Exhibit 10.1
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MTM TECHNOLOGIES, INC.
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made on the 7th day of
December, 2004, by and among MTM Technologies, Inc., a New York corporation (the
"Company"), and the purchasers listed on Schedule I hereto, each of which is
herein referred to as an "Initial Purchaser" and the purchasers listed on
Schedule II hereto, each of which is herein referred to as an "Additional
Purchaser", and collectively, as the "Purchasers".
W I T N E S S E T H:
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to issue and sell to the Additional Purchasers on the Initial
Closing Date (i) convertible secured subordinated promissory notes in the
aggregate principal amount of up to $10,000,000 maturing on the Maturity Date
(each, a "Series A-4 First Tranche Note" and, collectively, the "Series A-4
First Tranche Notes") which, subject to Shareholder Approval, are convertible in
accordance with their terms into shares of Series A-4 Preferred Stock and (ii)
detachable warrants, subject to Shareholder Approval, to purchase up to 615,386
shares (as such amount may be adjusted in accordance with the terms thereof) of
Common Stock (each, a "Warrant" and, collectively, the "Warrants"), and the
Additional Purchasers shall purchase the Series A-4 First Tranche Notes and the
Warrants from the Company on the terms and conditions set forth herein;
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to grant to the Additional Purchasers an option to purchase on
any Subsequent Closing Date (i) convertible secured subordinated promissory
notes in the aggregate principal amount of up to $15,000,000 maturing on the
Maturity Date (each, a "Series A-4 Second Tranche Note" and, collectively, the
"Series A-4 Second Tranche Notes" and, together with the Series A-4 First
Tranche Notes, the "Series A-4 Notes") which are convertible in accordance with
their terms into shares of Series A-4 Convertible Preferred Stock, $0.001 par
value per share (the "Series A-4 Preferred Stock") and (ii) detachable warrants
to purchase up to 923,077 shares (as such amount may be adjusted in accordance
with the terms thereof) of Common Stock (each, an "Additional Warrant" and,
collectively, the "Additional Warrants" and together with the Warrants, the
"Series A-4 Warrants"), and such Additional Purchaser shall purchase such Series
A-4 Second Tranche Notes and such Additional Warrants from the Company on the
terms and conditions set forth herein;
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to grant to the Additional Purchasers an option to purchase on
any Subsequent Closing Date convertible secured subordinated promissory notes in
the aggregate principal amount of up to $22,500,000 maturing on the Maturity
Date (each, a "Series A-5 Note" and, collectively, the "Series A-5 Notes" and
together with the Series A-4 Notes, the "Notes") which are convertible in
accordance with their terms into shares of Series A-5 Convertible Preferred
Stock, $0.001 par value per share (the "Series A-5 Preferred Stock" and,
together with the Series A-4 Preferred Stock, the "New Series A Preferred
Stock") and such Additional Purchaser shall purchase such Series A-5 Notes from
the Company on the terms and conditions set forth herein;
WHEREAS, pursuant to that certain Shareholders' Agreement, dated May
21, 2004, between the Company, Pequot and certain principal shareholders of the
Company (the "Shareholders' Agreement"), the parties thereto agreed to the
imposition of certain restrictions and obligations on such parties including,
among other things, certain transfer restrictions of the Company's capital stock
owned by such parties, certain co-sale and right of first refusal rights and the
agreement between such parties to vote their shares of the Company's capital
stock to elect certain individuals to the board of directors of the Company (the
"Board of Directors");
WHEREAS, subject to the terms and conditions set forth herein, it is a
condition precedent to the Additional Purchasers' obligations hereunder, that,
on or before the Initial Closing Date, the Shareholders' Agreement will be
amended and restated in substantially the form attached hereto as Exhibit M (the
"Amended Shareholders Agreement") to grant such similar rights to the Additional
Purchasers, including, among other things, the right for such Additional
Purchasers to nominate certain individuals for the Board of Directors;
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to grant certain registration rights to the Additional
Purchasers with respect to (i) the shares of Common Stock issuable from time to
time upon conversion of the New Series A Preferred Stock purchased by the
Additional Purchasers and the exercise of the Series A-4 Warrants and any other
warrant to purchase Common Stock of the Company previously granted to the
Additional Purchasers and (ii) all other shares of Common Stock owned from time
to time by the Purchasers and, on or prior to the Initial Closing Date, the
Company will cause that certain Registration Rights Agreement, dated May 21,
2004, between the Company, Pequot and certain individuals named therein, to be
amended and restated in substantially the form attached hereto as Exhibit N (the
"Amended Registration Rights Agreement"), to grant the Purchasers such
registration rights;
WHEREAS, the Independent Committee of the Board of Directors has
approved the execution and delivery of this Agreement and the transactions
contemplated hereby;
WHEREAS, if the shareholders of the Company approve the Restated
Certificate of Incorporation attached hereto as Exhibit B (the "Restated
Certificate"), the authorization and issuance of (or the conversion of the Notes
into) the New Series A Preferred Stock, the exercise of the Series A-4 Warrants
and the issuance of any Common Stock issuable upon conversion or exercise of the
foregoing (the "Shareholder Approval") prior to the date of issuance of any
Series A-4 Second Tranche Notes and/or Series A-5 Notes, such Series A-4 Second
Tranche Notes and/or Series A-5 Notes will not be issued and the Company instead
will issue and sell to the Additional Purchasers (i) instead of the Series A-4
Second Tranche Note, (x) the aggregate number of shares of Series A-4 Preferred
Stock determined by dividing the principal amount of the Series A-4 Second
Tranche Notes (plus, at the option of each Additional Purchaser, any accrued but
unpaid interest thereon) by $3.25 (subject to proportional adjustments for stock
splits, dividends and similar adjustments made with respect to the Series A-4
Preferred Stock on or after the date hereof and prior to the date of issuance of
such Series A-4 Preferred Stock) (the "Original Issue Price") (together with the
Series A-4 Preferred Stock to be issued to the Additional Purchasers upon
conversion of the Series A-4 First Tranche Notes, the "Series A-4 Purchased
Shares") and (y) the Additional Warrants and/or (ii) instead of the Series A-5
Notes, the aggregate number of shares of Series A-5 Preferred Stock determined
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by dividing the principal amount of the Series A-5 Notes (plus, at the option of
each Additional Purchaser, any accrued but unpaid interest thereon) by the
Original Issue Price (the "Series A-5 Purchased Shares" and, together with the
Series A-4 Purchased Shares, the "Purchased Shares"), all on the terms and
conditions set forth below;
WHEREAS, on or prior to the execution of this Agreement, the
shareholders of the Company holding in the aggregate (i) a majority of the
outstanding shares of (x) Series A-1 preferred stock, par value $0.001 per
share, of the Company (the "Series A-1 Preferred Stock"), (y) Series A-2
preferred stock, par value $0.001 per share, of the Company (the "Series A -2
Preferred Stock"), and (z) Series A-3 preferred stock, par value $0.001 per
share, of the Company (the "Series A-3 Preferred Stock") and, together with the
Series A-1 Preferred Stock and the Series A-2 Preferred Stock, the "Old Series A
Preferred Stock"), each voting on an as converted basis, and (z) Common Stock,
voting together as a single class and (ii) a majority of the outstanding shares
of Old Series A Preferred Stock voting as a single class, shall be bound to vote
in favor of the Restated Certificate, the authorization and issuance of (or the
conversion of the Notes into) the New Series A Preferred Stock, the exercise of
the Series A-4 Warrants and the issuance of any Common Stock issuable upon
conversion or exercise of the foregoing, pursuant to a voting agreement in
substantially the form attached hereto as Exhibit C (the "Voting Agreement");
NOW, THEREFORE, in consideration of the premises and agreements
contained in this Agreement, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, THE PARTIES HEREBY
AGREE AS FOLLOWS:
1. Purchase and Sale of the Notes, Purchased Shares, Warrants and the
Additional Warrants.
1.1 Authorization of Issuance of the Notes, Purchased Shares, Warrants
and the Additional Warrants.
(a) Subject to the terms and conditions of this Agreement, on or prior
to the Initial Closing Date, the Company shall have authorized the issuance and
sale to the Additional Purchasers of (i) the Series A-4 First Tranche Notes
substantially in the form attached hereto as Exhibit D-1, and (ii) the Warrants,
substantially in the form attached hereto as Exhibit E-1.
(b) Subject to the terms and conditions of this Agreement, on or prior
to any Subsequent Closing Date, the Company shall have authorized the issuance
and sale to the Additional Purchasers of:
(i) If the Shareholder Approval has not been obtained, (x) (A)
the Series A-4 Second Tranche Notes to be issued at such Subsequent Closing
substantially in the form attached hereto as Exhibit D-2, and (B) the Additional
Warrants, substantially in the form attached hereto as Exhibit E-2, or (y) the
Series A-5 Notes to be issued at such Subsequent Closing or substantially in the
form attached hereto as Exhibit D-3; or
(ii) If the Shareholder Approval has been obtained, (x) (A) the
additional Series A-4 Purchased Shares to be issued at such Subsequent Closing,
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and (B) the Additional Warrants, or (y) the Series A-5 Purchased Shares in each
case to be issued and sold on such Subsequent Closing Date.
1.2 Purchase and Sale of Series A-4 First Tranche Notes and Warrants.
Subject to the terms and conditions of this Agreement, each Additional
Purchaser, severally and not jointly, agrees to purchase at the Initial Closing,
and the Company agrees to issue and sell to each such Additional Purchaser at
the Initial Closing (i) a Series A-4 First Tranche Note, dated as of the Initial
Closing Date in the original principal amount equal to the dollar amount set
forth opposite such Additional Purchaser's name under the heading "Series A-4
First Tranche Note Purchase Price" on Schedule III hereto and (ii) Warrants for
the number of shares of Common Stock equal to 20% of the number of shares of
Common Stock issued or issuable on conversion of Series A-4 Preferred Stock
issued or issuable on conversion of the principal amount of such Additional
Purchaser's Series A-4 First Tranche Notes purchased on the Initial Closing Date
and as set forth opposite such Additional Purchaser's name under the heading
"Number of Warrant Shares" on Schedule III hereto, in exchange for the amount
set forth opposite such Additional Purchaser's name under the heading "Series
A-4 First Tranche Note Purchase Price" on Schedule III hereto. The aggregate
purchase price for the Series A-4 First Tranche Notes shall not exceed
$10,000,000.
1.3 Purchase and Sale of Series A-4 Second Tranche Notes or Additional
Series A-4 Purchased Shares and Additional Warrants.
(a) At any time and from time to time, but in no event later than nine
(9) months after the Initial Closing Date, each Additional Purchaser may, in its
sole discretion, purchase (the "Series A-4 Purchaser Option") and require the
Company to sell and issue at one or more subsequent closings (each, a "Series
A-4 Subsequent Closing" and collectively, the "Series A-4 Subsequent Closings"),
(i) (A) if the Shareholder Approval has not been obtained, Series A-4 Second
Tranche Notes in an aggregate amount of not less than $2,500,000 or, (B) if the
Shareholder Approval has been obtained, additional Series A-4 Purchased Shares
(issued and sold at the Original Issue Price) in an aggregate amount of not less
than $2,500,000, and (ii) in each case with Additional Warrants for the number
of shares of Common Stock equal to 20% of the number of shares of Common Stock
issued or issuable on conversion of Series A-4 Preferred Stock issued or
issuable on conversion of the principal amount of such Additional Purchaser's
Series A-4 Second Tranche Notes purchased on such Subsequent Closing Date and as
set forth in the Series A-4 Notice of Exercise. At least 15 days prior to each
such Series A-4 Subsequent Closing, such Additional Purchaser shall give to the
Company a written notice (the "Series A-4 Notice of Exercise") which sets forth
the aggregate amount Series A-4 Second Tranche Notes or additional Series A-4
Purchased Shares and Additional Warrants that such Additional Purchaser desires
to purchase on such Series A-4 Subsequent Closing Date. At such Series A-4
Subsequent Closing, subject to the terms hereof, the Company shall sell and
issue and such Additional Purchasers shall purchase the Series A-4 Second
Tranche Notes or additional Series A-4 Purchased Shares and Additional Warrants
specified in such Series A-4 Notice of Exercise. The aggregate purchase price of
Series A-4 Second Tranche Notes or additional Series A-4 Purchased Shares and
Additional Warrants issued at all of the Series A-4 Subsequent Closings shall
not exceed $15,000,000; provided, that Pequot may purchase an aggregate amount
of $10,000,000 of such Series A-4 Second Tranche Notes or additional Series A-4
Purchased Shares and Additional Warrants at such Series A-4 Subsequent Closings
and Constellation may purchase an aggregate amount of $5,000,000 of such Series
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A-4 Second Tranche Notes or additional Series A-4 Purchased Shares and
Additional Warrants at such Series A-4 Subsequent Closings. Notwithstanding the
foregoing and to the greatest extent permissible by applicable securities law,
the Additional Purchasers who are parties to this Agreement as of the Initial
Closing Date may reallocate their respective purchase price percentages with
respect to the amounts of Series A-4 Second Tranche Notes or additional Series
A-4 Purchased Shares and Additional Warrants at any such Series A-4 Subsequent
Closing may be agreed upon by such Additional Purchasers; provided, that, prior
to the applicable Subsequent Closing Date, such Additional Purchasers have
provided the Company with timely notice of such reallocation.
(b) Notwithstanding anything contained in Section 1.3(a) to the
contrary, on or prior to the first anniversary of the Initial Closing Date the
Company may provide a written notice (the "Company Notice") to the Additional
Purchasers requesting that the Additional Purchasers purchase their respective
percentage amounts of (i)(A) if the Shareholder Approval has not been obtained,
Series A-4 Second Tranche Notes in an aggregate amount of not less than
$2,500,000 or (B) if the Shareholder Approval has been obtained, additional
Series A-4 Purchased Shares (issued and sold at the Original Issue Price) in an
aggregate amount of not less than $2,500,000 and (ii) in each case with the
Additional Warrants that such Additional Purchaser is entitled to purchase in
accordance with Section 1.3(a). Upon receipt of the Company Notice, the
Additional Purchasers shall have 15 days to provide notice to the Company of the
amount of Series A-4 Second Tranche Notes or additional Series A-4 Purchased
Shares and Additional Warrants, if any, such Additional Purchaser desires to
purchase (the "Series A-4 Purchaser Notice"). If the Company (i) does not
receive such Series A-4 Purchaser Notice from a Additional Purchaser or (ii) if
a Additional Purchaser desires to purchase less than the amount of such Series
A-4 Second Tranche Notes or additional Series A-4 Purchased Shares and
Additional Warrants that such Additional Purchaser is entitled to purchase
pursuant to Section 1.3(a) (such Additional Purchaser, in any such instance as
set forth in clauses (i) and (ii), a "Rejecting Purchaser") then:
(i) to the extent that any other Person purchases such Series A-4
Second Tranche Notes or additional Series A-4 Purchased Shares and Additional
Warrants that were originally allocated to the Rejecting Purchaser, the
Rejecting Purchaser shall forfeit its right to purchase any additional Series
A-4 Second Tranche Notes or additional Series A-4 Purchased Shares and
Additional Warrants and the aggregate amount of Series A-5 Notes and/or Series
A-5 Purchased Shares that such Rejecting Purchaser may purchase pursuant to this
Agreement shall be increased by an amount equal to one half of the amount of
Series A-4 Second Tranche Notes or additional Series A-4 Purchased Shares and
Additional Warrants purchased by such other Persons; or
(ii) to the extent that such Series A-4 Second Tranche Notes or
additional Series A-4 Purchased Shares and Additional Warrants that such
Rejecting Purchaser was entitled to purchase are not purchased by any other
Person, such Rejecting Purchaser shall retain its Series A-4 Purchaser Option
with respect to the amount of such Series A-4 Second Tranche Notes or additional
Series A-4 Purchased Shares and Additional Warrants that was not purchased by
such other Persons.
1.4 Purchase and Sale of Series A-5 Notes and Series A-5 Purchased
Shares.
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(a) At any time and from time to time, but in no event later than
twelve (12) months after the Initial Closing Date, each Additional Purchaser,
may, in its sole discretion, purchase (the "Series A-5 Purchaser Option") and
require the Company to sell and issue at one or more subsequent closings (each a
"Series A-5 Subsequent Closing" and collectively, the "Series A-5 Subsequent
Closings"), (i) (A) if the Shareholder Approval has not been obtained, Series
A-5 Notes in an aggregate amount of not less than $2,500,000 or, (B) if the
Shareholder Approval has been obtained, Series A-5 Purchased Shares (issued and
sold at the Original Issue Price) in an aggregate amount of not less than
$2,500,000, as set forth in the Series A-5 Notice of Exercise. At least 15 days
prior to each such Series A-5 Subsequent Closing, such Additional Purchaser
shall give to the Company a written notice (the "Series A-5 Notice of Exercise")
which sets forth the aggregate amount Series A-5 Notes or Series A-5 Purchased
Shares that such Additional Purchaser desires to purchase on such Series A-5
Subsequent Closing Date. At such Series A-5 Subsequent Closing, subject to the
terms hereof, the Company shall sell and issue and such Additional Purchasers
shall purchase the Series A-5 Notes or Series A-5 Purchased Shares specified in
such Series A-5 Notice of Exercise. The aggregate purchase price of Series A-5
Notes or Series A-5 Purchased Shares issued at all of the Series A-5 Subsequent
Closings shall not exceed $22,500,000; provided, that, subject to the
adjustments made in accordance with Section 1.3(b), Pequot may purchase an
aggregate amount of $10,000,000, plus any increase in such amount in accordance
with Section 1.3(b), of such Series A-5 Notes or Series A-5 Purchased Shares at
such Series A-5 Subsequent Closings and Constellation may purchase an aggregate
amount of $5,000,000, plus any increase in such amount in accordance with
Section 1.3(b), of such Series A-5 Notes or Series A-5 Purchased Shares at such
Series A-5 Subsequent Closings. Notwithstanding the foregoing and to the
greatest extent permissible by applicable securities law, the Additional
Purchasers who are parties to this Agreement as of the Initial Closing Date may
reallocate their respective purchase price percentages with respect to the
amounts of Series A-5 Notes or Series A-5 Purchased Shares at any such Series
A-5 Subsequent Closing may be agreed upon by such Additional Purchasers;
provided, that, prior to the applicable Subsequent Closing Date, such Additional
Purchasers have provided the Company with timely notice of such reallocation.
1.5 Certain Rights of the Additional Purchasers. Notwithstanding
anything contained in this Agreement to the contrary, if, prior to the
expiration of the applicable Purchaser Option, either Additional Purchaser
provides written notice to the other Additional Purchaser that such Additional
Purchaser does not intend on purchasing any additional (x) Series A-4 Second
Tranche Notes or additional Series A-4 Purchased Warrants and Additional
Warrants or (y) Series A-5 Notes or Series A-5 Purchased Shares, then the other
Additional Purchaser may purchase the Purchased Securities set forth in such
notice on the terms and conditions set forth in this Agreement prior to the
expiration of such applicable Purchaser Option.
1.6 Use of Proceeds. The Company agrees to use the net proceeds from
the sale and issuance of the Series A-3 Purchased Shares, Notes, Purchased
Shares and the Series A-4 Warrants (together, the "Purchased Securities")
pursuant to this Agreement for working capital, acquisition of assets or equity
interests in other entities and other general corporate purposes.
1.7 Initial Closing. The purchase and sale of the Series A-4 First
Tranche Notes and the Warrants shall take place at the offices of Xxxxxx Xxxx &
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Priest LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, promptly upon the
satisfaction or waiver of the closing conditions set forth in Section 5.1, 5.2
and 5.4 hereto, but not later than December 10, 2004, or on such other date and
at such other time as the Company and Additional Purchasers hereto mutually
agree upon in writing (which time and place are designated as the "Initial
Closing"). The date of the Initial Closing is referred to herein as the "Initial
Closing Date." At the Initial Closing, the Company shall deliver to each
Additional Purchaser (i) Series A-4 First Tranche Notes, in an original
principal amount equal to the dollar amount set forth opposite such Additional
Purchaser's name under the heading "Series A-4 First Tranche Note Purchase
Price" on Schedule III hereto and (ii) Warrants entitling such Additional
Purchaser to purchase the number of shares of Common Stock set forth opposite
such Additional Purchaser's name under the heading "Number of Warrant Shares" on
Schedule III hereto, all against payment in the amounts set forth opposite such
Additional Purchaser's name under the heading "Series A-4 First Tranche Note
Purchase Price" on Schedule III hereto, by wire transfer of immediately
available funds to such account as the Company designates. The Initial Closing
shall not occur, and the Company shall have no obligation to make such
deliveries, unless the Additional Purchasers purchase and pay for the aggregate
number of Series A-4 First Tranche Notes and the Warrants set forth on Schedule
III hereto. The Company shall pay any documentary stamp or similar issue or
transfer taxes due as a result of the issuance and sale of the Series A-3
Purchased Shares, Series A-4 First Tranche Notes and the Warrants.
1.8 Subsequent Closings.
Upon the exercise of the Series A-4 Purchaser Option or Series A-5
Purchaser Option and subject to Section 1.3(b) and the Restated Certificate and
the satisfaction or waiver of the closing conditions set forth in Sections 6.1,
6.3 and 6.4, Series A-4 Subsequent Closings and Series A-5 Subsequent Closings
shall take place at the offices of Xxxxxx Xxxx & Priest LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, on a date specified by the Company in writing that is
not less than 15 days following the later of (a) satisfaction of the conditions
set forth in Section 5.1 and Section 5.3 of this Agreement and (b) (i) the date
on which written notice with respect to the election of the applicable Purchaser
Option has been given to the Company or (ii) with respect to the Series A-4
Second Tranche Notes or additional Series A-4 Preferred Stock as provided in
Section 1.3(b), the date that is no earlier than 15 days following the date on
which the Additional Purchasers have received the Company Notice, or on such
other date and at such other time as the Company and Additional Purchasers
hereto mutually agree upon in writing (each such date and time of such Series
A-4 Subsequent Closing and such Series A-5 Subsequent Closing are designated as
a "Subsequent Closing", as applicable). The date of each applicable Subsequent
Closing is referred to herein as a "Subsequent Closing Date." At each Subsequent
Closing, the Company shall deliver to each Additional Purchaser (i) if the
Shareholder Approval has not been obtained, a Series A -4 Second Tranche Note or
Series A-5 Note, as the case may be, dated as of such Subsequent Closing Date,
in an original principal amount equal to the dollar amount set forth in the
Notice of Exercise with respect to such Additional Purchaser or (ii) if the
Shareholder Approval has been obtained, the number of shares of Series A-4
Preferred Stock or Series A-5 Preferred Stock, as the case may be, determined by
dividing the principal amount set forth in the Notice of Exercise with respect
to such Additional Purchaser by the Original Issue Price and (iii) whether or
not Shareholder Approval has been obtained, at any Series A-4 Subsequent Closing
Date, Additional Warrants for the number of shares of Common Stock equal to 20%
of the number of shares of Common Stock issued or issuable on conversion of
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Series A-4 Preferred Stock issued or issuable on conversion of such Additional
Purchaser's Series A-4 Second Tranche Notes purchased on such Subsequent Closing
Date.
2. Term of the Notes; Security for the Notes; Subordination; Collateral
Agent.
2.1 General. The Notes shall be issued in the aggregate principal
amount of up to $47,500,000 and shall bear interest, be subject to conversion
into shares of Series A-4 Preferred Stock or Series A-5 Preferred Stock and
otherwise be in the forms attached hereto as Exhibits X-0, X-0 and D-3. The full
payment of the principal and accrued interest on any Note shall be made on the
Maturity Date. For purposes of this Agreement, "Maturity Date", with respect to
any Note, shall mean the date not less than the later of (x) 150 days following
the Initial Closing Date or (y) if the SEC reviews the Company's filings seeking
Shareholder Approval, 180 days following the Initial Closing Date, on which
66-2/3% of the holders of the Notes make written demand to the Borrower for
payment of the Notes.
2.2 Security. The Notes shall be equally and ratably secured by all of
the assets of the Company and the Subsidiaries pursuant to (i) a security
agreement to be entered into on or prior to the Initial Closing Date by the
Company, the Additional Purchasers and the Collateral Agent, substantially in
the form attached hereto as Exhibit F (the "Security Agreement"), (ii) a
security agreement to be entered into on or prior to the Initial Closing Date by
each Subsidiary, the Additional Purchasers and the Collateral Agent,
substantially in the form attached hereto as Exhibit G (the "Subsidiary Security
Agreement"), (iii) and all other security agreements executed and delivered
after the Initial Closing Date by any Person which becomes a Subsidiary after
the Initial Closing Date, pursuant to which, in the cases of clauses (i), (ii)
and (iii), the Company and each Subsidiary grants to the Collateral Agent and
Additional Purchasers a first priority security interest, to the extent therein
provided, subject to the Liens existing on the date of such security agreements,
in all of the assets of the Company and such Subsidiary and (iv) a pledge
agreement to be entered into on or prior to the Initial Closing Date by each
Subsidiary and the Additional Purchasers, substantially in the form attached
hereto as Exhibit H (the "Pledge Agreement"). The Company represents that the
schedules attached to the Security Agreement and the Subsidiary Security
Agreement shall be complete and true in all material respects on or prior to the
Initial Closing Date.
2.3 Subordination. The right of repayment of principal of and interest
on the Notes and the security interest of the Additional Purchasers in the
assets of the Company shall be subordinated only to (a) the rights and security
interest of Textron Financial Corporation ("Textron") under the Amended and
Restated Loan and Security Agreement, dated as of May 21, 2004, by and among the
Company, Textron and certain of the Company's subsidiaries (including, without
limitation, such other subsidiaries of the Company as from time to time become
party thereto) (collectively with the Schedule to Amended and Restated Loan and
Security Agreement attached thereto, the "Senior Credit Agreement"), in
accordance with the Subordination Agreement in substantially the form attached
hereto as Exhibit I (the "Subordination Agreement") and (b) the rights of any
Senior Lender in connection with any Senior Credit Facility pursuant to an
subordination agreement containing terms no less favorable, as a whole, to the
Additional Purchasers than the terms of the Subordination Agreement.
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2.4 Subsidiary Security Arrangements. The payment of the principal of
and interest on the Notes by the Company shall be guaranteed by each Subsidiary
(each a "Subsidiary Guarantor" and together, the "Subsidiary Guarantors") listed
in Section 3.1 of the Disclosure Schedule attached hereto (the "Disclosure
Schedule") in accordance with the a subsidiary guarantee to be entered into on
or prior to the Initial Closing Date by each Subsidiary and the Additional
Purchasers, substantially in the form attached hereto as Exhibit J (the
"Subsidiary Guarantee") and secured by the collateral pursuant to the Security
Agreement, Pledge Agreement and the Subsidiary Security Agreement.
2.5 Collateral Agent. Pequot Private Equity Fund III, L.P. (or, in its
discretion, its investment advisor) shall act as collateral agent under the Loan
Documents (the "Collateral Agent") in accordance with the terms and subject to
the conditions to the obligations of the collateral agent as provided in this
Agreement and in the Security Agreement.
3. Representations and Warranties of the Company.
The Company hereby represents and warrants to each Additional
Purchaser the following, except as set forth on the Disclosure Schedule,
specifically identifying or cross-referencing the relevant Sections hereof,
which Disclosure Schedule shall be deemed to be part of the representations and
warranties as if made hereunder:
3.1 Organization and Qualification. Each of the Company and the
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation or organization as set
forth in Section 3.1 of the Disclosure Schedule and has the requisite power and
authority to own, lease and operate its assets, properties and business and to
carry on its business as it is now being conducted or proposed to be conducted.
Each of the Company and the Subsidiaries is duly qualified as a foreign
corporation to transact business, and is in good standing, in each jurisdiction
where it owns or leases real property or maintains employees or where the nature
of its activities make such qualification necessary, except where such failure
to qualify would not have a Material Adverse Effect.
3.2 Certificate of Incorporation and Bylaws. The Company has delivered
to the Additional Purchasers true, correct, and complete copies of the Company's
certificate of incorporation as in effect on the date hereof (the "Existing
Certificate") and the Company's bylaws as in effect on the date hereof (the
"Bylaws").
3.3 Corporate Power and Authority. Each of the Company and the
Subsidiary Guarantors has all requisite corporate power and authority to execute
and deliver the Transaction Documents to which it is a party. The Company has
all requisite corporate power and authority to issue and sell the Series A-4
First Tranche Notes and Warrants to the Additional Purchasers hereunder. The
Company and each Subsidiary Guarantor has all requisite corporate power and
authority to carry out and perform its obligations under the terms of the
Transaction Documents. The Company has all requisite corporate power and
authority to sell and issue the Notes and the Series A-4 Warrants. At the time
of conversion of the Notes, the Company will have all requisite corporate power
and authority to issue the Series A-4 Preferred Stock and Series A-5 Preferred
Stock issued or issuable on conversion of the Notes and the Common Stock
issuable upon conversion of such Series A-4 Preferred Stock or Series A-5
9
Preferred Stock and the exercise of the Warrants and the Additional Warrants
(such Series A-4 Preferred Stock, Series A-5 Preferred Stock and Common Stock
are, together, the "Conversion Shares"). The Conversion Shares have been duly
reserved for issuance and when issued will be duly and validly issued, fully
paid and nonassessable.
3.4 Capitalization.
Immediately prior to the date hereof, the authorized capital stock of
the Company consists of 100,000,000, of which (i) 80,000,000 are designated as
Common Stock; and (ii) 20,000,000 shares are designated as Series A Preferred
Stock, 4,200,000 of which are designated Series A-1 Preferred Stock of which
3,255,814 are issued and outstanding, 2,600,000 of which are designated Series
A-2 Preferred Stock of which 2,000,000 are issued and outstanding and 7,200,000
of which are designated Series A-3 Preferred Stock of which 3,846,154 are issued
and outstanding. Shares of the authorized Common Stock have been reserved as
follows: (i) 250,000 shares of the authorized Common Stock have been reserved
for issuance pursuant to the exercise of stock options granted or to be granted
after the date hereof under the 1993 Stock Option Plan of the Company, (ii)
350,000 shares of the authorized Common Stock have been reserved for issuance
pursuant to the exercise of stock options granted or to be granted after the
date hereof under the 1996 Stock Option Plan of the Company, (iii) 250,000
shares of the authorized Common Stock have been reserved for issuance pursuant
to the exercise of stock options granted or to be granted after the date hereof
under the 1998 Stock Option Plan of the Company, (iv) 350,000 shares of the
authorized Common Stock have been reserved for issuance pursuant to the exercise
of stock options granted or to be granted after the date hereof under the 2000
Long-Term Performance Plan of the Company, (v) 250,000 shares of the authorized
Common Stock have been reserved for issuance pursuant to the exercise of stock
options granted or to be granted after the date hereof under the 2002 Long-Term
Performance Plan of the Company, (vi) 3,000,000 shares of the authorized Common
Stock have been reserved for issuance pursuant to the exercise of stock options
granted or to be granted after the date hereof under the 2004 Equity Incentive
Plan of the Company (the stock options described in clauses (i) through (vi),
collectively, the "Options"), (vii) 4,200,000 shares of the authorized Common
Stock have been reserved for issuance upon conversion of the Series A-1
Preferred Stock, (viii) 2,600,000 shares of the authorized Common Stock have
been reserved for issuance upon conversion of the Series A-2 Preferred Stock,
(ix) 7,200,000 shares of the authorized Common Stock have been reserved for
issuance upon conversion of the Series A-3 Preferred Stock, (x) 500,000 shares
of the authorized Common Stock have been reserved for issuance pursuant to the
exercise of the Series A-1 Warrants, (xi) 400,000 shares of the authorized
Common Stock have been reserved for issuance pursuant to the exercise of the
Series A-2 Warrants, (xii) 1,107,692 shares of the authorized Common Stock have
been reserved for issuance pursuant to the exercise of the Series A-3 Warrants,
(xiii) 408,631 shares of Series A-1 Preferred Stock have been reserved for
issuance as dividends with respect to the Series A-1 Preferred Stock, (xiv)
251,017 shares of Series A-2 Preferred Stock have been reserved for issuance as
dividends with respect to the Series A-2 Preferred Stock, (xv) 695,123 shares of
Series A-3 Preferred Stock have been reserved for issuance as dividends with
respect to the Series A-3 Preferred Stock, (xvi) 191,598 shares of authorized
Common Stock have been reserved for issuance in connection with the Company's
acquisition of DataVox Technologies, Inc. and the Company's obligation under
certain Promissory Notes issued to the founders of DataVox Technologies, Inc.,
(xvii) 111,628 shares of the authorized Common Stock have been reserved for
10
issuance in connection with the Company's obligation under the "earnout"
provisions of the Asset Purchase Agreement, dated as of September 17, 2004, by
and between the Company and Network Catalyst, Inc., (xviii) 930,233 shares of
the authorized Common Stock have been reserved for issuance in connection with
the closing of the Company's proposed acquisition of the assets and business
operations of Vector ESP, Inc. and Vector ESP Management, Inc. and (xix)
1,090,909 shares of the authorized Common Stock have been reserved for issuance
in connection with the Company's obligation under the "earnout" provisions of
the Asset Purchase Agreement, dated as of December 1, 2004, by and among the
Company, Vector ESP, Inc., Vector ESP Management, Inc. and Vector Global
Services, Inc. The rights, privileges and preferences of the Series A-1
Preferred Stock, Series A-2 Preferred Stock and Series A-3 Preferred Stock are
as stated in the Restated Certificate. As of the date hereof, all issued and
outstanding shares of the Company's capital stock are duly authorized and
validly issued, are fully paid and nonassessable and are owned of record, and to
the Company's Knowledge, beneficially, by the shareholders and in the amounts
set forth in Section 3.4 of the Disclosure Schedule and have been issued in
accordance with applicable federal and state securities laws; a pro forma
capitalization table reflecting the issued and outstanding Common Stock, Series
A-1 Preferred Stock and Series A-2 Preferred Stock, the Series A-3 Preferred
Stock, Series A-4 Preferred Stock and Series A-5 Preferred Stock (assuming that
the Additional Purchasers purchase all of the Series A-4 Preferred Stock and
Series A-5 Preferred Stock that they are entitled to purchase pursuant to this
Agreement) and all options and warrants with respect thereto on a fully diluted
basis immediately after the Initial Closing Date (assuming no additional
issuances of securities between the date hereof and the Initial Closing Date) is
attached hereto as Exhibit K. Except as set forth in Section 3.4 of the
Disclosure Schedule or as provided in the Restated Certificate, there are no
options, warrants, conversion privileges, or preemptive or other rights or
agreements presently outstanding to purchase or otherwise acquire from the
Company any shares of the capital stock or other securities of the Company.
Except for the Voting Agreement and the Shareholders Agreement, the Company has
not entered into any agreements with any of its shareholders with respect to the
voting of capital shares of the Company and to the Knowledge of the Company none
of its shareholders are parties to such agreements. Except as aforesaid and as
contemplated in the Transaction Documents, the Company is not a party to any
agreement or understanding, and to its Knowledge, no shareholders are a party to
such an agreement or understanding, that affects or relates to the voting or
giving of written consents with respect to any security, or the voting by a
director, of the Company. Except as aforesaid, to the Company's Knowledge, no
shareholder has granted options or other rights to any entity (other than the
Company) to purchase any shares of Common Stock or other equity securities of
the Company from such shareholder. Except as aforesaid or as set forth in
Section 3.4 of the Disclosure Schedule, the Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise to acquire or
retire any shares of its capital stock. Except as set forth in Section 3.4 of
the Disclosure Schedule, the Company has not declared or paid any dividend or
made any other distribution of cash, stock or other property to its
shareholders. The Company has no Subsidiaries other than as set forth in Section
3.1 of the Disclosure Schedule. Except as set forth in Section 3.4 of the
Disclosure Schedule, no stock plan, stock purchase, stock option or other
agreement or understanding between the Company and any holder of any equity
securities or rights to purchase equity securities provides for acceleration or
other changes in the vesting provisions or other terms of such agreement or
11
understanding (including any reduction in the exercise price of any option,
warrant or similar security) as the result of any merger, consolidation or sale
of stock.
3.5 Authorization. The execution, delivery and performance by the
Company and each Subsidiary of the Transaction Documents to which the Company
and any such Subsidiary is a party, the sale, issuance and delivery of the
Purchased Securities and the performance of all of the obligations of the
Company and the Subsidiaries under each of the Transaction Documents have been
authorized by the Board of Directors, and, other than Shareholder Approval and
approvals required by the Nasdaq Stock Market ("Nasdaq"), no other corporate
action on the part of the Company or any Subsidiary and no other corporate or
other approval or authorization is required on the part of the Company, any
Subsidiary or any Person by Law or otherwise in order to make the Transaction
Documents the valid, binding and enforceable obligations (subject to (i) laws of
general application relating to bankruptcy, insolvency, and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive
relief, or other equitable remedies) of the Company and each Subsidiary that is
a party thereto. Each of the Transaction Documents, when executed and delivered
by each of the Company and each Subsidiary that is a party thereto, will
constitute a valid and legally binding obligation of the Company and each
Subsidiary that is a party thereto, enforceable against the Company and such
Subsidiaries that are parties thereto in accordance with its respective terms,
subject to (i) laws of general application relating to bankruptcy, insolvency,
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief, or other equitable remedies.
3.6 Title to Properties and Assets; Leases; Insurance.
(a) Neither the Company nor any Subsidiary currently owns any real
property and has never owned any real property. Each of the Company and each
Subsidiary has good and marketable title to or has, or will have, concurrently
with the execution hereof, a valid leasehold interest in, or license to use, all
of the property or assets used by it or located on its premises and necessary
for the conduct of business as presently conducted, free and clear of all Liens,
other than those which together do not have a Material Adverse Effect (the
"Permitted Liens").
(b) With respect to the insurance policies and fidelity bonds covering
the assets, business, equipment, properties, operations, employees, officers and
directors of the Company and each Subsidiary, there is no claim by the Company
pending under any of such policies or bonds as to which coverage has been denied
or disputed by the underwriters of such policies or bonds which would have a
Material Adverse Effect. All premiums due and payable under all such policies
and bonds have been paid and the Company and each Subsidiary is otherwise in
compliance in all material respects with the terms of such policies and bonds.
The Company has no Knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies. The Company and each
Subsidiary maintains insurance in such amounts, including (as applicable)
self-insurance, retainage and deductible arrangements, and of such a character
as is reasonable for companies engaged in the same or similar business similarly
situated.
3.7 Related-Party Transactions. Except as set forth in Section 3.7 of
the Disclosure Schedule, no employee, officer, shareholder, director or
12
consultant of the Company or any Subsidiary or member of the immediate family
(defined as parents, spouse, siblings or lineal descendants) of any such officer
or director is indebted to the Company or any Subsidiary for borrowed money, and
neither the Company nor any Subsidiary is indebted for borrowed money (or
committed to make loans or extend or guarantee credit) to any of them other than
for reimbursement of expenses incurred in connection with their service to the
Company, and amounts accrued but not yet due to employees and other service
providers. To the Company's Knowledge, except as provided for in the Transaction
Documents and except as set forth in Section 3.7 of the Disclosure Schedule, (a)
no employee, officer, shareholder, director or consultant of the Company or any
Subsidiary or any member of the immediate family of any such officer or director
is, directly or indirectly, interested in any Material Contract or has any other
material business relationship with the Company or any Subsidiary, except stock
ownership in and employment by the Company and (b) no officer, director of the
Company or any Subsidiary or any member of the immediate family of such officer
or director has any material business relationship with any competitor of the
Company or any Subsidiary.
3.8 Permits; Compliance with Applicable Law. Except as set forth on
Section 3.8 of the Disclosure Schedule, the Company and each Subsidiary has all
material franchises, permits, licenses, authorizations, approvals, registrations
and any similar authority (the "Permits") necessary for the conduct of its
business as now being conducted by it and believes it can obtain any similar
authority for the conduct of its business as currently planned by the Company
and the Subsidiaries to be conducted. The Permits shall include, without
limitation, export control-related licenses and registrations and industrial
security clearances (facility and personnel clearances) as appropriate for
conduct of the Company's and Subsidiaries' businesses the absence of which would
have a Material Adverse Effect. Neither the Company nor any Subsidiary is in
violation in any material respect of, or default in any material respect under,
any such Permits. All such Permits are in full force and effect, and to the
Company's Knowledge, no violations in any material respect have been recorded in
respect of any such Permits; no proceeding is pending or, to the Company's
Knowledge, threatened to revoke or limit any such Permit; and no such Permit
will be suspended, cancelled or adversely modified as a result of the execution
and delivery of Transaction Documents. The Company and each Subsidiary is in
compliance in all respects with all applicable laws, except where the failure to
so comply would not have a Material Adverse Effect.
3.9 Proprietary Rights.
(a) The Company and the Subsidiaries are the sole owners, free and
clear of any Liens, other than Permitted Liens, or have a valid license, without
the payment of any royalty (except with respect to off-the-shelf software that
is licensed by the Company or a Subsidiary) and otherwise on commercially
reasonable terms, to, all material Proprietary Rights. As used herein, the term
"Proprietary Rights" means the Company's or the Subsidiaries' patents,
trademarks, trade names, service marks, logos, designs, formulations,
copyrights, and other trade rights and all registrations and applications
therefor, all know-how, trade secrets, technology or processes, research and
development, all Internet domain addresses, Web sites and computer programs,
data bases and software documentation and all other intellectual property owned,
licensed or otherwise used by the Company and the Subsidiaries (other than
off-the-shelf software that is licensed by the Company or a Subsidiary). Set
forth in Section 3.9(a) of the Disclosure Schedule is a true and correct list of
13
all patents, trademarks, trade names, service marks, logos, and registered
copyrights, as well as a list of all material proprietary software owned or
licensed by the Company and the Subsidiaries. Section 3.9(a) of the Disclosure
Schedule also indicates which of such items have been patented or registered or
are in the process of application for the same. The Company and each Subsidiary
have taken all reasonable actions to protect its rights in material Proprietary
Rights owned by it. The rights of the Company and each Subsidiary in the
material Proprietary Rights are valid and enforceable. Except as disclosed in
Schedule 3.9(a) of the Disclosure Schedule, neither the Company nor any
Subsidiary has received any written demand, claim, notice or inquiry from any
person or entity in respect of the material Proprietary Rights which challenges,
threatens to challenge or inquires as to whether there is any basis to
challenge, the validity of, or the rights of the Company and the Subsidiaries in
the material Proprietary Rights, and the Company has no Knowledge of any basis
for any such challenge. To the Company's Knowledge, neither the Company nor any
Subsidiary is in violation or infringement of, and has not violated or
infringed, any intellectual property rights of any other person or entity. To
the Company's Knowledge, except as set forth in Section 3.9(a) of the Disclosure
Schedule, no third party is infringing on the rights of the Company and the
Subsidiaries in and to the material Proprietary Rights. Except on an
arm's-length basis for value and other commercially reasonable terms, neither
the Company nor any Subsidiary has granted any license with respect to the
material Proprietary Rights to any person or entity.
(b) Also set forth in Section 3.9(b) of the Disclosure Schedule is a
true and complete list of all material software currently licensed or used by
the Company and the Subsidiaries in operating and maintaining its business,
excluding all off-the-shelf or shrink-wrap licensed software (collectively the
"Company Software"). The Company and the Subsidiaries either owns or has valid,
royalty free and fully paid licenses for all of the Company Software.
(c) Neither the Company nor any Subsidiary is aware that any 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 interfere with
their duties to the Company or that would conflict with the Company's or any
Subsidiaries' businesses, as presently proposed to be conducted. The current and
former employees and consultants of the Company described in Section 3.9(c) of
the Disclosure Schedule have entered into a valid and binding written agreements
with the Company sufficient to vest title in the Company of all Proprietary
Rights created by such employee in the scope of his or her employment with the
Company. Neither the Company nor any Subsidiary generally requires any of its
respective employees, other than employees and consultants in the information
technology area, to enter into a proprietary information and inventions
agreement. Neither the Company nor any Subsidiary is aware that any of its
current or former officers or consultants are in violation thereof, and the
Company and each Subsidiary will use its diligent efforts to prevent any such
violation. No employee, officer or consultant of the Company or any Subsidiary
has excluded works or inventions made prior to his or her employment with the
Company or such Subsidiary from his or her assignment of inventions pursuant to
such employee, officer or consultant's proprietary information and inventions
agreement. Neither the Company nor any Subsidiary believes it is or will be
necessary to utilize any inventions, trade secrets or proprietary information of
any of its employees (or persons it intends to hire) made prior to their
employment by the Company or any Subsidiary, except for inventions, trade
secrets or proprietary information that have been assigned to the Company or
14
such Subsidiary. If any Proprietary Rights have been conceived, developed or
created by any person or entity acting as an independent contractor, the Company
and each Subsidiary has irrevocably obtained worldwide, perpetual (except as
otherwise provided under any applicable laws) ownership of, and is the exclusive
owner of, all such Proprietary Rights by operation of law or by valid
assignment.
(d) The Company and each Subsidiary takes reasonable measures to
protect the confidentiality of the Proprietary Rights, including requiring
employees and independent contractors having access thereto to execute written
non-disclosure agreements. To the Knowledge of the Company, no Proprietary
Rights have been disclosed or authorized to be disclosed to any person or
entity, including any employee, agent or contractor, other than pursuant to a
non-disclosure agreement that adequately protects the proprietary interests of
the Company and the Subsidiaries in and to such Proprietary Rights. To the
Knowledge of the Company, no party to any non-disclosure agreement relating to
the Proprietary Rights is in breach thereof.
(e) Neither the execution nor delivery of this Agreement, the Existing
Certificate, the Bylaws or the Transaction Documents, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as presently proposed will, to the Knowledge of the Company,
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 employee is now obligated.
(f) Section 3.9(f) of the Disclosure Schedule contains a complete and
accurate list of all license and other agreements relating to the material
Proprietary Rights.
3.10 Material Contracts. (a) All material agreements of the Company
(collectively, the "Material Contracts") are included as exhibits to the Company
filings with the SEC. The SEC Reports (as hereinafter defined) include all of
the current assets of the Company and all financing arrangements of the Company
relating to current assets or current liabilities of the Company.
(b) Assuming the due execution and delivery by the other parties
thereto, each of such Material Contracts is as of the date hereof legal, valid
and binding, and in full force and effect, and enforceable in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency, and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief, or other equitable remedies. Except as set forth
in Section 3.10(b) of the Disclosure Schedule or in the SEC Reports, there is no
material breach, violation or default by the Company or any of the Subsidiaries
(or any other party) under any such Material Contract, and to the Company's
Knowledge, (x) no Material Contract has expired or been terminated in accordance
with its terms and (y) no event (including, without limitation, the transactions
contemplated by this Agreement) has occurred which, with notice or lapse of time
or both, would (A) constitute a material breach, violation or default by the
Company or any Subsidiary (or any other party) under any such Material Contract,
or (B) give rise to any Lien (other than a Permitted Lien) or right of
termination, modification, cancellation, prepayment, suspension, limitation,
revocation or acceleration against the Company or any Subsidiary under any such
Material Contract. Except as set forth in Section 3.10(b) of the Disclosure
Schedule or in the SEC Reports, neither the Company nor any Subsidiary is and,
15
to the Company's Knowledge, no other party to any of such Material Contract is
in arrears in respect of the performance or satisfaction of any material terms
or conditions on its part to be performed or satisfied under any of such
Material Contract, and neither the Company nor any Subsidiary has and, to the
Company's Knowledge, no other party thereto has granted or been granted any
material waiver or indulgence under any of such Material Contract or repudiated
any provision thereof.
3.11 Absence of Undisclosed Liabilities. Except as set forth in the
SEC reports or arising in the ordinary course since the date of the most recent
balance sheet filed with the SEC, the Company does not have any liabilities of
any type, whether absolute or contingent to the Company's Knowledge.
3.12 Absence of Conflicts. The Company is not in violation of or
default under any provision of its Existing Certificate or Bylaws. Except as set
forth in Section 3.12 of the Disclosure Schedule, the execution, delivery, and
performance of, and compliance with the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby, have not and
will not:
(a) violate, conflict with or result in a breach of any provision of
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any Lien
(other than a Permitted Lien) upon any of the assets, properties or business of
the Company and the Subsidiaries under, any of the terms, conditions or
provisions of (i) the Existing Certificate or the Bylaws, or (ii) any Material
Contract; or
(b) violate any judgment, ruling, order, writ, injunction, award,
decree, or any Law or regulation of any court or federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority which is applicable to the Company or any Subsidiary or any of their
assets, properties or businesses, which violation would have a Material Adverse
Effect.
3.13 Litigation. Except as set forth in Section 3.13 of the Disclosure
Schedule, there is no action, claim, litigation, tax or compliance audit, suit
or proceeding, regulatory or administrative enforcement action or governmental
inquiry or investigation (including, without limitation, a defective pricing
investigation or claim or other proceeding in connection with the Company's
contracts), pending, or, to the Company's Knowledge, any threat thereof, against
the Company or any Subsidiary or any of their officers or directors or the
assets of the Company or any Subsidiary. To the Company's Knowledge, there is no
reason to believe that any of the foregoing may occur which, in the aggregate,
would have a Material Adverse Effect. Neither the Company nor any Subsidiary is
subject to any outstanding judgment, order or decree directed against the
Company or any Subsidiary or any officer or director of any thereof. Except as
set forth in Section 3.13 of the Disclosure Schedule, there is no action, suit,
proceeding or investigation into the possibility thereof by the Company or any
Subsidiary currently pending or that the Company or any Subsidiary presently
intends to initiate against a third party.
3.14 Consents. No consent, approval, waiver or authorization, or
designation, declaration, notification, or filing with any person or entity
(governmental or private), on the part of the Company or any Subsidiary is
16
required in connection with the valid execution, delivery and performance of the
Transaction Documents, the offer, sale or issuance of the Purchased Securities
or the consummation of any other transaction contemplated hereby or by the
Purchased Shares or the Warrants (other than such notifications or filings
required under applicable federal or state securities laws, if any), except for
such consents, approvals, waivers, authorizations, designations, declarations,
notifications, or filings that will be received prior to or as of the Initial
Closing Date.
3.15 Labor Relations; Employees. Set forth in Section 3.15 of the
Disclosure Schedule is a true and correct list of the employees of the Company,
which list provides, among other things, the name, title, job description and
salary information concerning each such employee, as well a true and correct
list of each employee who holds an H-1B "Specialty Occupation" Visa, if any, all
as of November 30, 2003. Except as set forth in Section 3.15 of the Disclosure
Schedule, neither the Company nor any Subsidiary is delinquent in payments with
respect to any such employee, for any wages, salaries, commissions, bonuses or
other direct compensation for any services performed by the date hereof or
amounts required to be reimbursed to any employee as of the date hereof. The
Company and each Subsidiary is in compliance in all material respects with all
laws and orders relating to the employment of labor and classification of
persons as employees, including, without limitation, all such laws and orders
relating to wages, hours, discrimination, civil rights, safety and the
collection and payment of withholding and/or Social Security taxes and similar
taxes and the provision of employee benefits. To the Company's Knowledge, no
officer, division leader or other significant employee of the Company or any
Subsidiary has any current plans to terminate his employment with the Company or
such Subsidiary. Except as disclosed in the SEC Reports, to the Company's
Knowledge neither the Company nor any Subsidiary employs members of any labor
union. Except for the employment agreements listed on Section 3.15 of the
Disclosure Schedule, no employee of the Company or any Subsidiary has been
granted the right to continued employment by the Company or any such Subsidiary
or to any material compensation following termination of employment with the
Company or any such Subsidiary.
3.16 Employee Benefit Plans. (a) Except as set forth in the SEC
Reports or Section 3.16(a) of the Disclosure Schedule, the Company and the
Subsidiaries have no employment agreements or labor or collective bargaining
agreements and there are no employee benefit or compensation plans, agreements,
arrangements or commitments (including "employee benefit plans," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) maintained by the Company or any Subsidiary for any employees of the
Company or any Subsidiary or with respect to which the Company or any Subsidiary
has liability, or makes or has an obligation to make contributions (each a
"Company Employee Plan" and together the "Company Employee Plans").
(b) Except as set forth in Section 3.16(b) of the Disclosure Schedule,
each Company Employee Plan that is an employee welfare benefit plan as defined
under Section 3(l) of ERISA is funded through an insurance company contract.
Except as set forth in Section 3.16(b) of the Disclosure Schedule, each Company
Employee Plan by its terms and operation is in compliance in all material
respects with all applicable laws and all required filings, if any, with respect
to such Company Employee Plan has been made. Except as set forth in Section
3.16(b) of the Disclosure Schedule, neither the Company nor any entity that is
or was at any time treated as a single employer with the Company under Section
17
414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the
"Code") has at any time maintained, contributed to or been required to
contribute to or has any liability with respect to, any plan subject to Title IV
of ERISA (including, without limitation, any Multiemployer Plan). Except as set
forth in Section 3.16(b) of the Disclosure Schedule, the events contemplated by
this Agreement (either alone or together with any other event) will not (i)
entitle any employees to severance pay, unemployment compensation, or other
similar payments under any Company Employee Plan or law, (ii) accelerate the
time of payment or vesting or increase the amount of benefits due under any
Company Employee Plan or compensation to any employees of the Company or any
Subsidiary or (iii) result in any payments (including parachute payments) under
any Company Employee Plan or Law becoming due to any employee.
3.17 Tax Returns, Payments and Elections. The Company and each
Subsidiary has filed all tax returns and reports (including information returns
and reports) as required by law except to the extent that the failure to so file
did not and does not have a Material Adverse Effect. These returns and reports
are true and correct in all material respects. The Company and each Subsidiary
has paid or made provision for payment of all taxes and other assessments shown
as due on such returns. The provision for taxes of the Company and the
Subsidiaries as shown in the Financial Statements (as hereinafter defined) is
adequate in all material respects for all taxes, assessments and governmental
charges due or accrued as of the date thereof with respect to its business,
properties and operations. Neither the Company nor any Subsidiary has elected
pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to be
treated as a Subchapter S corporation pursuant to Section 1362(a) or a
collapsible corporation pursuant to Section 341(f) of the Code, nor has the
Company or any Subsidiary made any other elections pursuant to the Code (other
than elections that relate solely to methods of accounting, depreciation or
amortization) that would have a Material Adverse Effect. Neither the Company nor
any Subsidiary has had any tax deficiency proposed or assessed against it by the
Internal Revenue Service or any other foreign, federal, state or local taxing
authority and none have been asserted in writing or, to the Company's Knowledge,
threatened at any time for additional taxes. Neither the Company nor any
Subsidiary has executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge and none of the
foreign, federal, state or local income or franchise tax or sales or use tax
returns have ever been audited by governmental authorities. Since the date of
the Financial Statements, neither the Company nor any Subsidiary has incurred
any taxes, assessments or governmental charges other than in the ordinary course
of business. The Company and each Subsidiary has withheld or collected from each
payment made to each of its respective employees, the amount of all taxes
(including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes) and foreign taxes
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositories.
3.18 Brokers or Finders. Except as set forth in Section 3.18 of the
Disclosure Schedule, neither the Company nor any Subsidiary has incurred, or
will incur, directly or indirectly, as a result of any action taken by the
Company or any Subsidiary, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
the issuance of the Purchased Securities or any transaction contemplated hereby
or thereby. The Company agrees to indemnify and hold harmless each Additional
Purchaser from any liability for any commission or compensation in the nature of
a finder's fee (and the costs and expenses of defending against such liability
18
or asserted liability) for which the Company, any Subsidiary or any of their
respective officers, employees or representatives is responsible.
3.19 Offering Exemption. Assuming the truth and accuracy of the
representations and warranties contained in Section 5, the offer and sale of the
Purchased Securities as contemplated hereby and the issuance and delivery to the
Additional Purchasers of the Purchased Securities and the Conversion Shares, are
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), and will be registered or qualified (or exempt from
registration or qualification) under applicable state securities and "blue sky"
laws, as currently in effect.
3.20 Environmental Matters.
(a) The Company and each Subsidiary complies and has at all times
complied with all federal, state and local laws, judgments, decrees, orders,
consent agreements, authorizations, permits, licenses, rules, regulations,
common or decision law (including, without limitation, principles of negligence
and strict liability) relating to the protection, investigation or restoration
of the environment (including, without limitation, natural resources) or the
health or safety matters of humans and other living organisms, including the
Resource Conservation and Recovery Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Federal
Clean Water Act, as amended, the Federal Clean Air Act, as amended, the Toxic
Substances Control Act, or any state and local analogue (hereinafter
"Environmental Laws"), except where the failure to comply would not reasonably
be expected to have a Material Adverse Effect.
(b) Except as set forth in Section 3.20(b) of the Disclosure Schedule,
(i) the Company has no Knowledge of any claim, and has not received notice of a
written complaint, order, directive, claim, request for information or citation,
and to the Company's Knowledge no proceeding has been instituted raising a claim
against the Company or any Subsidiary or any predecessor or any of their
respective real properties now or formerly owned, leased or operated or other
assets indicating or alleging any damage to the environment or any liability or
obligation under or violation of any Environmental Law and (ii) neither the
Company nor any Subsidiary is subject to any order, decree, injunction or other
directive of any Governmental Authority.
(c) Except as set forth in Section 3.20(c) of the Disclosure Schedule,
(i) neither the Company nor any Subsidiary has used and, to the Company's
Knowledge, no other person has used any portion of any property currently or
previously owned, operated or leased by the Company or any Subsidiary for the
generation, handling, processing, treatment, storage or disposal of Hazardous
Materials except in accordance with applicable Environmental Laws; (ii) neither
the Company nor any Subsidiary owns or operates any underground tank or other
underground storage receptacle for Hazardous Materials, any asbestos-containing
materials or polychlorinated biphenyls, and, to the Company's Knowledge, no
underground tank or other underground storage receptacle for Hazardous
Materials, asbestos-containing materials or polychlorinated biphenyls are
located on any portion of any property currently owned, operated or leased by
the Company or any Subsidiary and (iii) to the Company's Knowledge, neither the
19
Company nor any Subsidiary has caused or suffered to occur any Releases or
threatened Releases of Hazardous Materials on, at, in, under, above, to, from or
about any property currently or previously owned, operated or leased by the
Company or any Subsidiary.
(d) The execution, delivery and performance of this Agreement is not
subject to any Environmental Laws which condition, restrict or prohibit the
sale, lease or other transfer of property or operations, including any so-called
"environmental cleanup responsibility acts" or requirements for the transfer of
permits, approvals, or licenses. To the Company's Knowledge, there have been no
environmentally related audits, studies, reports, analyses (including soil and
groundwater analyses), or investigations of any kind performed with respect to
the currently or previously owned, leased, or operated properties of the Company
or any Subsidiary.
3.21 Offering of Purchased Shares and Warrants. No form of general
solicitation or general advertising was used by the Company or any of its agents
or representatives in connection with the offer and sale of the Purchased
Securities. Neither the Company nor, to the Company's Knowledge, any agent
acting on the Company's behalf has, directly or indirectly, offered the
Purchased Securities of the Company for sale to or solicited any offers to buy
the Purchased Securities of the Company from, or otherwise approached or
negotiated with respect thereto with any other potential purchaser.
3.22 SEC Reports; Disclosure. (a) The Company has filed all required
forms, reports and documents with the Securities and Exchange Commission (the
"SEC") since April 1, 2001, each of which has complied in all material respects
with all applicable requirements of the Securities and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder, each as in effect on the date such forms, reports and
documents were filed. The Company has heretofore delivered to the Additional
Purchasers, in the form filed with the SEC (including any amendments thereto)
(i) its Annual Report on Form 10-K for the years ended March 31, 2004, 2003 and
2002, (ii) all definitive proxy statements relating to the Company's meeting of
shareholders (whether annual or special) held since April 1, 2004 and (iii) all
other reports or registration statements filed by the Company with the SEC since
April 1, 2004 (the items in clauses (i), (ii) and (iii) collectively, the "SEC
Reports").
(b) Except as set forth in Section 3.22(b) of the Disclosure Schedule,
none of (a) this Agreement (including, without limitation, the Disclosure
Schedule and the Schedules and Exhibits attached hereto), (b) the Existing
Certificate, (c) the Bylaws, (d) any other Transaction Documents, or (e) the SEC
Reports contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein in
light of the circumstances under which they were made not misleading. There is
no fact which, to the Knowledge of the Company, has not been disclosed to the
Additional Purchasers, which could be expected to have a Material Adverse Effect
on the ability of the Company and each Subsidiary to perform its obligations
under the Existing Certificate, the Bylaws or the Transaction Documents.
(c) Except as disclosed in the SEC Reports, since April 1, 2004, there
has not been any change, or any application or any request for any change, by
the Company or any of its Subsidiaries in accounting principles, methods or
policies for financial accounting or tax purposes.
20
(d) Except as set forth in Section 3.22(d) of the Disclosure Schedule,
the Company is not aware of any correspondence (other than routine
communications), action or proposed or threatened action by the SEC or Nasdaq
with regard to the Company since April 1, 2004.
3.23 Financial Statements. Included in the SEC Reports are the audited
financial statements of the Company and its Subsidiaries as at and for the years
ended March 31, 2004, 2003 and 2002 and the unaudited financial statements of
the Company and its Subsidiaries for the fiscal quarters ended June 30 and
September 30, 2004 (the "Financial Statements"). Except as set forth on Schedule
3.23 of the Disclosure Schedule, the Financial Statements have been prepared in
accordance with GAAP and fairly present the financial condition and operating
results of the Company and its Subsidiaries as of the date, and for the period,
indicated therein, except that the unaudited financial statements as at and for
the quarters ended June 30, 2004 and September 30, 2004 are subject to normal
year-end adjustments and do not contain all notes required under GAAP. Except as
set forth in the Financial Statements, the Company and its Subsidiaries have no
liabilities, obligations or commitments of any nature (whether accrued,
absolute, contingent, unliquidated or otherwise, due or to become due and
regardless of when addressed), which are required to be included in the
Financial Statements in accordance with GAAP other than (a) liabilities that are
listed on Section 3.23 of the Disclosure Schedule, (b) liabilities that have
arisen in the ordinary course of business since the date of the Company's most
recent quarterly report on Form 10-Q and have not had and could not reasonably
be expected to have a Material Adverse Effect and (c) obligations to perform
after the date hereof any contracts or agreement which have been disclosed or
which are not required to be disclosed in the SEC Reports because such contracts
and agreements are not material to the Company. Except as disclosed in the
Financial Statements, neither the Company nor any Subsidiary is a direct or
indirect guarantor or indemnitor of any indebtedness of any other person or
entity.
3.24 Changes. Except as expressly contemplated by the Existing
Certificate, the Bylaws and the Transaction Documents, as set forth in Section
3.24 of the Disclosure Schedule or as disclosed in the SEC Reports, since
September 30, 2004 there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company or any Subsidiary from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not created, in the aggregate, a Material Adverse Effect,
(b) any intentional waiver or cancellation of any material right of
the Company or any Subsidiary, or the cancellation of any material debt or claim
held by the Company or any Subsidiary,
(c) any payment, discharge or satisfaction of any material claim,
liability or obligation of the Company or any Subsidiary other than in the
ordinary course of business,
(d) any Lien (other than Permitted Liens) upon the assets of the
Company or any Subsidiary that would be prohibited by the terms of the Existing
Certificate,
21
(e) any declaration or payment of dividends on, or other distribution
with respect to, or any direct or indirect redemption or acquisition of, any
securities of the Company or any Subsidiary other than the Purchased Securities,
(f) any sale, assignment or transfer of any material, tangible or
intangible assets of the Company or any Subsidiary except in the ordinary course
of business,
(g) any loan by the Company or any Subsidiary to any officer,
director, employee, consultant or shareholder of the Company or any Subsidiary
(other than advances to such persons in the case of travel, entertainment or
other similar advances in the ordinary course of business),
(h) any material increase, direct or indirect, in the compensation
paid or payable to any officer or director of the Company or any Subsidiary or,
other than in the ordinary course of business, to any other employee, consultant
or agent of the Company or any Subsidiary,
(i) any material change in the accounting methods, practices or
policies of the Company or any Subsidiary,
(j) any indebtedness incurred for borrowed money by the Company or any
Subsidiary other than in the ordinary course of business,
(k) any material adverse change in the manner of business or
operations of the Company or any Subsidiary (including, without limitation, any
accelerations or deferral of the payment of any material accounts payable or
other current, material liabilities or deferral of the collection of any
material accounts or notes receivable),
(l) any Capital Expenditures or commitments therefor by the Company or
any Subsidiary that aggregate in excess of $250,000 for any twelve-month period,
(m) any issuance of any stock, bonds or other securities of the
Company or any Subsidiary,
(n) any amendment to the Existing Certificate, Bylaws or other
organizational documents of the Company or any amendment of the organizational
or formation documents of any Subsidiary, other than the Restated Certificate,
or
(o) except for the transactions contemplated by this Agreement, any
agreement or commitment (contingent or otherwise) by the Company or any
Subsidiary to do any of the foregoing.
3.25 Existing Registration Rights.
(a) Except as set forth in Section 3.25 of the Disclosure Schedule the
Company has not granted or agreed to grant rights to require the registration of
the Company's equity securities under the Securities Act, including piggyback
rights, to any person or entity.
22
3.26 Suppliers and Customers. Except as set forth in Section 3.26 of
the Disclosure Schedule, since September 30, 2004, none of the Company's or any
Subsidiaries' suppliers, vendors, or customers has: (i) terminated or cancelled
a Material Contract or material business relationship; (ii) threatened in
writing to terminate or cancel a Material Contract or material business
relationship; (iii) expressed dissatisfaction in writing with the performance of
the Company or any Subsidiary with respect to a Material Contract or material
business relationship; or (iv) demanded in writing any material modification,
termination or limitation of a Material Contract or material business
relationship with the Company or any Subsidiary (excluding any contracts or
business relationship which, if so terminated, cancelled, modified or limited,
would not result in a Material Adverse Effect), nor does the Company have
Knowledge that any of the events described in clauses (i) - (iv), whether in
writing or otherwise, will occur. Set forth in Section 3.26 of the Disclosure
Schedule is a list describing the sales derived from each of the Company's ten
largest customers (with respect to sales) for the period of April 1, 2004
through November 30, 2004 (determined by amount of revenue) and such list is
true and correct in all material respects.
3.27 Foreign Corrupt Practices Act. Neither the Company, any
Subsidiary nor, to the Company's Knowledge after reasonable inquiry by each of
the individuals referred to in the definition of the term "Knowledge" in Section
10, any employee of the Company or any Subsidiary has violated the United States
Foreign Corrupt Practices Act, as amended, in any material respect. To the
Company's Knowledge, no shareholder, director, officer, employee or agent of the
Company or of a Subsidiary has, directly or indirectly, made or agreed to make,
any unlawful or illegal payment, gift or political contribution to, or taken any
other unlawful or illegal action, for the benefit of any customer, supplier,
governmental employee or other Person who is or may be in a position to assist
or hinder the business of the Company or a Subsidiary.
4. Representations and Warranties of the Additional Purchasers. Each
Additional Purchaser hereby represents and warrants that:
4.1 Organization and Qualification. Each Additional Purchaser is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization and its Agreement of Limited
Partnership to carry on its business as it is now being conducted or proposed to
be conducted.
4.2 Power and Authority. Each Additional Purchaser has all requisite
power and authority as a limited partnership to execute and deliver the
Transaction Documents to which it is a party, to purchase the Purchased
Securities from the Company hereunder, and to carry out and perform its
obligations under the terms of the Transaction Documents.
4.3 Authorization. The execution, delivery and performance by such
Additional Purchaser of the Transaction Documents to which it is a party, and
the performance of all of the obligations of such Additional Purchaser under
each of such Transaction Documents have been duly and validly authorized, and no
other action, approval or authorization is required on the part of such
Additional Purchaser or any Person by Law or otherwise in order to make the
Transaction Documents the valid, binding and enforceable obligations (subject to
(i) laws of general application relating to bankruptcy, insolvency, and the
relief of debtors, and (ii) rules of law governing specific performance,
23
injunctive relief, or other equitable remedies) of such Additional Purchaser
that is a party thereto. Each of the Transaction Documents, when executed and
delivered by such Additional Purchaser that is a party thereto, will constitute
a valid and legally binding obligation of such Additional Purchaser that is a
party thereto, enforceable against such Additional Purchaser that is a party
thereto in accordance with its terms subject to: (i) laws of general application
relating to bankruptcy, insolvency, and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief, or other equitable
remedies.
4.4 Purchase Entirely for Own Account. The Purchased Securities and
the Conversion Shares (collectively, the "New Securities") will be acquired for
investment for such Additional Purchaser's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof.
Such Additional Purchaser's principal office is listed on Exhibit L attached
hereto. Such Additional Purchaser is aware that the Company is issuing the New
Securities pursuant to Section 4(2) of the Securities Act and Regulation D
promulgated thereunder without complying with the registration provisions of the
Securities Act or other applicable federal or state securities laws. Such
Additional Purchaser is also aware that the Company is relying upon, among other
things, the representations and warranties of the Additional Purchasers
contained in this Agreement for purposes of complying with Regulation D.
4.5 Disclosure of Information. Such Additional Purchaser has received
and carefully reviewed all the information it considers necessary or appropriate
for deciding whether to purchase the New Securities. Such Additional Purchaser
further represents that the Company has made available to such Additional
Purchaser, at a reasonable time prior to the date of this Agreement, an
opportunity to (a) ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the New Securities and the business,
properties and financial condition of the Company, all of which questions (if
any) have been answered to the reasonable satisfaction of such Additional
Purchaser, and (b) obtain additional information, all of which was furnished by
the Company to the reasonable satisfaction of such Additional Purchaser. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 4 of this Agreement or the right of the Additional
Purchasers to rely thereon.
4.6 Investment Experience. Such Additional Purchaser acknowledges that
it is able to fend for itself, can bear the economic risk of its investment, and
has such knowledge and experience in investing in companies similar to the
Company and in financial or business matters such that it is capable of
evaluating the merits and risks of the investment in the New Securities. Such
Additional Purchaser has made the determination to enter into this Agreement and
the other agreements contemplated hereby and to acquire the New Securities based
upon its own independent evaluation and assessment of the value of the Company
and its present and prospective business prospects.
4.7 Accredited Investor. Such Additional Purchaser is an "accredited
investor" within the meaning of SEC Rule 501 of Regulation D, as presently in
effect.
4.8 Restricted Securities; Legends. Such Additional Purchaser
recognizes that the New Securities will not be registered under the Securities
Act or other applicable federal or state securities laws. Such Additional
Purchaser understands that the New Securities it is purchasing are characterized
24
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. Such Additional Purchaser acknowledges that it may not to sell or
transfer the New Securities unless such New Securities are registered under the
Securities Act and under any other applicable securities laws and that
certificates evidencing the New Securities will bear the following legend or
similar legend:
THIS SECURITY AND THE SHARES OF STOCK WHICH MAY BE PURCHASED UPON THE
[EXERCISE] [CONVERSION] OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND SUCH SECURITIES
MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF SUCH REGISTRATION AND REGISTRATION UNDER APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION THEREFROM UNDER THE ACT AND THE RULES
AND REGULATIONS THEREUNDER AND SUCH APPLICABLE STATE SECURITIES LAWS.
THIS SECURITY AND THE SHARES OF STOCK WHICH MAY BE PURCHASED UPON THE
[EXERCISE] [CONVERSION] OF THIS SECURITY ARE ALSO SUBJECT TO CERTAIN
RESTRICTIONS ON THE TRANSFER THEREOF PURSUANT TO A SHAREHOLDERS
AGREEMENT WITH THE ISSUER.
4.9 No General Solicitation. Such Additional Purchaser acknowledges
that the New Securities were not offered to such Additional Purchaser means of:
(a) any advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium, or broadcast over television or radio, or
(b) any other form of general solicitation or advertising.
4.10 Absence of Conflicts. Such Additional Purchaser's execution,
delivery, and performance of, and compliance with the Transaction Documents and
the consummation of the transactions contemplated hereby and thereby, have not
and will not:
(a) violate, conflict with or result in a breach of any provision of
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in the creation of any Lien
upon any of the assets, properties or business of such Additional Purchaser
under, any of the terms, conditions or provisions of (i) its
certificate/articles of formation or organization or any of its other formation
or organizational documents, or (ii) any material contract to which it is a
party; or
(b) violate any judgment, ruling, order, writ, injunction, award,
decree, or any Law or regulation of any court or federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority which is applicable to such Additional Purchaser or any of its assets,
properties or businesses, which violation would have a Material Adverse Effect.
25
4.11 Brokers or Finders. Such Additional Purchaser has not incurred,
nor will it incur, directly or indirectly, as a result of any action taken by
such Additional Purchaser, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
the issuance of the New Securities or any transaction contemplated hereby or
thereby. Such Additional Purchaser agrees to indemnify and hold harmless the
Company and each Subsidiary 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
Additional Purchaser, or any of its respective officers, employees or
representatives is responsible.
5. Conditions of the Parties.
5.1 Conditions of Additional Purchasers' Obligations at any Closing.
The obligations of each Additional Purchaser under Section 1 of this Agreement
are subject to the satisfaction by the Company on or before any Closing of each
of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained in Section 4 shall be true and correct on and as of
such Closing with the same force and effect as though such representations and
warranties had been made on and as of the date of such Closing except as a
result of events and changes thereto that do not result in a Material Adverse
Effect (except where such representation is made as of a specific date, it shall
be true and correct as of such date except as a result of events and changes
thereto that do not result in a Material Adverse Effect).
(b) Performance. The Company shall have performed and complied with
all conditions contained in this Agreement that are required to be performed or
complied with by it on or before such Closing.
(c) No Default. With the exception of the default by the Company under
the Senior Credit Agreement as of the Initial Closing Date, immediately prior to
the issuance of the Purchased Securities and after giving effect thereto, no
Event of Default, or event which, with the passage time or the giving of notice
would constitute an Event of Default, shall have occurred and be continuing.
(d) No Material Adverse Effect; Compliance Certificate. No Material
Adverse Effect shall have occurred between the date hereof and such Closing Date
and the President and/or Chief Executive Officer of the Company shall deliver to
each Additional Purchaser at each such Closing a certificate stating that the
conditions specified in Sections 6.1(a), (b) and (c) have been fulfilled and
stating that no Material Adverse Effect has occurred between the date hereof and
such Closing Date.
(e) Consents and Approvals. All authorizations, approvals, permits, or
consents, if any, of any governmental authority or regulatory body of the United
States or of any state or any creditor of the Company or any other Person that
are required in connection with the lawful issuance and sale of the Purchased
Securities at such Closing pursuant to this Agreement shall be duly obtained and
effective as of each such Closing and the purchase and payment of the Purchased
26
Securities to be purchased by the Additional Purchasers at each such Closing on
the terms and conditions as provided herein shall not violate any applicable
Law.
(f) Good Standing; Qualification to do Business. The Company shall
have delivered to the Additional Purchasers certificates of good standing with
respect to the Company and each Subsidiary Guarantor dated as of a date no
earlier than 15 days prior to the any such Closing from the jurisdiction of
incorporation of the Company and each Subsidiary Guarantor and from each
jurisdiction in which it has qualified to do business and evidence of telephone
confirmation thereof as of the close of business immediately prior to such
Closing Date.
(g) Secretary's Certificate. The Company shall have delivered to the
Additional Purchasers:
(i) a certificate executed by its Secretary dated such Closing
Date certifying with respect to (i) a copy of its Existing Certificate and its
Bylaws as amended to and in effect on such Closing Date and that the Company is
not in violation of or default under any provision of its Restated Certificate
or Bylaws as of and on such Closing Date, (ii) board resolutions authorizing the
transactions contemplated by this Agreement and the Transaction Documents, (iii)
copies of all minutes of all meetings (or excerpts thereof) and all actions by
written consent of the shareholders of the Company authorizing the transactions
contemplated in the Transaction Documents and (iv) incumbency matters and such
other proceedings relating to the authorization, execution and delivery of the
Transaction Documents as may be reasonably requested by the Additional
Purchasers.
(ii) a certificate executed by the Secretary of each Subsidiary
Guarantor dated such Closing Date certifying with respect to (i) a copy of such
Subsidiary's articles or certificate of incorporation and bylaws, (b) board
resolutions authorizing the transactions contemplated by the Transaction
Documents to which such Subsidiary is a party and (c) incumbency matters.
(h) Opinion of Company Counsel. Each Additional Purchaser shall have
received from counsel to the Company, an opinion, dated such Closing Date, in a
form and substance reasonably acceptable to the Additional Purchasers.
(i) Cross-Receipts of the Additional Purchasers. The Company and the
Additional Purchasers shall have executed and delivered a cross-receipt
acknowledging the Company's delivery to the Additional Purchasers of the
documents and certificates representing the Purchased Securities issued and sold
to the Additional Purchasers on such Closing Date to the Additional Purchasers
and the Additional Purchasers' payment therefor.
(j) Compliance with Covenants. On any such Closing Date prior to
Shareholder Approval, the Company shall be in compliance with each of the
covenants set forth in Section 7 and Section 8 and thereafter with the covenants
set forth in Section 7.
(k) Pro-Forma Capitalization Table. The Company shall have delivered
to the Additional Purchasers a revised Exhibit K accurately reflecting any
additional issuances of securities by the Company between the date hereof and
such Closing Date.
27
(l) Disclosure Schedule. The Company shall have delivered to the
Additional Purchasers a revised Disclosure Schedule accurately reflecting any
additional information required to be provided to the Additional Purchasers
pursuant to this Agreement between the date hereof and any such Closing Date and
such revisions shall be reasonably acceptable to the Additional Purchasers.
(m) Conversion Shares. The Conversion Shares with respect to Purchased
Securities being purchased at such Closing, have been duly reserved for issuance
and when issued will be duly and validly issued, fully paid and nonassessable.
(n) Listing on Stock Exchange. The Common Stock shall be listed on
Nasdaq, any other national securities exchange as identified under the Exchange
Act, or the Nasdaq OTC Bulletin Board (or comparable substitute quotation
system) as of such Closing and no action shall have been taken by Nasdaq or such
national securities exchange to terminate such listing prior to any such
Closing.
5.2 Conditions of Additional Purchasers' Obligations at the Initial
Closing. In addition to the conditions set forth in Section 6.1, the obligations
of each Additional Purchaser under Section 1.2 of this Agreement are subject to
the satisfaction by the Company on the Initial Closing Date of each of the
following conditions:
(a) Shareholders' Agreement; Registration Rights Agreement; etc. The
Company and each other Additional Purchaser shall have executed the Amended
Shareholders' Agreement and the Amended Registration Rights Agreement.
(b) Security Agreement; Subsidiary Security Agreement; Pledge
Agreement; Subordination Agreement, Subsidiary Guarantee. The Company shall have
executed and delivered to the Additional Purchasers the Security Agreement, the
Pledge Agreement and the Subordination Agreement. Each Subsidiary Guarantor
shall execute and deliver to the Additional Purchasers the Subsidiary Security
Agreement and a Subsidiary Guarantee.
(c) Fairness Opinion. The Company shall have delivered to the
Additional Purchasers a copy of the fairness opinion rendered by Libra
Securities, LLC to the Independent Committee of the Board of Directors as to the
fairness on the date hereof, from a financial point of view, to the Company of
the consideration to be paid by the Additional Purchasers in connection with the
proposed purchase by the Additional Purchasers of the Purchased Securities to be
issued by the Company and any bringdowns and supplements to such opinion;
provided, that the Company shall not be required to obtain any such bringdowns
or supplements.
(d) Series A-4 First Tranche Notes. The Company shall deliver to each
Additional Purchaser its respective Series A-4 First Tranche Note.
(e) Warrants. The Company shall deliver to each Additional Purchaser
its respective Warrants.
(f) UCC-1 Financing Statements. The Company shall have prepared in
form and substance reasonably satisfactory to the Additional Purchasers copies
28
of financing statements on Form UCC-1, each to be filed in accordance with
Section 11.2 and delivered copies of the same to the Additional Purchasers.
(g) Election of Directors. The Company shall have taken all necessary
corporate action to effect the election of the Purchasers' designees (as
provided in the Shareholders' Agreement) as directors of the Company to take
office immediately following the Initial Closing.
(h) Textron Consent. The Company shall have received the written
consent of Textron reasonably acceptable to the Additional Purchasers with
respect to the transactions contemplated by this Agreement.
5.3 Conditions of Additional Purchasers' Obligations at any Subsequent
Closing. In addition to the conditions set forth in Section 5.1, the obligations
of each Additional Purchaser under Section 1.3 and Section 1.4 of this Agreement
are subject to the satisfaction by the Company on each Subsequent Closing Date
of the following conditions:
(a) Supplemental Schedule III. On or before any Subsequent Closing
Date, the Company shall deliver to each Additional Purchaser a supplement to
Schedule III reflecting the amount of Purchased Securities that the Company will
issue to each Additional Purchaser on such Subsequent Closing Date and the
aggregate purchase price therefor.
(b) Notes. If the Shareholder Approval has not occurred, (x) with
respect to any Series A-4 Subsequent Closing, the Company shall deliver to each
Additional Purchaser its respective Series A-4 Second Tranche Note or (y) with
respect to any Series A-5 Subsequent Closing Date, the Company shall deliver to
each Additional Purchaser its respective Series A-5 Note.
(c) Additional Warrants. With respect to any Series A-4 Subsequent
Closing, the Company shall deliver to each Additional Purchaser its respective
Additional Warrants.
(d) Purchased Shares. If the Shareholder Approval has occurred, (x)
with respect to any Series A-4 Subsequent Closing, the Company shall deliver to
each Additional Purchaser its respective Series A-4 Purchased Shares or (y) with
respect to any Series A-5 Subsequent Closing Date, the Company shall deliver to
each Additional Purchaser a certificate representing its respective Series A-5
Purchased Shares.
5.4 Conditions of Company's Obligations at any Closing. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the satisfaction by the Additional Purchasers on or
before any such Closing of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Additional Purchasers contained in Section 5 shall be true and correct in
all material respects on and as of such Closing (except where another date or
period of time is specifically stated herein for a representation or warranty
and in such case such representation or warranty shall be true and correct in
all material respects on and as of such date) with the same force and effect as
though such representations and warranties had been made on and as of the date
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of such Closing; provided, however, that representations and warranties that
contain a materiality qualification shall be true and correct in all respects.
(b) Performance. The Additional Purchasers shall have performed and
complied with all conditions contained in this Agreement that are required to be
performed or complied with by it on or before such Closing.
(c) Consents and Approvals. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state or any other Person that are required in connection with the lawful
issuance and sale of the Purchased Securities pursuant to this Agreement shall
be duly obtained and effective as of such Closing and the purchase and payment
of the Purchased Securities to be purchased by the Additional Purchasers at such
Closing on the terms and conditions as provided herein shall not violate any
applicable Law.
(d) Cross-Receipts of the Additional Purchasers. The Company and the
Additional Purchasers shall have executed and delivered a cross-receipt
acknowledging the Company's delivery to the Additional Purchasers of the
certificates representing the Purchased Securities issued and sold to the
Additional Purchasers on such Closing Date to the Additional Purchasers and the
Additional Purchasers' payment therefor.
(e) Purchase Price. The Additional Purchasers shall have delivered to
the Company the applicable purchase price for the Purchased Securities being
purchased on such Closing Date as provided in Section 1.3 and Section 1.4.
(f) Complete Purchase. If more than one Additional Purchaser is
purchasing Purchased Securities at any such Closing, then each such Additional
Purchaser shall have satisfied all of the foregoing conditions in this Section
5.4 and shall have purchased the Purchased Securities that each such Additional
Purchaser has agreed to purchase.
6. Events of Default and Remedies.
6.1 Events of Default. So long as the Notes are outstanding and have
not been converted, an Event of Default with respect to the Notes shall mean the
occurrence and existence of one or more of the following events or conditions
(for any reason, whether voluntary, involuntary or effected or required by any
Law applicable to the Company and/or any Subsidiary):
(a) The Company fails to pay when due and payable any portion of the
Note Indebtedness at stated maturity, upon acceleration or otherwise.
(b) The Company or any other Credit Party fails or neglects to
perform, keep, or observe in any material respect any term, provision,
condition, covenant or agreement contained in any Transaction Document or any
Loan Document to which the Company or such other Credit Party is a party.
30
(c) Any material portion of the Company's assets is seized, attached,
subjected to a writ or distress warrant, is levied upon or comes into the
possession of any judicial officer unless such action is stayed and such
attachment is dismissed within 30 days.
(d) The Company shall generally not pay its debts as they become due
or shall enter into any agreement (whether written or oral), or offer to enter
into any agreement, with all or a significant number of its creditors regarding
any moratorium or other indulgence with respect to its debts or the
participation of such creditors or their representatives in the supervision,
management or control of the business of the Company.
(e) Any bankruptcy or other insolvency proceeding is commenced by the
Company, or any such proceeding is commenced against the Company and remains
undischarged or unstayed for 45 days.
(f) Any notice of lien, levy or assessment in an aggregate amount in
excess of the amount provided in the Senior Credit Facility is filed of record
with respect to any of the Company assets.
(g) The occurrence of any default, event or condition which (i) causes
the Senior Lender to cause all or any part of the Senior Credit Facility to
become due (by acceleration, mandatory prepayment or repurchase, or otherwise)
before its otherwise stated maturity, or a failure to pay all or any part of the
Senior Credit Facility at its stated maturity and (ii) has not been waived by
the Senior Lender prior to the Maturity Date.
(h) Any representation or warranty made or deemed to be made by the
Company, any Affiliate or any other Credit Party in any Transaction Document or
any Loan Document or any other statement, document or report made or delivered
to the Additional Purchasers in connection therewith shall proved to have been
misleading in any material respect at the time that it was made.
(i)
(i) Any Prohibited Transaction or Reportable Event shall occur
with respect to a Plan which could have a Material Adverse Effect on the
financial condition of the Company;
(ii) any lien upon the assets of the Company in connection with
any Plan shall arise;
(iii) the Company or any of its ERISA Affiliates shall fail to
make full payment when due of all amounts which the Company or any of its ERISA
Affiliates may be required to pay to any Plan or any Multiemployer Plan as one
or more contributions thereto; or
(iv) the Company or any of its ERISA Affiliates creates or
permits the creation of any accumulated funding deficiency, whether or not
waived.
(j) Any Subsidiary Guarantor revokes, terminates or attempts to revoke
or terminate its guaranty of or any security under the Subsidiary Guarantee, or
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any such Subsidiary Guarantor becomes subject to any bankruptcy or other
insolvency proceeding and such proceeding remains undischarged or unstayed for
45 days or any such Subsidiary Guarantor, is dissolved, liquidated, merged,
reorganized or terminated.
6.2 Exercise of Remedies. If an Event of Default has occurred and is
continuing hereunder:
(a) the Collateral Agent, shall, upon being directed to do so in
writing by the 63% in Interest Additional Purchasers, declare the entire unpaid
Note Indebtedness, immediately due and payable, without presentment, notice or
demand, all of which are hereby expressly waived by the Company;
(b) upon the occurrence of any Event of Default specified in Section
6.1(d) or (e) above, and notwithstanding the lack of any declaration by the
Collateral Agent under preceding clause, the entire unpaid Note Indebtedness,
shall become automatically and immediately due and payable;
(c) the Collateral Agent shall, upon being directed to do so in
writing by the 63% in Interest Additional Purchasers, demand immediate delivery
of cash collateral, and the Company agrees to deliver such cash collateral upon
demand, in an amount equal to the Note Indebtedness due and payable; and
(d) the Collateral Agent shall, if directed to do so by the 63% in
Interest Additional Purchasers (subject to the terms hereof), exercise any
remedy permitted by this Agreement, or the Transaction Documents or at law or in
equity.
6.3 Waiver of Defaults. No Event of Default shall be waived by the
Additional Purchasers except in a writing signed by an officer of the Collateral
Agent with the consent of the 63% in Interest Additional Purchasers in
accordance with Section 12.8 hereof. No waiver of any Event of Default shall
extend to any other or further Event of Default.
7. Equity Covenants.
So long as any Purchaser together with any entity affiliated with it
owns at least 750,000 shares of Series A Purchased Shares (as appropriately
adjusted for any stock splits, stock dividends, combinations, and the like) and
for a period of six (6) months thereafter, the Company covenants and agrees that
it will comply with each of the following covenants.
7.1 Financial Statements. The Company shall furnish to each Purchaser,
within five Business Days after filing, a true and complete signed copy of its
Form 10-Q as filed with the SEC pursuant to the Exchange Act, all in such form,
and together with such other information with respect to the business of the
Company, as the Purchasers may request, which shall present fairly, in all
material respects, the financial position of the Company as of the end of each
such period and the results of its operations and cash flows during such period,
all in accordance with GAAP. Annually, but not later than five Business Days
after filing, the Company shall deliver to the Purchasers (i) a true and
complete signed copy of its Form 10-K as filed with the SEC pursuant to the
Exchange Act and (ii) audited financial statements which shall present fairly,
in all material respects, the financial position of the Company as of the end of
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each such period and the results of its operations and cash flows during such
period, all in accordance with GAAP and accompanied by the unqualified report
and opinion thereon of the Company's independent certified public accountant.
7.2 Certain Other Reports and Information. The Company shall deliver
to the Purchasers, within 30 days of issuance, all accountants' management
letters pertaining to, all other reports submitted by accountants in connection
with any audit of, and all other reports from outside accountants with respect
to, the Company and its Subsidiaries (and, in any event, any independent
auditors' annual management letters, if issued, will be delivered to the
Purchasers concurrently with the financial statements referred to in Section
7.1(a)).
7.3 Further Information; Further Assurances. The Company will, with
reasonable promptness, provide to the Purchasers such further assurances and
additional information, reports and statements respecting its business,
operations, properties and financial condition and respecting its Affiliates and
investments, as the Purchasers may from time to time reasonably request. The
Company shall use its reasonable commercial efforts to assist each Additional
Purchaser with respect to the necessary Securities Act and/or Exchange Act
filings with respect to the Purchased Securities at the cost and expense of such
Additional Purchaser.
7.4 Notice of Certain Events. Promptly upon becoming aware of any of
the following, the Company shall give the Purchasers notice thereof, together
with a written statement of a Responsible Officer of the Company setting forth
the details thereof and any action with respect thereto taken or proposed to be
taken by the Company:
(i) Any pending action, suit, proceeding or investigation by or
before any Governmental Authority against or affecting the Company (or any such
action, suit, proceeding or investigation threatened in writing) to the extent
that it would result in a Material Adverse Effect.
(ii) Any material violation, breach or default by the Company or
any of its Subsidiaries of or under any agreement or instrument material to its
business, assets, properties, operations or condition, financial or otherwise
(it being expressly understood and agreed that the Company need not provide
notice to the Purchasers pursuant to this Section 7.4(ii) of the termination of
any such agreement or instrument in accordance with its terms).
(iii) (A) Any Environmental Claim made or threatened in writing
against the Company, or (B) the Company's becoming aware of any past or present
acts, omissions, events or circumstances (including any Release, disposition,
removal, abandonment or escape of any Hazardous Materials on, at, in, under,
above, to, from or about any facility or property now or previously owned,
operated or leased by the Company or any of its Subsidiaries) which could form
the basis of any such Environmental Claim, which Environmental Claim, in the
case of either clause (A) or (B), if adversely resolved, would reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect.
(iv) The occurrence of any Material Adverse Effect or any
deviation in or change from the representations, warranties or covenants of the
Company in this Agreement or in the other Transaction Documents.
33
7.5 Visitation; Verification. The Company and its Subsidiaries shall
permit such Persons as the Purchasers may designate from time to time to visit
and inspect any of the properties of the Company and its Subsidiaries to examine
their respective assets, properties, offices and other facilities, and books and
records and take copies and extracts therefrom, and access to the outside
auditors of the Company and their work papers relating thereto, in each case, as
the Purchasers may from time to time reasonably request, and to discuss their
affairs with their directors, officers, employees and independent accountants at
such times and as often as the Purchasers may reasonably request; provided that
(i) any such Person shall provide at least two days' prior advance notice to the
Company of its intention to visit or inspect any of the properties of the
Company and its Subsidiaries; and (ii) all such visits or inspections shall be
conducted during the normal business hours of the Company and without undue
interference with the conduct of the Company's business. The Company shall
reimburse the Purchasers for reasonable out-of-pocket costs and expenses of for
all inspections in any calendar year; for all other times all such visits or
inspections shall be at the sole cost and expense of the Purchasers. The parties
hereto agree that no investigation by the Purchasers or their representatives
shall affect or limit the scope of the representations and warranties of the
Company contained herein or in any Transaction Document delivered pursuant
hereto or limit liability for breach of any such representation or warranty.
The Purchasers shall have the right to examine and verify accounts,
inventory and other properties and liabilities of the Company and its
Subsidiaries from time to time, and the Company shall cooperate with the
Purchasers in such verification. Without limitation of the foregoing, subject to
limitations required due to the nature of any classified work, contracts or
customer relationships, the Company hereby authorizes its officers, employees
and independent accountants to discuss with the Purchasers the affairs of the
Company and its Subsidiaries.
7.6 Insurance.
(a) The Company shall, and shall cause each of its Subsidiaries to (i)
maintain with financially sound and reputable insurers insurance with respect to
its properties and business and against such liabilities, workers' compensation,
casualties and contingencies and of such types and in such amounts as are
customary in the case of corporations engaged in the same or similar businesses
or having similar properties similarly situated and naming each Purchaser as an
additional insured and a loss payee, (ii) furnish to the Purchasers from time to
time upon request copies of the policies under which such insurance is issued,
original certificates of insurance and such other information relating to such
insurance as the Purchasers may reasonably request, and (iii) provide such other
insurance and endorsements as are required by this Agreement and the other
Transaction Documents.
(b) The Company shall maintain in effect an errors and omissions
insurance policy for the Company and its Subsidiaries with (i) coverage
extending to all officers and directors of the Company, (ii) policy limits not
less than those maintained by the Company and Subsidiaries on the date hereof,
and (iii) deductibles not greater than those as are reasonable for companies
engaged in the same or similar businesses and similarly situated.
7.7 Payment of Taxes and Other Potential Charges and Priority Claims.
The Company shall, and shall cause each of its Subsidiaries to, pay or
discharge:
34
(i) on or prior to the date on which material penalties attach
thereto, all taxes, assessments and other governmental charges imposed upon it
or any of its properties;
(ii) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, landlords and other like Persons
which, if unpaid, might result in the creation of a material Lien upon any such
property; and
(iii) on or prior to the date when due, all other lawful claims
which, if unpaid, might result in the creation of a Lien upon any such property
or which, if unpaid, might give rise to a claim entitled to priority over
general creditors of the Company in a case under Title 11 (Bankruptcy) of the
United States Code, as amended;
provided that unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced it need not pay or discharge any such tax,
assessment, charge or claim so long as (x) the validity thereof is contested in
good faith and by appropriate proceedings diligently conducted, and (y) such
reserves or other appropriate provisions as may be required by GAAP shall have
been made therefor.
7.8 Preservation of Corporate Status. The Company shall, and shall
cause each of its Subsidiaries to, maintain its status as a corporation or other
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or formation, and to be duly qualified to do
business as a foreign entity and in good standing in all jurisdictions in which
the ownership of its properties or the nature of its business or both make such
qualification necessary.
7.9 Governmental Approvals and Filings. The Company shall, and shall
cause each of its Subsidiaries to obtain, keep and maintain in full force and
effect all Governmental Approvals necessary in connection with or to facilitate
the execution and delivery of this Agreement or any other Transaction Document,
consummation of the transactions herein or therein contemplated, performance of
or compliance with the terms and conditions hereof or thereof or to ensure the
legality, validity, binding effect, enforceability or admissibility in evidence
hereof or thereof.
7.10 Maintenance of Properties. The Company shall, and shall cause
each of its Subsidiaries to (a) maintain or cause to be maintained in good
repair, working order and condition the properties now or hereafter owned,
leased or otherwise possessed by it (and make or cause to be made all needed and
proper repairs, renewals, replacements and improvements thereto) which are
necessary so that the business carried on in connection therewith may be
properly conducted at all times and (b) maintain and hold in full force and
effect all franchises, licenses, permits, certificates, authorizations,
qualification, accreditations and other rights, consents and approvals (whether
issued, made or given by a Governmental Authority or otherwise), necessary to
own and operate its properties and to carry on its business as presently
conducted and as presently planned to be conducted, except for any failure to
comply with any of the foregoing which would not, either individually or in the
aggregate, have a Material Adverse Effect. The Company shall use its
35
commercially reasonable efforts to preserve its favorable business relationships
with the clients, lenders, suppliers, customers, licensors and licensees and
others having business dealings with the Company and to preserve the goodwill
and ongoing operations of the Company.
7.11 Financial Accounting Practices. The Company shall, and shall
cause each of its Subsidiaries to, make and keep books, records and accounts
which, in reasonable detail, accurately and fairly reflect its transactions and
dispositions of its assets and maintain systems of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are executed
in accordance with management's general or specific authorization, (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with GAAP and (ii) to maintain accountability for
assets, (c) access to assets is permitted only in accordance with management's
general or specific authorization and (d) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
8. Debt Covenants.
8.1 General. So long as the Notes are outstanding and have not been
converted, the Company covenants and agrees that, until the final payment in
full or conversion of the Note Indebtedness, it will and will cause the
Subsidiaries to comply with the covenants set forth in Exhibit O attached
hereto.
8.2 Most Favored Nations. If the Company refinances or renegotiates
the Senior Credit Agreement or replaces it with another Senior Credit Facility
so that one or more of the covenants set forth in Exhibit O attached hereto is
more restrictive upon the Company than any covenant(s) set forth in the Senior
Credit Facility (each, a "Restrictive Covenant"), then, notwithstanding anything
to the contrary in this Agreement (including Section 12.8) or in any of the
other Transaction Documents, each Additional Purchaser hereby agrees that the
Company has the right to amend Exhibit O to this Agreement so that the
Restrictive Covenant(s) are replaced with covenants that are the same as those
set forth in such Senior Credit Agreement or replacement Senior Credit Facility.
The Company shall promptly provide the Purchasers with a copy of the amended or
supplemented Senior Credit Agreement or new Senior Credit Facility and the
amended Exhibit O. Such amended Exhibit O shall replace in its entirety the then
existing Exhibit O and shall constitute a part of this Agreement from and after
the date of delivery thereof to the Additional Purchasers. Thereafter, so long
as such amended or supplemented Senior Credit Agreement or new Senior Credit
Facility is approved by the Board of Directors, such amended Exhibit O will be
effective whether or not signed by the Additional Purchasers.
9. Indemnification.
9.1 General Indemnification. The Company shall indemnify, defend and
hold each Purchaser, its affiliates and their respective officers, directors,
partners (general and limited), employees, agents, attorneys successors and
assigns (each a "Purchaser Entity") harmless from and against all Losses
incurred or suffered by a Purchaser Entity as a result of the breach of any of
the representations and warranties set forth in Section 2 of the Initial Series
A Purchase Agreement or the representations, warranties, covenants or agreements
made by the Company in this Agreement or any of the other Transaction Documents,
except to the extent that such Losses are the result of the gross negligence,
willful misconduct or fraud of such Purchaser Entity. Each Purchaser, severally
and not jointly, shall indemnify, defend and hold the Company, its affiliates,
36
their respective officers, directors, employees, agents, attorneys, successors
and assigns (each a "Company Entity") harmless against all Losses as a result of
the breach of any of the representations, warranties, covenants or agreements
made by such Purchaser in this Agreement or any of the other Transaction
Documents, except to the extent that such Losses are a result of the gross
negligence, willful misconduct or fraud of such Company Entity.
9.2 Indemnification Principles. For purposes of this Section 9,
"Losses" shall mean each and all of the following items: claims, losses
(including, without limitation, losses of earnings), liabilities, obligations,
payments, damages (actual, punitive or consequential to the extent provided in
this Section 9.2), charges, judgments, fines, penalties, amounts paid in
settlement, costs and expenses (including, without limitation, interest which
may be imposed in connection therewith, costs and expenses of investigation,
actions, suits, proceedings, demands, assessments and reasonable fees, expenses
and disbursements of counsel, consultants and other experts). Each Purchaser and
the Company hereby agree that Losses shall not include punitive or consequential
damages except to the extent that such Losses are the result of the gross
negligence, willful misconduct or fraud of the party from whom the
indemnification is being sought (the "Indemnifying Party").
9.3 Claim Notice; Right to Defend. A party seeking indemnification
(the "Indemnified Party") under this Section 9 shall promptly upon becoming
aware of the facts indicating that a claim for indemnification may be warranted,
give to the Indemnifying Party a claim notice relating to such Loss (a "Claim
Notice"). Each Claim Notice shall specify the nature of the claim, the
applicable provision(s) of this Agreement or Section 2 of the Initial Series A
Purchase Agreement, as applicable, or other instrument under which the claim for
indemnity arises, and, if possible, the amount or the estimated amount thereof.
No failure or delay in giving a Claim Notice (so long as the same is given prior
to expiration of the representation or warranty upon which the claim is based)
and no failure to include any specific information relating to the claim (such
as the amount or estimated amount thereof) or any reference to any provision of
this Agreement or Section 2 of the Initial Series A Purchase Agreement, as
applicable, or other instrument under which the claim arises shall affect the
obligation of the Indemnifying Party unless such failure materially and
adversely prejudices the Indemnifying Party. If such Loss relates to the
commencement of any action or proceeding by a third person, the Indemnified
Party shall give a Claim Notice to the Indemnifying Party regarding such action
or proceeding and the Indemnifying Party shall be entitled to participate
therein to assume the defense thereof with counsel reasonably satisfactory to
the Indemnified Party. After the delivery of notice from the Indemnifying Party
to the Indemnified Party of its election to assume the defense of such action or
proceeding, the Indemnifying Party shall not be liable (except to the extent the
proviso to this sentence is applicable, in which event it will be so liable) to
the Indemnified Party under this Section 9 for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation, provided that each
Indemnified Party shall have the right to employ separate counsel to represent
it and assume its defense (in which case, the Indemnifying Party shall not
represent it) if (i) upon the advice of counsel, the representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them, (ii) in the event the Indemnifying Party has
not assumed the defense thereof within 10 days of receipt of notice of such
37
claim or commencement of action, and in which case the fees and expenses of one
such separate counsel shall be paid by the Indemnifying Party or (iii) if such
Indemnified Party who is a defendant in any action or proceeding which is also
brought against the Indemnifying Party reasonably shall have concluded that
there may be one or more legal defenses available to such Indemnified Party
which are not available to the Indemnifying Party. If any Indemnified Party
employs such separate counsel it will not enter into any settlement agreement
which is not approved by the Indemnifying Party, such approval not to be
unreasonably withheld. If the Indemnifying Party so assumes the defense thereof,
it may not agree to any settlement of any such claim or action as the result of
which any remedy or relief, other than monetary damages for which the
Indemnifying Party shall be responsible hereunder, shall be applied to or
against the Indemnified Party, without the prior written consent of the
Indemnified Party. In any action hereunder as to which the Indemnifying Party
has assumed the defense thereof with counsel reasonably satisfactory to the
Indemnified Party, the Indemnified Party shall continue to be entitled to
participate in the defense thereof, with counsel of its own choice, but, except
as set forth above, the Indemnifying Party shall not be obligated hereunder to
reimburse the Indemnified Party for the costs thereof.
10. Certain Definitions. For the purposes of this Agreement the following terms
will have the following meanings:
"Additional Warrant(s)" shall have the meaning ascribed to it in the
recitals.
"Affiliate(s)" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and executive officers of such Person), controlled by, or under direct
or indirect common control with such Person. A Person shall be deemed to control
a corporation for the purposes of this definition if such Person possesses,
directly or indirectly, the power (i) to vote 10% or more of the securities
having ordinary voting power for the election of directors of such corporation
or (ii) to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"Additional Purchaser(s)" shall have the meaning ascribed to it in the
preliminary paragraph.
"Agreement" shall have the meaning ascribed to it in the preliminary
paragraph.
"Amended Registration Rights Agreement" shall have the meaning
ascribed to it in the recitals.
"Amended Shareholders Agreement" shall have the meaning ascribed to it
in the recitals.
"Approval" shall have the meaning ascribed to it in Section 12.8(b).
"Assignment and Assumption Agreement" shall have the meaning ascribed
to it in the recitals.
"Board of Directors" shall have the meaning ascribed to it in the
recitals.
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"Business Day" shall mean any day other than a Saturday, Sunday,
public holiday under the laws of the State of New York or any other day on which
banking institutions are authorized to close in New York City.
"Bylaws" shall have the meaning ascribed to it in Section 3.2.
"Claim Notice" shall have the meaning ascribed to it in Section 9.3.
"Closing" shall mean each of the Initial Closing and any Subsequent
Closing.
"Closing Date" shall mean each of the Initial Closing Date and any
Subsequent Closing Date.
"Code" shall have the meaning ascribed to it in Section 3.16(b).
"Collateral Agent" shall have the meaning ascribed to it in Section
2.5.
"Company" shall have the meaning ascribed to it in the preliminary
paragraph.
"Company Employee Plan(s)" shall have the meaning ascribed to it in
Section 3.16(a).
"Company Entity" shall have the meaning ascribed to it in Section 9.1.
"Company Notice" shall have the meaning ascribed to it in Section
1.3(b).
"Company Software" shall have the meaning ascribed to it in Section
3.9(b).
"Common Stock" shall mean the common stock, par value $0.01 per share,
of the Company.
"Constellation" shall mean Constellation Venture Capital II, L.P. and
its affiliates.
"Controlled Group Member" shall mean each trade or business (whether
or not incorporated) which together with the Company is treated as a single
employer under Section 4001(a)(14) or 4001(b)(1) of ERISA or Section 414(b),
(c), (m) or (o) of the Code.
"Consolidated" shall mean, when used with reference to any financial
term in this Agreement, the aggregate for two or more Persons of the amounts
signified by such term for all such Persons determined on a consolidated basis
in accordance with GAAP. Unless otherwise specified herein, references to
consolidated financial statements or data of Company includes consolidation with
its Subsidiaries in accordance with GAAP.
"Conversion Shares" shall have the meaning ascribed to it in Section
3.3.
"Credit Party(ies)" shall mean the Company and each of the Subsidiary
Guarantors.
39
"Debt" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP, including without limitation, any items so classified on a
balance sheet and any reimbursement obligations in respect of letters of credit,
obligations in respect of purchasers acceptances, provided, however that for
purposes of calculating the aggregate Debt of such Person and its Subsidiaries
(if any), the direct and indirect and absolute and contingent obligations of
such Person (whether direct or contingent) shall be determined without
duplication.
"Default" shall mean an event which, with the passage of time or
giving of notice, will constitute an Event of Default.
"Disclosure Schedule" shall have the meaning ascribed to it in Section
2.4.
"EBITDA" for any period shall mean the net earnings (or loss) after
taxes of the Company for such period, (a) plus the sum of (i) the Interest
Expense of the Company for such period to the extent deducted in calculating net
earnings for such period, (ii) all charges against income for foreign, federal,
state and local income taxes of the Company for such period, to the extent
deducted in calculating net earnings for such period, (iii) the aggregate
depreciation expense of the Company for such period, (iv) the aggregate
amortization expense of the Company for such period, (v) losses from
discontinued operations and extraordinary items, and (vi) all other non-cash
charges deducted in determining such net earnings, (b) minus the sum of (i)
income from discontinued operations and extraordinary items and (ii) all
non-cash items (other than accrual basis revenues) included in determining such
net earnings, all as determined on a Consolidated basis in accordance with GAAP.
"Environmental Claim" shall mean, with respect to any Person, any
action, suit, proceeding, notice, claim, complaint, demand, request for
information or other communication (written or oral) against, of or to such
Person by or from any other Person (including any Governmental Authority,
citizens' group or present or former employee of such Person) alleging,
asserting or claiming any actual or potential (a) violation of or liability
under any Environmental Laws or (b) liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages, personal
injuries, fines or penalties arising out of, based on or resulting from the
presence, or release into the environment, of any Hazardous Materials at any
location, whether or not owned by such Person.
"Environmental Laws" shall have the meaning ascribed to it in Section
3.20(a).
"ERISA" shall have the meaning ascribed to it in Section 3.16(a).
"Event of Default" shall have the meaning ascribed to it in Section
6.1.
"ERISA Affiliate(s)" shall mean each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become a
member of a group of which the Company is a member and which is treated as a
single employer under ERISA Section 4001(b)(1) or Section 414 of the Code.
40
"Exchange Act" shall have the meaning ascribed to it in Section
3.22(a).
"Existing Certificate" shall, prior to Shareholder Approval, have the
meaning ascribed to it in Section 3.2 and thereafter, mean the Restated
Certificate.
"Financial Statements" shall have the meaning ascribed to it in
Section 3.23.
"GAAP" shall mean generally accepted accounting principles for
financial reporting in the United States, applied on a consistent basis.
"Governmental Approval" shall mean any approval, order, consent,
waiver, authorization, certificate, license, permit or validation of, or
exemption or other action by, or filing, recording or registration with, or
notice to, any Governmental Authority.
"Governmental Authority" shall mean any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"Hazardous Material(s)" shall mean any element, compound, substance or
other material (including, without limitation, any pollutant, contaminant,
hazardous waste, hazardous substance, chemical substance, or product) that is
listed, classified or regulated pursuant to any Environmental Law, including,
without limitation, any petroleum product, by-product or additive, asbestos,
presumed asbestos-containing material, asbestos-containing material, medical
waste, chlorofluorocarbon, hydrochlorofluorocarbon, lead-containing paint,
polychlorinated biphenyls, radioactive material or radon.
"Hereof", "hereto", "hereunder" and similar terms shall refer to this
Agreement and not to any particular paragraph or provision of this Agreement.
"Initial Series A Purchase Agreement" shall mean that certain Purchase
Agreement, dated as of January 29, 2004 between the Company and Pequot and its
assignees.
"Indemnified Party" shall have the meaning ascribed to it in Section
9.3.
"Indemnifying Party" shall have the meaning ascribed to it in Section
9.2.
"Initial Closing" shall have the meaning ascribed to it in Section
1.7.
"Initial Closing Date" shall have the meaning ascribed to it in
Section 1.7.
"Initial Purchaser(s)" shall have the meaning ascribed to it in the
preliminary paragraph.
"Interest Expense" for any period shall mean the total cash interest
expense of the Company (including amortization of deferred financing fees,
premiums or interest rate protection agreements and original issue discounts)
for such period determined in accordance with GAAP.
41
"Knowledge" shall mean with respect to the Company, the knowledge,
after diligent investigation, of the directors, officers and senior management
of the Company and of the person or persons in such entity with responsibility
for the matter with respect to which the knowledge is applicable.
"Law" shall mean the Company's certificate of incorporation, as
amended, the By-laws and any foreign, federal, state or local law, statute,
rule, regulation, ordinance, code, directive, writ, injunction, decree, judgment
or order applicable to the Company or the Subsidiaries.
"Loan Documents" shall mean the Notes, the Security Agreement, the
Subsidiary Security Agreement, the Pledge Agreement and the Subsidiary Guarantee
and Sections 2,5,6,7, 8 and 9 of this Agreement, collectively.
"Losses" shall have the meaning ascribed to it in Section 9.2.
"Lien(s)" shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, including any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security.
"Material Adverse Effect" shall mean an effect which is materially
adverse to the business, assets, properties, operations, results of operations
or condition (financial or otherwise) of the Company individually or of the
Company and the Subsidiaries taken as a whole (excluding general economic
conditions or acts of war or terrorism).
"Material Contracts" shall have the meaning ascribed to it in Section
3.10(a).
"Maturity Date" shall have the meaning ascribed to it in Section 2.1.
"Multiemployer Plan" shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Company or any Controlled Group Member has or had an obligation to
contribute.
"Nasdaq" shall have the meaning ascribed to it in Section 3.5.
"New Series A Preferred Stock" shall have the meaning ascribed to it
in the recitals.
"New Securities" shall have the meaning ascribed to it in Section 4.4.
"Note Indebtedness" shall mean without duplication principal,
interest, fees, expenses and other charges related to the Notes and
indemnification obligations with respect to the Notes, whether direct or
indirect, absolute or contingent, of the Company to any of the Additional
Purchasers or to the Collateral Agent, in any manner and at any time, whether
evidenced by the Notes or arising under this Agreement, due or hereafter to
become due, now owing or that may be hereafter incurred by the Company to, any
of the Additional Purchasers or the Collateral Agent, and any judgments that may
hereafter be rendered on such indebtedness or any part thereof, with interest
42
according to the rates and terms specified, or as provided by law, and any and
all consolidation, amendments, renewals, replacements, substitutions or
extensions of any of the foregoing.
"Notes" shall have the meaning ascribed to it in the recitals.
"Old Series A Preferred Stock" shall have the meaning ascribed to it
in the recitals.
"Options" shall have the meaning ascribed to it in Section 3.4.
"Original Issue Price" shall have the meaning ascribed to it in the
recitals.
"Pequot" shall mean Pequot Private Equity Fund III, L.P. and Pequot
Offshore Private Equity Partners III, L.P., together with certain of their
respective affiliates.
"Permits" shall have the meaning ascribed to it in Section 3.8.
"Permitted Liens" shall have the meaning ascribed to it in Section
3.6(a).
"Person" shall mean an individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated organization, joint
venture, joint stock company, or a government or any agency or political
subdivision thereof or other entity of any kind.
"Plan" shall mean any plan described in ERISA 3(2) maintained for
employees of the Company or any ERISA Affiliate other than a Multiemployer Plan.
"Pledge Agreement" shall have the meaning ascribed to it in Section
2.2.
"Prohibited Transaction(s)" shall mean any transaction described in
Section 406 of ERISA which is not exempt by reason of Section 408 of ERISA, and
any transaction described in 4975(c) of the Code which is not exempt by reason
of Section 4975(c)(2) of the Code.
"Proprietary Rights" shall have the meaning ascribed to it in Section
3.9(a).
"Purchased Securities" shall have the meaning ascribed to it in
Section 1.6.
"Purchased Shares" shall have the meaning ascribed to it in the
recitals.
"Purchaser(s)" shall have the meaning ascribed to it in the
preliminary paragraph.
"Purchaser Entity" shall have the meaning ascribed to it in Section
9.1.
"Purchaser Option" shall mean the Series A-4 Purchaser Option and/or
the Series A-5 Purchaser Option, as applicable.
"Rejecting Purchaser" shall have the meaning ascribed to it in Section
1.3(b).
43
"Release" shall mean any past or present release, spill, leak,
leaching, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping.
"Reportable Event" shall mean a reportable event described in Section
4043 of ERISA or the regulations thereunder, a withdrawal from a Plan described
in Section 4063 of ERISA, or a cessation of operations described in Section
4068(f) of ERISA.
"Responsible Officer" shall mean the President, Chief Executive
Officer, Vice President of Finance or Chief Financial Officer of the Company.
"Restated Certificate" shall have the meaning ascribed to it in the
recitals.
"Restrictive Covenant(s)" shall have the meaning ascribed to it in
Section 8.2.
"SEC" shall have the meaning ascribed to it in Section 3.22(a).
"SEC Reports" shall have the meaning ascribed to it in Section
3.22(a).
"Securities Act" shall have the meaning ascribed to it in Section
3.19.
"Security Agreement" shall have the meaning ascribed to it in Section
2.2.
"Senior Credit Agreement" shall have the meaning ascribed to it in
Section 2.3.
"Senior Credit Facility" shall mean, at any time, the credit facility
evidencing Senior Indebtedness.
"Senior Indebtedness" means Indebtedness under the Senior Credit
Agreement and Indebtedness under any future Senior Credit Facility so long as
the Senior Lender thereunder is selected by the Borrower within 60 days
following the date hereof and such future Senior Credit Facility consists of (a)
borrowings determined on the basis of not more than 90% of the Company's
accounts receivable, even though such facility may be secured by all of the
Company's assets, (b) an additional amount not to exceed $20,000,000 and (c)
only one Senior Credit Facility is in effect at any time, including the Senior
Credit Agreement.
"Senior Lender" means each holder of Senior Indebtedness.
"Series A Preferred Stock" shall mean the Series A-1 Preferred Stock,
Series A-2 Preferred Stock, Series A-3 Preferred Stock, Series A-4 Preferred
Stock and Series A-5 Preferred Stock, collectively.
"Series A-1 Preferred Stock" shall have the meaning ascribed to it in
the recitals.
"Series A-2 Preferred Stock" shall have the meaning ascribed to it in
the recitals.
"Series A-3 Preferred Stock" shall have the meaning ascribed to it in
the recitals.
44
"Series A Purchased Shares" shall mean the Series A Preferred Stock
sold and issued to the Initial Purchasers pursuant to the Initial Series A
Purchase Agreement and the Purchased Shares, collectively.
"Series A-3 Purchased Shares" shall mean the Series A-3 Preferred
Stock sold and issued to the Purchasers set forth in Schedule I hereto in
accordance with the Initial Series A Purchase Agreement.
"Series A-3 Purchased Shares Purchase Price" shall mean $3.25 per
share.
"Series A-3 Warrants" shall mean detachable warrants to purchase that
number of shares of Common Stock equal to 20% of the number of shares of Series
A-3 Purchased Shares being purchased at such time at an exercise price equal to
125% of the per share purchase price of such Series A-3 Purchased Shares.
"Series A-4 First Tranche Notes" shall have the meaning ascribed to it
in the recitals.
"Series A-4 Notice of Exercise" shall have the meaning ascribed to it
in Section 1.3(a).
"Series A-4 Notes" shall have the meaning ascribed to it in the
recitals.
"Series A-4 Preferred Stock" shall have the meaning ascribed to it in
the recitals.
"Series A-4 Purchased Shares" shall have the meaning ascribed to it in
the recitals.
"Series A-4 Purchaser Notice" shall have the meaning ascribed to it in
Section 1.3(b).
"Series A-4 Purchaser Option" shall have the meaning ascribed to it in
Section 1.3(a).
"Series A-4 Second Tranche Notes" shall have the meaning ascribed to
it in the recitals.
"Series A-4 Subsequent Closing" shall have the meaning ascribed to it
in Section 1.3(a).
"Series A-4 Warrants" shall have the meaning ascribed to it in the
recitals.
"Series A-5 Notes" shall have the meaning ascribed to it in the
recitals.
"Series A-5 Notice of Exercise" shall have the meaning ascribed to it
in Section 1.4(a).
"Series A-5 Preferred Stock" shall have the meaning ascribed to it in
the recitals.
45
"Series A-5 Purchaser Option" shall have the meaning ascribed to it in
Section 1.4(a).
"Series A-5 Subsequent Closing" shall have the meaning ascribed to it
in Section 1.4(a).
"Series A-5 Purchased Shares" shall have the meaning ascribed to it in
the recitals.
"Shareholders' Agreement" shall have the meaning ascribed to it in the
recitals.
"Shareholder Approval" shall have the meaning ascribed to it in the
recitals.
"63% in Interest Additional Purchasers" shall mean the Additional
Purchasers owning Purchased Securities, the original purchase price of which
constitutes at least 63% of the amounts invested by all of the Additional
Purchasers in all of the then outstanding Purchased Securities.
"63% in Interest Purchasers" shall mean the Purchasers owning
Purchased Securities, the original purchase price of which constitutes at least
63% of the amounts invested by all of the Purchasers in all of the then
outstanding Purchased Securities.
"Subordination Agreement" shall have the meaning ascribed to it in
Section 2.3.
"Subsidiary(ies)" shall mean any other corporation, limited liability
company, association, joint stock company, joint venture or business trust of
which, as of the date hereof or hereafter, (i) more than fifty percent (50%) of
the outstanding voting stock, share capital or other equity interests is owned
either directly or indirectly by any Person or one or more of its Subsidiaries,
or (ii) the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by any Person and/or its
Subsidiaries. Unless otherwise specified to the contrary herein, Subsidiary(ies)
shall refer to the Company's Subsidiary(ies).
"Subsidiary Guarantee" shall have the meaning ascribed to it in
Section 2.4.
"Subsidiary Guarantor" shall have the meaning ascribed to it in
Section 2.4.
"Subsidiary Security Agreement" shall have the meaning ascribed to it
in Section 2.2.
"Subsequent Closing" shall have the meaning ascribed to it in Section
1.8.
"Subsequent Closing Date" shall have the meaning ascribed to it in
Section 1.8.
"Supermajority Additional Purchasers" shall mean the Additional
Purchasers owning Purchased Securities, the original purchase price of which
constitutes at least 75% of the amounts invested by all of the Additional
Purchasers in all of the then outstanding Purchased Securities.
46
"Textron" shall have the meaning ascribed to it in Section 2.3.
"Transaction Document(s)" shall mean, collectively, this Agreement,
the Purchased Securities, the Shareholders' Agreement, the Registration Rights
Agreement, the Security Agreement, the Subsidiary Security Agreement, the Pledge
Agreement, the Subsidiary Guarantee and all other agreements and instruments and
any other documents, certificates, instruments or agreements executed pursuant
to or in connection with any such document or this Agreement, as such documents
may be amended from time to time.
"Voting Agreement" shall have the meaning ascribed to it in the
recitals.
"Warrants" shall have the meaning ascribed to it in the recitals.
11. Post-Closing Covenants.
11.1 Shareholder Approval. As soon as practicable after the date
hereof, the Company shall use its best efforts to hold a meeting of the
Company's shareholders in compliance with the rules of the SEC regarding
proxies, consents and authorizations of shareholders in Section 14 of the
Exchange Act, and the rules and regulations promulgated thereunder and shall
make all appropriate filings related thereto (including, without limitation, the
filing of any effective proxy statement) with the SEC to give effect thereto, to
approve the Restated Certificate, the authorization and issuance of (or the
conversion of the Notes into) the New Series A Preferred Stock, the issuance and
exercise of the Series A-4 Warrants and the issuance of any Common Stock
issuable upon conversion or exercise of the foregoing. The Company shall use its
reasonable commercial efforts to deliver to the Purchasers a copy of such proxy
statement and any amendments and supplements thereto at least five days prior to
the filing thereof with the SEC.
11.2 Restated Certificate. Promptly following the Shareholder
Approval, the Company shall file the Restated Certificate with the Secretary of
State of the State of New York.
11.3 Filing of Financing Statements. The Company shall have filed,
within 5 days of the Initial Closing Date, appropriately completed and duly
executed financing statements on Form UCC-1 with respect to the collateral, each
to be filed, with respect to the Company, with the Secretary of State of the
State of New York and with respect to any Subsidiary, with the applicable office
or recordation in the applicable jurisdiction of such Subsidiary, in each case,
in form and substance reasonably satisfactory to the Additional Purchasers and
shall provide evidence to the Collateral Agent of such filing.
11.4 Filing of Patent, Trademark and Copyright Recordation Forms. The
Company shall have prepared within 30 days of the Initial Closing Date and
shall, upon the request of the Additional Purchasers, file promptly thereafter,
recordation forms with respect to the collateral with the United States Patent
and Trademark Office, if necessary, to secure the Additional Purchasers'
security interest in the Patents and Trademarks pledged as collateral (as such
term is defined in the Security Agreement) in the Security Agreement and with
the United States Copyright Office to perfect the Additional Purchasers'
security interest in the Copyrights pledged as collateral in the Security
Agreement, in each case in form and substance reasonably satisfactory to the
Additional Purchasers.
47
12. Miscellaneous.
12.1 Survival of Representations and Warranties. The representations
and warranties of the Company and Purchasers contained in or made pursuant to
(i) Section 2 of the Initial Series A Purchase Agreement (other than those made
in Sections 2.17 and 2.20) and (ii) this Agreement (other than those made in
Sections 4.17 and 4.20) shall survive the execution and delivery of this
Agreement and the other Transaction Documents (A) with respect to the
representations and warranties made pursuant to Section 2 of the Initial Series
A Purchase Agreement, (w) in connection with the initial closing thereunder,
until the date that is three months following the end of the second fiscal year
of the Company ending after the date of such initial closing and (x) in
connection with any subsequent closing thereunder, until eighteen months after
the date of such subsequent closing, but in no event, earlier than the time
period set forth in clause (w) above and (B) with respect to the
representations, warranties and covenants made pursuant to this Agreement, (y)
in connection with the Initial Closing, until the date that is three months
following the end of the second fiscal year of the Company ending after the
Initial Closing Date and (z) in connection with any Subsequent Closing, until
eighteen months after such Subsequent Closing Date, but in no event, earlier
than the time period set forth in clause (y) above . The representations and
warranties of the Company made in (A) Sections 4.17 and 4.20 of this Agreement
shall survive the execution and delivery of this Agreement and the other
Transaction Documents and the Initial Closing and (B) Sections 2.17 and 2.20 of
the Initial Series A Purchase Agreement shall survive the execution and delivery
of the Initial Series A Purchase Agreement and the other transaction documents
and the initial closing contemplated thereunder, in any event, for a period of
six months after the applicable statute of limitations has expired, and, in each
case, such representations and warranties shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Purchasers or the Company.
12.2 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 Purchased 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. Subject to applicable securities laws and the Shareholders'
Agreement, each Purchaser shall have the right to assign all of the rights,
title and interest of such Purchaser pursuant to this Agreement, including,
without limitation, the right to purchase the Purchased Securities and any
shares of Common Stock issuable upon conversion thereon, to any third party
reasonably acceptable to the Company.
12.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York, excluding the application of any
conflicts of laws principles which would require the application of the laws of
another state.
12.4 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.
48
12.5 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.
12.6 Notices. All notices and other communications required or
permitted hereunder shall be in writing. Notices shall be delivered personally,
via recognized overnight courier (such as Federal Express, DHL or Airborne
Express) or via certified or registered mail. Notices may be delivered via
facsimile or e-mail, provided that by no later than two days thereafter such
notice is confirmed in writing and sent via one of the methods described in the
previous sentence. Notices shall be addressed as follows:
(a) if to an Initial Purchaser, to such Initial Purchaser's address
set forth on Schedule I hereto;
(b) if to an Additional Purchaser, to such Additional Purchaser's
address set forth on Schedule II hereto, or at such other address or facsimile
number as such Purchaser shall have furnished to the Company in writing, with a
copy to (i) with respect to Constellation, Ropes & Xxxx LLP, 00 Xxxxxxxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxxxxx X. Xxxxx, facsimile
number (000) 000-0000; or
(c) if to the Company, to MTM Technologies, Inc., 000 Xxxxx Xxxxxx,
Xxxxxxxx, Xxxxxxxxxxx 00000, Attention: General Counsel, facsimile number (203)
975-3701, or at such other address or facsimile number as the Company shall have
furnished in writing to the Purchasers, with a copy to Xxxxxx Xxxx & Priest LLP,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: E. Xxx Xxxx, facsimile
number (000) 000.0000.
All notices shall be effective upon receipt.
12.7 Expenses. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement and the transactions contemplated hereby. If the transactions
contemplated hereby are consummated on the Initial Closing Date or if the
Company enters into a transaction with another potential purchaser not
affiliated with either Additional Purchaser on substantially the terms set forth
in this Agreement, the Company shall reimburse the Additional Purchasers for the
reasonable out-of-pocket expenses (including legal fees and disbursements paid
to counsel to the Additional Purchasers), which the Additional Purchasers have
incurred with respect to the negotiation, execution, delivery and performance of
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby in an amount not exceeding one-hundred and ten
thousand dollars ($110,000) with respect to the Initial Closing and, for each
Subsequent Closing, an amount not to exceed ten thousand dollars ($10,000). The
Company shall pay all costs and expenses (including reasonable legal fees and
expenses) incurred by the Additional Purchasers in connection with, and, to the
extent the Additional Purchasers prevail in, the enforcement of this Agreement
and the Transaction Documents and in connection with any filing pursuant to the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, that may be
incurred by the Additional Purchasers as a result of the purchase or ownership
of the Purchased Securities. The Company shall pay all reasonable expenses
incurred by all Company directors who are not officers or employees of the
49
Company in connection with their attendance at meetings of the Company's Board
of Directors (including all reasonable travel and lodging expenses related
thereto).
12.8 Consents, Amendments and Waivers.
Subject to Sections, 13.8(a), (b) and (c), any term of this Agreement
may be amended, and the observance of any term hereof may be waived (either
generally or in a particular instance), only with the written consent of the 63%
in Interest Additional Purchasers as provided in Sections 13.8(c) and (d) and
the written consent of the Company. Any amendment or waiver effected in
accordance with this Section 12.8 shall be binding upon each of the parties
hereto.
(a) Subject to the terms of Sections 13.8(b) and (c), and except to
the extent expressly provided in Section 9, to the extent that (i) the terms of
this Agreement require a Credit Party to obtain the consent or approval of the
Additional Purchasers, (ii) the terms of this Agreement require or permit the
Collateral Agent to take any action, including but not limited to declaring an
Event of Default, (iii) a Credit Party seeks an amendment to or termination of
any of the terms of this Agreement or (iv) a Credit Party seeks a waiver of any
right of the Additional Purchasers under this Agreement, such consent, approval,
action, termination, amendment or waiver (each, an "Approval") shall be made by
a 63% in Interest Additional Purchasers.
(b) Notwithstanding anything to the contrary contained in Section
12.8(a), the Purchasers and the Company shall not, without the prior written
consent and approval of at least the Supermajority Additional Purchasers, amend,
modify, terminate or obtain a waiver of any provision of this Agreement, which
will have the effect of (i) reducing the principal amount of any Notes or of any
payment required to be made to the holders thereof, or modifying the terms of a
payment or prepayment thereof or (ii) reducing the rate or extending the time
for payment of interest under any Notes or (iii) releasing any collateral.
(c) Notwithstanding anything to the contrary contained in this Section
12.8, the Purchasers and the Company shall not, without the prior written
consent and approval of at least the 63% in Interest Purchasers, amend, modify,
terminate or obtain a waiver of any provision of Section 7, Section 9 or Section
12 of this Agreement.
(d) Notwithstanding anything to the contrary contained in Section
12.8(a), following a default pursuant to Section 6.1(a) hereof (a) each
Additional Purchaser shall be permitted to exercise all of its rights and
remedies under this Agreement, the Note held by such Additional Purchaser, and
the Transaction Documents individually, and (b) the Company shall be required to
seek any and all consents, approvals, waivers, terminations or amendments
pursuant to this Agreement from each such Additional Purchaser individually, as
provided in this Agreement. Each Additional Purchaser agrees that, for the
benefit of the other Additional Purchasers, any proceeds received by such
Additional Purchaser as a result of the exercise of rights and remedies under
this Agreement pursuant to this Section 12.8(d) will be divided, pro rata, among
all Additional Purchasers.
12.9 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable Law or rule in any
50
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction to the greatest extent
possible to carry out the intentions of the parties hereto.
12.10 Entire Agreement. Each party hereby acknowledges that no other
party or any other person or entity has made any promises, warranties,
understandings or representations whatsoever, express or implied, not contained
in the Transaction Documents and acknowledges that it has not executed the
Transaction Documents in reliance upon any such promises, representations,
understandings or warranties not contained herein or therein and that the
Transaction Documents supersede all prior agreements and understandings between
the parties with respect thereto. There are no promises, covenants or
undertakings other than those expressly set forth or provided for in the
Transaction Documents.
12.11 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party under this Agreement, upon any breach or
default of any other party under this Agreement, shall impair any such right,
power or remedy of such nonbreaching or nondefaulting party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring.
12.12 Facsimile Signatures. Any signature page delivered by a fax
machine shall be binding to the same extent as an original signature page, with
regard to any agreement subject to the terms hereof or any amendment thereto.
Any party who delivers such a signature page agrees to deliver promptly an
original counterpart to each party to whom the faxed signature page was sent.
12.13 Other Remedies. In addition to those remedies specifically set
forth herein and in the Transaction Documents, if any, each party may proceed to
protect and enforce its rights under this Agreement and the Transaction
Documents either by suit in equity and/or by action at law, including, but not
limited to, an action for damages as a result of any such breach and/or an
action for specific performance of any such covenant or agreement contained in
this Agreement or in the Transaction Documents. No right or remedy conferred
upon or reserved to any party under this Agreement or the Transaction Documents
is intended to be exclusive of any other right or remedy, and every right and
remedy shall be cumulative and in addition to every other right and remedy given
under this Agreement and the Transaction Documents or now and hereafter existing
under applicable law.
12.14 Further Assurances. At any time or from time to time after any
Closing, the Company, on the one hand, and the Purchasers, on the other hand,
agree to cooperate with each other, and at the request of the other party, to
execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby relating to
the purchase contemplated herein and to otherwise carry out the intent of the
parties hereunder.
51
12.15 Exchanges; Lost, Stolen or Mutilated Stock Certificates and
Warrants. Upon surrender by any Purchaser to the Company of any Note, stock
certificate, Warrant or Additional Warrant, the Company at its expense shall
issue in exchange therefor, and deliver to such Purchaser, a replacement Note,
stock certificate, Warrant or Additional Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Note, stock certificate, Warrant or Additional Warrant and in case of any such
loss, theft or destruction, upon delivery of an indemnity agreement,
satisfactory to the Company, or in case of any such mutilation, upon surrender
and cancellation of such Note, stock certificate, Warrant or Additional Warrant,
the Company shall issue and deliver to such Purchaser a new Note, stock
certificate, Warrant or Additional Warrant of like tenor, in lieu of such lost,
stolen or mutilated Note, stock certificate, Warrant or Additional Warrant.
12.16 Termination. This Agreement may be terminated at any time prior
to the Initial Closing by mutual agreement of the Company and all Additional
Purchasers set forth in writing.
12.17 Preemptive Rights. To the extent that any Purchaser has or holds
preemptive rights, such Purchaser hereby waives any and all preemptive rights
that it may have with respect to the Purchased Securities issued or issuable
pursuant to this Agreement.
12.18 Consent of Series A Holders. By its execution below, the Initial
Purchasers hereby consent to the transactions contemplated by this Agreement and
the other Transaction Documents, as required by the Existing Certificate and the
Initial Series A Purchase Agreement.
12.19 Termination of Initial Series A Purchase Agreement. Except as
otherwise set forth in this Agreement, including, without limitation, Sections 9
and 12 hereof, by its execution below, the Initial Purchasers hereby consent to
the termination of the Initial Series A Purchase Agreement and agree that after
the date hereof, the Initial Series A Purchase Agreement shall be of no further
force and effect.
12.20 Public Announcements. The Company shall obtain the prior written
consent of any Additional Purchaser prior to any dissemination of information to
the public referring to or mentioning the name of any such Additional Purchaser
or any affiliate thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
52
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
The Company:
MTM TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
Signature Page to Purchase Agreement
The Initial Purchasers:
-----------------------
PEQUOT PRIVATE EQUITY FUND III, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By: /s/ Xxxxx Xxxxx
---------------------------------------
Name: Xxxxx Xxxxx
Title: General Counsel
PEQUOT OFFSHORE PRIVATE EQUITY
PARTNERS III, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By: /s/ Xxxxx Xxxxx
---------------------------------------
Name: Xxxxx Xxxxx
Title: General Counsel
Signature Page to Purchase Agreement
The Initial Purchasers:
-----------------------
CONSTELLATION VENTURE CAPITAL II, L.P.
By: Constellation Ventures
Management II, LLC
Its General Partner
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
CONSTELLATION VENTURE CAPITAL
OFFSHORE II, L.P.
By: Constellation Ventures
Management II, LLC
Its General Partner
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
THE BSC EMPLOYEE FUND VI, L.P.
By: Constellation Ventures
Management II, LLC
Its General Partner
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
CVC II PARTNERS, LLC
By: The Bear Xxxxxxx Companies Inc.
Its Managing Member
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
Signature Page to Purchase Agreement
The Additional Purchasers:
--------------------------
PEQUOT PRIVATE EQUITY FUND III, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By: /s/ Xxxxx Xxxxx
---------------------------------------
Name: Xxxxx Xxxxx
Title: General Counsel
PEQUOT OFFSHORE PRIVATE EQUITY
PARTNERS III, L.P.
By: Pequot Capital Management, Inc.,
its Investment Manager
By: /s/ Xxxxx Xxxxx
---------------------------------------
Name: Xxxxx Xxxxx
Title: General Counsel
CONSTELLATION VENTURE CAPITAL II, L.P.
By: Constellation Ventures
Management II, LLC
Its General Partner
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
CONSTELLATION VENTURE CAPITAL
OFFSHORE II, L.P.
By: Constellation Ventures
Management II, LLC
Its General Partner
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
Signature Page to Purchase Agreement
THE BSC EMPLOYEE FUND VI, L.P.
By: Constellation Ventures
Management II, LLC
Its General Partner
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
CVC II PARTNERS, LLC
By: The Bear Xxxxxxx Companies Inc.
Its Managing Member
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Senior Managing Director
Signature Page to Purchase Agreement
SCHEDULE I
----------
NAMES AND ADDRESSES OF INITIAL PURCHASERS
-----------------------------------------
1. Pequot Private Equity Fund III, L.P.
c/o Pequot Capital Management, Inc. 000
Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Fax: (000) 000-0000
with a copy to
Xxxxx Xxxxx
c/o Pequot Capital Management, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
2. Pequot Offshore Private Equity Partners III, L.P.
c/o Pequot Capital Management, Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Fax: (000) 000-0000
with a copy to
Xxxxx Xxxxx
c/o Pequot Capital Management, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
3. Constellation Venture Capital II, L.P.
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
4. Constellation Venture Capital Offshore II, L.P.
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
5. The BSC Employee Fund VI, L.P.
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
6. CVC Partners II, LLC
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
SCHEDULE II
-----------
NAMES AND ADDRESSES OF ADDITIONAL PURCHASERS
--------------------------------------------
1. Pequot Private Equity Fund III, L.P.
c/o Pequot Capital Management, Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Fax: (000) 000-0000
with a copy to
Xxxxx Xxxxx
c/o Pequot Capital Management, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
2. Pequot Offshore Private Equity Partners III, L.P.
c/o Pequot Capital Management, Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Fax: (000) 000-0000
with a copy to
Xxxxx Xxxxx
c/o Pequot Capital Management, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
3. Constellation Venture Capital II, L.P.
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
4. Constellation Venture Capital Offshore II, L.P.
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
5. The BSC Employee Fund VI, L.P.
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
6. CVC Partners II, LLC
c/o Constellation Ventures
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
SCHEDULE III
------------
SCHEDULE OF PURCHASERS
----------------------
NAME AND ADDRESS SERIES A-4 FIRST NUMBER OF WARRANT
OF TRANCHE NOTE PURCHASE SHARES/1/
PURCHASER PRICE
Pequot Private Equity Fund III, L.P. $5,477,807.00 337,096
Pequot Offshore Private Equity Partners III, L.P. $772,193.00 47,520
Constellation Venture Capital II, L.P. $1,872,133.25 115,208
Constellation Venture Capital Offshore II, L.P. $996,261.50 61,309
The BSC Employee Fund VI, L.P. $834,853.50 51,376
CVC Partners II, LLC $46,751.25 2,877
Totals $9,999,999.50 615,386
-----------------
1. /1/ Subject to adjustments in accordance with the terms of the Warrants.
EXHIBIT A
---------
INITIAL SERIES A PURCHASE AGREEMENT
-----------------------------------
EXHIBIT B
---------
RESTATED CERTIFICATE
--------------------
EXHIBIT C
---------
VOTING AGREEMENT
----------------
EXHIBIT X-0, X-0, X-0
---------------------
FORM OF NOTES
-------------
EXHIBIT E
---------
FORM OF WARRANT AND ADDITIONAL WARRANTS
---------------------------------------
EXHIBIT F
---------
FORM OF SECURITY AGREEMENT
--------------------------
EXHIBIT G
---------
FORM OF SUBSIDIARY SECURITY AGREEMENT
-------------------------------------
EXHIBIT H
---------
FORM OF PLEDGE AGREEMENT
------------------------
EXHIBIT I
---------
FORM OF SUBORDINATION AGREEMENT
-------------------------------
EXHIBIT J
---------
FORM OF SUBSIDIARY GUARANTEE
----------------------------
EXHIBIT K
---------
CAPITALIZATION TABLE
--------------------
EXHIBIT L
---------
PRINCIPAL OFFICES OF PURCHASERS
-------------------------------
EXHIBIT M
---------
FORM OF SHAREHOLDERS AGREEMENT
------------------------------
EXHIBIT N
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
EXHIBIT O
---------
DEBT COVENANTS
--------------
1. Affirmative Covenants.
1.1 Taxes. The Company shall file all tax returns and pay or make
adequate provision for the payment of all taxes, assessments and other charges
on or prior to the date when due.
1.2 Notice of Litigation. The Company shall promptly notify the
Additional Purchasers in writing of any litigation, suit or administrative
proceeding which may materially and adversely affect the collateral or the
Company's business, assets, operations, prospects or condition, financial or
otherwise, whether or not the claim is covered by insurance.
1.3 ERISA. The Company shall notify the Additional Purchasers (i)
promptly upon the occurrence of any event described in paragraph 4043 of ERISA,
other than a termination, partial termination or merger of a Plan or a Plan's
assets and (ii) prior to any termination, partial termination or merger of a
Plan or a transfer of a Plan's assets.
1.4 Change In Location. The Company shall notify the Additional
Purchasers in writing 45 days prior to any change in the location of the
Company's chief executive office or the location of any collateral, or the
Company's opening or closing of any other place of business.
1.5 Corporate Existence. The Company shall maintain its corporate
existence and its qualification to do business and good standing in all states
necessary for the conduct of its business and the ownership of its property and
maintain adequate assets, trademarks, copyrights, licenses and patents, for the
conduct of its business.
1.6 Labor Disputes. The Company shall promptly notify the Additional
Purchasers in writing of any material labor dispute to which the Company is or
may become subject and the expiration of any labor contract to which the Company
is a party or bound.
1.7 Violations of Law. The Company shall promptly notify the
Additional Purchasers in writing of any violation of any law, statute,
regulation or ordinance of any Governmental Authority, or of any agency thereof,
applicable to the Company which may materially and adversely affect the
collateral or the Company's business, assets, prospects, operations or
condition, financial or otherwise.
1.8 Defaults. The Company shall notify the Additional Purchasers in
writing within five Business Days of the occurrence of the Company's default
under any note, indenture, loan agreement, mortgage, lease or other agreement to
which the Company is a party or by which the Company is bound, or any other
default under any Indebtedness.
1.9 Capital Expenditures. The Company shall promptly notify the
Additional Purchasers in writing of any Capital Expenditure materially affecting
the Company's business, assets, prospects, operations or condition, financial or
otherwise.
1.10 Books and Records. The Company shall keep adequate records and
books of account with respect to its business activities in which proper entries
are made in accordance with GAAP, reflecting all of its financial transactions.
1.11 Leases; Warehouse Agreements. The Company shall provide the
Additional Purchasers with (i) copies of all agreements between the Company and
any landlord or warehouseman which owns any premises at which any collateral
may, from time to time be located and (ii) landlord and mortgage waivers in a
form reasonably acceptable to the Additional Purchasers with respect to all
locations where any collateral is hereafter located.
1.12 Financial Statements. The Company shall furnish to the Collateral
Agent and each Additional Purchaser:
(a) As soon as practicable, and in any event by the date of filing
thereof by the Company with the SEC pursuant to the Company's reporting
requirements under the Exchange Act, the Company shall furnish to the Collateral
Agent and each Additional Purchaser Consolidated statements of income, cash
flows and changes in stockholders' equity of the Company for such fiscal year
and a Consolidated balance sheet of the Company as of the close of such fiscal
year, and notes to each, all in reasonable detail, setting forth in comparative
form the corresponding figures for the preceding calendar year. Such financial
statements shall be accompanied by an opinion of independent certified public
accountants of recognized national standing selected by the Company and
reasonably satisfactory to the Collateral Agent and each Additional Purchaser.
Such opinion shall be free of exceptions or qualifications not acceptable to the
63% in Interest Additional Purchasers and in any event shall be free of any
exception or qualification which is of "going concern" or like nature or which
relates to a limited scope of examination. Such opinion in any event shall
contain a written statement of such accountants substantially to the effect that
(i) such accountants examined such financial statements in accordance with GAAP
and accordingly made such tests of accounting records and such other auditing
procedures as such accountants considered necessary in the circumstances and
(ii) in the opinion of such accountants such financial statements present fairly
in all material respects the financial position of the Company as of the end of
such fiscal year and the results of its operations and its cash flows and
changes in stockholders' equity for such fiscal year, in conformity with GAAP;
and
(b) As soon as practicable, and in any event by the date of filing
thereof by the Company with the SEC pursuant to the Company's reporting
requirements under the Exchange Act, the Company shall furnish to the Collateral
Agent and each Additional Purchaser unaudited Consolidated statements of income
and cash flows of the Company for such fiscal quarter and for the period from
the beginning of such fiscal year to the end of such fiscal quarter and an
unaudited Consolidated balance sheet of the Company as of the close of such
fiscal quarter, all in reasonable detail, setting forth in comparative form the
corresponding figures for the same periods or as of the same date during the
preceding fiscal year. Such financial statements shall be certified by a
Responsible Officer of the Company as presenting fairly in all material respects
the financial position of the Company as of the end of such fiscal quarter and
the results of its operations and its cash flows for such fiscal quarter, in
conformity with GAAP (but without physical inventory), subject to normal and
recurring year-end audit adjustments and the lack of complete footnotes.
1.13 Further Information; Further Assurances. The Company will, with
reasonable promptness, provide to the Collateral Agent and each Additional
Purchaser such further assurances and additional information, reports and
statements respecting its business, operations, properties and financial
condition and respecting its Affiliates and investments, as the Collateral Agent
and/or each Additional Purchaser may from time to time reasonably request.
1.14 Financial Covenants. The Company will maintain on the last day of
each fiscal quarter the following:
Tangible Net Worth Not less than $11,000,000
Debt/Tangible Net Worth Equal to or less than 3:1
Liquidity Equal to or greater than 1:1
EBITDA (beginning in the last quarter
of the 2005 fiscal year) Greater than 0
The calculation of the amounts set forth above shall be made in the same manner
as required by the Senior Credit Agreement.
1.15 Shareholder Approval. As soon as practicable after the date
hereof, the Company shall use its best efforts to hold a meeting of the
Company's shareholders in compliance with the rules of the SEC regarding
proxies, consents and authorizations of shareholders in Section 14 of the
Exchange Act, and the rules and regulations promulgated thereunder and shall
make all appropriate filings related thereto (including, without limitation, the
filing of any effective proxy statement) with the SEC to give effect thereto, to
approve the Restated Certificate, the authorization and issuance of (or the
conversion of the Notes into) the New Series A Preferred Stock, the issuance and
exercise of the Series A-4 Warrants and the issuance of any Common Stock
issuable upon conversion or exercise of the foregoing. The Company shall use its
reasonable commercial efforts to deliver to the Additional Purchasers a copy of
such proxy statement and any amendments and supplements thereto at least five
days prior to the filing thereof with the SEC.
1.16 Restated Certificate. Promptly following the Shareholder
Approval, the Company shall file the Restated Certificate with the Secretary of
State of the State of New York.
2. Negative Covenants.
So long as the Notes are outstanding and have not been converted, the Company
covenants and agrees that, until the final payment in full or conversion of the
Notes, it will not and will cause the Subsidiaries not to perform any of the
following:
2.1 Mergers. Except as permitted by the Certificate of Incorporation
without approval of the shareholders, merge or consolidate with or acquire any
other Person or make any other material change in its capital structure or in
its business or operations, in any such case, which might materially adversely
affect the repayment of the Note Indebtedness.
2.2 Loans. Except as permitted by the Certificate of Incorporation
without approval of the shareholders, make advances, loans or extensions of
credit to, or invest in, any Person except for intercompany loans between the
Company and its Subsidiaries.
2.3 Dividends. Declare or pay cash dividends upon any of its stock or
distribute any of its property or redeem, retire, purchase or acquire directly
or indirectly any of its stock except for dividends on the Series A Preferred
Stock issued pursuant to the Initial Series A Purchase Agreement and this
Agreement so long, as no Event of Default under this Agreement has occurred and
is continuing, provided that the foregoing shall not prohibit the payment of
dividends solely in the form of capital stock of the Company.
2.4 Adverse Transactions. Enter into any transaction which materially
and adversely affects the collateral or its ability to repay the Note
Indebtedness in full as and when due.
2.5 Indebtedness of Others. Become directly or contingently liable for
the Indebtedness of any Person, except by endorsement of instruments for
deposit; and except for any existing guarantees made by the Company prior to the
date hereof, if any.
2.6 Repurchase. Make a sale to any customer on a xxxx-and-hold,
guaranteed sale, sale and return, sale on approval, consignment, or any other
repurchase or return basis.
2.7 Name. Use any corporate or fictitious name other than its
corporate name as set forth in its Existing Certificate.
2.8 Prepayment. Prepay any Indebtedness other than trade payables.
2.9 Capital Expenditure. Make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital Expenditures by
the Company in any fiscal year (commencing with the 2005 fiscal year) would
exceed $2,000,000.
2.10 Indebtedness. Create, incur, assume or permit to exist any
Indebtedness (including Indebtedness in connection with Capital Leases), other
than (i) the Senior Credit Facility, (ii) the Note Indebtedness, (iii) trade
payables and other contractual obligations to suppliers and customers incurred
in the ordinary course of business, and (iv) other Indebtedness existing on the
date of this Agreement and reflected in the most recent quarterly report on Form
10-Q and (v) any issuance of debt that is subordinate to the Note Indebtedness.
2.11 Nature of Business. Enter into any new business, or make any
material change in any of the Company's business objectives, purposes or
operations.
2.12 Real Property. Purchase or acquire any real property without each
Additional Purchaser's prior written consent, a condition of which consent shall
include delivery of appropriate environmental reports and analysis, in form and
substance satisfactory to the Additional Purchasers.
2.13 Liens. Create, incur, assume or suffer to exist any Lien, whether
now owned or hereafter acquired, except Permitted Liens.
2.14 Change in Fiscal Year; Auditors. Change or permit any subsidiary
to change the commencement or ending date of its fiscal year or retain the
independent public auditors for purposes of preparing the Company's audited
financial statements which are different than those retained by the Company and
its Subsidiaries at the time of the Initial Closing Date, in each case, without
receiving the prior written consent of the Additional Purchasers.
2.15 Issuance of Stock. The Company shall not issue or permit any
subsidiary to issue any capital stock after the Initial Closing Date without the
prior written approval of the Additional Purchasers, except for issuances of
stock contemplated by the this Agreement, the Initial Series A Purchase
Agreement, and pursuant to the Company's various stock option and other employee
benefit plans or in connection with a strategic investment or similar
transaction approved by a majority of the Board of Directors.
3. Certain Definitions. For the purposes of this Exhibit O the following
terms will have the following meanings:
"Capital Expenditure(s)" shall mean, all expenditures made and
liabilities incurred for the acquisition of any fixed asset or improvement,
replacement, substitution or addition thereto which has a useful life of more
than one year and including, without limitation, those arising in connection
with Capital Leases.
"Capital Lease(s)" of any Person shall mean any lease which is, or is
required under GAAP to be, capitalized for financial reporting purposes and
reflected as a liability on the balance sheet of such Person.
"Capital Lease Obligations" shall mean the aggregate amount which is,
or is required under GAAP to be, reported as a liability on the balance sheet of
such Person at such time as lessee under a Capital Lease.
"Indebtedness" of a Person shall mean:
(a) all obligations on account of money borrowed by, or credit
extended to or on behalf of, or for or on account of deposits with or advances
to, such Person (other than trade payables and accrued liabilities in the
ordinary course);
(b) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments;
(c) all obligations of such Person for the deferred purchase price of
property or services;
(d) all obligations secured by a Lien on property owned by such
Person, whether or not assumed (except inchoate Liens securing obligations not
yet due and payable); and all Capital Lease Obligations or obligations under
Synthetic Leases (without regard to any limitation on the rights and remedies of
the holder of such Lien or the lessor under such Capital Lease or Synthetic
Lease to repossession or sale of such property);
(e) the face amount of all letters of credit issued for the account of
such Person and, without duplication, the unreimbursed amount of all drafts
drawn thereunder, and all other payment or monetary indemnification obligations
of such Person associated with such letters of credit or draws thereon;
(f) all obligations of such Person in respect of acceptances or
similar obligations issued for the account of such Person; and
(g) all obligations of such Person under any interest rate or currency
protection agreement, interest rate or currency future, interest rate or
currency option, interest rate or currency swap or cap or other interest rate or
currency hedge agreement.
"Liquidity" shall have the meaning given such term in the Senior
Credit Agreement.
"Synthetic Lease(s)" shall mean any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet financing
product of such Person where the transaction is considered Indebtedness for
borrowed money for federal income tax purposes but is classified as an operating
lease in accordance with GAAP for financial reporting purposes.
"Tangible Net Worth" shall mean, at any time, an amount equal to (i)
the sum of the amounts at which the Company's cash, receivables, inventory
(calculated at the lower of cost or market and determined on a first-in;
first-out basis) and net fixed assets would be shown on a balance sheet of the
Company at such date prepared in accordance with GAAP, provided that amounts due
from Affiliates shall be excluded therefrom, minus (ii) Indebtedness of the
Company at such date.
TABLE OF CONTENTS
1
1. Purchase and Sale of the Notes, Purchased Shares, Warrants
and the Additional Warrants................................................3
1.1 Authorization of Issuance of the Notes, Purchased Shares, Warrants
and the Additional Warrants..........................................3
1.2 Purchase and Sale of Series A4 First Tranche Notes and Warrants......4
1.3 Purchase and Sale of Series A4 Second Tranche Notes or Additional
Series A4 Purchased Shares and Additional Warrants....................4
1.4 Purchase and Sale of Series A5 Notes and Series A5 Purchased Shares...5
1.5 Certain Rights of the Additional Purchasers...........................6
1.6 Use of Proceeds.......................................................6
1.7 Initial Closing.......................................................6
1.8 Subsequent Closings...................................................7
2. Term of the Notes; Security for the Notes; Subordination; Collateral Agent..8
2.1 General...............................................................8
2.2 Security..............................................................8
2.3 Subordination.........................................................8
2.4 Subsidiary Security Arrangements......................................9
2.5 Collateral Agent......................................................9
3. Representations and Warranties of the Company...............................9
3.1 Organization and Qualification........................................9
3.2 Certificate of Incorporation and Bylaws...............................9
3.3 Corporate Power and Authority.........................................9
3.4 Capitalization.......................................................10
3.5 Authorization........................................................12
3.6 Title to Properties and Assets; Leases; Insurance....................12
3.7 RelatedParty Transactions............................................12
3.8 Permits; Compliance with Applicable Law..............................13
3.9 Proprietary Rights...................................................13
3.10 Material Contracts...................................................15
3.11 Absence of Undisclosed Liabilities...................................16
3.12 Absence of Conflicts.................................................16
3.13 Litigation...........................................................16
3.14 Consents.............................................................16
3.15 Labor Relations; Employees...........................................17
3.16 Employee Benefit Plans...............................................17
3.17 Tax Returns, Payments and Elections..................................18
3.18 Brokers or Finders...................................................18
3.19 Offering Exemption...................................................19
3.20 Environmental Matters................................................19
3.21 Offering of Purchased Shares and Warrants............................20
3.22 SEC Reports; Disclosure..............................................20
3.23 Financial Statements.................................................21
3.24 Changes..............................................................21
3.25 Existing Registration Rights.........................................22
3.26 Suppliers and Customers..............................................23
3.27 Foreign Corrupt Practices Act........................................23
4. Representations and Warranties of the Additional Purchasers................23
4.1 Organization and Qualification.......................................23
4.2 Power and Authority..................................................23
4.3 Authorization........................................................23
4.4 Purchase Entirely for Own Account....................................24
4.5 Disclosure of Information............................................24
4.6 Investment Experience................................................24
4.7 Accredited Investor..................................................24
4.8 Restricted Securities; Legends.......................................24
4.9 No General Solicitation..............................................25
4.10 Absence of Conflicts.................................................25
4.11 Brokers or Finders...................................................26
5. Conditions of the Parties..................................................26
5.1 Conditions of Additional Purchasers' Obligations at any Closing......26
5.2 Conditions of Additional Purchasers' Obligations at the Initial
Closing..............................................................28
5.3 Conditions of Additional Purchasers' Obligations at any Subsequent
Closing..............................................................29
5.4 Conditions of Company's Obligations at any Closing...................29
6. Events of Default and Remedies.............................................30
6.1 Events of Default....................................................30
6.2 Exercise of Remedies.................................................32
6.3 Waiver of Defaults...................................................32
7. Equity Covenants...........................................................32
7.1 Financial Statements.................................................32
7.2 Certain Other Reports and Information................................33
7.3 Further Information; Further Assurances..............................33
7.4 Notice of Certain Events.............................................33
7.5 Visitation; Verification.............................................34
7.6 Insurance............................................................34
7.7 Payment of Taxes and Other Potential Charges and Priority Claims.....34
7.8 Preservation of Corporate Status.....................................35
7.9 Governmental Approvals and Filings...................................35
7.10 Maintenance of Properties............................................35
7.11 Financial Accounting Practices.......................................36
8. Debt Covenants.............................................................36
8.1 General..............................................................36
8.2 Most Favored Nations.................................................36
9. Indemnification............................................................36
9.1 General Indemnification..............................................36
9.2 Indemnification Principles...........................................37
9.3 Claim Notice; Right to Defend........................................37
10.Certain Definitions........................................................38
11.PostClosing Covenants......................................................47
11.1 Shareholder Approval.................................................47
11.2 Restated Certificate.................................................47
11.3 Filing of Financing Statements.......................................47
11.4 Filing of Patent, Trademark and Copyright Recordation Forms..........47
12.Miscellaneous..............................................................48
12.1 Survival of Representations and Warranties...........................48
12.2 Successors and Assigns...............................................48
12.3 Governing Law........................................................48
12.4 Counterparts.........................................................48
12.5 Titles and Subtitles.................................................49
12.6 Notices..............................................................49
12.7 Expenses.............................................................49
12.8 Consents, Amendments and Waivers.....................................50
12.9 Severability.........................................................50
12.10 Entire Agreement.....................................................51
12.11 Delays or Omissions..................................................51
12.12 Facsimile Signatures.................................................51
12.13 Other Remedies.......................................................51
12.14 Further Assurances...................................................51
12.15 Exchanges; Lost, Stolen or Mutilated Stock Certificates and
Warrants.............................................................52
12.16 Termination..........................................................52
12.17 Preemptive Rights....................................................52
12.18 Consent of Series A Holders..........................................52
12.19 Termination of Initial Series A Purchase Agreement...................52
12.20 Public Announcements.................................................52
1. Affirmative Covenants......................................................77
1.1 Taxes................................................................77
1.2 Notice of Litigation.................................................77
1.3 ERISA................................................................77
1.4 Change In Location...................................................77
1.5 Corporate Existence..................................................77
1.6 Labor Disputes.......................................................77
1.7 Violations of Law....................................................77
1.8 Defaults.............................................................77
1.9 Capital Expenditures.................................................78
1.10 Books and Records....................................................78
1.11 Leases; Warehouse Agreements.........................................78
1.12 Financial Statements.................................................78
1.13 Further Information; Further Assurances..............................79
1.14 Financial Covenants..................................................79
1.15 Shareholder Approval.................................................79
1.16 Restated Certificate.................................................80
2. Negative Covenants.........................................................80
2.1 Mergers..............................................................80
2.2 Loans................................................................80
2.3 Dividends............................................................80
2.4 Adverse Transactions.................................................80
2.5 Indebtedness of Others...............................................80
2.6 Repurchase...........................................................80
2.7 Name.................................................................80
2.8 Prepayment...........................................................80
2.9 Capital Expenditure..................................................80
2.10 Indebtedness.........................................................81
2.11 Nature of Business...................................................81
2.12 Real Property........................................................81
2.13 Liens................................................................81
2.14 Change in Fiscal Year; Auditors......................................81
2.15 Issuance of Stock....................................................81
3. Certain Definitions........................................................81
EXHIBIT & SCHEDULES LIST
------------------------
Exhibit A - Initial Series A Purchase Agreement
Exhibit B - Restated Certificate
Exhibit C - Voting Agreement
Exhibit D-1 - Form of Series A-4 First Tranche Note
Exhibit D-2 Form of Series A-4 Second Tranche Note
Exhibit D-3 Form of Series A-5 Note
Exhibit E-1 Form of Warrants
Exhibit E-2 - Form of Additional Warrants
Exhibit F - Form of Security Agreement
Exhibit G - Form of Subsidiary Security Agreement
Exhibit H - Form of Pledge Agreement
Exhibit I - Form of Subordination Agreement
Exhibit J - Form of Subsidiary Guarantee
Exhibit K - Pro-Forma Capitalization Table
Exhibit L - Principal Place of Business of Purchasers
Exhibit M - Form of Shareholders Agreement
Exhibit N - Form of Registration Rights Agreement
Exhibit O - Debt Covenants
Schedule I List of Initial Purchasers
Schedule II List of Additional Purchasers
Schedule III - Schedule of Purchasers
DISCLOSURE SCHEDULES
SECTIONS
--------
Section 3.1 Jurisdictions; Subsidiaries
Section 3.4 Options, Warrants; Shareholder Agreements; Repurchase
Obligations; Declarations of Dividends; Stock Option
Agreements
Section 3.6(a) Permitted Liens
Section 3.7 Related Party Transactions
Section 3.8 Permits
Section 3.9(a) Patents, Trademarks and Copyrights; Infringement on
Proprietary Rights
Section 3.9(b) Company Software
Section 3.9(c) Proprietary Information and Inventions Agreements
Section 3.9(f) Proprietary Rights Licenses
Section 3.10(b) Material Contract in Arrears or Waived
Section 3.12 Conflicts
Section 3.13 Litigation
Section 3.15 Labor Relations; Employees
Section 3.16(a) Employee Agreements; Benefit Plans
Section 3.16(b) Non Compliant Employee Benefit Plans
Section 3.18 Brokers and Finders
Section 3.20(b) Environmental Matters
Section 3.20(c) Hazardous Materials
Section 3.22(b) Material Misstatements
Section 3.22(d) Action by SEC or Nasdaq
Section 3.23 Financial Statements Not Prepared In Accordance With GAAP;
Liabilities
Section 3.24 Changes
Section 3.25 Existing Registration Rights
Section 3.26 Suppliers and Customers
PURCHASE AGREEMENT
BETWEEN
MTM TECHNOLOGIES, INC.
AND
PEQUOT PRIVATE EQUITY FUND III, L.P.
AND
PEQUOT OFFSHORE PRIVATE EQUITY PARTNERS III, L.P.
AND
CONSTELLATION VENTURE CAPITAL II, L.P.
AND
CONSTELLATION VENTURE CAPITAL OFFSHORE II, L.P.
AND
THE BSC EMPLOYEE FUND VI, L.P.
AND
CVC II PARTNERS, LLC
DATED DECEMBER 7, 2004
