EXHIBIT 4.1
Form of Securities Purchase Agreement
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is made as of
October 23, 2002, by and between TeraForce Technology Corporation, a Delaware
corporation (the "Company") and _____________, a resident of _________, (the
"Investor").
RECITALS
WHEREAS, the Investor desires to acquire upon the terms and conditions
stated in this Agreement, an aggregate of __________shares of the Company's
Common Stock, par value $0.01 per share, (the "Common Stock"), in exchange for
$__________ cash; and
WHEREAS, the Company believes it is in the best interests of the
Company and the Stockholders to consummate the contemplated transaction; and
WHEREAS, the Company and the Investor are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, the Company and the Investor hereby agree to the terms and
conditions hereinafter set forth, as follows:
AGREEMENT
ARTICLE 1
DEFINED TERMS
As used herein, the following terms shall have the following meanings:
(a) "1933 Act" shall have the meaning set forth in the Recitals to this
Agreement.
(b) "1934 Act" shall have the meaning set forth in Article 3.5 of this
Agreement.
(c) "AAA" shall have the meaning set forth in Article 8.4 of this
Agreement.
(d) "Agreement" shall have the meaning set forth in the introduction to
this Agreement.
(g) "Business" shall mean the business currently conducted by the
Company and its subsidiaries involving the design, development, production and
sale of computing products, optical networking equipment and other technology
related products, including providing related services.
(h) "Business Day" shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of Texas generally are authorized or required by law or other government
actions to close.
(i) "Common Stock" shall mean the Company's common stock, par value
$0.01 per share.
(j) "Company" shall have the meaning set forth in the introduction to
this Agreement.
(kl) "Closing Condition" shall have the meaning set forth in Article
7.1 of this Agreement.
(l) "GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
(rn) "Investor" shall have the meaning set forth in the introduction to
this Agreement.
(o) "Person" or "Persons" shall mean any individual, corporation,
limited liability company, voluntary association, partnership, joint venture,
trust, unincorporated organization or government or any agency, instrumentality
or political subdivision thereof, or any other form of entity.
(p) "Registration Rights Agreement" shall mean the Registration Rights
Agreement executed an even date herewith, by and among the Company and the
Investors.
(q) "Regulation D" shall have the meaning set forth in the Recitals to
this Agreement.
(r) "SEC" shall mean the Securities and Exchange Commission or any
successor governmental authority.
(s) "SEC Documents" shall have the meaning set forth in Article 3.5 of
this Agreement.
(t) "Shares" shall have the meaning set forth in Article 2.1 of this
Agreement.
(u) "Stockholders" shall mean the stockholders of the Common Stock of
the Company as of the date hereof.
ARTICLE 2
PURCHASE AND SALE OF THE SHARES
2.1 Issuance of Shares. Upon the terms and subject to the conditions
contained herein, and on the basis of the representations, warranties, covenants
and agreements set forth herein, the Company agrees to issue to the Investor,
and the Investor agrees to acquire, _____________shares of Common Stock in
exchange for $_________ in cash.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors, as of the date
hereof, as follows:
3.1 Authorization. The execution, delivery and performance by the
Company of this Agreement and the Registration Rights Agreement, and the
consummation by the Company of the transaction contemplated hereby and thereby,
have been duly authorized by all necessary corporate action. This Agreement and
the Registration Rights Agreement have been duly executed and delivered by the
Company and constitute valid and binding obligations of the Company enforceable
in accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies, and (iii) to the extent that the
indemnification provisions and the choice of law provisions contained in this
Agreement and the Registration Rights Agreement may be limited by applicable
laws or deemed against public policy. The execution, delivery and performance of
the transactions contemplated by this Agreement and the Registration Rights
Agreement and compliance with their provisions by the
Company will not violate any provision of law and will not conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute a default under, or require a consent or waiver under, (x) the
Company's Amended and Restated Certificate of Incorporation or Restated Bylaws
(each as amended to date) or (y) any indenture, lease, agreement or other
instrument to which the Company is a party or by which it or any of its
properties is bound, or any decree, judgment, order, statute, rule or regulation
applicable to the Company which conflict or breach would result in a Material
Adverse Effect.
3.2 Organization and Qualification. The Company is a corporation
organized under the laws of the state of Delaware, has power and authority to
own its properties and assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing in each
jurisdiction in which its ownership of property or the conduct of its business
requires such qualification, except for jurisdictions in which such failure to
be so qualified or to be in good standing would not have a Material Adverse
Effect.
3.3. Issuance by the Company. Consummation of the transactions
contemplated hereby will transfer to the Investor good, valid and marketable
title to the Shares, free and clear of any liens, claims or encumbrances, except
as set forth in the Registration Rights Agreement, to the extent applicable, or
in any legend which appears on any certificate representing any of the Shares.
3.4 Issuance of Shares. The issuance and delivery of the shares of
Common Stock have been at or prior to the date hereof, duly authorized by all
necessary corporate action on the part of the Company. No person has any right
of first refusal or any preemptive rights in connection with the issuance and
sale of the Shares. The shares of Common Stock will be duly and validly issued,
fully paid and non-assessable, with no personal liability attaching ownership
thereof, will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company and will be free of restrictions
on transfer other than restrictions on transfer under this Agreement, the
Registration Rights Agreement and under applicable state and federal securities
laws.
3.5 SEC Documents; Financial Statements. Since December 31, 2001, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. 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. As of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with GAAP, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of the
Company and its subsidiaries as of the dates thereof and the results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end immaterial audit adjustments).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrant to the Company as of the date
hereof as follows:
4.1 Organization. Investor has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
4.2 Authority. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby by the Investor have been
duly and validly authorized by all requisite action on the part of the Investor.
This Agreement has been duly executed and delivered by Investor and constitutes
the valid and binding obligations of Investor, enforceable against the Investors
in accordance with its terms except as the same may be limited by equitable
principles and by bankruptcy, insolvency, moratorium, and other laws of general
application affecting the enforcement of creditors' rights.
4.3 Investment Representations. The Investor is acquiring the Shares
for investment purposes only and not with a view to the resale or distribution
of all or any part thereof. The Investor acknowledges that the Shares have not
been registered under the 1933 Act, or the securities or "blue sky" laws of any
state or other domestic or foreign jurisdiction, and that none of such
securities may be sold, transferred or otherwise disposed of except pursuant to
an effective registration statement thereunder or an applicable exemption
therefrom.
4.4 Accredited Investor. The Investor (a) has such knowledge and
experience in financial and business matters that such Investor is capable of
evaluating the merits and risks of his or her investment in the Shares and has
the financial ability to assume the monetary risk associated therewith; (b) is
able to bear the complete loss of his or her investment in the Shares; (c) has
received such documents and information from the Company as such Investor has
requested and has had the opportunity to ask questions of, and receive answers
from, the Company and the terms and conditions of the offering of the Shares and
to obtain additional information; (d) is an "accredited investor" as defined in
Rule 501(a) of Regulation D promulgated under the 1933 Act; and (e) is not
relying upon any statements or instruments made or issued by any person other
than the Company in making a decision to invest in the Shares.
ARTICLE 5
COVENANTS OF THE COMPANY
5.1 Registration Rights Agreement. Upon the closing of this
transaction, the Company will enter into a Registration Rights Agreement with
the Investor in substantially the form of Exhibit A. Such Registration Rights
Agreement will provide that the Company will file a shelf registration covering
the resale of the Shares.
ARTICLE 6
CLOSING
6.1 Closing, Delivery. The Closing will take place at the Company's
offices in Richardson, Texas, or such other location as the parties shall
mutually agree. Upon the closing the Investor will transfer an aggregate of
$__________to the following account:
BankOne, NA,
ABA #111000614
TeraForce Technology Corporation
Master Concentration Account
Acct. No. 1571582582
or in such other manner as the Company and the Investor shall agree.
The Company will deliver to the Investor the Shares and the Registration Rights
Agreement.
ARTICLE 7
MISCELLANEOUS
7.1 Severability. Whenever possible, each provision of this Agreement
shall be interpreted so as to be effective and valid under applicable law. If
any provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
7.2 Headings. The descriptive headings of this Agreement are inserted
for convenience of reference only and do not constitute a part of and shall not
affect the interpretation of this Agreement.
7.3 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been sufficiently
given (a) if sent by facsimile transmission, upon telephonic confirmation of
receipt, (b) if sent by registered or certified mail, upon the sooner of the
expiration of five (5) days after deposit in the post office facilities properly
addressed with postage prepaid or acknowledgement of receipt, (c) if personally
delivered, when delivered to the party to whom notice is sent, or (d) if
delivered by a recognized overnight courier, upon receipt evidencing proof of
delivery, addressed to the appropriate party or parties, at the address of such
party set forth below, (or at such other address as such party may designate by
written notice furnished to all other parties in accordance herewith):
(a) if to the Investor:
(b) if to the Company:
TeraForce Technology Corporation
1240 E. Campbell Road
Richardson, TX 75081
Telecopier: (469) 330-4972
Attn: Robert P. Capps
7.4 Dispute Resolution. All disputes and claims arising out of or
relating to this Agreement that are not resolved pursuant to an agreement of the
parties shall be arbitrated in accordance with the Commercial Arbitration Rules
of the American Arbitration Association ("AAA"), and judgment upon any
arbitration award shall be binding and may be entered in any court or other
tribunal having jurisdiction thereof, the parties hereby consenting to the
jurisdiction of such courts for this purpose. If the parties herein cannot agree
upon an arbitrator, one shall be appointed by the AAA who shall be neutral and
experienced in the subject matter of the dispute. The arbitrator's award shall
be binding and in writing. All arbitration proceedings shall be conducted in
Dallas County, Texas.
7.5 Governing Law. This Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of Texas, without
regard to the conflict of laws provisions thereof.
7.6 Entire Agreement. This Agreement constitutes the entire agreement
of the parties concerning the transactions contemplated hereby, and supersede
all prior agreements and understandings, written or oral, regarding the subject
matter hereof.
7.7 Expenses. Except as otherwise provided herein, the Company and the
Investor shall each bear their own expenses and legal fees in connection with
the consummation of this transaction.
7.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. This Agreement shall become effective, as of
the date specified in the opening paragraph, upon the execution by all of the
parties of at least one counterpart hereof, and it shall not be necessary that
any single counterpart bear the signatures of all parties. Execution and
delivery of this Agreement by delivery of a facsimile copy bearing the facsimile
signature of a party shall constitute a valid and binding execution and delivery
of this Agreement by such party. Such facsimile copies shall constitute
enforceable original documents.
7.9 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH ANY STATE REGULATORY
AUTHORITY HAVING JURISDICTION THEREOF AND THE ISSUANCE OF SUCH SECURITIES OR THE
PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION OR IN THE ABSENCE OF EXEMPTION FROM SUCH QUALIFICATION IS
UNLAWFUL. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TERAFORCE TECHNOLOGY CORPORATION
By:
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Name: Herman M. Frietsch
Title: Chief Executive Officer
INVESTOR:
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