EXHIBIT
10.1
CONVERTIBLE NOTE PURCHASE
AGREEMENT
THIS CONVERTIBLE
NOTE PURCHASE AGREEMENT (this “ Agreement
”) is dated as of 16 th
day of
February, 2007, between ELANDIA, INC., a Delaware corporation (the
“ Company ”), and STANFORD INTERNATIONAL BANK
LIMITED, a corporation organized under the laws of Antigua and
Barbuda (the “ Purchaser ”).
WHEREAS , subject to the terms and conditions set forth
in this Agreement and pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the “ Securities
Act ”), the Company desires to issue and sell to
Purchaser, and Purchaser desires to purchase from the Company, a
certain convertible promissory note of the Company as more fully
described in this Agreement.
NOW, THEREFORE
, in consideration of the premises
and the mutual covenants and agreements set forth herein, and other
good and valuable consideration exchanged between the parties, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree that the foregoing recitals are true and
correct and further agree as follows:
ARTICLE
I—DEFINITIONS
Section 1.1 Definitions
. In addition to terms defined elsewhere in this Agreement, the
following terms have the meanings indicated which meanings shall be
equally applicable to both the singular and the plural forms of
such terms:
“ Affiliate ”
shall mean any Person which directly or indirectly through one or
more intermediaries controls, or is controlled by or is under
common control, with a Person, as such terms are used in and
construed under Rule 144 under the Securities Act. The term
“control” means the possession, directly of indirectly,
of the power to cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by
contract or otherwise. “ Closing ” means the
closing of the purchase and sale of the Note pursuant to
Section 2.1 .
“ Closing Date ”
means February 16, 2007, or such other date as the parties may
agree in writing.
“ Collateral Assignment of
Note ” means the Collateral Assignment of Promissory
Note, dated the Closing Date, among the Company and Purchaser, in
the form of Exhibit F .
“ Commission ”
means the Securities and Exchange Commission.
“ Common Stock ”
means the common stock of the Company, par value $0.00001 per
share, and any securities into which such common stock shall
hereinafter have been reclassified into.
“ Effective Date
” means the date that the initial Registration Statement
filed by the Company pursuant to the Registration Rights Agreement
is first declared effective by the Commission.
“ Exchange Act ”
means the Securities Exchange Act of 1934, as amended.
“ GAAP ” shall
have the meaning ascribed to such term in Section 3.1(h)
hereof.
“ Latin Node ”
shall mean Latin Node, Inc., a Florida corporation.
“ Liens ” shall
have the meaning ascribed to such term in Section 3.1(a)
hereof.
“ Material Adverse
Effect ” shall have the meaning assigned to such term in
Section 3.1(b) hereof.
“ Note ” means
the 10% Convertible Promissory Note due four (4) years from
the date of issuance, issued by the Company to Purchaser hereunder,
in the form of Exhibit B .
“ Old Note ”
means that certain promissory note, dated as of July 24, 2006,
in the original principal amount of $3,300,000, executed by the
Company in favor of the Purchaser and issued pursuant to that
certain Note Purchase Agreement, dated as of February 10,
2006, as amended by that certain First Amendment to Note Purchase
Agreement, dated as of July 24, 2006, by and between the
Company and the Purchaser.
“ Person ” means
an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“ Pledge Agreement
” means the Stock Pledge Agreement, dated the Closing Date,
among the Company and Purchaser, in the form of Exhibit E
.
“ Principal Market
” means initially the OTC Bulletin Board and shall also
include, the NASDAQ Capital Market or the NASDAQ Global Market,
whichever is at the time the principal trading exchange or market
for the Common Stock, based upon share volume.
“ Proceeding ”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.
“ Registration
Statement ” means the registration statement to be filed
by the Company pursuant to the Registration Rights
Agreement.
“ Registration Rights
Agreement ” means the Registration Rights Agreement,
dated the Closing Date, among the Company, Purchaser and SGC, in
the form of Exhibit C .
“ Required Approvals
” shall have the meaning ascribed to such term in
Section 3.1(e) hereof.
2
“ Rule 144 ”
means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
“ SEC Reports ”
shall have the meaning ascribed to such term in Section 3.1(h)
hereof.
“ Securities ”
means the Note, the Warrants and the Underlying Shares.
“ Securities Act
” means the Securities Act of 1933, as amended.
“ Series A Preferred
Stock ” means the Series A Convertible Preferred Stock of
the Company and any securities into which such preferred stock
shall hereinafter have been reclassified into the terms of which
are as set forth in the Certificate of Designation of Series A
Convertible Preferred Stock attached hereto as Exhibit A .
The Series A Preferred Stock shall be convertible into shares of
Common Stock pursuant to the terms set forth in the Series A
Certificate of Designation.
“ SGC ” means
Stanford Group Company, a Texas corporation.
“ Short Term Note
” means that certain promissory note, dated as of
February 5, 2007, in the original principal amount of
$12,000,000, executed by the Company in favor of the
Purchaser.
“ Subscription Amount
” means $25,300,000.
“ Subsidiary ”
means any subsidiary of the Company as set forth on Schedule 3.1(a)
attached hereto.
“ Trading Day ”
means any day during which the Principal Market shall be open for
business.
“ Transaction Documents
” means this Agreement, the Note, the Warrants, the
Registration Rights Agreement and any other documents or agreements
executed in connection with the transactions contemplated
hereunder.
“ Underlying Shares
” means the shares of Common Stock issuable upon conversion
of the Series A Preferred Stock issuable upon conversion of the
Note and upon exercise of the Warrants.
“ Warrants ”
means collectively the Common Stock purchase warrants, in the form
of Exhibit D delivered to Purchaser, SGC and to the
Persons identified on Schedule 1 hereto at the Closing in
accordance with Section 2.2 hereof. In connection with the
purchase of the Note, the Company shall issue to Purchaser and its
assigns 1,320,000 Warrants and in connection with the refinancing
of the Old Note, as described herein, the Company shall issue to
Purchaser and its assigns 198,000 Warrants. In addition, in
connection with the purchase of the Note, the Company shall issue
to SGC 200,000 Warrants.
3
“ Warrant Shares
” means the shares of Common Stock issuable upon exercise of
the Warrants.
Section 1.2 Accounting
Terms . Accounting terms not specifically defined in this
Agreement shall have the meaning given to them under accounting
principles and practices generally accepted in the Ecuador, applied
on a consistent basis with the financial statements referred to in
Section 3.3 hereof, and shall be determined both as to
classification of items and amounts in accordance
therewith.
Section 1.3 Other
Definitional Provisions . The words “hereof,”
“herein,” and “hereunder” and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and Section, Subsection and Exhibit references are to
this Agreement unless otherwise specified.
ARTICLE II—PURCHASE AND
SALE
Section 2.1 Purchase of
Note; Closing . Upon the terms and subject to the conditions
set forth herein, concurrent with the execution and delivery of
this Agreement by the parties hereto, the Company agrees to sell,
and Purchaser agrees to purchase, the Note in the principal amount
of $25,300,000. Purchaser shall deliver to the Company the
Subscription Amount via wire transfer or a certified check
immediately available funds as follows: (a) $17,300,000 on the
Closing Date ($3,300,000 of which shall be used to refinance the
Old Note and $2,000,000 of which shall be paid to SGC as described
in Section 3.1(r), below); and (b) $8,000,000 on or prior
to February 15, 2007. At the Closing, the Company shall
deliver to Purchaser the Note evidencing a principal amount equal
to $25,300,000 and the other items set forth in
Section 2.2.
Section 2.2 Conditions to
Closing . Upon satisfaction or waiver by the party sought to be
benefited thereby of the conditions set forth in this
Section 2.2, the Closing shall occur.
(a) At or prior to the Closing, the
Company shall deliver or cause to be delivered to Purchaser the
following:
(i) the Note duly exacted by the
Company and registered in the name of Purchaser;
(ii) Warrants registered in the
names of the Persons set forth on Schedule 1 attached hereto to
purchase an aggregate of 1,518,000 shares of Common Stock, with a
term of seven (7) years and an initial exercise price equal to
$5.00 per share of Common Stock, subject to adjustment
therein;
(iii) Warrants registered in the
names of SGC to purchase an aggregate of 200,000 shares of Common
Stock, with a term of seven (7) years and an initial exercise
price equal to $5.00 per share of Common Stock, subject to
adjustment therein;
4
(iv) the Registration Rights
Agreement duly executed by the Company;
(v) the Pledge Agreement duly
executed by the Company;
(vi) the Collateral Assignment
(along with original promissory note identified therein) duly
executed by the Company; and
(vii) this Agreement, duly executed
by the Company.
(b) At or prior to the Closing,
Purchaser shall deliver or cause to be delivered to the Company the
following:
(i) that portion of the Subscription
Amount due at Closing;
(ii) the Registration Rights
Agreement duly executed by Purchaser and SGC;
(iii) the Pledge Agreement duly
executed by the Purchaser;
(iv) the original Old Note and the
Short Term Note, each marked for cancellation; and
(v) this Agreement, duly executed by
Purchaser.
(c) All representations and
warranties of the other party contained herein shall remain true
and correct as of the Closing Date and all covenants of the other
party shall have been performed if due prior to such
date.
(d) There shall have been no
Material Adverse Effect (as defined in Section 3.1(b)) with
respect to the Company since the date hereof.
(e) The Company shall have delivered
to the Purchaser a duly executed and binding securities purchase
agreement between the Company and Latin Node, on terms and
conditions acceptable to the Purchaser in its sole and absolute
discretion.
(f) The Purchaser shall have
completed its customary due diligence of the Company, including
legal and financial review, to its absolute
satisfaction.
(g) The Purchaser shall have
completed its customary due diligence of Latin Node, including
legal and financial review, to its absolute satisfaction
(h) The Company shall have paid to
the Purchaser all accrued and unpaid interest owing through the
Closing Date on the Old Note.
5
ARTICLE III—REPRESENTATIONS
AND WARRANTIES
Section 3.1 Representations
and Warranties of the Company . The Company hereby makes the
representations and warranties set forth below to
Purchaser.
(a) Subsidiaries . Except as
set forth in Schedule 3.1(a) attached hereto, the Company has no
direct or indirect subsidiaries. The Company owns, directly or
indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any lien, charge, security
interest, encumbrance, right of first refusal or other restriction
(collectively, “ Liens ”), and all the issued
and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.
(b) Organization and
Qualification . Each of the Company and the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and
the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not, individually or in the aggregate:
(i) adversely affect the legality, validity or enforceability
of any Transaction Document, (ii) have or result in or be
reasonably likely to have or result in a material adverse effect on
the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken
as a whole, or (iii) adversely impair the Company’s
ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (i), (ii) or (iii), a
“ Material Adverse Effect ”).
(c) Authorization;
Enforcement . The Company has the requisite corporate power and
authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to
carry out its obligations hereunder or thereunder. The execution
and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby
or thereby have been duly authorized by all necessary action on the
part of the Company and no further consent or action is required by
the Company other than Required Approvals. Each of the Transaction
Documents has been (or upon delivery will be) duly executed by the
Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally and general
principles of equity. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its respective certificate or
articles of incorporation, by-laws or other organizational or
charter documents.
(d) No Conflicts . The
execution, delivery and performance of the Transaction Documents by
the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not: (i) conflict with or
violate any provision of the
6
Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) subject to
obtaining the Required Approvals, conflict with, or constitute a
default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or
(iii) result, in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company
or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in
the aggregate, have or result in a Material Adverse
Effect.
(e) Filings, Consents and
Approvals . Neither the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other than
(i) the filings required under Section 4.7 and
(ii) the filing with the Commission of the Registration
Statement (collectively, the “ Required Approvals
”).
(f) Issuance of the
Securities . The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and
non-assessable, free and clear of all Liens. The Company has
reserved from its duly authorized capital stock a number of shares
of Common Stock for issuance of the Underlying Shares. The Company
has not, and to the knowledge of the Company, no Affiliate of the
Company has sold, offered for sale or solicited offers to buy or
otherwise negotiated in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with
the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the
Securities to Purchaser, or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations
of any Principal Market.
(g) Capitalization . On the
date hereof, the authorized capital of the Company consists of
(i) 50,000,000 shares of Common Stock, par value $0.00001 per
share, of which 13,060,314 shares are issued and outstanding
excluding shares of Common Stock reserved for issuance pursuant to
the Company’s employee stock option plan and
(ii) 6,000,000 shares of Series A Preferred Stock, of which
-0- shares are issued and outstanding. Except as a result of the
purchase and sale of the Securities, no securities of the Company
are entitled to preemptive or similar rights, and no Person has any
right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of
the purchase and sale of the Securities, there are no outstanding
options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares
of
7
Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable
into shares of Common Stock. The issuance and sale of the
Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than Purchaser) and
will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under such
securities.
(h) SEC Reports; Financial
Statements . Except as set forth on Schedule 3.1(h), the
Company has filed all reports required to be filed by it under the
Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law to file such
material) (the foregoing materials being collectively referred to
herein as the “ SEC Reports ”). As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act
and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the
Company included in the SEC Reports comply in all material respects
with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at
the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (“ GAAP
”), except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end
audit adjustments.
(i) Material Changes . Since
the date of the latest audited financial statements included within
the SEC Reports, except as specifically disclosed in the SEC
Reports: (i) there has been no event, occurrence or
development that has had or that could result in a Material Adverse
Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required
to be reflected in the Company’s financial statements
pursuant to GAAP or required to be disclosed in filings made with
the Commission, (iii) the Company has not altered its method
of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of
cash or other property to its stockholders or purchased, redeemed
or made any agreements to purchase or redeem any shares of its
capital stock, and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant
to existing Company stock option or similar plans or for other
compensatory purposes.
(j) Litigation . Except as
disclosed in the SEC Reports, there is no action, suit, inquiry,
notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “ Action ”) which:
(i) adversely
8
affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable
decision, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any director or officer thereof, is
or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or
a claim of breach of fiduciary duty. The Company does not have
pending before the Commission any request for confidential
treatment of information. There has not been, and to the knowledge
of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any
current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities
Act.
(k) Compliance . Neither the
Company nor any Subsidiary: (i) is in default under or in
violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived),
(ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, except
in each case as could not, individually or in the aggregate, have
or result in a Material Adverse Effect.
(l) Labor Relations . No
material labor dispute exists or, to the knowledge of the Company,
is imminent with respect to any of the employees of the
Company.
(m) Regulatory Permits . The
Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except
where the failure to possess such permits could not, individually
or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect (“ Material Permits ”),
and neither the Company nor any Subsidiary has received any notice
of proceedings relating to the revocation or modification of any
Material Permit.
(n) Title to Assets . The
Company and the Subsidiaries have good and marketable title in fee
simple to all real property owned by them that is material to the
business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens that do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held under valid, subsisting and enforceable leases of which the
Company and the Subsidiaries are in compliance.
9
(o) Patents and Trademarks .
The Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar
rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect
(collectively, the “ Intellectual Property Rights
”). Neither the Company nor any Subsidiary has received a
written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of
any Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property
Rights.
(p) Insurance . The Company
and the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. To the best of
Company’s knowledge, such insurance contracts and policies
are accurate and complete. Neither the Company nor any Subsidiary
has any reason to believe it will not be able to renew its existing
insurance cove
