NETSAT EXPRESS, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
AUGUST 11, 1999
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Stock...............................................................................1
--------------------------
1.1. Sale and Issuance of Series A Preferred Stock...................................................1
---------------------------------------------
1.2. Closing.........................................................................................1
-------
2. Representations and Warranties of the Company............................................................1
---------------------------------------------
2.1. Organization, Good Standing and Qualification...................................................1
---------------------------------------------
2.2. Capitalization and Voting Rights................................................................1
--------------------------------
2.3. Subsidiaries....................................................................................2
------------
2.4. Authorization...................................................................................2
-------------
2.5. Valid Issuance of Preferred and Common Stock....................................................3
--------------------------------------------
2.6. Governmental Consents...........................................................................3
---------------------
2.7. Offering........................................................................................3
--------
2.8. Litigation......................................................................................3
----------
2.9. Compliance with Other Instruments...............................................................4
---------------------------------
2.10. Agreements; Action..............................................................................4
------------------
2.11. Related-Party Transactions......................................................................5
--------------------------
2.12. Financial Statements............................................................................5
--------------------
2.13. Changes.........................................................................................5
-------
2.14. Tax Returns.....................................................................................6
-----------
2.15. Permits.........................................................................................7
-------
2.16. Environmental and Safety Laws...................................................................7
-----------------------------
2.17. Disclosure......................................................................................7
----------
2.18. Business Plan...................................................................................7
-------------
2.19. Registration Rights.............................................................................8
-------------------
2.20. Corporate Documents; Minute Books...............................................................8
---------------------------------
2.21. Title to Property and Assets....................................................................8
----------------------------
2.22. Insurance.......................................................................................8
---------
2.23. Employee Benefit Plans..........................................................................8
----------------------
2.24. Labor Agreements and Actions....................................................................8
----------------------------
2.25. Status of Intellectual Property.................................................................9
-------------------------------
3. Representations and Warranties of the Investors..........................................................9
-----------------------------------------------
3.1. Authorization...................................................................................9
-------------
3.2. Purchase Entirely for Own Account..............................................................10
---------------------------------
3.3. Disclosure of Information......................................................................10
-------------------------
3.4. Investment Experience..........................................................................10
---------------------
3.5. Accredited Investor............................................................................10
-------------------
3.6. Restricted Securities..........................................................................10
---------------------
3.7. Further Limitations on Disposition.............................................................11
----------------------------------
3.8. Legends........................................................................................11
-------
3.9. Tax Advisors...................................................................................11
------------
3.10. Investor Counsel...............................................................................11
----------------
i
4. Conditions of Investor's Obligations at Closing.........................................................12
-----------------------------------------------
4.1. Representations and Warranties.................................................................12
------------------------------
4.2. Performance....................................................................................12
-----------
4.3. Compliance Certificates........................................................................12
-----------------------
4.4. Qualifications.................................................................................12
--------------
4.5. Proceedings and Documents......................................................................12
-------------------------
4.6. Opinion of Company Counsel.....................................................................12
--------------------------
4.7. Investors'Rights Agreement.....................................................................12
--------------------------
4.8. Contribution Agreement.........................................................................13
----------------------
4.9. Stockholders Agreement.........................................................................13
----------------------
5. Conditions of the Company's Obligations at Closing......................................................13
--------------------------------------------------
5.1. Representations and Warranties.................................................................13
------------------------------
5.2. Payment of Purchase Price......................................................................13
-------------------------
5.3. Qualifications.................................................................................13
--------------
5.4. Investors'Rights Agreement.....................................................................13
--------------------------
5.5. Stockholders Agreement.........................................................................13
----------------------
6. Miscellaneous...........................................................................................13
-------------
6.1. Survival.......................................................................................13
--------
6.2. Successors and Assigns.........................................................................13
----------------------
6.3. Governing Law..................................................................................13
-------------
6.4. Titles and Subtitles...........................................................................14
--------------------
6.5. Notices........................................................................................14
-------
6.6. Finder's Fee...................................................................................14
------------
6.7. Expenses.......................................................................................14
--------
6.8. Amendments and Waivers.........................................................................14
----------------------
6.9. Severability...................................................................................15
------------
6.10. Entire Agreement...............................................................................15
----------------
6.11. Counterparts...................................................................................15
------------
SCHEDULE A Schedule of Investors
SCHEDULE B Schedule of Exceptions
EXHIBIT A Amended and Restated Certificate of Incorporation
EXHIBIT B List of Stockholders
EXHIBIT C Investors' Rights Agreement
EXHIBIT D Opinion of Counsel for the Company
EXHIBIT E Stockholders Agreement
ii
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement") is made on the 11th day of August, 1999, by and between NetSat
Express, Inc., a Delaware corporation (the "Company"), and the investors listed
on Schedule A hereto (each, an "Investor" and collectively, the "Investors").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
--------------------------
1.1. Sale and Issuance of Series A Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary
of State of Delaware on or before the Closing (as defined below) the Amended
and Restated Certificate of Incorporation in the form attached hereto as
Exhibit A (the "Restated Certificate").
(b) Subject to the terms and conditions of this
Agreement, each Investor agrees, severally, to purchase at the Closing and the
Company agrees to sell and issue to each Investor at the Closing that number of
shares of the Company's Series A Preferred Stock, 1,000,000 shares in the
aggregate, set forth opposite each Investor's name on Schedule A hereto for the
purchase price set forth thereon, for an aggregate purchase price of $5,000,000.
1.2. Closing. The purchase and sale of the Series A
Preferred Stock shall take place at the offices of Brobeck, Phleger & Harrison
LLP, 1633 Broadway, New York, New York 10019 at 11:00 a.m., on August 11, 1999
or at such other time and place as the Company and each Investor mutually agree
upon orally or in writing (which time and place are designated as the
"Closing"). At the Closing the Company shall deliver to each Investor a
certificate representing the Series A Preferred Stock that such Investor is
purchasing against payment of the purchase price therefor by wire transfer.
2. Representations and Warranties of the Company. The
Company hereby represents and warrants to each Investor that, except as set
forth on a Schedule of Exceptions (the "Schedule of Exceptions") furnished each
Investor and counsel for Investors prior to execution hereof and attached hereto
as Schedule B, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1. Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to own its properties and assets and to carry on it business as
now conducted and as presently proposed to be conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on its
business or properties.
2.2. Capitalization and Voting Rights. The authorized
capital of the Company consists of:
1
(a) Preferred Stock. 4,000,000 shares of Preferred Stock,
par value $.001 (the "Preferred Stock"), of which 1,000,000 shares have been
designated Series A Participating Preferred Stock (the "Series A Preferred
Stock") and all of which will be sold pursuant to this Agreement. The rights,
privileges and preferences of the Series A Preferred Stock are stated in the
Restated Certificate.
(b) Common Stock. 26,000,000 shares of common stock, par
value $.001 ("Common Stock"), of which 6,000,000 shares are issued and
outstanding and of which 1,000,000 shares will be sold pursuant to the Common
Stock Purchase Agreement (the "Common Stock Purchase Agreement") by and between
the Company and Globix Corporation (to be executed and closed simultaneously
with the Closing).
(c) The outstanding shares of Common Stock are owned by
the stockholders and in the numbers specified in Exhibit B hereto.
(d) The outstanding shares of Common Stock are all duly
and validly authorized and issued, fully paid and nonassessable, and were
issued in compliance with all applicable state and federal laws concerning the
issuance of securities.
(e) Except for (i) the conversion privileges of the Series
A Preferred Stock to be issued under this Agreement, (ii) dividends payable on
the Series A Preferred Stock pursuant to the Restated Certificate, and (iii)
currently outstanding options to purchase 877,536 shares of Common Stock granted
to employees or consultants pursuant to the Company's 1999 Stock Incentive Plan
(the "Option Plan"), there are not outstanding any options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. In addition to
the aforementioned options, the Company has reserved an additional 1,102,464
shares of its Common Stock for purchase upon exercise of options to be granted
in the future under the Option Plan. Except as set forth in the Investors'
Rights Agreement (as defined below) and the Stockholders Agreement (as defined
below), the Company is not a party or subject to any agreement or understanding,
and, to the Company's knowledge, there is no agreement or understanding between
any persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company.
2.3. Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant in any
joint venture, partnership, or similar arrangement.
2.4. Authorization. All corporate action on the part of
the Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the Investors' Rights
Agreement dated the date hereof, by and among the Company and the signatories
thereto, the form of which is attached hereto as Exhibit C (the "Investors'
Rights Agreement"), the Stockholders Agreement dated the date hereof, by and
among the Company and the signatories thereto, the form of which is attached
hereto as Exhibit E (the "Stockholders Agreement"), and the Common Stock
Purchase Agreement, the performance of all obligations of the Company hereunder
and thereunder, and the authorization (or reservation for issuance), sale and
issuance of the Series A Preferred Stock being sold hereunder, the Common
2
Stock issuable upon conversion of the Series A Preferred Stock and the Common
Stock being sold under the Common Stock Purchase Agreement has been taken or
will be taken prior to or simultaneously with the Closing. This Agreement and
the Investors' Rights Agreement constitute valid and legally 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 the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.
2.5. Valid Issuance of Preferred and Common Stock. The
Series A Preferred Stock that is being purchased by the Investors hereunder,
when issued, sold and delivered in accordance with the terms of this Agreement
for the consideration expressed herein, will be duly and validly issued, fully
paid and nonassessable and will be free of restrictions on transfer, other than
restrictions on transfer under this Agreement and the Investors' Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series A Preferred Stock purchased under
this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Certificate, will be duly
and validly issued, fully paid and nonassessable and will be free of
restrictions on transfer, other than restrictions on transfer under this
Agreement and the Investors' Rights Agreement and under applicable state and
federal securities laws. The Common Stock that is being purchased by Globix
Corporation under the Common Stock Purchase Agreement, when issued, sold and
delivered in accordance with the terms of the Common Stock Purchase Agreement
for the consideration expressed therein, will be duly and validly issued, fully
paid and nonassessable and will be free of restrictions on transfer, other than
restrictions on transfer under the Common Stock Purchase Agreement and the
Investors' Rights Agreement and under applicable state and federal securities
laws.
2.6. Governmental Consents. No consent, approval, order
or authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement or the Common Stock Purchase Agreement, except
for filings required pursuant to applicable federal and state securities laws
and blue sky laws, which filings will be effected within the required statutory
period.
2.7. Offering. Subject in part to the truth and accuracy
of Investor's representations set forth in Section 3 of this Agreement, the
offer, sale and issuance of the Series A Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act of
1933, as amended (the "Act"), and the qualification or registration requirements
of the applicable blue sky laws. Neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemptions.
2.8. Litigation. There is no action, suit, proceeding or
investigation pending, or to the Company's knowledge, currently threatened
against the Company that questions the validity of this Agreement or the Common
Stock Purchase Agreement or the right of the
3
Company to enter into such agreements or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse changes in the business, assets or
condition of the Company, financially or otherwise, or any change in the current
equity ownership of the Company. There is no material action, suit, proceeding,
claim, arbitration or investigation ("Action") pending (or, to the Company's
knowledge, currently threatened) against the Company, its activities, properties
or assets or, to the Company's knowledge, against any officer, director or
employee of the Company in connection with such officer's, director's or
employee's relationship with, or actions taken on behalf of, the Company. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
2.9. Compliance with Other Instruments. The Company is
not in violation of any provision of its Restated Certificate or Bylaws nor, to
its knowledge, of any instrument, judgment, order, writ, decree or contract,
statute, rule or regulation ("Instruments") to which the Company is subject,
except for any violation of an Instrument that individually or in the aggregate
would not have a material adverse effect on the condition, financial or
otherwise, or operations of the Company. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not result in any violation, or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under the
Restated Certificate, Bylaws or any Instrument or an event that results in the
creation of any lien, charge or encumbrance upon any assets of the Company or
the suspension, revocation, impairment, forfeiture or nonrenewal of any material
permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.
2.10. Agreements; Action. (a) Except for agreements
explicitly contemplated hereby and except as set forth on the Schedule of
Exceptions, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, affiliates or any
affiliate thereof.
(b) Except as set forth on the Schedule of Exceptions,
there are no agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the Company is a
party or by which it is bound that may involve (i) obligations (contingent or
otherwise) of, or payments to the Company, in excess of $50,000, other than
obligations of, or payments to, the Company arising from purchase or sale
agreements entered into in the ordinary course of business, (ii) the license of
any patent, copyright, trade secret or other proprietary right to or from the
Company, other than licenses arising from the purchase of "off the shelf" or
other standard products, (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company's products or services,
or (iv) indemnification by the Company with respect to infringements of
proprietary rights, other than indemnification obligations arising from purchase
or sale agreements entered into in the ordinary course of business.
(c) Except as set forth on the Schedule of Exceptions,
the Company has not (i) declared or paid any dividends or authorized or made any
distribution upon or with respect to any class or series of its capital stock,
(ii) incurred any indebtedness for money borrowed or any
4
other liabilities individually in excess of $100,000 or, in the case of
indebtedness and/or liabilities individually less than $100,000, in excess of
$200,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than for the purpose of the sale
of its services in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above,
all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.
2.11. Related-Party Transactions. No employee, officer
or director of the Company or member of his or her immediate family is indebted
to the Company, nor is the Company indebted (or committed to make loans or
extend or guarantee credit) to any of them. Except as set forth on the Schedule
of Exceptions, to the best of the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business relationship,
or any firm or corporation that competes with the Company, except that
employees, officers or directors of the Company and members of their immediate
families may own up to 5% of the stock in publicly traded companies that may
compete with the Company. No member of the immediate family of any officer or
director of the Company is directly or indirectly interested in any material
contract with the Company.
2.12. Financial Statements. The Company has delivered
to each Investor its audited financial statements (balance sheet and statement
of operations, statement of stockholders' equity and statement of cash flows,
including notes thereto) at June 30, 1999 and 1998, and for the fiscal years
then ended (the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated and with each other. The
Financial Statements fairly present the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein.
Except as set forth in the Financial Statements, the Company has no material
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to June 30, 1999 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements, which, in both cases, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company. Except as disclosed in the Financial Statements, the Company is not
a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
2.13. Changes. Since June 30, 1999 there has not been:
(a) except as set forth on the Schedule of Exceptions,
any change in the assets, liabilities, financial condition or operating results
of the Company from that reflected in
5
the Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results or business of the Company;
(c) any waiver by the Company of a valuable right or
of a material debt owed to it;
(d) except as set forth on the Schedule of Exceptions,
any satisfaction or discharge of any lien, claim or encumbrance or payment of
any obligation by the Company, except in the ordinary course of business and
that is not material to the assets, properties, financial condition, operating
results or business of the Company;
(e) any material change or amendment to a material
contract or arrangement by which the Company or any of its assets or properties
is bound or subject, except as set forth on the Schedule of Exceptions;
(f) any material change in any compensation
arrangement or agreement with any employee; or
(g) any agreement or commitment by the Company to do
any of the things described in this Section 2.13.
2.14. Tax Returns. (a) The Company has filed or caused
to be filed, or has properly filed extensions for, all tax returns, reports,
forms and other such documents ("Tax Returns") that are required to be filed and
has paid or caused to be paid all Taxes as shown on said returns and on all
material assessments received by it to the extent that such Taxes have become
due, except Taxes the validity or amount of which is being contested in good
faith by appropriate proceedings and with respect to which adequate reserves, in
accordance with generally accepted accounting principles in effect from time to
time ("GAAP"), have been set aside. Such Tax Returns are true and correct in all
material respects. The Company has paid or caused to be paid, or has established
reserves in accordance with GAAP for all Tax liabilities applicable to the
Company for all fiscal years that have not been examined and reported on by the
taxing authorities (or closed by applicable statutes). Except as disclosed in
the Schedule of Exceptions, no additional Tax assessment against the Company has
been heretofore proposed by any Governmental Authority and remains outstanding
for which provision has not been made on its balance sheet. Except as set forth
on the Schedule of Exceptions, no waivers of the statute of limitation or
extension of time within which to assess any Tax have been affirmatively granted
by the Company. The Schedule of Exceptions sets forth the tax year through which
United States federal income tax returns of the Company have been examined and
closed.
(b) Except as set forth on the Schedule of Exceptions,
with respect to all Tax Returns of the Company, (i) no audit is in progress and
no extension of time is in force with respect to any date on which any Tax
Return was or is to be filed and no waiver or agreement is in force for the
extension of time for the assessment or payment of any Tax; and (ii) there is no
unassessed deficiency proposed or to our knowledge threatened against the
Company.
6
(c) Except as set forth on the Schedule of Exceptions,
the Company has not agreed to make any adjustments under section 481 of the Code
that would survive the Closing by reason of a change of accounting method or
otherwise prior to Closing.
(d) None of the respective assets of the Company is
required to be treated as being owned by any Person, other than the Company,
pursuant to the "safe harbor" leasing provisions of Section 168(f)(8) of the
Code.
As used in this Agreement, "Tax" or "Taxes" means any federal,
state, county, local, foreign and other taxes (including, without limitation,
income, profits, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustments related
to any of the foregoing.
As used in this Agreement, "Governmental Authority" means the
government of any nation, state or other political subdivision thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
2.15. Permits. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business,
the lack of which could materially and adversely affect the business, properties
or financial condition of the Company. The Company is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority.
2.16. Environmental and Safety Laws. The Company is not
in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
2.17. Disclosure. The Company has fully provided each
Investor with all the information that such Investor has requested for deciding
whether to purchase the Series A Preferred Stock. Neither this Agreement
(including all the exhibits and schedules hereto) nor any other statements or
certificates made or delivered in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading in light of the circumstances
under which they were made.
2.18. Business Plan. The Business Plan dated July 1999,
previously delivered to each Investor has been prepared in good faith by the
Company and does not contain any untrue statement of a material fact nor does it
omit to state a material fact necessary to make the statements made therein not
misleading, except that with respect to projections contained in the Business
Plan, the Company represents only that such projections were prepared in good
faith and that the Company reasonably believes there is a reasonable basis for
such projections. There
7
has been no material adverse change in the assets, business, properties or
financial or other condition of the Company since July 1, 1999 that would cause
the Business Plan to no longer be valid.
2.19. Registration Rights. Except as provided in the
Investors' Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
2.20. Corporate Documents; Minute Books. Except for
amendments necessary to satisfy representations and warranties or conditions
contained herein (the forms of which amendments have been approved by the
Investors), the Restated Certificate and Bylaws of the Company are in the form
previously provided to counsel for the Investors. The minute books of the
Company provided to the Investors contain a complete summary of all meetings of
directors and stockholders since the time of incorporation and reflect all
transactions referred to in such minutes accurately in all material respects.
2.21. Title to Property and Assets. The property and
assets the Company owns are owned by the Company free and clear of all
mortgages, liens, loans and encumbrances, except (i) as reflected in the
Financial Statements, (ii) for statutory liens for the payment of current taxes
that are not yet delinquent, and (iii) for liens, encumbrances and security
interests that arise in the ordinary course of business and minor defects in
title, none of which, individually or in the aggregate, materially impair the
Company's ownership or use of such property or assets. With respect to the
property and assets it leases, the Company is in material compliance with such
leases and, to its knowledge, holds a valid leasehold interest free of any
liens, claims or encumbrances, subject to clauses (i)-(iii).
2.22. Insurance. The Company has fire and casualty
insurance policies with such coverages in amounts (subject to reasonable
deductibles) customary for companies similarly situated.
2.23. Employee Benefit Plans. Except as set forth on the
Schedule of Exceptions, the Company does not have any Employee Benefit Plan as
defined in the Employee Retirement Income Security Act of 1974.
2.24. Labor Agreements and Actions. The Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
Company's knowledge, has sought to represent any of the employees,
representatives or agents of the Company. There is no strike or other labor
dispute involving the Company pending, or to the Company's knowledge,
threatened, that could have a material adverse effect on the assets, properties,
financial condition, operating results or business of the Company, nor is the
Company aware of any labor organization activity involving its employees. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. The employment of each officer and employee of the Company is
terminable at the will of the Company. The Company is not a party to or bound by
any currently effective employment contract, deferred compensation
8
agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement
or other employee compensation agreement. To its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
employment opportunity and other laws related to employment.
2.25. Status of Intellectual Property.
(a) To the Company's knowledge, the Company owns or
has sufficient licenses to use all of the material patents, patent applications,
registered trademarks, trademark applications, copyright registrations and
applications therefor which are necessary for the conduct of the business.
Except as set forth on the Schedule of Exceptions:
(i) The patents owned by the Company and patent
applications (collectively, "Patent Rights") are owned by the Company free and
clear of all mortgages, liens, charges or encumbrances whatsoever. No licenses
have been granted with respect to the Patent Rights and the Company has not
received written notice from any third party claiming that its practice of the
inventions covered by the Patent Rights or the patents or patents application
licensed to the Company would infringe the patent rights of such third party.
(ii) The copyright registrations and pending
applications owned by the Company are owned by the Company free and clear of all
mortgages, liens, charges or encumbrances whatsoever. Except for licenses
granted to end users in accordance with the Company's standard terms, no
licenses have been granted with respect to any of the Company's copyrighted
material and the Company has not received written notice from any third party
claiming that any of its activities in the conduct of its business as presently
conducted infringe the copyrights of such third party.
(iii) The trademark registrations and pending
applications owned by the Company are owned by the Company free and clear of all
mortgages, liens, charges or encumbrances whatsoever. No licenses have been
granted with respect to any of such trademarks or applications and the Company
has not received notice from any third party claiming that any of its activities
in the conduct of its business as presently conducted infringe the trademarks,
trade names or trade dress of such third party.
(b) Except as set forth on the Schedule of Exceptions,
all technical information and know-how in possession of the Company relating to
the design or manufacture of products sold, and services performed, by it,
including without limitation methods of manufacture, lab journals,
manufacturing, engineering and other drawings, design and engineering
specifications and similar items recording or evidencing such information is
owned by the Company free and clear of all mortgages, liens, charges or
encumbrances whatsoever.
3. Representations and Warranties of the Investors.
Each Investor hereby represents, warrants and covenants that:
3.1. Authorization. Such Investor has full power and
authority to enter into this Agreement, the Investors' Rights Agreement and the
Stockholders Agreement, and each such agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization,
9
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 the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
3.2. Purchase Entirely for Own Account. This Agreement
is made with such Investor in reliance upon such Investor's representation to
the Company, which by such Investor's execution of this Agreement Investor
hereby confirms, that the Series A Preferred Stock to be received by such
Investor and the Common Stock issuable upon conversation thereof (collectively,
the "Securities") will be acquired for investment for such Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that Investor has no present intention of
selling, granting any participation in or otherwise distributing the same. By
executing this Agreement, such Investor further represents that such Investor
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to any Securities.
3.3. Disclosure of Information. Such Investor has
received all the information it has requested in deciding whether to purchase
the Series A Preferred Stock. Such Investor further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Series A Preferred Stock and the
business, properties, prospects and financial condition of the Company. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of such Investor to
rely thereon.
3.4. Investment Experience. Such Investor has invested in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series A
Preferred Stock.
3.5. Accredited Investor. Such Investor is an "accredited
investor" within the meaning of Securities and Exchange Commission ("SEC") Rule
501 of Regulation D, as presently in effect.
3.6. Restricted Securities. Such Investor understands that
the Securities it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such Securities may be resold without
registration under the Act only in certain limited circumstances. In the absence
of an effective registration statement covering the Securities (or the Common
Stock issued on conversion thereof) or an available exemption from registration
under the Act, the Series A Preferred Stock (and any Common Stock issued on
conversation thereof) must be held indefinitely. In this connection, such
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act,
including without limitation the Rule 144 condition that current information
about the Company be available to the
10
public. Such information is not now available and the Company has no present
plans to make such information available.
3.7. Further Limitations on Disposition. Without in any
way limiting the representations set forth above, such Investor further agrees
not to make any disposition of all or any portion of the Series A Preferred
Stock unless and until the transferee has agreed in writing for the benefit of
the Company to be bound by this Section 3 and the Investors' Rights Agreement,
and:
(a) There is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) Such Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
requested by the Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company that such disposition
will not require registration of such shares under the Act. It is agreed that
the Company will not require opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of subsections (a)
and (b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor to his or her spouse or to the siblings,
lineal descendants or ancestors of such partner or his or her spouse ("Family
Members") or to a trust established for the benefit of such Investor or Family
Member or to a charitable organization, if the transferee agrees in writing to
be subject to the terms hereof to the same extent as if he or she were an
original Investor hereunder.
3.8. Legends. It is understood that the certificates
evidencing the Series A Preferred Stock may bear one or all of the following
legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) Any legend required by the applicable blue sky laws.
3.9. Tax Advisors. Such Investor has reviewed with such
Investor's own tax advisors the federal, state and local tax consequences of
this investment, where applicable, and the transactions contemplated by this
Agreement. Investor is relying solely on such advisors and not on any statements
or representations of the Company or any of its agents and understands that
Investor (and not the Company) shall be responsible for Investor's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.
3.10. Investor Counsel. Such Investor acknowledges that
Investor has had the opportunity to review this Agreement, the exhibits and
the schedules attached hereto and the
11
transactions contemplated by this Agreement with Investor's own legal counsel.
Investor is relying solely on Investor's legal counsel and not on any statements
or representations of the Company or any of the Company's agents, including
Brobeck, Phleger & Harrison LLP, for legal advice with respect to this
investment or the transactions contemplated by this Agreement.
4. Conditions of Investor's Obligations at Closing. The
obligations of each Investor under subsection 1.1(b) of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective against any Investor who
does not consent thereto:
4.1. Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
4.2. Performance. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing, including, without limitation, adoption and filing with the
Secretary of State of the State of Delaware of the Restated Certificate.
4.3. Compliance Certificates. The Chief Executive Officer of
the Company shall deliver to each Investor at the Closing a certificate stating
that the conditions specified in Sections 4.1 and 4.2 have been fulfilled. The
Secretary of the Company shall deliver to each Investor at the Closing a
certificate as to the resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and the
Common Stock Purchase Agreement and each exhibit hereto and thereto to which it
is a signatory and the consummation of the transactions contemplated herein and
therein.
4.4. Qualifications. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful issuance
and sale of the Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
4.5. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
4.6. Opinion of Company Counsel. Each Investor shall have
received from Brobeck, Phleger & Harrison LLP, counsel for the Company, an
opinion, dated as of the Closing, in the form attached hereto as Exhibit D.
4.7. Investors' Rights Agreement. The Company and each
Investor shall have entered into the Investors' Rights Agreement in the form
attached as Exhibit C.
12
4.8. Contribution Agreement. The Company and Globecomm
Systems Inc. shall have entered into the Contribution Agreement and such
agreement shall be in full force and effect.
4.9. Stockholders Agreement. The Company and each Investor
shall have entered into a Stockholders Agreement in the form attached hereto as
Exhibit E.
5. Conditions of the Company's Obligations at Closing. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
that Investor:
5.1. Representations and Warranties. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
5.2. Payment of Purchase Price. The Investor shall have
delivered the purchase price specified in Section 1.1(b).
5.3. Qualifications. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful issuance
and sale of the Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
5.4. Investors' Rights Agreement. The Company and each
Investor shall have entered into the Investors' Rights Agreement in the form
attached as Exhibit C.
5.5. Stockholders Agreement. The Company and each Investor
shall have entered into a Stockholders Agreement in the form attached hereto as
Exhibit E.
6. Miscellaneous.
6.1. Survival. The warranties, representations and covenants
of the Company and Investors contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing for a
period of one year and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of the Investors or the Company.
6.2. Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.3. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New York.
13
6.4. Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.5. Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day; (iii) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the address as set forth on the signature page hereof or at such other
address as such party may designate by ten days advance written notice to the
other parties hereto. A copy of any notice sent to the Company shall be sent to
Luci Staller Altman, Esq., Brobeck, Phleger & Harrison LLP, 1633 Broadway, 47th
Floor, New York, New York 10019. A copy of any notice sent to the Investors
shall be sent to Laura B. Sherman, Esq., Paul, Weiss, Rifkind, Wharton &
Garrison, 1615 L Street, NW Suite 1300, Washington, District of Columbia 20036.
6.6. Finder's Fee. Except as set forth on the Schedule of
Exceptions, each party represents that it neither is nor will be obligated for
any finders' fee or commission in connection with this transaction. Each
Investor agrees to indemnify and to hold harmless the Company from any liability
for any commission or compensation in the nature of a finders' fee (and the
costs and expenses of defending against such liability or asserted liability)
for which such Investor or any of its officers, partners, employees or
representatives is responsible. The Company agrees to indemnify and hold
harmless each Investor from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
6.7. Expenses. Irrespective of whether the Closing is
effected, the Company and the Investors shall pay all costs and expenses that
such party incurs with respect to the negotiation, execution, delivery and
performance of this Agreement; provided that if the Closing is effected, the
Company shall pay the reasonable fees and expenses of one special counsel to the
Investors, not to exceed $25,000.00. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the Investors'
Rights Agreement, the Stockholders Agreement or the Restated Certificate, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
6.8. Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock not previously sold to the public that is issued
or issuable upon conversion of the Series A Preferred Stock sold pursuant to
this Agreement. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Investor, each future holder of all such
Securities and the Company.
14
6.9. Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
6.10. Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth herein
or therein.
6.11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
NETSAT EXPRESS, INC.
By: /s/: Kenneth A. Miller
--------------------------------------------
Kenneth A. Miller, Chief Executive Officer
Address: 45 Oser Avenue
Hauppauge, NY 11788
INVESTORS:
/s/: Gary Gladstein
--------------------------------------------
George Soros
by Gary Gladstein attorney-in-fact
Address: 888 Seventh Avenue
New York, New York 10016