CONVERTIBLE NOTE PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
August 2, 2000, among Universal Broadband Networks, Inc., a Delaware corporation
(the "COMPANY"), and the investors signatory hereto (each such investor is a
"PURCHASER" and all such investors are, collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire, over the period of time described
herein, to purchase from the Company up to an aggregate principal amount of
$8,795,000 of the Company's 8% Convertible Notes due August 2, 2002, which shall
be in the form of EXHIBIT A (the "NOTES"), and which are convertible into shares
of the Company's common stock, $.001 par value per share(the "COMMON STOCK");
and
WHEREAS, on July 7, 2000 the Purchasers loaned to the Company an
aggregate of $1,295,000 (the "PREVIOUS LOAN").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I
PURCHASE AND SALE
1.1 THE CLOSING.
(a) THE CLOSING. (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall issue and sell to the Purchasers and
the Purchasers shall, severally and not jointly, purchase from the Company the
Notes. The closing of the purchase and sale of the Notes (the "CLOSING") shall
take place at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP
("ROBINSON SILVERMAN"), 1290 Avenue of the Americas, New York, New York 10104,
immediately following the execution hereof or such later date as the parties
shall agree. The date of the Closing is hereinafter referred to as the "CLOSING
DATE."
(ii) On the Closing Date, the parties shall deliver
or shall cause to be delivered the following: (A) the Company shall deliver to
each Purchaser: (1) Notes in the aggregate principal amount of 1/3 of the
purchase price indicated below such Purchaser's name on the signature page to
this Agreement, registered in the name of such Purchaser, (2) a Note, dated as
of July 7, 2000, in the aggregate principal amount of $1,295,000, registered in
the name of such Purchaser, evidencing the Previous Loan, (3) the legal opinion
of Pillsbury Madison & Sutro, LLP, outside counsel to the Company, in the form
of EXHIBIT C, (4) an executed Registration Rights Agreement, dated the date
hereof, among the Company and the Purchasers, in the form of EXHIBIT B (the
"REGISTRATION RIGHTS AGREEMENT"), (5) the Transfer Agent Instructions, in the
form of EXHIBIT D, delivered to and acknowledged by the Company's transfer agent
(the "TRANSFER AGENT INSTRUCTIONS") and (6) an executed copy of the Pledge
Agreement, dated the date hereof, among the Company, the Purchasers and Mary E.
Blake (the "PLEDGOR"), in the form of EXHIBIT E (the " PLEDGE AGREEMENT"); and
(B) each Purchaser shall deliver (1) 1/3 of the purchase price indicated below
such Purchaser's name on the signature page to this Agreement in United States
dollars in immediately available funds by wire transfer to an account designated
in writing by the Company for such purpose, and (2) executed copies of the
Registration Rights Agreement and the Pledge Agreement.
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(iii) On the earlier to occur of (x) the 20th day
following the Closing Date and (y) the date the Underlying Shares Registration
Statement (as defined herein) is filed with the Securities and Exchange
Commission (the "COMMISSION")(such earlier date, the "FIRST ADDITIONAL FUNDING
DATE"), if all of the conditions listed in Section 3.13 hereof shall have been
either satisfied by the Company or waived by the Purchasers, then: (A) the
Company will, against delivery of the amounts set forth in clause (B) in this
paragraph, deliver to each Purchaser, Notes in the aggregate principal amount of
1/3 of the purchase price indicated below such Purchaser's name on the signature
page to this Agreement, registered in the name of such Purchaser (the "FIRST
ADDITIONAL NOTES" which shall be included within the definition of "NOTES") ,
and (B) each Purchaser will deliver to the Company, 1/3 of the purchase price
indicated below such Purchaser's name on the signature page to this Agreement in
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose.
(iv) On the earlier to occur of (x) the 90th day
following the Closing Date and (y) the Effective Date (as defined herein) (such
earlier date, the "SECOND ADDITIONAL FUNDING DATE"), if all of the conditions
listed in Section 3.14 hereof shall have been either satisfied by the Company or
waived by the Purchasers, then: (A) the Company will, against delivery of the
amounts set forth in clause (B) in this paragraph, deliver to each Purchaser,
Notes in the aggregate principal amount of 1/3 of the purchase price indicated
below such Purchaser's name on the signature page to this Agreement, registered
in the name of such Purchaser (the "SECOND ADDITIONAL NOTES" which shall be
included within the definition of "NOTES"), and (B) each Purchaser will deliver
to the Company, 1/3 of the purchase price indicated below such Purchaser's name
on the signature page to this Agreement in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose.
1.2 CERTAIN DEFINED TERMS. For purposes of this Agreement,
"CONVERSION PRICE," "ORIGINAL ISSUE DATE" and "TRADING DAY" shall have the
meanings set forth in the Notes; "BUSINESS DAY" shall mean any day except
Saturday, Sunday and any day which shall be a federal legal holiday or a day on
which banking institutions in the State of New York or the State of Texas are
authorized or required by law or other governmental action to close; "PERSON"
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
makes the following representations and warranties to the Purchasers:
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(a) ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth in
SCHEDULE 2.1(A) (collectively the "SUBSIDIARIES"). Each of the Subsidiaries is
an entity, duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Each of the Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of the Securities (as defined below) or any of this Agreement, the Registration
Rights Agreement, the Pledge Agreement, the Transfer Agent Instructions or the
Notes (collectively, the "TRANSACTION DOCUMENTS"), (y) have or result in a
material adverse effect on the results of operations, assets, prospects, or
condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (z) adversely impair the Company's ability to perform fully on a
timely basis its obligations under any of the Transaction Documents (any of (x),
(y) or (z), a "MATERIAL ADVERSE EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been duly executed by the Company and, when
delivered (or filed, as the case may be) in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational or
charter documents.
(c) CAPITALIZATION. The number of authorized, issued and
outstanding capital stock of the Company is set forth in SCHEDULE 2.1(C). Except
as disclosed in SCHEDULE 2.1(C), the Company owns all of the capital stock of
each Subsidiary. No shares of Common Stock are entitled to preemptive or similar
rights, nor is any holder of securities of the Company or any Subsidiary
entitled to preemptive or similar rights arising out of any agreement or
understanding with the Company or any Subsidiary by virtue of any of the
Transaction Documents. Except as a result of the purchase and sale of the Notes
and except as disclosed in SCHEDULE 2.1(C), there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person (as defined below) any right to subscribe
for or acquire, any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock.
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(d) ISSUANCE OF THE NOTES. The Notes are duly authorized and,
when issued and paid for in accordance with the terms hereof, will be duly and
validly issued, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of first refusal of any kind (collectively, "LIENS").
The Company has on the date hereof and will, at all times while the Notes are
outstanding, maintain an adequate reserve of duly authorized shares of Common
Stock, reserved for issuance to the holders of the Notes, to enable it to
perform its conversion and other obligations under this Agreement and the Notes.
Such number of reserved and available shares of Common Stock is not less than
200% of the number of shares of Common Stock which would be issuable upon
conversion in full of the Notes, assuming such conversion occurred on the
Original Issue Date, the Notes remain outstanding for two years and all interest
is paid in shares of Common Stock and an aggregate principal amount of
$8,795,000 is outstanding under the Notes (such number of shares of Common
Stock, the "INITIAL MINIMUM"). All such authorized shares of Common Stock shall
be duly reserved for issuance to the holders of the Notes. The shares of Common
Stock issuable upon conversion of the Notes are collectively referred to herein
as the "UNDERLYING SHARES." The Notes and the Underlying Shares are collectively
referred to herein as, the "SECURITIES." When issued in accordance with the
Notes, the Underlying Shares will be duly authorized, validly issued, fully paid
and nonassessable, free and clear of all Liens.
(e) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.
(f) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.10, (ii) the filing with the Commission of a registration statement meeting
the requirements set forth in the Registration Rights Agreement and covering the
resale of the Underlying Shares by the Purchasers (the "UNDERLYING SHARES
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REGISTRATION STATEMENT"), (iii) the application(s) to the Nasdaq Stock Market
for the listing of the Underlying Shares for trading on the Nasdaq National
Market ("NASDAQ") (and with any other national securities exchange or market on
which the Common Stock is then listed) in the time and manner required thereby,
(iv) applicable Blue Sky filings and (v) in all other cases where the failure to
obtain such consent, waiver, authorization or order, or to give such notice or
make such filing or registration could not have or result in, individually or in
the aggregate, a Material Adverse Effect (collectively, the "REQUIRED
APPROVALS").
(g) LITIGATION; PROCEEDINGS. Except as set forth in SCHEDULE
2.1(G), there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign)
(collectively, an "ACTION") which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision, individually or
in the aggregate, have or result in a Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any judgment or order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, in each case of clauses (i), (ii) or (iii) above,
except as could not individually or in the aggregate, have or result in a
Material Adverse Effect.
(i) PRIVATE OFFERING. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"). Neither the Company
nor any Person acting on its behalf has taken or is, to the knowledge of the
Company, contemplating taking any action which could subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act including soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
(j) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has filed
all reports required to be filed by it under the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), including pursuant to Section 13(a) or
15(d) thereof, for the 12 months preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC DOCUMENTS" and,
together with the Schedules to this Agreement, the "DISCLOSURE MATERIALS") on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such extension. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
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they were made, not misleading. All material agreements to which the Company is
a party or to which the property or assets of the Company are subject have been
filed as exhibits to the SEC Documents as required under the Exchange Act. The
financial statements of the Company included in the SEC Documents comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. Since March 31, 2000, except as
specifically disclosed in the SEC Documents, (a) there has been no event,
occurrence or development that has or that could result in a Material Adverse
Effect, (b) the Company has not incurred any liabilities (contingent or
otherwise) other than (x) liabilities incurred in the ordinary course of
business consistent with past practice and (y) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (c) the Company has not
altered its method of accounting or the identity of its auditors and (d) the
Company has not declared or made any payment or distribution of cash or other
property to its stockholders or officers or directors (other than in compliance
with existing Company stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any shares of
its capital stock.
(k) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) CERTAIN FEES. Except for certain fees payable to Havkit
Corporation by the Company pursuant to and in accordance with SCHEDULE 2.1(L),
which fees shall be deducted from the applicable purchase price and paid by the
Purchasers on the applicable closing date, no fees or commissions will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement. The
Company shall indemnify and hold harmless the Purchasers, their employees,
officers, directors, agents, and partners, and their respective Affiliates, from
and against all claims, losses, damages, costs (including the costs of
preparation and attorney's fees) and expenses suffered in respect of any such
claimed or existing fees, as such fees and expenses are incurred.
(m) SOLICITATION MATERIALS. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
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(n) EXCLUSIVITY. The Company shall not issue and sell the
Notes to any Person other than the Purchasers without the specific prior written
consent of the Purchasers.
(o) SENIORITY. Except as set forth in SCHEDULE 2.1(O), no
indebtedness of the Company is senior to the Notes in right of payment, whether
with respect to interest or upon liquidation or dissolution, or otherwise.
(p) FORM S-3 ELIGIBILITY. The Company is eligible to register
its Common Stock for resale under Form S-3 promulgated under the Securities Act.
(q) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. Except as
set forth in the SEC Documents, the Company has not, in the two years preceding
the date hereof, received notice (written or oral) from the NASDAQ, any stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange, market
or trading facility. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
(r) PATENTS AND TRADEMARKS. The Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
rights which are necessary or material for use in connection with their
respective businesses, as described in the SEC Documents and which the failure
to so have would have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or its
Subsidiaries violates or infringes upon the rights of any Person. To the best
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights.
(s) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as
set forth on SCHEDULE 6(B) to the Registration Rights Agreement, the Company has
not granted or agreed to grant to any Person 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.
Except as set forth on Schedule 6(b) to the Registration Rights Agreement, no
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(t) 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 as described in the SEC Documents, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
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(u) TITLE. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them which is
material to the business of the Company and its Subsidiaries and good and
marketable title in 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 Liens as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property
by the Company and its Subsidiaries. Any real property and facilities held under
lease by the Company and its Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and its Subsidiaries are
in compliance and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its Subsidiaries.
(v) ABSENCE OF CERTAIN PROCEEDINGS. Except as described in the
SEC Documents: (i) neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving (A) a claim
of violation of or liability under federal or state securities laws or (B) a
claim of breach of fiduciary duty; (ii) the Company does not have pending before
the Commission any request for confidential treatment of information and the
Company has no knowledge of any expected such request that would be made prior
to the Effectiveness Date (as defined in the Registration Rights Agreement); and
(iii) there has not been, and to the best of the Company's knowledge there is
not pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company.
(w) LABOR RELATIONS. No material labor problem exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(x) DISCLOSURE. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers or its
agents or counsel with any information that constitutes or might constitute
material non-public information. The Company understands and confirms that the
Purchasers shall be relying on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby for itself and for no other Purchaser represents and warrants to the
Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
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obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement, the Registration Rights Agreement and the Notes,
at all times to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act or
under an exemption from such registration and in compliance with applicable
federal and state securities laws. Nothing contained herein shall be deemed a
representation or warranty by such Purchaser to hold Securities for any period
of time. Such Purchaser is acquiring the Securities hereunder in the ordinary
course of its business. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any person to distribute the
Securities.
(c) PURCHASER STATUS. At the time such Purchaser was offered
the Notes, it was, and at the date hereof it is, an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Such Purchaser has not been
formed solely for the purpose of acquiring the Securities.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) ABILITY OF SUCH PURCHASER TO BEAR RISK OF INVESTMENT. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
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(g) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) RELIANCE. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that no Purchaser makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act. Notwithstanding the foregoing, the Company, without requiring a
legal opinion as described in the immediately preceding sentence, hereby
consents to and agrees to register on the books of the Company and with any
transfer agent for the securities of the Company any transfer of Securities by a
Purchaser to an Affiliate of such Purchaser or to one or more funds or managed
accounts under common management with such Purchaser, and any transfer among any
such Affiliates or one or more funds or managed accounts, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes (subject to the qualifications
hereof). Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
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NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS.
Underlying Shares shall not contain the legend set forth above
nor any other legend if the conversion of Notes or other issuances of Underlying
Shares as contemplated hereby or by the Notes occurs at any time while an
Underlying Shares Registration Statement is effective under the Securities Act
or the holder is relying on Rule 144 promulgated under the Securities Act ("RULE
144") in connection with the resale of such Underlying Shares or, in the event
there is not an effective Underlying Shares Registration Statement, at such time
and Rule 144 is not then available if, in the opinion of counsel to the Company,
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the day that the Underlying Shares Registration Statement is declared effective
by the Commission (the "EFFECTIVE DATE"). The Company agrees that, in the event
any Underlying Shares are issued with a legend in accordance with this Section
3.1(b), it will, within three (3) Trading Days after request therefor by a
Purchaser, provide such Purchaser with a certificate or certificates
representing such Underlying Shares, free from such legend at such time as such
legend would not have been required under this Section 3.1(b) had such issuance
occurred on the date of such request. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in this Section.
3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Underlying Shares upon conversion of the Notes in accordance
with the terms of the Notes in accordance with their terms, will 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 Underlying Shares upon conversion of the Notes in
accordance with the terms of the Notes is unconditional and absolute, subject to
the limitations set forth herein or in the Notes, regardless of the effect of
any such dilution.
3.3 FURNISHING OF INFORMATION. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchasers to sell the Securities under Rule 144 promulgated
under the Securities Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Underlying
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
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including causing its attorneys to render and deliver any legal opinion required
in order to permit a Purchaser to receive Underlying Shares free of all
restrictive legends and to subsequently sell Underlying Shares under Rule 144
upon receipt of a notice of an intention to sell or other form of notice having
a similar effect.. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
3.4 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of the NASDAQ.
3.5 INCREASE IN AUTHORIZED SHARES. If on any date the Company would be,
if a notice of conversion or exercise (as the case may be) were to be delivered
on such date, precluded from (a) issuing 200% of the number of Underlying Shares
as would then be issuable upon a conversion in full of the Notes (the "CURRENT
REQUIRED MINIMUM"), in either case, due to the unavailability of a sufficient
number of authorized but unissued or reserved shares of Common Stock, then the
Board of Directors of the Company shall promptly prepare and mail to the
stockholders of the Company proxy materials requesting authorization to amend
the Company's certificate or articles of incorporation to increase the number of
shares of Common Stock which the Company is authorized to issue to at least such
number of shares as reasonably requested by the Purchasers in order to provide
for such number of authorized and unissued shares of Common Stock to enable the
Company to comply with its issuance, conversion, exercise and reservation of
shares obligations as set forth in this Agreement and the Notes (the sum of (x)
the number of shares of Common Stock then outstanding plus all shares of Common
Stock issuable upon exercise of all outstanding options, warrants and
convertible instruments, and (y) the Current Required Minimum, shall be a
reasonable number). In connection therewith, the Board of Directors shall (a)
adopt proper resolutions authorizing such increase, (b) recommend to and
otherwise use its best efforts to promptly and duly obtain stockholder approval
to carry out such resolutions (and hold a special meeting of the stockholders no
later than the earlier to occur of the 60th day after delivery of the proxy
materials relating to such meeting and the 90th day after request by a holder of
Securities to issue the number of Underlying Shares in accordance with the terms
hereof) and (c) within five Business Days of obtaining such stockholder
authorization, file an appropriate amendment to the Company's certificate or
articles of incorporation to evidence such increase.
3.6 RESERVATION AND LISTING OF UNDERLYING SHARES. (a) The Company shall
(i) in the time and manner required by NASDAQ and such other exchange, market or
quotation facility on which the Common Stock is traded, prepare and file with
the NASDAQ (and such national securities exchange, market or trading or
quotation facility on which the Common Stock is then traded) an additional
shares listing application covering a number of shares of Common Stock which is
not less than the Initial Minimum, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing on the NASDAQ (as well as on
any such other national securities exchange or market or trading or quotation
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facility on which the Common Stock is then listed) as soon as possible
thereafter, and (iii) provide to the Purchasers evidence of such listing, and
the Company shall maintain the listing of its Common Stock thereon. If the
number of Underlying Shares issuable upon conversion in full of the Notes
exceeds 85% of the number of Underlying Shares previously listed on account
thereof with NASDAQ (and any such other required exchanges), then the Company
shall take the necessary actions to immediately list a number of Underlying
Shares as equals no less than the then Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon conversion of the Notes in full in accordance with this
Agreement and the Notes, respectively, in such amount as may be required to
fulfill its obligations in full under the Transaction Documents, which reserve
shall equal no less than the then Current Required Minimum.
3.7 CONVERSION PROCEDURES. The Transfer Agent Instructions and
Conversion Notice (as defined in the Notes) set forth the totality of the
procedures with respect to the conversion of the Notes, including the form of
legal opinion, if necessary, that shall be rendered to the Company's transfer
agent and such other information and instructions as may be reasonably necessary
to enable the Purchasers to convert their Notes as contemplated in the Notes.
3.8 CONVERSION OBLIGATIONS OF THE COMPANY. The Company shall honor
conversions of the Notes and shall deliver Underlying Shares in accordance with
the respective terms, conditions and time periods set forth herein and in the
Notes.
3.9 SUBSEQUENT FINANCINGS; LIMITATION ON REGISTRATION. (a) Subject to
Section 3.9(d) and (e), from the date hereof through the 90th Trading Day
following the Effective Date, the Company will not offer, sell, grant any option
to purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition) any of its or its Affiliates' equity or
equity equivalent securities (including the issuance of any debt or other
instrument at any time over the life thereof convertible into or exchangeable
for Common Stock), PROVIDED, that if the Company shall enter into an equity line
of financing with the Purchasers pursuant to which the Company shall be
obligated to file a registration statement with the Commission, during the
period (if any) in which such registration statement shall not be effective, the
provisions of this Section 3.9(a) shall not apply.
(b) Subject to Section 3.9(d) and (e), the Company shall not,
directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition) any of its equity or equity-equivalent securities or
securities of any of its Affiliates that are exchangeable or convertible
(directly or indirectly) for shares of Common Stock, including the issuance of
any debt or other instrument at any time over the life thereof convertible into
or exchangeable for Common Stock (collectively, a "SUBSEQUENT PLACEMENT") from
the date hereof until the expiration of the 180th Trading Day after the
Effective Date, unless (A) the Company delivers to each of the Purchasers a
written notice (the "SUBSEQUENT PLACEMENT NOTICE") of its intention to effect
such Subsequent Placement, which Subsequent Placement Notice shall describe in
reasonable detail the proposed terms of such Subsequent Placement, the amount of
proceeds intended to be raised thereunder, the Person with whom such Subsequent
Placement shall be effected, and attached to which shall be a term sheet or
similar document relating thereto and (B) such Purchaser shall not have notified
the Company by 6:30 p.m. (New York City time) on the fifth Business Day after
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its receipt of the Subsequent Placement Notice of its willingness to provide (or
to cause its sole designee to provide), subject to completion of mutually
acceptable documentation, financing to the Company on the same terms set forth
in the Subsequent Placement Notice. If the Purchasers shall fail to notify the
Company of their intention to enter into such negotiations within such time
period, the Company may effect the Subsequent Placement substantially upon the
terms and to the Persons (or Affiliates of such Persons) set forth in the
Subsequent Placement Notice; PROVIDED, that the Company shall provide the
Purchasers with a second Subsequent Placement Notice, and the Purchasers shall
again have the right of first refusal set forth above in this paragraph (a), if
the Subsequent Placement subject to the initial Subsequent Placement Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Placement Notice within 30 Trading Days after the date of the initial
Subsequent Placement Notice with the Person (or an Affiliate of such Person)
identified in the Subsequent Placement Notice. If the Purchasers shall indicate
a willingness to provide financing in excess of the amount set forth in the
Subsequent Placement Notice, then each Purchaser shall be entitled to provide
financing pursuant to such Subsequent Placement Notice up to an amount equal to
such Purchaser's pro-rata portion of the aggregate number of Shares purchased by
such Purchaser under this Agreement, but the Company shall not be required to
accept financing from the Purchasers in an amount in excess of the amount set
forth in the Subsequent Placement Notice.
(c) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Section 6(c) of
the Registration Rights Agreement to be registered, in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to Section 3.9 (e), the Company
shall not, for a period of not less than 90 Trading Days after the Effective
Date, without the prior written consent of the Purchasers (i) issue or sell any
of its or any of its Affiliates' equity or equity- equivalent securities
pursuant to Regulation S promulgated under the Securities Act, or (ii) register
any securities of the Company. Any days after the Effective Date that a
Purchaser is unable to sell Underlying Shares under the Underlying Shares
Registration Statement shall be added to such 90 Trading Day period.
(d) With respect to Section 3.9(a) and (b), the 90 and 180
Trading Day periods shall be extended for the number of Trading Days during such
period (A) in which trading in the Common Stock is suspended by any securities
exchange or market or quotation system on which the Common Stock is then listed,
or (B) during which the Underlying Shares Registration Statement is not
effective, or (C) during which the prospectus included in the Underlying Shares
Registration Statement may not be used by the holders thereof for the resale of
Underlying Shares.
(e) The restrictions contained in Section 3.9(a) and (b)
above, shall not apply to (i) the granting of options or warrants to employees,
officers and directors of the Company, and the issuance of Common Stock upon
exercise of such options or warrants granted under any stock option plan
heretofore or hereinafter duly adopted by the Company, (ii) a Subsequent
Placement, effectuated within 30 days of the Closing Date whereby the Company
shall: (x) be contractually prohibited from causing a registration statement
filed in connection with such Subsequent Placement from being declared effective
within 90 days of the Effective Date and (y) provide 5 Business Day prior
written notice to the Purchasers and (iii) issuances of Common Stock pursuant to
a Strategic Transaction (as defined herein). A "STRATEGIC TRANSACTION" shall
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mean a transaction or relationship in which the Company issues shares of Common
Stock to a Person which is, itself or through its subsidiaries, an operating
company in a business related to the business of the Company and in which the
Company receives material benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities.
3.10 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company shall:
(i) on the Closing Date issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K disclosing the transactions contemplated hereby within ten
Business Days after the Closing Date, and (iii) timely file with the Commission
a Form D promulgated under the Securities Act. The Company shall, no less than
two Business Days prior to the filing of any disclosure required by clauses (ii)
and (iii) above, provide a copy thereof to the Purchasers for their review. The
Company and the Purchasers shall consult with each other in issuing any other
press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or stock market or
trading facility with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, except if such disclosure is required by law or stock
market regulations, in which such case the disclosing party shall promptly
provide the other party with prior notice of such public statement, filing or
other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the names of the Purchasers, or include the names of the
Purchasers in any filing with the Commission, or any regulatory agency, trading
facility or stock market without the prior written consent of the Purchasers,
except to the extent such disclosure (but not any disclosure as to the
controlling Persons thereof) is required by law or stock market regulations, in
which case the Company shall provide the Purchasers with prior notice of such
disclosure.
3.11 USE OF PROCEEDS. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.
3.12 REIMBURSEMENT. If any Purchaser becomes involved in any capacity
in any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, solely as a result of acquiring the
Securities under this Agreement, the Company will reimburse such Purchaser for
its reasonable legal and other expenses (including the cost of any investigation
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred. The reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliates of the Purchasers who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchasers and any such
Affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Purchasers and
any such Affiliate and any such Person. The Company also agrees that neither the
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Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under this Agreement.
Section 3.13 CONDITIONS PRECEDENT TO THE PURCHASE OF THE FIRST
ADDITIONAL NOTES. Notwithstanding anything to the contrary contained in this
Agreement, the commitment of a Purchaser to purchase the First Additional Notes
is subject to the satisfaction or waiver by such Purchaser of each of the
following conditions as of the First Additional Funding Date:
(i) CLOSING OF INITIAL NOTES. The Closing shall have occurred;
(ii) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained herein shall be true
and correct as of the date when made and as of the First Additional Funding Date
as though made on and as of the First Additional Funding Date (other than
representations and warranties which relate to a specific date (which shall not
include representations and warranties relating to the "date hereof");
(iii) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company between the Closing Date and the First Additional Funding
Date and no Event (as defined in the Registration Rights Agreement ) shall have
occurred which has not been cured to the satisfaction of the Purchasers;
(iv) NO INJUNCTION. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits or makes impracticable the
purchase of the First Additional Notes;
(v) ADVERSE CHANGES. Since the Closing Date, no event or
series of events which reasonably would be expected to have or result in a
Material Adverse Effect shall have occurred;
(vi) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading in
the Common Stock shall not have been suspended by the Commission or on the
NASDAQ at any time since the Closing Date and the Company shall not have
received any notice of threatened or pending proceedings for delisting the
Common Stock from NASDAQ;
(vii) SHAREHOLDER APPROVAL. No approval of the shareholders of
the Company shall be required under the rules of the Nasdaq Stock Market or such
other exchange or trading facility or which the Common Stock is the traded or
listed for trading in order to issue a minimum of 200% of the shares of Common
Stock issuable upon conversion of the outstanding principal amount of the Notes
(assuming such conversion occurred on the First Additional Funding Date);
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(viii) SHARES OF COMMON STOCK. The Company shall have duly
reserved the number of shares of Common Stock as required by the Transaction
Documents to be reserved for issuance upon conversion of the Notes;
(ix) PERFORMANCE OF CONVERSION OBLIGATIONS. The Company shall
have timely complied with its conversion and delivery requirements under the
Notes;
(x) CLOSING THRESHOLD. For the ten Trading Days immediately
preceding the First Additional Funding Date, the average daily trading volume of
the Common Stock on the NASDAQ shall be at least 150,000 shares and the average
of the Per Share Market Value for such ten Trading Day period shall be greater
than $2.50 (subject to equitable adjustments for stock splits, recombinations
and similar events); and
(xi) DELIVERY OF FIRST ADDITIONAL PLEDGED SHARES. The Pledgor
shall have delivered to the Purchasers the First Additional Pledged Shares (as
defined in the Pledge Agreement) pursuant to the Pledge Agreement.
Section 3.14 CONDITIONS PRECEDENT TO THE PURCHASE OF THE SECOND
ADDITIONAL NOTES. Notwithstanding anything to the contrary contained in this
Agreement, the commitment of a Purchaser to purchase the Second Additional Notes
is subject to the satisfaction or waiver by such Purchaser of each of the
following conditions as of the Second Additional Funding Date:
(i) CLOSING OF FIRST ADDITIONAL NOTES. The closing of the sale
of the First Additional Notes shall have occurred;
(ii) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained herein shall be true
and correct as of the date when made and as of the Second Additional Funding
Date as though made on and as of the Second Additional Funding Date (other than
representations and warranties which relate to a specific date (which shall not
include representations and warranties relating to the "date hereof");
(iii) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company between the Closing Date and the Second Additional Funding
Date and no Event (as defined in the Registration Rights Agreement ) shall have
occurred which has not been cured to the satisfaction of the Purchasers;
(iv) UNDERLYING SHARES REGISTRATION STATEMENT. The Underlying
Shares Registration Statement shall have been declared effective under the
Securities Act by the Commission and shall have remained effective at all times,
not subject to any actual or threatened stop order or subject to any actual or
threatened suspension at any time prior to the Second Additional Funding Date;
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(v) NO INJUNCTION. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits or makes impracticable the
purchase of the Second Additional Notes;
(vi) ADVERSE CHANGES. Since the Closing Date, no event or
series of events which reasonably would be expected to have or result in a
Material Adverse Effect shall have occurred;
(vii) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading
in the Common Stock shall not have been suspended by the Commission or on the
NASDAQ at any time since the Closing Date and the Company shall not have
received any notice of threatened or pending proceedings for delisting the
Common Stock from NASDAQ;
(viii) SHAREHOLDER APPROVAL. No approval of the shareholders
of the Company shall be required under the rules of the Nasdaq Stock Market or
such other exchange or trading facility or which the Common Stock is the traded
or listed for trading in order to issue a minimum of 200% of the shares of
Common Stock issuable upon conversion of the outstanding principal amount of the
Notes (assuming such conversion occurred on the Second Additional Funding Date);
(ix) SHARES OF COMMON STOCK. The Company shall have duly
reserved the number of shares of Common Stock as required by the Transaction
Documents to be reserved for issuance upon conversion of the Notes;
(x) PERFORMANCE OF CONVERSION OBLIGATIONS. The Company shall
have timely complied with its conversion and delivery requirements under the
Notes; and
(xi) DELIVERY OF SECOND ADDITIONAL PLEDGED SHARES. The Pledgor
shall have delivered to the Purchasers the Second Additional Pledged Shares (as
defined in the Pledge Agreement) pursuant to the Pledge Agreement.
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ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. At the Closing, the Company shall
reimburse the Purchasers for their legal fees and expenses incurred in
connection with the preparation and negotiation of the Transaction Documents by
paying to Robinson Silverman $25,000 for the preparation and negotiation of the
Transaction Documents. The amount contemplated by the immediately preceding
sentence shall be retained by the Purchasers and shall not be delivered to the
Company at the Closing. Other than the amount contemplated herein, and except as
otherwise set forth in the Registration Rights Agreement, each party shall pay
the fees and expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of the Securities.
4.2 ENTIRE AGREEMENT; AMENDMENTS. The Transaction Documents,
together with the Exhibits and Schedules thereto and the Transfer Agent
Instructions contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such documents, exhibits and schedules.
4.3 NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:30 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 6:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: Universal Broadband Networks, Inc.
2030 Main, Suite 550
Irvine, California 92614
Facsimile No.: (949) 261-2714
Attn: Jeffrey R. Matsen, Executive Vice
President
With copies to: Pillsbury Madison & Sutro, LLP
650 Town Center Drive, 7th Floor
Costa Mesa, California 92626
Facsimile No.: (714) 436-2800
Attn: Christopher A. Wilson, Esq.
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If to a Purchaser: To the address set forth under such
Purchaser's name on the signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or require ment
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
4.5 HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
4.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchasers. Except as set
forth in Section 3.1(a), the Purchasers may not assign this Agreement or any of
the rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
4.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
4.8 GOVERNING LAW. The corporate laws of the State of Delaware
shall govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is 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 via registered or
certified mail or overnight delivery (with evidence of delivery) 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.
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<PAGE>
4.9 SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
conversion of the Notes.
4.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 SEVERABILITY. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.12 REMEDIES. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each of
the Purchasers will be entitled to specific performance of the obligations of
the Company under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any
breach of obligations described in the foregoing sentence and hereby agrees to
waive in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
4.13 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS.
The obligations of each Purchaser under any Transaction Document is several and
not joint with the obligations of any other Purchaser and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
Convertible Note Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
UNIVERSAL BROADBAND NETWORKS, INC.
By:
-------------------------------------
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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<PAGE>
HERKIMER LLLC
By:
------------------------------------
Name:
Title:
Purchase Price: $7,500,000
Address for Notice:
Herkimer LLC
c/o Citco Trustees (Cayman) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (345) 945-7566
With copies to: Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and (212) 541-1432
Attn: Eric L. Cohen, Esq.
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<PAGE>
================================================================================
CONVERTIBLE NOTE PURCHASE AGREEMENT
Among
UNIVERSAL BROADBAND NETWORKS, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of August 2, 2000
================================================================================
SCHEDULE 2.1 (l)
----------------
FEES PAYMENT DATE
---- ------------
1. $225,000 Closing Date
2. $175,000 First Additional Closing Date
3. $175,000 Second Additional Closing Date
