, certifying that the
conditions specified in this paragraph 5.1 have been
fulfilled as of the Closing, it being understood that such
Investor may rely on such certificate as though it were a
representation and warranty of the Company made herein;
19
5.1.5 the Company shall have delivered to such Investor an
opinion of counsel for the Company, dated as of such date,
in substantially the form set forth on Exhibit 5.1.5 hereto;
5.1.6 the Company shall have delivered to such Investor duly
executed certificates representing the Shares, Series A
Warrant and Series B Warrant being purchased by such
Investor;
5.1.7 the Company shall have executed and delivered to such
Investor the Registration Rights Agreement;
5.1.8 the Company shall have delivered to such Investor a copy of
the Insurance Binder, and such Investor shall be reasonably
satisfied that the Insurance Policies shall be in effect
immediately upon payment of the premiums thereof at Closing;
5.1.9 there shall have been no material adverse change in the
Company's consolidated business or financial condition since
the date of the Company's most recent unaudited financial
statements contained in the Disclosure Documents;
5.1.10 there shall be no injunction, restraining order or decree
of any nature of any court or Government Authority of
competent jurisdiction that is in effect that restrains or
prohibits the consummation of the transactions contemplated
hereby or by the other Transaction Documents; and
5.1.11 the aggregate Purchase Price to be paid at the Closing by
the Investors for the Purchased Securities shall be at least
$5,500,000.
5.2 Conditions to Company's Obligations at the Closing. The Company's
-----------------------------------------------------
obligations to effect the Closing are conditioned upon the fulfillment or waiver
by the Company of each of the following events as of the Closing Date:
5.2.1 the representations and warranties of each Investor shall be
true and correct in all material respects as of such date as
if made on such date (except that to the extent that any
such representation or warranty relates to a particular
date, in which case such representation or warranty shall be
true and correct in all respects as of that particular
date);
5.2.2 each Investor shall have complied with or performed all of
the agreements, obligations and conditions set forth in this
Agreement that are required to be complied with or performed
by such Investor on or before the Closing;
20
5.2.3 there shall be no injunction, restraining order or decree
of any nature of any court or Government Authority of
competent jurisdiction that is in effect that restrains or
prohibits the consummation of the transactions contemplated
hereby or by the other Transaction Documents;
5.2.4 each Investor shall have executed each Transaction Document
to which it is a party and delivered the same to the
Company; and
5.2.5 each Investor shall have delivered to the Company the
Purchase Price for the Purchased Securities being purchased
by it at the Closing by wire transfer of immediately
available funds.
6. MISCELLANEOUS.
-------------
6.1 Survival; Severability. The representations, warranties, covenants and
----------------------
indemnities made by the parties herein and in the other Transaction Documents
shall survive the Closing notwithstanding any due diligence investigation made
by or on behalf of the party seeking to rely thereon. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that in such case the
parties shall negotiate in good faith to replace such provision with a new
provision which is not illegal, unenforceable or void, as long as such new
provision does not materially change the economic benefits of this Agreement to
the parties.
6.2 Successors and Assigns. The terms and conditions of this Agreement
-----------------------
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. The Investor may assign its rights and obligations hereunder,
in connection with any private sale or transfer of the Purchased Securities in
accordance with the terms hereof, as long as, as a condition precedent to such
transfer, the transferee executes an acknowledgment agreeing to be bound by the
applicable provisions of this Agreement, in which case the term "Investor" shall
be deemed to refer to such transferee as though such transferee were an original
signatory hereto. The Company may not assign its rights or obligations under
this Agreement.
6.3 No Reliance. Each party acknowledges that (i) it has such knowledge in
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business and financial matters as to be fully capable of evaluating this
Agreement, the other Transaction Documents, and the transactions contemplated
hereby and thereby, (ii) it is not relying on any advice or representation of
any other party in connection with entering into this Agreement, the other
Transaction Documents, or such transactions (other than the representations made
in this Agreement or the other Transaction Documents), (iii) it has not received
from such party any assurance or guarantee as to the merits (whether legal,
regulatory, tax, financial or otherwise) of entering into this Agreement or the
21
other Transaction Documents or the performance of its obligations hereunder and
thereunder, and (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial and accounting advisors to the extent that it
has deemed necessary, and has entered into this Agreement and the other
Transaction Documents based on its own independent judgment and on the advice of
its advisors as it has deemed necessary, and not on any view (whether written or
oral) expressed by such other party.
6.4 Independent Nature of Investors' Obligations and Rights. The
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obligations of each Investor hereunder are several and not joint with the
obligations of the other Investors hereunder, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor hereunder. Nothing contained herein or in any other agreement or
document delivered at the Closing, and no action taken by any Investor pursuant
hereto or thereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each
Investor shall be entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement or the other Transaction
Documents, and it shall not be necessary for any other Investor to be joined as
an additional party in any proceeding for such purpose.
6.5 Injunctive Relief. The Company acknowledges and agrees that a breach
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by it of its obligations hereunder will cause irreparable harm to each Investor
and that the remedy or remedies at law for any such breach will be inadequate
and agrees, in the event of any such breach, in addition to all other available
remedies, such Investor shall be entitled to an injunction restraining any
breach and requiring immediate and specific performance of such obligations
without the necessity of showing economic loss.
6.6 Governing Law; Jurisdiction. This Agreement shall be governed by and
----------------------------
construed under the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York. Each party hereby
irrevocably submits to the non-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, and hereby irrevocably waives, and agrees not
to assert in any suit, action or proceeding involving any Investor or permitted
assignee of an Investor, 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 in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.
6.7 Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. This Agreement may be
executed and delivered by facsimile transmission.
22
6.8 Headings. The headings used in this Agreement are used for convenience
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only and are not to be considered in construing or interpreting this Agreement.
6.9 Notices. Any notice, demand or request required or permitted to be
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given by the Company or an Investor pursuant to the terms of this Agreement
shall be in writing and shall be deemed delivered (i) when delivered personally
or by verifiable facsimile transmission, unless such delivery is made on a day
that is not a Business Day, in which case such delivery will be deemed to be
made on the next succeeding Business Day, (ii) on the next Business Day after
timely delivery to an overnight courier and (iii) on the Business Day actually
received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid), addressed as follows:
If to the Company:
Raptor Networks Technology, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and if to any Investor, to such address for such Investor as shall appear on the
signature page hereof executed by such Investor, or as shall be designated by
such Investor in writing to the Company in accordance with this Section 6.9.
6.10 Expenses. The Company and each Investor shall pay all costs and
--------
expenses that it incurs in connection with the negotiation, execution, delivery
and performance of this Agreement or the other Transaction Documents, provided,
--------
however, that that the Company shall, at the Closing, pay up to (i) $50,000 in
-------
immediately available funds for all out-of-pocket expenses (including without
limitation legal fees and expenses) incurred by Satellite Strategic Finance
Associates, LLC ("Satellite") in connection its due diligence investigation of
the Company and the negotiation, preparation, execution, delivery and
performance of this Agreement and the other Transaction Documents, and (ii)
$10,000 in immediately available funds for legal fees and expenses incurred by
Longview Equity Funds, LP in connection with its review of this Agreement and
the other Transaction Documents. At the Closing, the amount due for such fees
and expenses (which may include fees and expenses estimated to be incurred for
completion of the transaction and post-closing matters) may be netted out of the
Purchase Price payable by Satellite Strategic Finance Associates, LLC and
Longview Equity Fund, LP. In the event the amount paid by the Company for such
fees and expenses is less than the amount of fees and expenses actually incurred
23
by Satellite, the Company shall promptly pay such deficiency (up to $50,000 in
the aggregate) within thirty (30) days following receipt of an invoice therefor.
Notwithstanding anything herein to the contrary, if the Closing does not occur
otherwise than as a result of a breach of this Agreement by an Investor, the
Company shall remain obligated to pay the expenses of Satellite up to $50,000 in
the aggregate.
6.11 Entire Agreement; Amendments. This Agreement and the other Transaction
----------------------------
Documents constitute the entire agreement between the parties with regard to the
subject matter hereof and thereof, superseding all prior agreements or
understandings, whether written or oral, between or among the parties. Except as
expressly provided herein, neither this Agreement nor any term hereof may be
amended except pursuant to a written instrument executed by the Company and the
holders of at least two-thirds (2/3) of the number of Outstanding Registrable
Securities, and no provision hereof may be waived other than by a written
instrument signed by the party against whom enforcement of any such waiver is
sought.
[Signature Pages to Follow]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first-above written.
RAPTOR NETWORKS TECHNOLOGY, INC.
By:
--------------------------
Name:
Title:
SATELLITE STRATEGIC FINANCE ASSOCIATES, LLC
By:
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Name:
Title:
ADDRESS:
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Tel:
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Fax:
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Shares to be Purchased:
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EIN:
25
