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Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.19
UTILICOM NETWORKS, INC.
NOTE AND WARRANT PURCHASE AGREEMENT
DATED DECEMBER 15, 1998
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TABLE OF CONTENTS
PAGE NO.
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1. Authorization and Sale of Securities.................................1
1.1 Authorization...............................................1
1.2 Purchase and Sale of Securities.............................2
1.3 Use of Proceeds.............................................2
1.4 Director....................................................2
2. Closing..............................................................2
2.1 Closing.....................................................2
2.2 Investment..................................................3
3. Representations and Warranties of the Company........................3
3.1 Organization and Standing...................................3
3.2 Capitalization..............................................3
3.3 Subsidiaries, Etc...........................................4
3.4 Stockholder List and Agreements.............................4
3.5 Issuance of Securities......................................4
3.6 Authority for Agreement.....................................4
3.7 Governmental Consents.......................................5
3.8 Litigation..................................................5
3.9 Financial Statements........................................5
3.10 Absence of Liabilities......................................5
3.11 Tax Returns.................................................6
3.12 Property and Assets.........................................6
3.13 Intellectual Property.......................................6
3.14 Material Contracts and Obligations..........................6
3.15 Compliance..................................................7
3.16 Employee Matters............................................7
3.17 ERISA.......................................................7
3.18 Books and Records...........................................7
3.19 Environmental Matters.......................................7
3.20 Indebtedness................................................7
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4. Representations and Warranties of the Purchaser......................8
4.1 Information.................................................8
4.2 Authority...................................................8
4.3 Suitability.................................................8
4.4 Lack of Liquidity...........................................9
4.5 Investment Intent...........................................9
5. Conditions to the Obligations of the Purchasers......................9
5.1 Accuracy of Representations and Warranties..................9
5.2 Performance.................................................9
5.3 Opinion of Counsel..........................................9
5.4 Other Agreements...........................................10
5.5 Certificates and Documents.................................11
6. Conditions to the Obligations of the Company........................11
6.1 Accuracy of Representations and Warranties.................11
6.2 Amendment to Note Purchase Agreement.......................12
6.3 Side Letter Regarding Bariston, LLC Commitment.............12
6.4 AT&T Loan Agreement........................................12
6.5 SIGECO Contribution........................................12
7. Covenants of the Company............................................11
7.1 Reimbursement of Expenses..................................11
7.2 Restricted Payments........................................11
8. Miscellaneous.......................................................12
8.1 Successors and Assigns.....................................12
8.2 Confidentiality............................................12
8.3 Survival of Representations and Warranties.................12
8.4 Notices....................................................12
8.5 Brokers....................................................13
8.6 Entire Agreement...........................................14
8.7 Amendments and Waivers.....................................14
8.8 Counterparts...............................................14
8.9 Section Headings...........................................14
8.10 Severability...............................................14
8.11 Governing Law..............................................14
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SCHEDULE I - PURCHASERS
EXHIBITS
Schedule 1.3 - Indebtedness to be Repaid at Closing
Exhibit A - Form of Note
Exhibit B - Form of Warrant
Exhibit C - Exceptions to Representations and Warranties
Exhibit D - List of Stockholders
Exhibit E - Termination of Pledge Agreement
Exhibit F - Indebtedness of the Company
Exhibit G - Refinancing Lender Notes and Warrants
Exhibit H - Side Letter Regarding SIGECOM, LLC Board Seat
Exhibit I - Side Letter Regarding Bariston Partners, LLC Commitment
Exhibit J - Employee and Attorney Notes
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NOTE AND WARRANT PURCHASE AGREEMENT
This Note and Warrant Purchase Agreement ("Agreement") dated as of
December 15, 1998 is entered into by and among Utilicom Networks, Inc., a
Delaware corporation (the "Company"), and the purchasers listed on Schedule 1
attached hereto (each referred to as a "Purchaser" and collectively as the
"Purchasers"). ▇▇▇▇▇▇▇▇ Communications, Inc., one of the Purchasers hereunder,
is sometimes referred to herein as "▇▇▇▇▇▇▇▇".
In consideration of the mutual promises and covenants contained in
this Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Securities.
1.1 Authorization. The Company has, or before the Closing (as
defined in Section 2.1) will have, duly authorized the sale and issuance,
pursuant to the terms of this Agreement, of the following securities:
(a) The Notes. Convertible and exchangeable promissory notes
having an aggregate principal amount of up to Ten Million Five Hundred Thousand
Dollars ($10,500,000) (collectively, the "Notes" and individually a "Note")
which Notes shall accrue interest at a rate of twelve percent (12%) per annum.
Each Note shall be due and payable, together with any accrued and unpaid
interest thereon, on the earlier of: (i) June 30, 1999 (as such date may be
extended to July 31, 1999 pursuant to the terms of the Side Letter Regarding
Bariston Partners, LLC Commitment, the "Maturity Date"); or (ii) the occurrence
of a Material Event of Default, as defined in the Notes. Upon the occurrence of
a Material Event of Default, as such term is defined in the Note, with respect
to any Note, such Note may at the option of the holder and for a period of 30
days after the Purchaser is notified of such Material Event of Default (the
Notice Date) beginning on the date of such Notice Date, (the "Option Period")
either be (A) automatically converted into Common Stock, $.01 par value, of the
Company (the "Common Stock") at a per share price of $3.00 or (B) automatically
exchanged for all membership interests held by the Company (collectively, the
"SIGECOM Membership Interests") in SIGECOM, LLC, a subsidiary of the Company
("SIGECOM, LLC"), all in accordance with the terms and conditions of the Notes.
If a Purchaser does not convert or exchange its Note during the Option Period
it will be deemed, without further action on the part of such Purchaser, that
the Purchaser has demanded payment of all amounts due under such Note.
Each Note shall be substantially in the form of Exhibit A hereto.
(b) The Warrants. Common Stock purchase warrants
substantially in the form of Exhibit B hereto (each a "Warrant" and
collectively, the "Warrants"), which Warrants will be exercisable, in the
aggregate, for a total of 525,000 shares of Common
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Stock (collectively, the "Warrant Shares"). The Warrant Shares shall be deemed
to be Conversion Shares as such term is defined in the Registration Rights
Agreement, dated as of May 8, 1998, among the Company and the Purchasers (the
"Registration Rights Agreement") and, upon issuance of the Warrant Shares, each
of the Purchasers as the holder of the Warrant Shares shall be entitled to
registration rights which are pari passu with those granted to the Purchasers
in the Registration Rights Agreement.
1.2 Purchase and Sale of Securities. In reliance upon the
representations and warranties and subject to the terms and conditions set
forth in this Agreement, at the Closing (as defined in Section 2.1) the Company
agrees to issue and sell to each of the Purchasers, and each of the Purchasers
agrees to purchase, the Notes and the Warrants set forth opposite such
Purchaser's name on Schedule I. The purchase price for the Notes shall be the
face value of such Note. The Warrants shall be issued to the Purchasers as
additional consideration for the purchase of the Notes. Each Purchaser will, as
consideration for the Company's delivery to each such Purchaser of Notes with a
face value of Two Hundred and Fifty Thousand Dollars ($250,000), deliver to the
Company for cancellation promissory notes issued by the Company to each such
Purchaser pursuant to an Interim Loan Agreement, dated October 30, 1998, among
the Company and the Purchasers (the "Interim Promissory Notes"). The accrued
and unpaid interest on the Interim Promissory Notes will be paid in cash to the
Purchasers on the Closing Date. The Notes and the Warrants being sold under
this Agreement and the Common Stock issuable upon exercise of the Warrants are
referred to in this Agreement as the "Securities". The Company's agreement with
each of the Purchasers is a separate agreement, and the sale of Securities to
each of the Purchasers is a separate sale.
1.3 Use of Proceeds. The Company shall use the proceeds from
the sale of the Notes and Warrants (the "Proceeds") as follows: (i) first, at
the Closing, the Company will fund an equity investment in SIGECOM, LLC of
Seven Million Three Hundred Thousand Dollars ($7,300,000) (the "SIGECOM
Investment") in accordance with the terms of the Operating Agreement dated May
8, 1998 between the Company and Sigeco (the "Operating Agreement"); (ii)
second, to repay the currently outstanding indebtedness of the Company listed
on Schedule 1.3 and (iii) finally, for general working capital purposes
consistent with the Company's 1998 Budget as approved by the Company's Board of
Directors (the "Board of Directors").
1.4 Director. Simultaneously with the Closing (as defined in
Section 2.1), the members of the Board of Directors of the Company will take
all necessary action to elect ▇▇▇▇▇▇ ▇▇▇▇▇▇ to the Board of Directors.
2. Closing.
2.1 Closing. The closing (the "Closing") of the purchase of
Notes and Warrants by the Purchasers under this Agreement shall take place at
the offices of Peabody
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& ▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m. on
December 15, 1998, when the Purchasers shall have tendered their Investment, as
such term is defined in Section 2.2, or such other time, date and place
thereafter as the Company and the Purchasers may agree upon. At the Closing,
the Company shall deliver to the Purchasers their respective Notes and Warrants
against payment to the Company of the purchase price therefor, by wire
transfer, check, cancellation of the Interim Promissory Notes, or other method
acceptable to the Company. The date of the Closing is referred to herein as the
"Closing Date".
2.2 Investment. The term "Investment" shall mean, for each
Purchaser, the amount set forth opposite each Purchaser's name under "Total
Purchase Price" on Schedule 1 whether paid in cash or by exchange of Interim
Promissory Notes.
3. Representations and Warranties of the Company. Subject to and
except as disclosed by the Company in Exhibit C hereto, the Company hereby
represents and warrants to each of the Purchasers as follows:
3.1 Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as presently conducted by it and to enter into and perform this
Agreement and to carry out the transactions contemplated by this Agreement. The
Company is duly qualified to do business as a foreign corporation and is in
good standing in every jurisdiction in which the failure to so qualify would
have a material adverse effect on the operations or financial condition of the
Company. The Company has furnished to the Purchasers true and complete copies
of its Certificate of Incorporation (the "Certificate of Incorporation") and
By-Laws (the "By-Laws"), each as amended to date and presently in effect.
3.2 Capitalization. Prior to the Closing, the authorized
capital stock of the Company consists of 20,000,000 shares of Common Stock, of
which 3,245,006 shares are issued and outstanding, and 5,000,000 shares of
preferred stock, $.01 par value (the "Preferred Stock"), of which 10,000 shares
have been designated as Series B Redeemable Preferred Stock, $.01 par value
(the "Redeemable Preferred Stock") of which 10,000 shares are issued and
outstanding. The Company has also reserved (i) 3,000,000 shares of Common Stock
for issuance under the Company's 1996 Stock Option Plan (the "Stock Option
Plan") (which number includes 2,334,126 shares of Common Stock issuable upon
the exercise of options granted under the Stock Option Plan); and (ii) 767,735
shares of Common Stock issuable upon the exercise of the warrants listed on
Exhibit D. All of the Company's issued and outstanding shares of capital stock
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth in Exhibit C hereto or provided in this
Agreement, (i) no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any shares of capital
stock of the Company is authorized or outstanding, (ii) the Company has no
obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right or to issue or distribute to
holders of any shares of its capital stock any evidences of indebtedness or
assets of the Company, and (iii) the Company has no obligation (contingent
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or otherwise) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
3.3 Subsidiaries, Etc. Except as listed on Exhibit C, the
Company has no subsidiaries and does not own or control, directly or
indirectly, any shares of capital stock of any other corporation or any
interest in any partnership, joint venture, limited liability company or other
non-corporate business enterprise.
3.4 Stockholder List and Agreements. Exhibit D attached
hereto sets forth a true and complete list of the stockholders of the Company,
showing the number of shares of Common Stock or other securities of the Company
held by each stockholder as of the date of this Agreement. Except as disclosed
in Exhibit C attached hereto or as provided in this Agreement, there are no
agreements, written or oral, between the Company and any holder of its capital
stock, or, to the best of the Company's knowledge, among any holders of its
capital stock, relating to the acquisition (including, without limitation,
rights of first refusal or pre-emptive rights), disposition, registration under
the Securities Act of 1933, as amended (the "Securities Act") or voting of the
capital stock of the Company.
3.5 Issuance of Securities. The issuance, sale and delivery
of the Securities in accordance with this Agreement have been, or will be on or
prior to the Closing, duly authorized by all necessary corporate action on the
part of the Company. The Securities when so issued, sold and delivered against
payment therefor in accordance with the provisions of this Agreement will be
duly and validly issued, fully paid and non-assessable. After consummation of
the transactions contemplated hereby, each purchaser shall own, beneficially
and of record and free and clear of any "Lien" (as defined below) that number
of Securities which each Purchaser purchases hereunder. "Lien" shall mean any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect to an asset.
3.6 Authority for Agreement. The execution, delivery and
performance by the Company of this Agreement, the Notes, the Warrants, the
Termination of Pledge Agreement (the "Pledge Termination Agreement") dated of
even date herewith between the Company and ▇▇▇▇▇▇▇▇ terminating the Pledge
Agreement dated May 8, 1998 between the Company and ▇▇▇▇▇▇▇▇ and all other
agreements or documents required pursuant to Section 5.4 hereof (all of the
above described documents except this Agreement, the "Ancillary Documents") and
the consummation by the Company of the transactions contemplated hereby and
thereby, have been or will be prior to the Closing duly authorized by all
necessary corporate action. This Agreement and the Ancillary
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Documents have been or prior to the Closing will be duly executed and delivered
by the Company and constitute or will prior to the Closing constitute valid and
binding obligations of the Company enforceable against the Company in
accordance with their respective terms. Except as set forth in Exhibit C, the
execution of and performance of the transactions contemplated by this Agreement
and the Ancillary Documents and compliance with their provisions by the Company
will not violate any provision of law and will not conflict with or result in
any breach of any of the terms, conditions or provisions of, or constitute a
default under, or require a consent or waiver under, or result in the creation
of any Lien under its Certificate of Incorporation or By-laws or any indenture,
lease, agreement or other instrument to which the Company is a party or by
which it or any of its properties is bound, or any decree, judgment, order,
statute, rule or regulation applicable to the Company.
3.7 Governmental Consents. Subject to the accuracy of the
representations and warranties of each of the Purchasers as set forth in
Section 4, and, except for the filing of any notice subsequent to the Closing
that may be required under applicable state or Federal securities laws (which,
if required, shall be filed on a timely basis in accordance with applicable
regulations), no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any governmental
authority is required on the part of the Company in connection with the
execution and delivery of this Agreement, the offer, issuance, sale and
delivery of the Securities, or the other transactions contemplated by this
Agreement, except such filings as shall have been made prior to and shall be
effective on and as of the Closing Date.
3.8 Litigation. Except as set forth in Exhibit C, there is no
action, suit or proceeding or governmental inquiry or investigation pending,
or, to the best of the Company's knowledge, any threat thereof, against the
Company, which questions the validity of this Agreement or the right of the
Company to enter into this Agreement, or which would result, either
individually or in the aggregate, in any material adverse effect on the
business, prospects, assets or condition, financial or otherwise, of the
Company.
3.9 Financial Statements. The Financial Statements (as
defined below) of the Company previously delivered to each of the Purchasers
present fairly the financial position of the Company as of the dates thereof
and its results of operations for the periods covered thereby and have been
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied except that they contain no footnotes and may require
non-material adjustments to conform to GAAP. The Financial Statements are the
audited financial statements of the Company for the period from January 1, 1997
through December 31, 1997 and for the nine month period ended September 30,
1998 being unaudited and subject to year-end adjustments which in the aggregate
are not expected to be material. Since September 30, 1998 and except as set
forth on Exhibit C, (i) there has been no material adverse change in the
business, assets or condition, financial or otherwise, or operation of the
Company; (ii) neither the business, condition nor
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operations of the Company nor any of its properties or assets has been
materially adversely affected as a result of any legislative or regulatory
change, any revocation or change in any franchise, license or right to do
business, or any other event or occurrence, whether or not insured against; and
(iii) the Company has not entered into any material transaction or made any
distribution on its capital stock or other ownership interest.
3.10 Absence of Liabilities. Except as disclosed in Exhibit
C, the Company did not have, at September 30, 1998, any liabilities, Liens or
obligations of any type which in the aggregate exceeded $100,000, whether
absolute or contingent, which were not fully reflected on the Financial
Statements, and, since September 30, 1998, the Company has not incurred or
otherwise become subject to any such liabilities, Liens or obligations which in
the aggregate exceeded $100,000.
3.11 Tax Returns. The Company has completely and accurately
prepared and timely filed all Federal, state and other tax returns required by
law to be filed by it, and all taxes (including all withholding taxes) shown to
be due and all additional assessments have been paid or provisions made
therefor. The Company knows of no additional material assessments or
adjustments pending or threatened against the Company for any period, nor of
any basis for any such material assessment or adjustment.
3.12 Property and Assets. The Company has good and marketable
title to all of its material properties and assets, including but not limited
to all properties and assets reflected on the Financial Statements, and none of
such properties or assets is subject to any Lien or liability other than those,
if any, the material terms of which are described in the Financial Statements
or in Exhibit C.
3.13 Intellectual Property. Exhibit C sets forth a true and
complete list of all patents, patent applications, trademarks, service marks,
trademark and service ▇▇▇▇ applications, trade names, copyright registrations
and licenses presently used by the Company or necessary for the conduct of the
Company's business as presently conducted as well as any agreement under which
the Company has access to any confidential information used by the Company in
its business (the "Intellectual Property Rights"). The Company owns, or has the
right to use under the agreements or upon the terms described in Exhibit C, all
of the Intellectual Property Rights, and has taken all actions reasonably
necessary to protect and preserve the Intellectual Property Rights. To the
Company's knowledge, the business conducted by the Company does not and will
not cause the Company to infringe or violate any of the patents, trademarks,
service marks, trade names, copyrights, licenses, trade secrets or other
intellectual property rights of any other person or entity. To the Company's
knowledge, no other person or entity (including without limitation any prior
employer of any officer, director or employee of the Company) has the right to
use or any interest in any inventions, improvements, discoveries or other
confidential information utilized by the Company in its business, except as set
forth in Exhibit C.
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3.14 Material Contracts and Obligations. Except for this
Agreement and the Ancillary Documents, Exhibit C sets forth a list of all
material agreements or commitments of any nature to which the Company is a
party or by which it is bound, including without limitation: (i) each agreement
which requires future expenditures by the Company in excess of $100,000 or
which might result in payments to the Company in excess of $100,000; (ii) all
employment and consulting agreements, employee benefit, bonus, pension,
profit-sharing, stock option, stock purchase and similar plans and
arrangements, and distributor and sales representative agreements; (iii) any
agreement with any stockholder, officer or director of the Company, or any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payment to, any such person or entity and (iv) any agreement relating to the
Intellectual Property Rights. The Company has delivered to the Purchasers
copies of such of the foregoing agreements to the extent such delivery has been
requested in writing. All of such agreements and contracts are valid, binding
and in full force and effect, and, except as set forth on Exhibit C, to the
Company's knowledge, no party is currently in breach or default thereunder.
3.15 Compliance. The Company has, in all material respects,
complied with all laws, regulations and orders applicable to its business and
has all material permits and licenses required thereby. There is no term or
provision of any mortgage, indenture, contract, agreement or instrument to
which the Company is a party or by which it is bound, or, to the best of the
Company's knowledge, of any provision of any state or Federal judgment, decree,
order, statute, rule or regulation applicable to or binding upon the Company,
with respect to which the Company is not in material compliance or which
materially adversely affects the business, prospects, assets or condition,
financial or otherwise, of the Company.
3.16 Employee Matters. None of the employees of the Company
is represented by any labor union, and there is no labor strike or other labor
trouble pending with respect to the Company (including, without limitation, any
organizational drive) or, to the best of the Company's knowledge, threatened.
3.17 ERISA. Effective November 1, 1998, the Company adopted a
401(k) Pension Plan which is subject to the Employee Retirement Income Security
Act of 1974, as amended.
3.18 Books and Records. The minute book of the Company
contains complete and accurate records of all meetings and other corporate
actions of its stockholders and its Board of Directors and any committees
thereof. The stock ledger of the Company is complete and reflects all
issuances, transfers, repurchases and
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cancellations of shares of capital stock of the Company.
3.19 Environmental Matters.
(a) The operation of the business is in all material
respects in compliance with all applicable environmental laws (whether federal,
state, local or foreign law (including common law), statute, code, ordinance,
rule, regulation or other requirement relating to the environment, natural
resources, or public and employee health and safety).
(b) To the Company's knowledge, all real property owned
or leased by the Company and, all property adjacent thereto, is free of
contamination by or from any hazardous materials at concentrations exceeding
those allowed by such environmental laws.
3.20 Indebtedness. A schedule of Indebtedness of the Company
is set forth in Exhibit F, and except as provided in Schedule 3.20, none of
such Indebtedness is currently in default. "Indebtedness" means all
obligations, contingent and otherwise, which should, in accordance with
generally accepted accounting principles consistently applied, be classified
upon the Company's balance sheet as liabilities, but in any event including,
without limitation, liabilities secured by any mortgage on property owned or
acquired subject to such mortgage, whether or not the liability secured thereby
shall have been assumed, and also including, without limitation: (i) all
guaranties, endorsements and other contingent obligations, in respect of
indebtedness of others, whether or not the same are or should be so reflected
in said balance sheet, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business; and (ii) the present value of any lease payments due under
leases required to be capitalized in accordance with applicable Statements of
Financial Accounting Standards, determined in accordance with applicable
Statements of Financial Accounting Standards.
4. Representations and Warranties of the Purchasers. Each of the
Purchasers severally represents and warrants to the Company:
4.1 Information. The officers of the Company have made
available to each Purchaser any and all written information which such
Purchaser has requested and have answered, to such Purchaser's satisfaction,
all inquiries made by such Purchaser. Each Purchaser understands that no
Federal or state agency or authority has reviewed or passed upon the sale of
the Securities contemplated hereby.
4.2 Authority. Such Purchaser has full power and authority to
enter into and to perform this Agreement in accordance with its terms. The
execution of and the performance of the transactions contemplated by this
Agreement and the compliance by such Purchaser with the provisions thereof will
not violate, conflict with or result in
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a breach of any of the terms, conditions or provisions of, or constitute a
default under, or require a consent or waiver under any indenture, lease,
agreement or other instrument to which such Purchaser is a party or by which
such Purchaser or any of such Purchaser's properties are bound. Any Purchaser
which is a corporation, partnership or trust represents that it has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
4.3 Suitability. Such Purchaser has knowledge and experience
in financial and business matters which enable such Purchaser to evaluate the
merits and risks of making an investment in the Company. Such Purchaser has
made an independent examination of the investment, accounting and tax aspects
of the proposed purchase transaction having relied solely upon the advice, if
any, of such Purchaser's counsel, accountants, or business advisors with regard
to the various considerations involved in making an investment in the Company,
and agrees that the Company has no responsibility with respect to such matters
and any such advice. Such Purchaser hereby confirms to the Company that such
Purchaser has been granted an opportunity to ask questions of and receive
answers from officers and directors of the Company concerning the Company, the
terms and conditions of the Investment and other matters and to obtain all
additional information which such Purchaser deems necessary to evaluate the
merits and risks of making an investment in the Company. Such Purchaser
acknowledges and understands that the purchase of Securities is speculative and
involves a high degree of risk.
4.4 Lack of Liquidity. Such Purchaser has adequate means of
providing for current needs and possible contingencies without resorting to the
sale of the Securities and has no need for liquidity of the investment made in
the Company. In making this representation and warranty, such Purchaser
understands that an investment in the Company is an illiquid investment. In
particular, such Purchaser understands that the Securities are being offered
and sold without registration under the Securities Act, and, therefore, cannot
be resold unless they are subsequently registered under the Securities Act and
applicable state securities laws or unless an exemption from such registration
is available. Such Purchaser acknowledges that the Company is under no
obligation to comply with Regulation A or any other exemption requirement under
the Securities Act or to supply information necessary to permit routine sales
under Rule 144.
4.5 Investment Intent. Such Purchaser is acquiring the
Securities for such Purchaser's own account for investment and not with a view
to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the same; and, except as
contemplated by the Ancillary Documents, such Purchaser has no present or
contemplated agreement, undertaking, arrangement, obligation, indebtedness or
commitment providing for the disposition thereof.
5. Conditions to the Obligations of the Purchasers. The
obligation of each of the Purchasers to purchase Securities at the Closing is
subject to the fulfillment, or the
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waiver by such Purchaser, of each of the following conditions on or before the
Closing Date:
5.1 Accuracy of Representations and Warranties. Each
representation and warranty contained in Section 3 shall be true on and as of
the Closing Date with the same effect as though such representation and
warranty had been made on and as of that date.
5.2 Performance. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement
required to be performed or complied with by the Company prior to or at the
Closing Date.
5.3 Opinion of Counsel. Each Purchaser shall have received an
opinion from Peabody & ▇▇▇▇▇▇, counsel for the Company, dated as of the Closing
Date addressed to such Purchaser hereunder, substantially to the effect that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to conduct its business as presently
conducted, to enter into and perform this Agreement and the Ancillary Documents
and to carry out the transactions contemplated by this Agreement and the
Ancillary Documents. Based solely on the representations of the Company in this
Agreement, the Company is duly qualified to do business and in good standing in
Delaware, and in every other jurisdiction in which the failure to so qualify
would have a material adverse effect on the operations or financial condition
of the Company.
(b) Based solely upon such counsel's review of the minute
books and stock records of the Company, and except for changes contemplated by
this Agreement, the authorized and issued and outstanding capital stock of the
Company is as described in Section 3.2 of this Agreement. Based solely upon
such counsel's review of the minute book and stock records of the Company, all
issued and outstanding shares of capital stock of the Company have been duly
authorized and are validly issued.
(c) The Securities have been duly authorized and, if
applicable, reserved for issuance, by all necessary corporate action on the
part of the Company. The Securities, when issued, sold and delivered against
payment therefor in accordance with the provisions of this Agreement, will be
validly issued, fully paid and non-assessable.
(d) The execution, delivery and performance by the
Company of this Agreement and the Ancillary Documents have been duly authorized
by all necessary corporate action and this Agreement and the Ancillary
Documents have been duly executed and delivered by the Company. This Agreement
and the Ancillary Documents constitute the valid and binding obligations of the
Company, enforceable against the
- 10 -
15
Company in accordance with their respective terms, subject as to enforcement of
remedies to applicable bankruptcy, insolvency, reorganization or similar laws
affecting generally the enforcement of creditors' rights and subject to a
court's discretionary authority with respect to the granting of a decree
ordering specific performance or other equitable remedies. The execution and
delivery of this Agreement and the Ancillary Documents and the offer, issue and
sale of the Securities hereunder will not result in any breach of any of the
terms, conditions, or provisions of, or constitute a default under, the
Certificate of Incorporation or By-laws of the Company, each as amended as of
the Closing Date, or, based solely upon the Company's representations in this
Agreement and to such counsel's knowledge, any indenture, lease, agreement, or
other instrument to which the Company is a party or by which it or any of its
properties are bound, or any decree, judgment or order specifically naming the
Company of which such counsel is aware. (e) To such counsel's knowledge, there
is no action, suit or proceeding or governmental inquiry or investigation,
pending, or any threat thereof, against the Company, which questions the
validity of this Agreement or the Ancillary Documents or the right of the
Company to enter into such agreements, or which would result, if determined
adversely to the Company, either individually or in the aggregate, in any
material adverse change in the business, prospects, assets or condition,
financial or otherwise, of the Company, nor to such counsel's knowledge is
there any litigation pending or threatened against the Company, except as
disclosed in Exhibit C.
5.4 Other Agreements.
(a) The Termination of Pledge Agreement attached hereto as
Exhibit E, shall have been executed and delivered by the parties named therein.
(b) The Refinancing Lender Notes and Warrants each in the form
attached hereto as Exhibit G shall have been executed and delivered by the
parties named, and in the amounts noted, on Exhibit G.
(c) The Side Letter Regarding SIGECOM, LLC Board Seat, attached
hereto as Exhibit H, shall have been executed and delivered by the parties
named therein.
(d) The Side Letter Regarding the Bariston Partners, LLC
Commitment attached hereto as Exhibit I, shall have been executed and delivered
by the parties named therein.
(e) The Employee and Attorney Notes, each in the form attached
hereto as Exhibit J shall have been executed and delivered by the parties
named, and in the amounts noted, on Exhibit J.
(f) The Loan Agreement, dated as of the date hereof, among AT&T
Commercial Financial Corporation, SIGECOM, LLC and the other parties named
therein (the "AT&T Loan Agreement") shall have been executed and delivered by
the parties thereto and the
- 11 -
16
initial Advance, as such term is defined in the AT&T Loan Agreement, shall have
been delivered to SIGECOM, LLC.
5.5 Certificates and Documents. The Company shall have
delivered to each of the Purchasers:
(a) A copy of the Certificate of Incorporation of the
Company, as amended and in effect as of the Closing Date, as certified by the
Secretary of the State of Delaware;
(b) Copies of certificates, as of the most recent
practicable dates, as to the corporate good standing of the Company issued by
the Delaware Secretary of State, the Secretary of State of the State of Indiana
and of The Commonwealth of Massachusetts;
(c) By-laws of the Company, certified by the Secretary of
the Company as of the Closing Date; and
(d) Resolutions of the Board of Directors of the Company,
authorizing and approving all matters in connection with this Agreement, the
Ancillary Documents, and the transactions contemplated hereby and thereby
certified by the Secretary of the Company as of the Closing Date.
6. Condition to the Obligations of the Company. The obligation
of the Company to issue and sell Securities at the Closing, to each of the
Purchasers is subject to fulfillment, or the waiver, of the following
conditions by each of the Purchasers on or before the Closing Date:
6.1 Accuracy of Representations and Warranties. The
representations and warranties of such Purchaser contained in Section 4 shall
be true on and as of the Closing Date with the same effect as through such
representations and warranties had been made on and as of that date.
6.2 Termination of Pledge Agreement. ▇▇▇▇▇▇▇▇ shall have
executed and delivered to the Company the Termination of Pledge Agreement
substantially in the form of Exhibit E.
6.3 AT&T Loan Agreement. The AT&T Loan Agreement shall have
been executed and delivered and the initial Advance shall have been delivered
to SIGECOM, LLC.
6.4 SIGECO Contribution. SIGECO Advanced Communications, Inc.
("SIGECO"), a Purchaser hereunder, shall have delivered $7,300,000 to SIGECOM,
LLC as
- 12 -
17
an equity investment in accordance with the terms of the Operating Agreement.
7. Covenants of the Company.
7.1 Reimbursement of Expenses. Within thirty (30) days after
receiving an invoice therefor and reasonable documentation thereof, the Company
shall reimburse the Purchasers for all of their out-of-pocket and third party
expenses (including, but not limited to, in-house counsel fees) in connection
with the transactions contemplated herein and in the Ancillary Documents.
7.2 Restricted Payments. The Company will not: (a) declare or
make any dividends on shares of capital stock of the Company, or (b) except
with respect to the Notes and the Indebtedness listed on Schedule 1.3 hereto,
purchase, redeem, retire, decease or otherwise acquire for value, deposit any
monies with any person with respect to, or make any voluntary payment or
prepayment of the principal of or interest on, or any other amount owing in
respect of, any indebtedness other than regularly scheduled payments of
principal or interest in respect thereof required to be made pursuant to the
instruments evidencing such indebtedness.
7.3 Notice. The Company shall give the Purchasers prompt
written notice of any Event of Default or Material Event of Default, as such
terms are defined in the Notes.
8. Miscellaneous.
8.1 Successors and Assigns. This Agreement, and the rights
and obligations of each Purchaser hereunder, may be assigned by such Purchaser
to any person or entity to which Securities are transferred by such Purchaser
not in violation of the terms of this Agreement or in violation of applicable
securities laws, and such transferee shall be deemed a "Purchaser" for purposes
of this Agreement; provided that the transferee provides written notice of such
assignment to the Company.
8.2 Confidentiality. Each Purchaser agrees that such
Purchaser shall keep confidential and will not disclose or divulge any
confidential, proprietary or secret information which such Purchaser may obtain
from the Company, including, without limitation, financial statements, reports
and other materials submitted by the Company to such Purchaser in connection
with the transactions contemplated by or pursuant to this Agreement, or
pursuant to visitation or inspection rights granted hereunder, unless such
information is known, or until such information becomes known, generally to the
public; provided, however, that a Purchaser may disclose such information (i)
to a Purchaser's attorneys, accountants, consultants, and other professionals
solely to the extent necessary to obtain their services in connection with its
investment in the Company, (ii) to any prospective purchaser of any Securities
from such Purchaser as long as such prospective
- 13 -
18
purchaser agrees in advance and in writing (with a copy of such agreement and a
list identifying all materials proposed to be furnished provided first to the
Company) to be bound by the provisions of this Section 8.2, (iii) to any
affiliate of such Purchaser or to a member, partner, shareholder or subsidiary
of such Purchaser provided such person first agrees in writing to be bound by
this Section 8.2 and a copy of such writing is first furnished to the Company,
or (iv) if required to do so by an arbitration tribunal or a court of competent
jurisdiction or applicable law.
8.3 Survival of Representations and Warranties. All
agreements, representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Closing of the transactions
contemplated hereby.
8.4 Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand, by overnight courier service, facsimile or mailed by first class
certified or registered mail, return receipt requested, postage prepaid, as
follows:
If to the Company, at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇, Facsimile Number (▇▇▇) ▇▇▇-▇▇▇▇ Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, President, or at such other address or addresses as may have been
furnished in writing by the Company to the Purchasers; or
If to a Purchaser, at the address set forth on such Purchaser's
counterpart signature page, or at such other address or addresses as may have
been furnished to the Company in writing by such Purchaser.
Notices provided in accordance with this Section 8.4 shall be deemed
delivered upon personal delivery, upon receipt of facsimile confirmation or two
business days after deposit in the mail.
8.5 Brokers. Except as set forth on Exhibit C, the Company
and each Purchaser (i) represents and warrants to the other parties hereto that
he, she or it has retained no finder or broker in connection with the
transactions contemplated by this Agreement, and (ii) will indemnify and save
the other parties harmless from and against any and all claims, liabilities or
obligations with respect to brokerage or finders' fees or commissions, or
consulting fees in connection with the transactions contemplated by this
Agreement asserted by any person on the basis of any statement or
representation alleged to have been made by such indemnifying party.
8.6 Entire Agreement. This Agreement, the Ancillary
Agreements, embody the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings relating to such subject matter.
- 14 -
19
8.7 Amendments and Waivers. Except as otherwise expressly set
forth in this Agreement, any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in
a particular instance and either retroactively or prospectively) with the
written consent of the parties hereto. Any amendment or waiver effected in
accordance with this Section 8.7 shall be binding upon each holder of any
Securities, each future holder of such Securities and the Company. No waivers
of or exceptions to any term, condition or provision of this Agreement, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision.
8.8 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which shall be one and the same document.
8.9 Section Headings. The section headings are for the
convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.
8.10 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
8.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of Massachusetts,
excluding conflicts of law provisions.
8.12 Waiver of Jury Trial. The Company and each of the
Purchasers hereby irrevocably and unconditionally waives, to the fullest extent
it may legally and effectively do so, any right that it may have to a trial by
jury of any suit, action or proceeding (whether a claim in tort, contract,
equity, or otherwise) arising out of or relating to a dispute under this
Agreement, the Notes or the Warrants, and agrees that any such dispute shall be
tried before a judge sitting without a jury.
- 15 -
20
This Agreement is hereby executed by the undersigned as of the day and
year first written above.
COMPANY:
UTILICOM NETWORKS, INC.
By:
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
21
SECURITIES PURCHASE AGREEMENT
COUNTERPART PURCHASER SIGNATURE PAGE
Principal Amount of Notes Purchased:
Warrants Purchased: $ ****
-----------
Total purchase price: $ ****
-----------
Cash: $ ****
-----------
Interim Promissory Notes: $ ****
-----------
Entity Name: SIGECO ADVANCED COMMUNICATIONS, INC.
------------------------------------
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Secretary
--------------------------------
Address: ▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Evansville, IN 47735-0306
-------------------------------------
22
SECURITIES PURCHASE AGREEMENT
COUNTERPART PURCHASER SIGNATURE PAGE
Principal Amount of Notes Purchased:
Warrants Purchased: 200,000
Total purchase price: $ 4,000,000.00
------------
Cash: $ 3,750,000.00
------------
Interim Promissory Notes: $ 250,000.00
------------
Entity Name: ▇▇▇▇▇▇▇▇ Communications, Inc.
------------------------------------
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Its: Vice President
--------------------------------
Address:
---------------------------
-------------------------------------
Copies of all notices required or permitted hereunder shall
be sent to the following addresses or fax numbers:
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Communications, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a
copy to: General Counsel
▇▇▇▇▇▇▇▇ Communications, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
23
EXHIBIT A
FORM OF NOTE
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS PROMISSORY NOTE MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS PROMISSORY NOTE UNDER SAID ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
UTILICOM NETWORKS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
$ Date:
------------ ---------------
FOR VALUE RECEIVED, Utilicom Networks, Inc. a Delaware corporation (the
"Company") hereby promises to pay to the order of _____________, the principal
amount of ____ Dollars ($_____), plus interest as set forth herein on the
principal balance from time to time outstanding. Interest shall accrue on the
principal balance outstanding at a rate equal to 12% per annum (the "Interest
Rate"). Interest shall be calculated on the basis of actual number of days
elapsed over a year of 360 days. Notwithstanding any other provision of this
Promissory Note, the holder hereof does not intend to charge, and the Company
shall not be required to pay, any interest or other fees or charges in excess of
the maximum permitted by applicable law; and any payments in excess of such
maximum shall be refunded to the Company or credited to reduce principal
hereunder. All payments received by the holder hereunder will be applied first
to costs of collection, if any, then to interest and the balance to principal.
Payments of principal and interest will be made by check or wire transfer in
immediately available United States funds sent to the holder at the address or
pursuant to the wiring instructions furnished to the Company for that purpose.
The entire unpaid principal balance of this Promissory Note and all accrued
and unpaid interest thereon and all other fees, charges, costs and expenses
hereunder (the "Indebtedness") shall become immediately due and payable, without
demand, on the earlier of: (i) June 30, 1999 (as such date may be extended to
July 31, 1999 pursuant to the terms of the Bariston Side Letter (as defined
below) the "Maturity Date"); (ii) an Event of Default as defined in the Note
Purchase Agreement (the "▇▇▇▇▇▇▇▇ Note Purchase Agreement") dated as of May 8,
1998 between the Company and ▇▇▇▇▇▇▇▇ Communications, Inc. ("▇▇▇▇▇▇▇▇"); or
(iii) as pertains to the Company, upon the occurrence of any one or more of the
following events (a) the filing of any complaint, application or petition or the
entry of any order or judgment seeking or granting relief pursuant to Title 11
of the United States Code entitled "Bankruptcy", as amended from time to time,
or pursuant to any similar state or federal law or procedure for any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief for debtors; (b) the appointment of any trustee, receiver,
master.
24
assignee, liquidator, custodian or other similar party: or (c) the assignment
for the benefit of creditors or creation of any trust mortgage or any other
rearrangement, extension or other arrangement for relief from or restructuring
of debts (the failure of the Company to pay the Indebtedness on or before the
Maturity Date and each of the events listed in (ii) and (iii) shall constitute
an "Event of Default"). The term "Bariston Side Letter" refers to the Side
Letter Regarding Bariston Partners, LLC Commitment, dated the date hereof, among
Bariston Partners, LLC ("Bariston") the Company, ▇▇▇▇▇▇▇▇ and SIGECO Advanced
Communications, Inc. ("Sigeco").
Upon the occurrence of an Event of Default, the holder of this
Promissory Note may declare a default and demand payment of all amounts owing
hereunder. Upon the occurrence of a Material Event of Default (as defined
below), for a period of 30 days after the holder is notified of such Material
Event of Default (the "Option Period") the holder may at its option either: (i)
convert all of the then current outstanding principal balance of this Promissory
Note and all accrued interest hereon into such number of fully paid and
non-assessable shares of common stock, $.01 par value, of the Company (the
"Common Stock") at the rate of one share of Common Stock for each $3.00
converted; or (ii) exchange, on a pro rata basis with all other holders of
Promissory Notes issued pursuant to the terms of the Note and Warrant Purchase
Agreement, dated the date hereof, among the Company, ▇▇▇▇▇▇▇▇ and Sigeco (the
"Note and Warrant Purchase Agreement"), the principal balance of this Promissory
Note (the "Conversion Balance") for all of SIGECOM, LLC Membership Interest
currently held by the Company. If the holder does not convert or exchange this
Promissory Note during the Option Period, then the holder of this Promissory
Note will be deemed to have demanded payment of all amounts then owing
hereunder. The term "Material Event of Default" as used herein means any of the
following: (a) the failure by the Company to pay all amounts owing hereunder on
the Maturity Date (b) a non-payment Event of Default, as such term is defined in
this Promissory Note, which is not cured within thirty (30) days of such Event
of Default; or (c) any Event of Default, as such term is defined in the Loan
Agreement dated the date hereof among SIGECOM, LLC, AT&T Commercial Financial
Corporation and the other parties named therein (the "Loan Agreement"), which
results in an acceleration of all amounts owed pursuant to the terms of the Loan
Agreement.
If the holder of this Promissory Note elects to exchange the Conversion
Balance into SIGECOM, LLC Membership Interest as set forth above then all
accrued and unpaid interest on this Promissory Note shall be paid, in cash, to
the holder on the date of such exchange.
No fractions of shares of Common Stock or scrip representing fractions
of shares of Common Stock or fractions or SIGECOM, LLC Membership Interests
shall be issued upon conversion or exchange, as applicable, of this Promissory
Note. If any fraction of a share of Common Stock or SIGECOM, LLC Membership
Interests would, except for the provisions of this paragraph, be deliverable on
the conversion or exchange, as applicable, of the Conversion Balance, the
Company shall make payment in lieu thereof in an amount of cash equal to the
value of such fractional share or SIGECOM, LLC Membership Interest.
2
25
This Promissory Note may be prepaid at any time without premium or
penalty, in whole but not in part except as set forth below. Any prepayment
shall be accompanied by a payment of accrued interest in respect of the
principal being prepaid.
The Company shall prepay, in equal amounts, this Promissory Note and
by the Company pursuant to the terms of the Note and Warrant Purchase Agreement
with the proceeds of any Qualified Equity Financing which is completed by the
Company prior to the Maturity Date. As used herein, the term "Qualified Equity
Financing" shall mean any offering by the Company of equity securities of the
Company resulting in the receipt of cash proceeds by the Company which alone, or
when added to cash proceeds received by the Company in any other equity
financing completed by the Company on or after the date hereof through the
Maturity Date, equals at least One Million Dollars ($1,000,000).
****
[▇▇▇▇▇▇▇▇ ONLY In addition, if, at any time that principal or accrued
interest on this Promissory Note remains outstanding, the holder desires to
purchase one or more Notes pursuant to the terms of the ▇▇▇▇▇▇▇▇ Note Purchase
Agreement then, at the option of the holder, the holder may apply any principal
and interest outstanding under this Promissory Note toward the purchase of such
Note or Notes.
This Promissory Note is one of the Promissory Notes of like tenor to be
issued to several holders pursuant to, and the holder is entitled to the
benefits of, the Note and Warrant Purchase Agreement, and the holder, by
acceptance of this Promissory Note, agrees to be bound by the provisions of the
Note and Warrant Purchase Agreement. This Promissory Note will be recorded on
the books of the Company or its agent as to principal and interest. Any transfer
of this Promissory Note will be effected only by surrender of this Promissory
Note to the Company and reissuance of a new note to the transferee.
The Company agrees to pay the holder's reasonable costs in collecting
and enforcing this Promissory Note, including reasonable attorney's fees.
No waiver of any obligation of the Company under this Promissory Note
shall be effective unless it is in a writing signed by the holder. A waiver by
the holder of any right or remedy under this Promissory Note on any occasion
shall not be a bar to exercise of the same right or remedy on any subsequent
occasion or of any other right or remedy at any time.
3
26
Any notice required or permitted under this Promissory Note shall be in
writing and shall be deemed to have been given on the date of delivery, if
delivered personally or by overnight courier to the party to whom notice is to
be given at the address set forth in the Note and Warrant Purchase Agreement, or
on the third business day after mailing, if mailed to the party to whom notice
is to be given, by certified mail, return receipt requested, postage prepaid,
and addressed to the addressee at the address of the addressee set forth in the
Note Purchase Agreement, or, in each case, to the most recent address, specified
by written notice, given to the sender pursuant to this paragraph.
The Company hereby expressly waives presentment, demand, and protest,
notice of demand, dishonor and nonpayment of this Promissory Note, and all other
notices or demands of any kind in connection with the delivery, acceptance,
performance, default or enforcement hereof, and hereby consents to any delays,
extensions of time, renewals, waivers or modifications that may be granted or
consented to by the holder hereof with respect to the time of payment or any
other provision hereof.
In the event any one or more of the provisions of this Promissory Note
shall for any reason be held to be invalid, illegal or unenforceable, in whole
or in part or in any respect, or in the event that any one or more of the
provisions of this Promissory Note operate or would prospectively operate to
invalidate this Promissory Note, then and in any such event, such provision(s)
only shall be deemed null and void and shall not affect any other provision of
this Promissory Note and the remaining provisions of this Promissory Note shall
remain operative and in full force and effect and in no way shall be affected,
prejudiced, or disturbed thereby.
This Promissory Note shall not be assignable by a holder in whole or in
part, except to an affiliate of the holder, without the prior written consent of
the Company.
This Promissory Note shall be governed by and construed and enforced in
accordance with the laws of The Commonwealth of Massachusetts, without regard to
conflicts of law principles.
UTILICOM NETWORKS, INC.:
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
4
27
EXHIBIT B
FORM OF WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS AVAILABLE WITH
RESPECT THERETO.
COMMON STOCK PURCHASE WARRANT
Warrant No. ___ Number of Shares:___
UTILICOM NETWORKS, INC.
Void after December ___, 2008
1. Issuance. This Warrant is issued to _________ (the "Holder"), by
Utilicom, Networks, Inc., a Delaware corporation (hereinafter with its
successors called the "Company") as of December ___, 1998 (the "Original Issue
Date"). Reference is made to a Note and Warrant Purchase Agreement dated as of
the date hereof among the Company, the Holder and the other parties thereto
(the "Note and Warrant Purchase Agreement"), the terms of which are
incorporated herein by reference. Capitalized terms not otherwise defined
herein shall have the meaning ascribed to them in the Note and Warrant Purchase
Agreement.
2. Purchase Price; Number of Shares. Subject to the terms and conditions
hereinafter set forth and commencing on the date hereof, the registered holder
of this Warrant (the "Holder"), is entitled; upon surrender of this Warrant and
the subscription form annexed hereto duly executed and delivered to the office
of the Company, located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, or such other office as the Company shall notify the Holder of in
writing, to purchase from the Company ____ shares (as adjusted for any stock
split, combination, consolidation, or stock distributions or stock dividends
with respect to such shares) of fully paid and nonassessable shares of Common
Stock, $.01 par value, of the Company (the "Common Stock") at a price per share
(the "Purchase Price") equal to the lower of (i) $3.00 per share of Common
Stock or (ii) Eighty Percent (80%) of the lowest price paid per share of Common
Stock or Convertible Securities (as defined herein) equivalent to one share of
Common Stock, by investors in any equity financing completed by the Company
prior to the Maturity Date. Until such time as this Warrant is exercised in
full or expires, the applicable Purchase Price and the securities issuable upon
exercise of this Warrant are subject to adjustment as hereinafter provided.
3. Payment of Purchase Price. The Purchase Price applicable in
accordance with Section 2 above may be paid (i) in cash or by check, (ii) by
the surrender by the Holder to the Company of any promissory notes or other
obligations issued by the Company, with all
28
such notes and obligations so surrendered being credited against the applicable
Purchase Price in an amount equal to the principal amount thereof plus accrued
interest to the date of surrender or (iii) by any combination of the foregoing.
4. Net Issue Election. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares equal to the
value of this Warrant or any portion hereof by the surrender of this Warrant or
such portion to the Company, with the net issue election notice annexed hereto
duly executed, at the office of the Company. Thereupon, the Company shall issue
to the Holder such number of fully paid and nonassessable shares of Common
Stock as is computed using the following formula:
X = Y (A - B)
---------
A
where X = the number of shares to be issued to the Holder pursuant to this
Section 4.
Y = the number of shares covered by this Warrant in respect of which the
net issue election is made pursuant to this Section 4.
A = the fair market value of one share of Common Stock, as determined in
good faith by the Board, as at the time the net issue election is made pursuant
to this Section 4.
B = the applicable purchase price in effect under this Warrant at the
time the net issue election is made pursuant to this Section 4.
The Board shall promptly respond in writing to an inquiry by the Holder as to
the fair market value of one share of Common Stock.
5. Partial Exercise. This Warrant may be exercised in part, and the
Holder shall be entitled to receive a new warrant, which shall be dated as of
the date of this Warrant, covering the number of shares in respect of which
this Warrant shall not have been exercised.
6. Issuance Date. The person or persons in whose name or names any
certificate representing shares of Common Stock is issued hereunder shall be
deemed to have become the holder of record of the shares represented thereby as
of the close of business on the date this Warrant is exercised with respect to
such shares, whether or not the transfer books of the Company shall be closed.
7. Expiration Date. This Warrant shall expire at the close of business
on December ____, 2008, and shall be void thereafter.
8. Reserved Shares; Valid Issuance. The Company covenants that it will
at all times from and after the date hereof reserve and keep available such
number of its authorized shares of Common Stock, free from all preemptive or
similar rights therein, as will be
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sufficient to permit the exercise of this Warrant in full. The Company further
covenants that such shares as may be issued pursuant to the exercise of this
Warrant will, upon issuance, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof.
9. Adjustment for Stock Splits, Reverse Stock Splits or Stock Dividends.
If after the Original Issue Date (as defined in Section 1 hereof) the Company
shall subdivide the Common Stock, by split-up or otherwise, or combine the
Common Stock, or issue additional shares of Common Stock in payment of a stock
dividend on the Common Stock, the number of shares issuable on the exercise of
this Warrant shall forthwith be proportionately increased in the case of a
subdivision or stock dividend, or proportionately decreased in the case of a
combination, and the applicable Purchase Price shall forthwith be
proportionately decreased in the case of a subdivision or stock dividend, or
proportionately increased in the case of a combination.
10. Mergers and Reclassifications. If after the Original Issue Date there
shall be any reclassification, capital reorganization or change of the Common
Stock (other than as a result of a subdivision, combination or stock dividend
provided for in Section 9 hereof), or any consolidation of the Company with, or
merger of the Company into, another corporation or other business organization
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
outstanding Common Stock), or any sale or conveyance to another corporation or
other business organization of all or substantially all of the assets of the
Company, then, as a condition of such reclassification, reorganization, change,
consolidation, merger, sale or conveyance, lawful provisions shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the Holder, so that the Holder shall thereafter have the
right to purchase, at a total price not to exceed that payable upon the
exercise of this Warrant in full, the kind and amount of shares of stock and
other securities and property receivable upon such reclassification,
reorganization, change, consolidation, merger, sale or conveyance by a holder of
the number of shares of Common Stock which might have been purchased by the
Holder immediately prior to such reclassification, reorganization, change,
consolidation, merger, sale or conveyance, and in any such case appropriate
provisions shall be made with respect to the rights and interest of the Holder
to the end that the provisions hereof (including without limitation, provisions
for the adjustment of the Purchase Price and the number of shares issuable
hereunder) shall thereafter be applicable in relation to any shares of stock or
other securities and property thereafter deliverable upon exercise hereof.
11. Adjustments for Issuances Below Purchase Price. In case the Company
shall at any time or from time to time after the Original Issue Date issue or
sell any additional shares of Common Stock, other than Excluded Stock, as
defined below, (the "Additional Shares of Common Stock") for a consideration
per share less than or equal to the applicable Purchase Price in effect for
this Warrant immediately prior to the time of such issue or sale of such
additional shares of Common Stock (excluding transactions covered by Section 9
or 10
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hereof) then forthwith upon such issue or sale as the case may be, the
applicable Purchase Price shall be reduced to a price calculated as follows:
Adjusted Purchase Price = (Outstanding Stock x Purchase Price) - Additional
Stock Consideration
-------------------------------------------------
Outstanding Stock - No. of Additional Shares of
Common Stock
As used herein:
"Additional Stock Consideration" means the consideration received by the
Company upon the issuance of the Additional Shares of Common Stock.
"Convertible Securities" means any evidences of indebtedness, shares or
securities, in each case convertible into or exchangeable for Additional Shares
of Common Stock.
"Excluded Stock" means: (a) shares of Common Stock issued or issuable on
conversion of the Company's Series B Reedemable [sic] Preferred Stock issued and
outstanding as of the date hereof; (b) up to 3,000,000 shares of Common Stock
issued or issuable upon the exercise of stock options issued pursuant to the
Company's 1996 Employee Stock Option Plan, as amended from time to time; (c) all
shares of stock issued or issuable upon the exercise of Options of the Company
issued and outstanding as of the date hereof and (d) all shares of stock issued
or issuable upon the exercise of the Bariston Fee Warrants.
"No. of Additional Shares of Common Stock" means the number of shares of
Additional Shares of Common Stock issued in connection with the issuance of the
same.
"Options" means rights, options or warrants to subscribe for, purchase or
otherwise acquire Common Stock or Convertible Securities.
"Outstanding Stock" means the total number of shares of Common Stock
outstanding plus the total number of shares of Common Stock issuable upon
conversion or exercise of outstanding preferred stock or Convertible Securities
or Options (including this Warrant and all other warrants) immediately prior to
the issuance of the Additional Shares of Common Stock.
No adjustment in the Purchase Price need be made if such adjustment would
result in a change in the Purchase Price of less than $0.01. Any such adjustment
which is not made shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, on a cumulative basis, amounts to
an adjustment of $0.01 or more in the Purchase Price. No adjustment in the
Purchase Price of this Warrant shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for such
Additional Shares of Common Stock issued or deemed to be issued by the Company
is less than the Purchase Price then in effect on the date of, and immediately
prior to, such issue, for this Warrant.
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In the event of any adjustment in the Purchase Price pursuant to this
Section, the number of shares issuable upon exercise of this Warrant shall be
simultaneously adjusted to that number determined by dividing (a) the aggregate
Purchase Price which would have been payable had this Warrant been exercised in
full, for cash, immediately prior to such issuance, by (b) the Adjusted
Purchase Price.
For purposes of making any adjustment required under this Section, the
consideration received by the Company for any issue or sale of securities shall
(a) to the extent that it consists of cash be computed as the net amount of
cash received by the Company after deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale, (b) to the extent that it consists of
property other than cash, be computed at the fair market value of that property
as determined in good faith by the Board of Directors, and (c) if Additional
Shares of Common Stock, Convertible Securities or right or Options are issued
or sold together with other stock or securities or other assets of the Company
for a consideration which covers both, the consideration received shall be
computed (as provided in clauses (a) and (b) above) as the portion of the
consideration so received that may be reasonably determined in good faith by
the Board of Directors to be allocable to such Additional Shares of Common
Stock, Convertible Securities, or rights or Options.
For purposes of the adjustment required under this Section, if at any time
or from time to time after the date on which this Warrant is issued, the
Company issues or sells any Options or Convertible Securities, then in each
case the Company shall be deemed to have issued at the time of the issuance of
such Options or Convertible Securities the maximum number of Additional Shares
of Common Stock (as set forth in the instruments relating thereto, giving
effect to any provision contained therein for a subsequent upward adjustment of
such number) issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of consideration, if any, received by the Company for the issuance of
such Options or Convertible Securities plus, in the case of such Options, the
minimum amounts of consideration, if any (as set forth in the instruments
relating thereto, giving effect to any provision contained therein for a
subsequent downward adjustment of such consideration), payable to the Company
upon the exercise of such Options and, in the case of Convertible Securities,
the minimum amounts of consideration, if any, payable to the Company (other
than by cancellation of liabilities or obligations evidenced by such
Convertible Securities). No further adjustment of the Purchase Price, adjusted
upon the issuance of such Options or Convertible Securities, shall be made as a
result of the actual issuance of Additional Shares of Common Stock on the
exercise of any such Options or the conversion of any such Convertible
Securities. If any such Options or the conversion privilege represented by any
such Convertible Securities shall expire without having been exercised, the
Purchase Price adjusted upon the issuance of such Options or Convertible
Securities shall be readjusted to the Purchase Price which would have been in
effect had an adjustment been made on the basis that the only Additional Shares
of Common Stock so issued were the Additional Shares of Common Stock, if any,
actually issued or sold for the consideration received by the Company
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for the granting of all such Options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible Securities
actually converted plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities.
12. Fractional Shares. In no event shall any fractional share of Common
Stock be issued upon any exercise of this Warrant. If, upon exercise of this
Warrant as an entirety, the Holder would, except as provided in this Section 12,
be entitled to receive a fractional share of Common Stock, then the Company
shall issue the next higher number of full shares of Common Stock, issuing a
full share with respect to such fractional share.
13. Certificate of Adjustment. Whenever the Purchase Price is adjusted, as
herein provided, the Company shall promptly deliver to the Holder a certificate
of a firm of independent public accountants setting forth the Purchase Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
14. Notices of Record Date, Etc. In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
(b) any reclassification of the capital stock of the Company, capital
reorganization of the Company, consolidation or merger involving the
Company, or sale or conveyance of all or substantially all of its assets,
or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, or (ii) the date on which
any such reclassification, reorganization, consolidation, merger, sale or
conveyance, dissolution, liquidation or winding-up is to take place, and the
time, if any is to be fixed, as of which the holders of record in respect of
such event are to be determined. Such notice shall be mailed at least 10 days
prior to the date specified in such notice on which any such action is to be
taken.
15. Amendment. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Company and the Holder. No such
amendment, modification or waiver shall be effective as to this Warrant unless
the terms of such
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amendment, modification or waiver shall apply with the same force and effect to
all of the other Warrants then outstanding.
16. Warrant Register; Transfers, Etc.
A. The Company will maintain a register containing the names and
addresses of the registered holders of the Warrants. The Holder may change its
address as shown on the warrant register by written notice to the Company
requesting such change. Any notice or written communication required or
permitted to be given to the Holder may be given by certified mail or delivered
to the Holder at its address as shown on the warrant register.
B. Subject to compliance with applicable federal and state securities
laws, this Warrant may be transferred by the Holder with respect to any or all
of the shares purchasable hereunder, provided, however, that the transferee
receive a Warrant to purchase no less than 50,000 shares of Common Stock. Upon
surrender of this Warrant to the Company, together with the assignment hereof
properly endorsed, for transfer of this Warrant as an entirety by the Holder,
the Company shall issue a new warrant of the same denomination to the assignee.
Upon surrender of this Warrant to the Company, together with the assignment
hereof properly endorsed, by the Holder for transfer with respect to a portion
of the shares of Common Stock purchasable hereunder, the Company shall issue a
new warrant to the assignee, in such denomination as shall be requested by the
Holder hereof, and shall issue to such Holder a new warrant covering the number
of shares in respect of which this Warrant shall not have been transferred.
C. In case this Warrant shall be mutilated, lost, stolen or destroyed,
the Company shall issue a new warrant of like tenor and denomination and
deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft or destruction of such Warrant (including a
reasonably detailed affidavit with respect to the circumstances of any loss,
theft or destruction) and of indemnity reasonably satisfactory to the Company.
17. No Impairment. The Company will not, by amendment of its Certificate
of Incorporation or through any reclassification, capital reorganization,
consolidation, merger, sale or conveyance of assets, dissolution, liquidation,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder.
18. Governing Law. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts.
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19. Successors and Assigns. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
20. Business Days. If the last or appointed day for the taking of any
action required or the expiration of any right granted herein shall be a
Saturday or Sunday or a legal holiday in the Commonwealth of Massachusetts, then
such action may be taken or right may be exercised on the next succeeding day
which is not a Saturday or Sunday or such a legal holiday.
Date: December __, 1998
UTILICOM NETWORKS, INC.
(Corporate Seal) By:
-------------------------------------
Attest: Title:
----------------------------------
----------------------------
Subscription
To: Date:
---------------------- --------------
The undersigned hereby subscribes for ________ shares of Common Stock
covered by this Warrant. The certificate(s) for such shares shall be issued in
the name of the undersigned or as otherwise indicated below:
-------------------------------
Signature
-------------------------------
Name for Registration
-------------------------------
Mailing Address
Net Issue Election Notice
To: Date:
---------------------- --------------
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The undersigned hereby elects under Section 4 to surrender the right to
purchase ______ shares of Common Stock pursuant to this Warrant. The
certificate(s) for the shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below.
--------------------------------
Signature
--------------------------------
Name for Registration
--------------------------------
Mailing Address
Assignment
For value received ______________________ hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
Please print or typewrite name and address of Assignee
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoint
______________________ its attorney to transfer the within Warrant on the books
of the within named Company with full power of substitution on the premises.
Dated: __________________
__________________
In the Presence of:
_________________________
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