EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June 30,
1998, by and between Secure Computing Corporation, a Delaware corporation (the
"Company"), and each of the entities whose names appear on the signature pages
hereof. Such entities are each referred to herein as a "Purchaser" and,
collectively, as the "Purchasers".
The Company wishes to sell to each Purchaser, and each Purchaser wishes
to purchase, on the terms and subject to the conditions set forth in this
Agreement, shares (the "Preferred Shares") of the Company's Series C Convertible
Preferred Stock, par value $0.01 per share (the "Preferred Stock") and related
Warrants in the form attached hereto as Exhibit A (the "Warrants"). The
Preferred Shares are convertible pursuant to the terms of a Certificate of
Designation relating to the Preferred Stock, the form of which is attached
hereto as Exhibit B (the "Certificate of Designation") into shares (the
"Conversion Shares") of the Company's common stock, par value $0.01 per share
(the "Common Stock"). The Warrants are exercisable into shares of Common Stock
(the "Warrant Shares") in accordance with their terms. The Preferred Shares, the
Conversion Shares, the Warrants and the Warrant Shares are collectively referred
to herein as the "Securities".
The Company has agreed to effect the registration of the Conversion
Shares and the Warrant Shares under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Rights Agreement of even date
herewith by and among the Company and the Purchasers (the "Registration Rights
Agreement"). The sale of the Preferred Shares and the Warrants by the Company to
the Purchasers will be effected in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D ("Regulation D"), as
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act.
The Company and each Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
1.1 Agreement to Purchase and Sell. Upon the terms and subject to the
satisfaction or waiver of the conditions set forth herein, the Company agrees to
sell at the Closing (as defined below) and each Purchaser agrees to purchase the
number of Preferred Shares, together with Warrants to purchase the number of
shares of Common Stock, set forth below such Purchaser's name on the signature
pages hereof at a purchase price for such Preferred Shares and Warrants equal to
one thousand dollars ($1,000) times the number of Preferred Shares purchased by
such Purchaser (the "Purchase Price"). The Warrants will entitle each Purchaser
to purchase, at the exercise price stated therein, a number of shares of Common
Stock equal to the aggregate Stated Value (as defined in the Certificate of
Designation) of the Preferred Shares purchased by such Purchaser hereunder
divided by the average Closing Bid Price (as defined in the Certificate of
Designation) for the Common Stock
during the period of fifteen (15) Trading Days (as defined in the Certificate of
Designation) occurring immediately prior to (but not including) the issue date
for the Warrants multiplied by ten percent (10%).
1.2 Closing. Subject to the satisfaction or waiver of the conditions
set forth herein, the closing of the purchase and sale of the Preferred Shares
and Warrants (the "Closing") will be deemed to occur when this Agreement and the
other Transaction Documents (as defined below) have been executed and delivered
by the Company and each Purchaser (which delivery may be effected by facsimile
transmission), and full payment of the Purchase Price has been made by each
Purchaser by wire transfer of immediately available funds against physical
delivery by the Company of duly executed certificates representing the Preferred
Shares and the Warrants purchased by such Purchaser at the Closing. The date on
which the Closing is deemed to occur is referred to herein as the "Closing
Date". It is anticipated that the Closing Date will occur on June 30, 1998 or
such later date as may be mutually agreed to by the parties.
1.3 Certain Definitions. When used herein, (A) "business day" shall
mean any day on which the New York Stock Exchange and commercial banks in the
city of New York are open for business, (B) an "affiliate" of a party shall mean
any person or entity controlling, controlled by or under common control with
that party and (C) "control" shall mean, with respect to an entity, the ability
to direct the business, operations or management of such entity, whether through
an equity interest therein or otherwise.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby makes the following representations and
warranties to the Company and agrees with the Company that, as of the date of
this Agreement and as of the Closing Date:
2.1 Authorization; Enforceability. Such Purchaser is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with full power and authority
to purchase the Preferred Shares and Warrants and to execute and deliver this
Agreement. This Agreement constitutes such Purchaser's valid and legally binding
obligation, enforceable in accordance with its terms, except as such enforcement
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) general principles of equity.
2.2 Accredited Investor; Investment Intent. Such Purchaser is an
accredited investor as that term is defined in Rule 501 of Regulation D, and is
acquiring the Preferred Shares and Warrants solely for its own account as a
principal for investment purposes and not with a present view to the public
resale or distribution of all or any part thereof, except pursuant to sales that
are exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act; provided, however that in making such
representation, such Purchaser does not agree (except as otherwise expressly set
forth in this Agreement or in the other Transaction Documents) to hold the
Securities for any minimum or specific term and reserves the right to sell,
transfer or otherwise dispose
of the Securities at any time in accordance with the provisions of this
Agreement and with Federal and state securities laws applicable to such sale,
transfer or disposition.
2.3 Information. The Company has provided such Purchaser with
information regarding the business, operations and financial condition of the
Company, and has granted to such Purchaser the opportunity to ask questions of
and receive answers from representatives of the Company, its officers,
directors, employees and agents concerning the Company and materials relating to
the terms and conditions of the purchase and sale of the Preferred Shares and
Warrants hereunder. Neither such information nor any other investigation
conducted by such Purchaser or any of its representatives shall modify, amend or
otherwise affect such Purchaser's right to rely on the Company's representations
and warranties contained in this Agreement.
2.4 Limitations on Disposition. Such Purchaser acknowledges that,
except as provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the Securities Act and may not be
transferred or resold without registration under the Securities Act or unless
pursuant to an exemption therefrom.
2.5 Legend. Such Purchaser understands that the certificates
representing the Securities may bear at issuance a restrictive legend in
substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, and
may not be offered or sold unless a registration statement
under the Securities Act and applicable state securities laws
shall have become effective with regard thereto, or an
exemption from registration under the Securities Act and
applicable state securities laws is available in connection
with such offer or sale. Such securities are issued subject to
the provisions of (i) the Certificate of Designation relating
to the Series C Convertible Preferred Stock of Secure
Computing Corporation (the "Company"), (ii) a Securities
Purchase Agreement, dated as of June30, 1998, by and among the
Company and the purchasers named therein, and (iii) a
Registration Rights Agreement, dated as of June 30, 1998, by
and among the Company and such purchasers."
Notwithstanding the foregoing, it is agreed that, as long as
(A) the resale or transfer (including without limitation a pledge) of Securities
is registered pursuant to an effective registration statement and the holder
thereof has represented to the Company, in a related conversion or exercise
notice or otherwise in writing, that such holder has resold or transferred
Securities in accordance with the terms of the prospectus relating to such
registration statement, (B) such holder provides the Company with an opinion of
counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions to the effect that Securities can be sold publicly
without registration under the Securities Act (provided that such opinion shall
not be required for a sale or transfer of Securities to an affiliate of the
holder), (C) Securities can be sold pursuant to Rule 144 under the Securities
Act or any successor provision ("Rule 144") and a registered broker dealer
provides to the Company a customary broker's Rule 144 letter and such holder
delivers to the Company a customary seller's
representation letter or (D) Securities are eligible for resale under Rule
144(k) or any successor provision, such Securities shall be issued without any
legend or other restrictive language and, with respect to Securities upon which
such legend is stamped, the Company shall issue new certificates without such
legend to the holder upon request.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties
to each Purchaser and agrees with each Purchaser that, as of the date of this
Agreement and as of the Closing Date:
3.1 Organization, Good Standing and Qualification. Each of the Company
and its subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
all requisite power and authority to carry on its business as now conducted.
Each of the Company and its subsidiaries is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on the consolidated business, operations,
properties, financial condition, prospects or results of operations of the
Company and its subsidiaries taken as a whole or on the ability of the Company
to perform its obligations under the Transaction Documents or the Certificate of
Designation (a "Material Adverse Effect"). The term "subsidiaries" shall mean
entities in which the Company has an equity interest of 50% or greater.
3.2 Authorization; Consents. The Company has the requisite corporate
power and authority to enter into and perform its obligations under (i) this
Agreement, (ii) the Registration Rights Agreement, (iii) the Warrants and (iv)
all other agreements, documents, certificates or other instruments executed and
delivered by or on behalf of the Company at any Closing (the instruments
described in (i), (ii), (iii) and (iv) being collectively referred to herein as
the "Transaction Documents"), to execute and perform its obligations under the
Certificate of Designation, to issue and sell the Preferred Shares and the
Warrants to the Purchasers in accordance with the terms hereof, to issue the
Conversion Shares upon conversion of the Preferred Shares in accordance with the
Certificate of Designation and to issue the Warrant Shares upon exercise of the
Warrants. All corporate action on the part of the Company by its officers,
directors and stockholders necessary for (A) the authorization, execution and
delivery of, and the performance by the Company of its obligations under, the
Transaction Documents, and (B) the authorization, execution and filing of, and
the performance by the Company of its obligations under, the Certificate of
Designation has been taken, and no further consent or authorization of the
Company, its Board of Directors, its stockholders, any governmental agency or
organization (other than such approval as may be required under the Securities
Act and applicable state securities laws in respect of the Registration Rights
Agreement), or any other person or entity is required (pursuant to any rule of
the National Association of Securities Dealers, Inc. ("NASD")or otherwise,
except for any stockholder approval that may be required pursuant to NASD Rule
4460(i)).
3.3 Enforcement. The Transaction Documents and the Certificate of
Designation constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity.
3.4 Disclosure Documents; Agreements; Financial Statements; Other
Information. The Company has filed with the Commission: (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, (ii) a Quarterly
Report on Form 10-Q for the quarter ended Xxxxx 00, 0000, (xxx) all Current
Reports on Form 8-K required to be filed with the Commission since December 31,
1997 and (iv) the Company's definitive Proxy Statement for its 1998 Annual
Meeting of Stockholders (collectively, the "Disclosure Documents"). The Company
is not aware of any event occurring on or prior to the Closing Date (other than
the transactions effected hereby) that would require the filing of, or with
respect to which the Company intends to file, a Form 8-K after the Closing. Each
Disclosure Document, as of the date of the filing thereof with the Commission,
conformed in all material respects to the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder and, as of the date of such filing, such Disclosure
Document did not contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements required to be filed as exhibits to the
Disclosure Documents have been filed as required. Neither the Company nor any of
its subsidiaries is in breach of any agreement to which it is a party or by
which it is bound where such breach is reasonably likely to have a Material
Adverse Effect. Except as set forth in the Disclosure Documents or any schedule
or exhibit attached hereto, the Company has no liabilities, contingent or
otherwise, other than liabilities incurred in the ordinary course of business
which, under generally accepted accounting principles, are not required to be
reflected in such financial statements and which, individually or in the
aggregate, are not material to the consolidated business or financial condition
of the Company and its subsidiaries taken as a whole. As of their respective
dates, the financial statements of the Company included in the Disclosure
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied at
the times and during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end adjustments). The written
information described in paragraph 2.3 above does not contain an untrue
statement of material fact or omit to state a material fact required in order to
make such information not misleading, and does not include any material,
non-public information.
3.5 Capitalization. The capitalization of the Company as of May 31,
1998, including its authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Preferred Stock) exercisable
for, or convertible into or exchangeable for any shares of Common Stock and the
number of shares initially to be reserved for issuance upon conversion of the
Preferred Shares and exercise of the Warrants is set
forth on Schedule 3.5 hereto. All of such outstanding shares of capital stock
have been, or upon issuance will be, validly issued, fully paid and
non-assessable. No shares of the capital stock of the Company are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances created by or through the Company. Except as
disclosed on Schedule 3.5, or as contemplated herein, as of the date of this
Agreement and as of the Closing Date, there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exercisable
or exchangeable for, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries. There has been no material changes to the
information set forth on Schedule 3.5 since May 31, 1998.
3.6 Valid Issuance. The Preferred Shares are duly authorized and, when
issued, sold and delivered in accordance with the terms hereof, (i) will be duly
and validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company, (ii) based in part upon the representations of each
Purchaser in this Agreement, will be issued, sold and delivered in compliance
with all applicable Federal and state securities laws and (iii) will be entitled
to all of the rights, preferences and privileges set forth in the Certificate of
Designation. The Warrants are duly authorized and, when issued, sold and
delivered in accordance with the terms hereof, (i) will be duly and validly
issued, fully paid and nonassessable, free and clear of any taxes, liens,
claims, preemptive or similar rights or encumbrances imposed by or through the
Company and (ii) based in part upon the representations of each Purchaser in
this Agreement, will be issued, sold and delivered in compliance with all
applicable Federal and state securities laws. The Conversion Shares are duly
authorized and, to the extent required pursuant to this Agreement, the other
Transaction Documents and the Certificate of Designation, reserved for issuance
and, when issued upon conversion of the Preferred Shares in accordance with the
terms of the Certificate of Designation, will be duly and validly issued, fully
paid and nonassessable, free and clear of any taxes, liens, claims, preemptive
or similar rights or encumbrances imposed by or through the Company. The Warrant
Shares are duly authorized and, upon the issuance thereof in accordance with the
terms of the Warrant, will be duly and validly issued, fully paid and
nonassessable, free and clear of any taxes, liens, claims, preemptive or similar
rights or encumbrances imposed by or through the Company.
3.7 No Conflict with Other Instruments. except as set forth in Schedule
3.7 hereto, neither the Company nor any of its subsidiaries is in violation of
any provisions of its charter, Bylaws or any other governing document or in
default (and no event has occurred which, with notice or lapse of time or both,
would constitute a default) under any provision of any instrument or contract to
which it is a party or by which it is bound, or of any provision of any Federal
or state judgment, writ, decree, order, statute, rule or governmental regulation
applicable to the Company, which would have a Material Adverse Effect. The (i)
execution, delivery and performance of this Agreement and the other Transaction
Documents, (ii) execution and filing of the Certificate of Designation, and
(iii) consummation of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Preferred Shares and the
Warrants and the reservation for issuance and issuance of the
Conversion Shares and the Warrant Shares) will not result in any such violation
or be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision, instrument or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company or of any of its subsidiaries or the
triggering of any preemptive or anti-dilution rights or rights of first refusal
or first offer on the part of holders of the Company's securities.
3.8 Financial Condition; Taxes; Litigation.
3.8.1 The Company's financial condition is, in all material
respects, as described in the Disclosure Documents, except for changes in the
ordinary course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the consolidated business or financial
condition of the Company and its subsidiaries taken as a whole. Except as
otherwise described in the Disclosure Documents, there has been no material
adverse change to the Company's business, operations, properties, financial
condition, prospects or results of operations since the date of the Company's
most recent audited financial statements contained in the Disclosure Documents.
3.8.2 The Company has filed all tax returns required to be
filed by it and paid all taxes which are due, except for taxes which it
reasonably disputes or which could not reasonably be expected to have a Material
Adverse Effect.
3.8.3 Neither the Company nor any of its subsidiaries is the
subject of any pending or, to the Company's knowledge, threatened inquiry,
investigation or administrative or legal proceeding by the Internal Revenue
Service, the taxing authorities of any state or local jurisdiction, the
Commission or any state securities commission or other governmental or
regulatory entity.
3.8.4 Except as described on Schedule 3.8.4, there is no
material claim, litigation or administrative proceeding pending, or, to the
Company's knowledge, threatened or contemplated, against the Company or any of
its subsidiaries, or against any officer, director or employee of the Company or
any such subsidiary in connection with such person's employment therewith.
Neither the Company nor any of its subsidiaries is a party to or subject to the
provisions of, any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality which could reasonably be expected to have
a Material Adverse Effect.
3.9 Reporting Company; Form S-3. The Company is subject to the
reporting requirements of the Exchange Act, has a class of securities registered
under Section 12 of the Exchange Act, and has filed all reports required
thereby. The Company is eligible to register shares of its Common Stock on a
registration statement on Form S-3 under the Securities Act.
3.10 Acknowledgement of Dilution. The Company acknowledges that the
issuance of the Conversion Shares upon conversion of the Preferred Shares in
accordance with the terms of the Certificate of Designation and the issuance of
the Warrant Shares upon exercise of the Warrants may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation
to issue Conversion Shares upon conversion of the Preferred Shares and to issue
Warrant Shares upon exercise of the Warrants is unconditional and absolute
regardless of the effect of any such dilution.
3.11 Intellectual Property. The Company and its subsidiaries each owns
or possesses adequate trademarks, trade names and other rights to inventions,
know-how, patents, copyrights, confidential information and other intellectual
property rights necessary to conduct the business now operated by it (the
"Intellectual Property Rights"), and is not aware of any infringement by a third
party with respect to such rights or of any infringement by it or conflict with
asserted rights of others that, in any such case, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate have
a Material Adverse Effect. The Intellectual Property Rights are valid and
enforceable and no registration relating thereto has lapsed, expired or
terminated or is the subject of any claim or proceeding that could result in any
such lapse, expiration or termination. The Company and its subsidiaries each has
complied in all material respects with its obligations pursuant to any agreement
relating to the Intellectual Property Rights that are the subject of licenses
granted by third parties.
3.12 Registration Rights; Rights of Participation. Except as described
on Schedule 3.12 hereto, (A) the Company has not granted or agreed to grant to
any person or entity any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied and (B) no person or entity,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers, agents or other third parties, has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement, the other
Transaction Documents or the Certificate of Designation which has not been
waived.
3.13 Trading on Nasdaq. The Common Stock is authorized for quotation on
the Nasdaq National Market, and trading in the Common Stock on Nasdaq has not
been suspended. The Company is in full compliance with the continued designation
criteria of the Nasdaq National Market, and does not reasonably anticipate that
the Common Stock will lose its designation as a Nasdaq National Market Security,
whether by reason of the transactions contemplated by this Agreement, the other
Transaction Documents or the Certificate of Designation, and is not aware of any
inquiry by or received any notice from the National Association of Securities
Dealers, Inc. ("NASD") regarding any failure or alleged failure by the Company
to comply with such criteria.
3.14 Solicitation. Neither the Company nor any of its subsidiaries or
affiliates, nor any person acting on its or their behalf, (i) has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Preferred Shares or
(ii) has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under any circumstances that would
require registration of the Preferred Shares under the Securities Act.
3.15 Fees. Except as described on Schedule 3.15 hereto, the Company is
not obligated to pay any compensation or other fee, cost or related expenditure
to any underwriter, broker, agent or
other representative in connection with the transactions contemplated hereby.
3.16 Foreign Corrupt Practices. To the knowledge of the Company,
neither the Company, nor any of its subsidiaries nor any director, officer,
agent, employee or other person acting on behalf of the Company or any
subsidiary, has (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity,
(ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee, or (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
3.17 Other Issuances of Securities. The Company has not issued (and
will not issue) any shares of Common Stock or shares of any series of preferred
stock or other securities or instruments convertible into, exchangeable for or
otherwise entitling the holder thereof to acquire shares of Common Stock which
would be integrated with the sale of the Preferred Shares to the Purchasers, or
the issuance of the Conversion Shares upon conversion thereof, for purposes of
determining whether stockholder approval is required under the designation
criteria of the Nasdaq National Market or otherwise.
3.18 Title. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, claims,
encumbrances and defects, except for liens, claims, encumbrances or defects
which do not materially affect the value of such property and do not interfere
with the use made or 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 with such exceptions as are not material and do not interfere with the
use made or proposed to be made of such property and buildings by the Company
and its subsidiaries.
3.19 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 where the lack of any such certificate, authorization or permit would
have a Material Adverse Effect, and neither the Company nor any such subsidiary
has received any notice of proceedings relating to the revocation or material
modification of any such certificate, authorization or permit.
4. COVENANTS OF THE COMPANY AND THE PURCHASERS.
4.1 Corporate Existence. The Company shall, so long as any Purchaser or
any affiliate of such Purchaser beneficially owns any Securities, maintain its
corporate existence in good standing and shall pay all taxes owed by it when due
except for taxes which the Company reasonably disputes or as to which the
failure to pay could not reasonably be expected to have a Material Adverse
Effect.
4.2 Provision of Information. The Company shall provide each Purchaser
with copies of its annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, press releases and proxy statements and other
materials sent to stockholders, in each such case promptly after the filing
thereof with the Commission, until the conversion or redemption of all of the
Preferred Shares.
4.3 Form D; Blue-Sky Qualification. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Purchaser promptly after such filing. The Company shall, on
or before the Closing Date, take such action as is necessary to qualify the
Preferred Shares for sale under applicable state or "blue-sky" laws or obtain an
exemption therefrom, and shall provide evidence of any such action to each
Purchaser at or prior to the Closing.
4.4 Reporting Status. As long as any Purchaser or any affiliate of such
Purchaser beneficially owns any Securities and until the date on which any of
the foregoing may be sold to the public pursuant to Rule 144(k) (or any
successor rule or regulation), (i) the Company shall timely file with the
Commission all reports required to be so filed pursuant to the Exchange Act and
(ii) the Company shall not terminate its status as an issuer required by the
Exchange Act to file reports thereunder even if the Exchange Act or the rules or
regulations thereunder would permit such termination. The Company agrees to file
with the Commission a Form 8-K describing the terms of the transactions
contemplated by this Agreement and the other Transaction Documents, with the
Transaction Documents attached to such Form 8-K as an exhibit thereto, on or
before the fifteenth (15th) day following the Closing Date in the form required
by the Exchange Act. On or before the business day immediately following the
Closing Date, the Company agrees to issue a press release describing all of the
material terms of the transaction consummated at the Closing.
4.5 Reservation of Common Stock. The Company shall at all times have
authorized and reserved for issuance, free from any preemptive rights, solely
for the purpose of effecting conversions of the Preferred Shares and exercise of
the Warrants, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all of the Preferred Shares and
exercise of all of the Warrants (the "Reserved Amount"). As of the Closing Date,
the Reserved Amount shall be equal to no less than 125% of the number of shares
of Common Stock issuable upon conversion of all of the Preferred Shares plus
100% of the number of shares of Common Stock issuable upon exercise of all of
the Warrants to be issued at the Closing (assuming for such purpose that such
conversion or exercise were to occur as of the Closing Date). If on any date the
Reserved Amount is less than 112.5% of the number of shares of Common Stock then
issuable upon conversion of all of the Preferred Shares plus 100% of the number
of shares of Common Stock issuable upon exercise of all of the Warrants then
outstanding (assuming for such purpose that such conversion or exercise were to
occur as of such date), the Company shall take action (including without
limitation seeking stockholder approval for the authorization or reservation of
additional shares of Common Stock) as soon as practicable (but in no event later
than the fifth (5th) business day or, in the event that stockholder approval is
required, the sixtieth (60th) day following receipt by the Company of notice
thereof from a Purchaser) to increase the Reserved Amount to no less than 125%
of the number of shares of Common Stock into which such outstanding Preferred
Shares are then convertible plus 100% of the number of
shares of Common Stock issuable upon the exercise of such outstanding Warrants
are exercisable. The Company shall not reduce the number of shares reserved for
issuance hereunder without the written consent of the holders of two-thirds of
the Preferred Shares then outstanding. Any determination made hereunder as to
the number of shares of Common Stock issuable upon the conversion of Preferred
Shares or exercise of Warrants shall be made without regard to any restriction
on such conversion or exercise that might otherwise exist under this Agreement,
the other Transaction Documents or the Certificate of Designation.
4.6 Stockholder Meeting. The Company agrees that, on or prior to the
date which is one hundred and eighty (180) days following the Closing Date, it
will hold a special meeting of its stockholders at which it will recommend that
such stockholders approve the transactions contemplated by this Agreement, the
other Transaction Documents and the Certificate of Designation.
4.7 Use of Proceeds. The Company shall use the proceeds from the sale
of the Preferred Shares and the Warrants for general corporate purposes only, in
the ordinary course of its business and consistent with past practice, and shall
not use such proceeds to make a loan to any employee, officer or director of the
Company or to repurchase or pay a dividend on shares of Common Stock, except in
connection with a stock repurchase at the original purchase price therefor (as
long as such repurchase is effected at a purchase price for the shares of Common
Stock being repurchased which is less than the then current market value of the
Common Stock) from an employee under a stock option plan or other similar
agreement in effect on the date hereof.
4.8 Transactions with Affiliates. The Company agrees that any
transaction or arrangement between it or any of its subsidiaries and any
affiliate or employee of the Company shall be effected on an arms' length basis
in accordance with customary commercial practice and shall be approved by a
majority of the Company's outside directors.
4.9 Quotation on Nasdaq. The Company shall (i) promptly following the
Closing take such action as may be necessary to include the Conversion Shares
and the Warrant Shares on the Nasdaq National Market, and (ii) use its best
efforts to maintain the designation and quotation, or listing, of the Common
Stock on the Nasdaq National Market, the New York Stock Exchange or the American
Stock Exchange.
4.10 Use of Purchaser Name. Except as may be required by applicable
law, the Company shall not use, directly or indirectly, any Purchaser's name or
the name of any of its affiliates in any advertisement, announcement, press
release or other similar communication unless it has received the prior written
consent of any Purchaser for the specific use contemplated or as otherwise
required by applicable law or regulation.
4.11 Company's Instructions to Transfer Agent. On or prior to the
Closing Date, the Company shall execute and deliver irrevocable instructions to
its transfer agent (the "Transfer Agent") (i) to issue certificates representing
Conversion Shares upon conversion of the Preferred Shares in accordance with the
terms of the Certificate of Designation and receipt of a valid Conversion Notice
(as defined in the Certificate of Designation) from a Purchaser, in the amount
specified in such Conversion
Notice, in the name of such Purchaser or its nominee, (ii) to issue certificates
representing Warrant Shares upon exercise of the Warrants in accordance with
their terms and receipt of a valid Exercise Notice (as defined in the Warrants)
from a Purchaser, in the amount specified in such Exercise Notice in the name of
such Purchaser or its nominee and (iii) to deliver such certificates to such
Purchaser no later than the close of business on the third (3rd) business day
following the related Conversion Date (as defined in the Certificate of
Designation) or Exercise Date (as defined in the Warrant), as the case may be.
As long as the Company shall instruct the transfer agent that, in lieu of
delivering physical certificates representing shares of Common Stock to a
Purchaser upon conversion of the Preferred Shares, or exercise of the Warrants,
and as long as the Transfer Agent is a participant in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, and such Purchaser
has not informed the Company that it wishes to receive physical certificates
therefor, the transfer agent may effect delivery of Conversion Shares or Warrant
Shares, as the case may be, by crediting the account of such Purchaser or its
nominee at DTC for the number of shares for which delivery is required hereunder
within the time frame specified above for delivery of certificates. The Company
represents to and agrees with each Purchaser that it will not give any
instruction to the Transfer Agent that will conflict with the foregoing
instruction or otherwise restrict such Purchaser's right to convert the
Preferred Shares or to receive Conversion Shares in accordance with the terms of
the Certificate of Designation or to exercise the Warrant or to receive Warrant
Shares upon exercise of the Warrants. In the event that the Company's
relationship with the Transfer Agent should be terminated for any reason, the
Transfer Agent shall continue acting as transfer agent pursuant to the terms
hereof until such time that a successor transfer agent is appointed by the
Company and receives the instructions described above.
4.12 Capital Raising Limitation. The Company will not, during the
ninety (90) day period following the Closing Date, offer for sale or sell any
Common Stock (or any security convertible into, or exercisable or exchangeable
for, Common Stock) (the "Capital Raising Limitation"). The Capital Raising
Limitation will not apply to (i) a transaction involving the issuance of Common
Stock in a registered firm-commitment underwritten public offering (other than
an offering conducted pursuant to Rule 415 under the Securities Act), (ii) the
issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding on the date hereof or (iii)
the grant of options or warrants, or the issuance of additional securities,
under any Company stock option or restricted stock plan or similar equity
incentive plan or arrangement in effect on the date hereof for the benefit of
the Company's employees, directors or consultants.
4.13 Right of First Offer. Prior to any offer or sale, other than
pursuant to a firm-commitment, underwritten public offering, by the Company of
Common Stock (or any securities convertible or exercisable into or exchangeable
for Common Stock) during the one (1) year period following the Closing Date (the
"First Offer Period"), the Company must first deliver to each Purchaser written
notice describing the proposed issuance, including the terms and conditions
thereof, and provide such Purchaser with an option during the five (5) business
day period following delivery of such notice to purchase up to its proportionate
share (based on the number of Preferred Shares purchased by such Purchaser
hereunder relative to the number of Preferred Shares purchased by all of the
Purchasers hereunder) of the securities being offered on the same terms as
contemplated by such
issuance. In the event that such Purchaser either does not give notice within
such five business day period that it intends to exercise the foregoing option
or informs the Company in writing that it does not intend to participate in such
issuance, the Company may offer to a third party the option to purchase up to,
in the aggregate, the amount of securities which were declined by such
Purchaser, on the same terms as were offered to such Purchaser.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Purchasers' Obligations at Closing. Each Purchaser's
obligations at the Closing, including without limitation its obligation to
purchase Preferred Shares and Warrants at the Closing, are conditioned upon the
fulfillment (or waiver by such Purchaser) of each of the following events as of
the Closing Date:
5.1.1 the representations and warranties of the Company set
forth in this Agreement shall be true and correct in
all material respects as of such date as if made on
the Closing Date;
5.1.2 the Company shall have complied with or performed in
all material respects all of the agreements,
obligations and conditions set forth in this
Agreement that are required to be complied with or
performed by the Company on or before the Closing;
5.1.3 the Company shall have delivered to such Purchaser a
certificate, signed by an officer of the Company,
certifying that the conditions specified in
paragraphs 5.1.1 and 5.1.2 above have been fulfilled
as of the Closing;
5.1.4 the Company shall have filed the Certificate of
Designation with the Secretary of State of the State
of Delaware and shall have furnished such Purchaser
with a file-stamped copy thereof;
5.1.5 the Company shall have delivered to such Purchaser an
opinion of counsel for the Company, dated as of such
date, in substantially the form set forth on Exhibit
5.1.5 hereto
5.1.6 the Company shall have delivered duly executed
certificates representing the Preferred Shares and
the Warrants being so purchased;
5.1.7 the Company shall have executed and delivered the
Registration Rights Agreement;
5.1.8 the Common Stock shall be designated for quotation
and actively traded on the Nasdaq National Market;
5.1.9 there shall have been no material adverse change in
the Company's consolidated business or financial
condition since the date of the Company's most recent
audited financial statements contained in the
Disclosure Documents;
5.1.10 the Company shall have authorized and reserved for
issuance one hundred and twenty five percent (125%)
of the aggregate number of shares of Common Stock
issuable upon conversion of all of the Preferred
Shares plus one hundred percent (100%) of the
aggregate number of shares of Common Stock issuable
upon exercise of all of the Warrants (such number to
be determined using the Conversion Price or exercise
price in effect on the Closing Date without regard to
any restriction on such conversion or exercise that
might otherwise exist pursuant to this Agreement, any
other Transaction Document or the Certificate of
Designation) to be issued at the Closing;
5.1.11 Xxxxxxx Xxxxxx and Xxxxxxx XxXxxxxx shall have
executed and delivered an irrevocable agreement
addressed to the Company regarding such person's
agreement to refrain, during the six month period
beginning on the Closing Date, from selling any of
such shares of Common Stock at a price per share of
less than fifteen dollars ($15.00);
5.1.12 Xxxxxxx Xxxxxx and Xxxxxxx XxXxxxxx shall have
executed and delivered an irrevocable agreement
addressed to the Company regarding such person's
agreement to vote such shares in favor of any
proposal made at or in connection with any meeting of
the holders of the Company's Common Stock regarding
(i) approval of the transactions contemplated herein
or (ii) the authorization of additional shares of
Common Stock for issuance as Conversion Shares; and
5.1.13 the Company shall have notified such Purchaser in
writing of the name, address, and telephone and fax
numbers of, and the name of a contact person at, the
Transfer Agent for the purpose of delivering
Conversion Notices (as defined in the Certificate of
Designation).
5.2 Conditions to Company's Obligations at the Closing. The Company's
obligations at the Closing are conditioned upon the fulfillment of each of the
following events as of the Closing Date:
5.2.1 the representations and warranties of each Purchaser
shall be true and correct in all material respects as
of such date as if made on the Closing Date; and
5.2.2 each Purchaser shall have complied with or performed
all of the agreements, obligations and conditions set
forth in this Agreement that are required to be
complied with or performed by the Purchaser on or
before the Closing; and
5.2.3 each Purchaser shall have tendered payment of the
Purchase Price for the Preferred Shares and Warrant
to be purchased by such Purchaser.
6. MISCELLANEOUS.
6.1 Survival; Severability. The representations, warranties, covenants
and indemnities made by the parties herein shall survive the Closing
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that in such case the parties shall negotiate
in good faith to replace such provision with a new provision which is not
illegal, unenforceable or void, as long as such new provision does not
materially change the economic benefits of this Agreement to the parties.
6.2 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. The Purchaser may assign its rights and obligations
hereunder, in connection with any private sale or transfer of the Preferred
Shares in accordance with the terms hereof, as long as, as a condition precedent
to such transfer, the transferee (i) provides the Company with prior notice of
the transfer, including the identity and address of the proposed transferee and
the number of shares to be transferred and (ii) executes an acknowledgment
agreeing to be bound by the applicable provisions of this Agreement, in which
case the term "Purchaser" shall be deemed to refer to such transferee as though
such transferee were an original signatory hereto. The Company may not assign it
rights or obligations under this Agreement.
6.3 No Reliance. Each party acknowledges that (i) it has such knowledge
in business and financial matters as to be fully capable of evaluating this
Agreement, the other Transaction Documents and the transactions contemplated
hereby and thereby, (ii) it is not relying on any advice or representation of
the other party in connection with entering into this Agreement, the other
Transaction Documents or such transactions (other than the representations made
in this Agreement or the other Transaction Documents), (iii) it has not received
from such party any assurance or guarantee as to the merits (whether legal,
regulatory, tax, financial or otherwise) of entering into this Agreement or the
other Transaction Documents or the performance of its obligations hereunder and
thereunder, and (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial and accounting advisors to the extent that it
has deemed necessary, and has entered into this Agreement
and the other Transaction Documents based on its own independent judgment and on
the advice of its advisors as it has deemed necessary, and not on any view
(whether written or oral) expressed by such party.
6.4 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder are several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at the Closing, and no action taken by any Purchaser pursuant
hereto or 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 this Agreement.
Each Purchaser shall be entitled to 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.
6.5 Injunctive Relief. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Purchaser and that
the remedy or remedies at law for any such breach will be inadequate and agrees,
in the event of any such breach, in addition to all other available remedies, to
an injunction restraining any breach and requiring immediate and specific
performance of such obligations without the necessity of showing economic loss.
6.6 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed under the laws of the State of New York without regard to the
conflict of laws provisions thereof. Each party hereby irrevocably submits to
the non-exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.
6.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
6.8 Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.9 Notices. Any notice, demand or request required or permitted to be
given by any party to any other party pursuant to the terms of this Agreement
shall be in writing and shall be deemed given (i) when delivered personally or
by verifiable facsimile transmission (with an original to follow) on or before
5:00 p.m., eastern time, on a business day or, if such day is not a business
day, on the next succeeding business day, (ii) on the next business day after
timely delivery to a nationally-recognized overnight courier and (iii) on the
third business day after deposit in the U.S. mail (certified or registered mail,
return receipt requested, postage prepaid), addressed to the parties as follows:
IF TO THE COMPANY:
Secure Computing Corporation
Xxx Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxx, Xxxxxxxxxx 00000
Attn: Chief Financial Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
and if to any Purchaser, to such address for such Purchaser as shall appear on
the signature page hereof executed by such Purchaser, or as shall be designated
by such Purchaser in writing to the Company.
6.10 Expenses. The Company and each Purchaser each shall pay all costs
and expenses that it incurs in connection with the negotiation, execution,
delivery and performance of this Agreement, provided, however, that the Company
shall reimburse the Purchasers for all out-of-pocket expenses (including without
limitation legal fees and expenses) incurred by it in connection with its due
diligence investigation of the Company and the negotiation, preparation,
execution, delivery and performance of the Certificate of Designation, this
Agreement and the other Transaction Documents in an amount not to exceed twenty
five thousand dollars ($25,000).
6.11 Entire Agreement; Amendments. This Agreement and the other
Transaction Documents constitute the entire agreement between the parties with
regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or
among the parties. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended except pursuant to a written instrument
executed by the Company and the holders of at least two-thirds (2/3) of the
Preferred Shares then outstanding, and no provision hereof may be waived other
than by a written instrument signed by the party against whom enforcement of any
such waiver is sought.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
SECURE COMPUTING CORPORATION
By:
-------------------------------
Name:
Title:
PURCHASER NAME:
-----------------------------
By:
-------------------------------
Name:
Title:
ADDRESS:
---------------------------------
---------------------------------
Tel:
----------------------------
Fax:
----------------------------
Number of Shares of Series C Preferred Stock to be Purchased: _______________
Number of Shares of Common Stock represented by
the Warrants to be Purchased: _______________
