Exhibit 10.1
SECURITIES PURCHASE
AGREEMENT
- BY AND AMONG -
SOLOMON TECHNOLOGIES,
INC.
(the
“Company”)
AND
THE PERSONS LISTED AS INVESTORS
IN EXHIBIT 2.1
(the
“Investors”)
APRIL 15, 2004
This SECURITIES PURCHASE AGREEMENT
(the “Agreement” ) is dated April 15,
2004, by and among Solomon Technologies, Inc., a Delaware
corporation (the “Company” ) , and
each of the persons listed in Exhibit 2.1 (each an
“Investor” and collectively the
“Investors” ).
PREAMBLE
WHEREAS, the Investors are willing
to purchase, and the Company is willing to sell, on the terms
contained in this Agreement, Series A Preferred Stock of the
Company having the characteristics set forth in the Restated
Certificate attached as Exhibit 1.1(a) and warrants
having the characteristics set forth in the certificate attached as
Exhibit 1.1(b) ; and
WHEREAS, the Company is offering to
other investors to purchase up to 2,000,000 shares of Series A
Preferred Stock pursuant to the terms as set forth in that
Confidential Private Placement Memorandum dated March 12. 2004 (the
“ Memorandum ”).
NOW THEREFORE, for good and valuable
consideration the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows.
ARTICLE I
DEFINED TERMS
1.1 Definitions . The
following terms, when used in this Agreement, have the following
meanings, unless the context otherwise indicates:
“ 1933 Act
” means the Securities Act of 1933, as amended.
“ 1934 Act
” means the Securities Exchange Act of 1934, as
amended.
“ Affiliate
” means, with respect to any Person, any other Person, which,
directly or indirectly, controls, is controlled by, or is under
common control with such Person, including, without limitation, any
partner, officer, director, or member of such Person and any
venture capital fund now or hereafter existing which is controlled
by or under common control with one or more general partners or
shares the same management company with such Person.
“ Closing
” and “ Closing Date ” mean the
consummation of the Company’s sale and the Investors’
purchase of the Series A Preferred Stock and the Warrants, and the
date on which the same occurs or occurred.
“ Commission
” means the United States Securities and Exchange
Commission.
“ Common Stock
” means the $0.001 par value common stock of the
Company.
“ Designated
Representative ” means Woodlaken LLC, a Connecticut
limited liability company.
“ Environmental
Laws ” means any law, regulation, or other applicable
requirement relating to (a) releases or threatened release of a
Hazardous Substance; (b) pollution or protection of employee health
or safety, public health or the environment; or (c) the
manufacture, handling, transport, use, treatment, storage, or
disposal of Hazardous Substances.
“General
Release” means
the General Release of All Claims by and among by and among
Pinetree, the Company and Town Creek Industries, Inc., a Maryland
corporation and wholly owned subsidiary of the Company, annexed
hereto as Exhibit 1.1(c) .
“Hazardous
Substance” means any pollutant, contaminant or toxic or
hazardous material, substance or waste, or petroleum or any
fraction thereof.
“Key
Employee” means
any executive-level employee (including division director and Vice
President level positions) as well as any employee who either alone
or in concert with others develops, invents, programs or designs
any Company Intellectual Property (as defined in Section
3.12).
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“ Knowledge
” shall mean and include (a) actual knowledge of the Person,
including, as to the Company, the actual knowledge of any of the
executive officers of the Company and (b) that knowledge which a
prudent businessperson could have obtained in the management of his
business after making due inquiry, and after exercising due
diligence, with respect thereto.
“ Material Adverse
Effect ” means a material adverse effect on the
business, assets (including intangible assets), liabilities,
financial condition , property, prospects or results of
operations of the Company and its Subsidiaries, taken as a
whole.
“ Person ”
means a natural person, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental entity or other entity or
organization.
“Pinetree”
shall mean Pinetree (Barbados) Inc.,
a corporation organized under the laws of Barbados.
“Pinetree
Note” shall
mean the Convertible Promissory Note in the original principal
amount of $572,490.22 issued by the Company dated July 31, 2003, as
amended December 12, 2003.
“ Restated
Certificate ” means the Amended and Restated
Certificate of Designation establishing the rights, privileges and
preferences of the Series A Preferred Stock annexed hereto as
Exhibit 1.1(a) .
“ Series A Preferred
Stock ” means the $0.001 par value cumulative
convertible preferred stock, Series A of Solomon Technologies, Inc.
having the characteristics set forth in the Restated
Certificate.
“ Subsidiary
” or “ Subsidiaries ” of any Person
means any corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other Persons performing
similar functions are at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such
Person.
“ Transaction
Agreements ” means this Agreement, the Registration
Rights Agreement, Stockholders’ Agreement, Employment
Agreement, Escrow Agreement, Exchange Agreement, all Employee
Confidentiality and Noncompetition Agreements and any other
agreements, instruments or documents entered into in connection
with this Agreement.
“ Warrants
” means the common stock purchase warrants having such terms
as set forth in the Certificate annexed hereto as Exhibit
1.1(b) .
Additional defined terms are found
in the body of this Agreement.
1.2 Interpretation . The
masculine form of words includes the feminine and the neuter and
vice versa, and, unless the context otherwise requires, the
singular form of words includes the plural and vice versa. The
words “herein,” “hereof,”
“hereunder,” and other words of similar import when
used in this Agreement refer to this Agreement as a whole, and not
to any particular section or subsection. Exhibits are incorporated
by reference into this Agreement as though such exhibits were set
forth at the point of such reference.
ARTICLE II
PURCHASE AND SALE
TERMS
2.1 Purchase and Sale .
Subject to the terms of this Agreement, the Company shall issue and
sell to the Investors and each Investor shall purchase from the
Company at the Closing the number of shares of Series A Preferred
Stock and Warrants at the aggregate purchase price set forth
opposite its name in Exhibit 2.1 . The obligation of
each Investor to purchase is several and not joint. The Investors
designated as “ Cash Investors ” on
Exhibit 2.1 shall deliver on or before the Closing
Date the aggregate purchase price for such Investor in good and
available funds. The Investors designated as “ Exchange
Investors ” on Exhibit 2.1 shall be
deemed to have
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delivered at the Closing certificates of shares
of preferred stock and warrants (collectively the “
Outstanding Securities ”), as such terms are
used in the Company’s Confidential Private Placement
Memorandum dated January 18, 2004, as set forth in Exhibit
2.1 , or, as to Pinetree shall deliver at the Closing the
original Pinetree Note for cancellation and the General
Release.
2.2 Transfer Legends and
Restrictions . The transfer of the shares of Series A Preferred
Stock and Warrants and the Common Stock issuable upon conversion of
the Series A Preferred Stock and exercise of the Warrants will be
“restricted securities” as such term is defined under
Rule 144 of the 1933 Act. Each certificate evidencing the shares of
Series A Preferred Stock and Warrants and the Common Stock issuable
upon conversion of the Series A Preferred Stock and exercise of the
Warrants, including any certificate issued to any transferee
thereof, shall be imprinted with legends in substantially the
following form:
“THE OFFER AND SALE OF THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933
ACT”), AND MAY NOT BE OFFERED OR TRANSFERRED BY SALE,
ASSIGNMENT, PLEDGE OR OTHERWISE UNLESS (I) A REGISTRATION STATEMENT
FOR THE OFFER AND SALE OF SUCH SECURITIES UNDER THE 1933 ACT IS IN
EFFECT OR (II) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
WHICH OPINION IS SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE 1933
ACT.”
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
Except as set forth in the Company
Disclosure Schedule annexed hereto, the Company represents and
warrants to the Investors, at and as of the Closing
that:
3.1 Organization, Good Standing,
Corporate Power and Qualification. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation and
has all requisite corporate power and authority to carry on its
business as presently conducted and as proposed to be conducted.
The Company and each of its Subsidiaries 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.
3.2 Capitalization . The
authorized capital of the Company consists, immediately prior to
the Closing, of:
(a) 25,000,000 shares of Common
Stock, 4,925,484 shares of which are issued and outstanding
immediately prior to the Closing. All of the outstanding shares of
Common Stock have been duly authorized, are fully paid and
nonassessable and were issued in compliance with all applicable
federal and state securities laws. The Company holds no treasury
stock and no shares of Series A Preferred Stock in its
treasury.
(b) 5,000,000 shares of Preferred
Stock, of which 1,625,000 shares have been designated Series A, of
which 35,000 are issued and outstanding immediately prior to the
Closing.
(c) Immediately prior to the
Closing, the Restated Certificate will be filed with the Delaware
Secretary of State and the rights, privileges and preferences of
the Series A Preferred Stock will be as stated in the Restated
Certificate and as provided by the general corporation law of the
State of Delaware.
(d) Except for the conversion
privileges of the Series A Preferred Stock to be issued under this
Agreement, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first
refusal or similar rights) or agreements, orally or in writing, to
purchase or acquire from the Company any shares of Common Stock or
Series A Preferred Stock, or any securities convertible into or
exchangeable for shares of Common Stock or Series A Preferred
Stock.
3.3 Authorization. All
corporate action required to be taken by the Company’s Board
of Directors and stockholders in order to authorize the Company to
enter into this Agreement and the other Transaction Agreements, and
to issue the Series A Preferred Stock at the Closing and the Common
Stock issuable upon conversion of the Series A Preferred Stock, has
been taken or will be taken prior to the Closing. All action on
the
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part of the officers of the Company necessary
for the execution and delivery of this Agreement and the other
Transaction Agreements, the performance of all obligations of the
Company under this Agreement and the other Transaction Agreements
to be performed as of the Closing, and the issuance and delivery of
the Series A Preferred Stock has been taken or will be taken prior
to the Closing. This Agreement and each other Transaction
Agreement, when executed and delivered by the Company, shall
constitute the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with their terms
except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, or other laws of
general application relating to or affecting the enforcement of
creditors’ rights generally, or (ii) as limited by laws
relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
3.4 Valid Issuance of Series A
Preferred Stock. The Series A Preferred Stock, when issued,
sold and delivered in accordance with the terms and for the
consideration set forth in this Agreement, will be validly issued,
fully paid and nonassessable and free of restrictions on transfer
other than restrictions on transfer under this Agreement or any
other Transaction Agreement, applicable state and federal
securities laws and liens or encumbrances created by or imposed by
an Investor. Assuming the accuracy of the representations of the
Investors in Article IV of this Agreement and subject to the
filings described in Section 3.5 below, the Series A Preferred
Stock will be issued in compliance with all applicable federal and
state securities laws. The Common Stock issuable upon conversion of
the Series A Preferred Stock has been duly reserved for issuance,
and upon issuance in accordance with the terms of the Restated
Certificate, will be validly issued, fully paid and nonassessable
and free of restrictions on transfer other than restrictions on
transfer under this Agreement, applicable federal and state
securities laws and liens or encumbrances created by or imposed by
an Investor. Based in part upon the representations of the
Investors in Section 4 of this Agreement and their continued status
as “accredited investors”, and subject to Section 3.5
below, the Common Stock issuable upon conversion of the Series A
Preferred Stock will be issued in compliance with all applicable
federal and state securities laws.
3.5 Governmental Consents and
Filings. Assuming the accuracy of the representations made by
the Investors in Article IV of this Agreement, no consent,
approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any
federal, state or local governmental authority is required on the
part of the Company in connection with the consummation of the
transactions contemplated by this Agreement or the other
Transaction Agreements, except for (i) the filing of the Restated
Certificate, which will have been filed as of the Closing, and (ii)
filings pursuant to Regulation D of the 1933 Act, and applicable
state securities laws, which have been made or will be made in a
timely manner.
3.6 Agreements; Actions.
Except for this Agreement, or as disclosed in the SEC Documents (as
defined in Section 3.9), there are no agreements, understandings,
instruments, contracts or proposed transactions to which the
Company is a party or by which it is bound that involve (i)
obligations (contingent or otherwise) of, or payments to, the
Company or any of its Subsidiaries in excess of $25,000, (ii) the
license of any patent, copyright, trade secret or other proprietary
right to or from the Company or any of its Subsidiaries, (iii) the
grant - of - rights to manufacture, produce,
assemble, license, market, or sell its products to any other person
or affect the Company’s or any of its Subsidiaries’
exclusive right to develop, manufacture, assemble, distribute,
market or sell its products, or (iv) indemnification by the Company
or any of its Subsidiaries with respect to infringements of
proprietary rights. Except as set forth in the SEC Documents,
neither the Company nor any of its Subsidiaries has (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 incurred any other
liabilities individually in excess of $25,000 or in excess of
$100,000 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 the sale of its inventory in the ordinary course
of business. For the purposes of this Section, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and
proposed transactions involving the same Person (including Persons
that the Company has reason to believe are affiliated with each
other) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of this Section. Neither the
Company nor any of its Subsidiaries is a guarantor or indemnitor of
any indebtedness of any other person, firm or
corporation.
3.7 Conflicts of Interest .
Except as disclosed in the SEC Documents:
(a) Other than (i) standard employee
benefits generally made available to all employees, (ii) standard
director and officer indemnification agreements approved by the
Board of Directors, and (iii) the purchase of shares of the
Company’s capital stock and the issuance of options to
purchase shares of the Company’s Common
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Stock, in each instance, approved by the Board
of Directors, there are no agreements, understandings or proposed
transactions between the Company or any of its Subsidiaries and any
of the Company’s officers, directors, or Key Employees, or
any Affiliate thereof.
(b) Neither the Company nor any of
its Subsidiaries is indebted, directly or indirectly, to any of its
directors, officers or employees or to their respective spouses or
children or to any Affiliate of any of the foregoing, other than in
connection with expenses or advances of expenses incurred in the
ordinary course of business or employee relocation expenses. None
of the Company’s directors, officers or employees, or any
members of their immediate families, or any Affiliate of the
foregoing (i) are, directly or indirectly, indebted to the Company
or any of its Subsidiaries or, (ii) to the Company’s
knowledge, have any direct or indirect ownership interest in any
firm or corporation with which the Company or any of its
Subsidiaries is affiliated or with which the Company or any of its
Subsidiaries has a business relationship, or any firm or
corporation which competes with the Company or any of its
Subsidiaries except that directors, officers or employees or
stockholders of the Company may own stock in (but not exceeding two
percent of the outstanding capital stock of) publicly traded
companies that may compete with the
Company and its Subsidiaries. To the Company’s Knowledge,
none of the Company’s or any of its Subsidiaries’
directors, officers or employees or any members of their immediate
families or any Affiliate of any of the foregoing are, directly or
indirectly, interested in any contract with the Company or any of
its Subsidiaries. None of the directors or officers, or any members
of their immediate families, has any material commercial,
industrial, banking, consulting, legal, accounting, charitable or
familial relationship with any of the Company’s or any of its
Subsidiaries’ major business relationship partners, service
providers, joint venture partners, licensees and
competitors.
3.8 Rights of Registration and
Voting Rights. Except as disclosed in the SEC Documents, or as
provided in the Registration Rights Agreement, the Company is not
under any obligation to register under the 1933 Act any of its
currently outstanding securities or any securities issuable upon
exercise or conversion of its currently outstanding securities. To
the Company’s Knowledge, except as contemplated in the
Stockholders’ Agreement, no stockholder of the Company has
entered into any agreements with respect to the voting of capital
shares of the Company.
3.9 SEC Documents; Financial
Statements . Since January 1, 2003, the Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by it with the Commission under the 1933 Act and 1934
Act (the “ SEC Documents ”). The term SEC
Documents shall also include the Memorandum. The Company has
delivered to the Designated Representative, or made available
through the SEC’s website at http://www.sec.gov, true and
complete copies of the SEC Documents. As of their respective dates,
the financial statements of the Company disclosed in the SEC
Documents (the “ Financial Statements ”)
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 generally accepted accounting
principles, 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 financial position of the Company as of the
dates thereof and the results of its operations and cash flows for
the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Since December
31, 2003, except as disclosed in the SEC Documents, there has not
been: (i) any change in the assets, liabilities, financial
condition or operating results of the Company or any of its
Subsidiaries from that reflected in the Financial Statements,
except changes in the ordinary course of business that have not
caused, in the aggregate, a Material Adverse Effect; (ii) any
damage, destruction or loss, whether or not covered by insurance,
that would have a Material Adverse Effect; (iii) any waiver or
compromise by the Company or any of its Subsidiaries of a valuable
right or of a material debt owed to it; (iv) any satisfaction or
discharge of any lien, claim, or encumbrance or payment of any
obligation by the Company or any of its Subsidiaries, except in the
ordinary course of business and the satisfaction or discharge of
which would not have a Material Adverse Effect; (v) any material
change to a material contract or agreement by which the Company or
any of its Subsidiaries or any of their assets is bound or subject;
(vi) any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(vii) any resignation or termination of employment of any officer
or Key Employee of the Company or any of its Subsidiaries; (viii)
any mortgage, pledge, transfer of a security interest in, or lien,
created by the Company or any of its Subsidiaries, with respect to
any of their respective material properties or assets, except liens
for taxes not yet due or payable and liens that arise in the
ordinary course of business and do not materially impair the
Company’s or any of its Subsidiaries’ ownership or use
of such property or assets; (ix) any loans or guarantees made by
the Company or any of its Subsidiaries to or for the benefit of its
employees, officers or
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directors, or any members of their immediate
families, other than travel advances and other advances made in the
ordinary course of its business; (x) any declaration, setting aside
or payment or other distribution in respect of any of the
Company’s or any of its Subsidiaries’ capital stock, or
any direct or indirect redemption, purchase, or other acquisition
of any of such stock by the Company or any of its Subsidiaries;
(xi) any sale, assignment or transfer of any Company Intellectual
Property that could reasonably be expected to result in a Material
Adverse Effect; (xii) receipt of notice that there has been a loss
of, or material order cancellation by, any major customer of the
Company or any of its Subsidiaries; (xiii) to the Company’s
Knowledge, any other event or condition of any character, other
than events affecting the economy or the Company’s or any of
its Subsidiaries’ industries generally, that could reasonably
be expected to result in a Material Adverse Effect; or (xiv) any
arrangement or commitment by the Company or any of its Subsidiaries
to do any of the things described in this Section 3.9.
3.10 10b-5 . The SEC
Documents do not include any untrue statements of material fact,
nor do they omit to state any material fact required to be stated
therein necessary to make the statements made, in light of the
circumstances under which they were made, not
misleading.
3.11 No Default . Except as
disclosed in the SEC Documents, neither the Company nor any of its
Subsidiaries is in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in
any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it is or its
property is bound and neither the execution, nor the delivery by
the Company or any of its Subsidiaries, nor the performance by the
Company of its obligations under this Agreement or any of the
exhibits or attachments hereto will conflict with or result in the
breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any
lien or charge on any assets or properties of the Company or any of
its Subsidiaries under the Company’s Certificate of
Incorporation, bylaws, any material indenture, mortgage, deed of
trust or other material agreement applicable to the Company or any
of its Subsidiaries or instrument to which the Company or any of
its Subsidiaries is a party or by which it is bound, or any
statute, or any decree, judgment, order, rules or regulation of any
court or governmental agency or body having jurisdiction over the
Company or any of its Subsidiaries or their respective properties,
in each case which default, lien or charge is likely to cause a
Material Adverse Effect.
3.12 Intellectual Property
Rights . The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights (such rights
are collectively referred to herein as the “ Company
Intellectual Property ”) necessary to conduct their
respective businesses as now conducted and as presently proposed to
be conducted. The Company and its Subsidiaries do not have any
Knowledge of any infringement by the Company or its Subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service mark
registrations, trade secret or other similar rights of others, and
there is no claim, action or proceeding being made or brought
against, or to the Company’s Knowledge, being threatened
against, the Company or its Subsidiaries regarding trademark, trade
name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade
secret or other infringement; and the Company and its Subsidiaries
are unaware of any facts or circumstances which might give rise to
any of the foregoing. Other than with respect to commercially
available software products under standard end-user object code
license agreements, there are no outstanding options, licenses,
agreements, claims, encumbrances or shared ownership interests of
any kind relating to the foregoing, nor is the Company bound by or
a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, names, copyrights, trade
secrets, licenses, information, proprietary rights and processes of
any other person or entity. The Company has obtained and possesses
valid licenses to use all of the software programs present on the
computers and other software enabled electronic devices that it
owns or leases or that it has otherwise provided to its employees
for their use in connection with the Company’s
business.
3.13 Employee Relations .
Neither the Company nor any of its Subsidiaries is involved in any
labor dispute nor, to the Knowledge of the Company or any of its
Subsidiaries, is any such dispute threatened. None of the
Company’s or any of its Subsidiaries’ employees is a
member of a union and the Company and its Subsidiaries believe that
their relations with their employees are good. To the
Company’s Knowledge, none of its employees is obligated under
any contract (including licenses, covenants or commitments of any
nature) or other agreement, or subject to any judgment, decree or
order of any court or administrative agency, that would materially
interfere with such employee’s ability to promote the
interest of the Company or that would conflict with the
Company’s business. Neither the execution or delivery of this
Agreement or any other Transaction Agreement, nor the carrying on
of the Company’s business by the employees of the Company,
nor the conduct of the Company’s business as now
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conducted and as presently proposed to be
conducted, will, to the Company’s Knowledge, conflict with or
result in a breach of the terms, conditions, or provisions of, or
constitute a default under, any contract, covenant or instrument
under which any such employee is now obligated. The Company is not
delinquent in payments to any of its employees, consultants, or
independent contractors for any wages, salaries, commissions,
bonuses, or other direct compensation for any service performed for
it to the date hereof or amounts required to be reimbursed to such
employees, consultants, or independent contractors. The Company has
complied with all applicable state and federal equal employment
opportunit
