EXHIBIT 10.19
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SERIES A CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
DATED MAY 20, 1997
BY AND AMONG
ANICOM, INC.
AND
EACH OF THE PURCHASERS LISTED ON EXHIBIT A
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TABLE OF CONTENTS
Page
SECTION 1 Definitions................................................1
1.1 Defined Terms..............................................1
SECTION 2 Authorization and Sale of Convertible Preferred Stock......4
2.1 Authorization of Convertible Preferred Stock...............4
2.2 Sale and Purchase of Convertible Preferred Stock...........4
2.3 Use of Proceeds............................................4
SECTION 3 Closing Date; Delivery.....................................5
3.1 Closing Date...............................................5
3.2 Delivery...................................................5
SECTION 4 Representations and Warranties of the Company..............5
4.1 Organization, Good Standing and Qualification..............5
4.2 Capitalization.............................................6
4.3 Subsidiaries...............................................6
4.4 Partnerships...............................................7
4.5 Authorization..............................................7
4.6 Consents...................................................7
4.7 Absence of Litigation......................................7
4.8 Insurance..................................................7
4.9 Patents and Trademarks.....................................7
4.10 Compliance with Other Instruments and Legal
Requirements.............................................8
4.11 Material Agreements; Action............................... 8
4.12 Disclosure................................................ 9
4.13 Brokers' Fees............................................. 9
4.14 Registration Rights....................................... 9
4.15 Real Property............................................. 9
4.16 Tangible Personal Property................................10
4.17 Environmental Matters.....................................10
4.18 Company SEC Reports and Financial Statements..............11
4.19 Changes...................................................12
4.20 Employee Benefit Plans....................................13
4.21 Taxes.....................................................15
4.22 Minute Books..............................................15
4.23 Labor and Employment Matters..............................16
SECTION 5 Representations, Warranties and Covenants of the
Purchasers..............................................16
5.1 Accredited Investor; Experience; Risk.....................16
5.2 Investment................................................17
5.3 Authorization.............................................17
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Page
5.4 Consents..................................................17
5.5 Brokers' Fees.............................................17
5.6 Plan Assets...............................................17
5.7 Restrictive Legends.......................................17
SECTION 6 Conditions to Closing of Purchasers.......................18
6.1 Representations and Warranties Correct....................18
6.2 Covenants.................................................18
6.3 Opinion of Company's Counsel..............................18
6.4 No Material Adverse Change................................18
6.5 Certificate of Designation................................18
6.6 State Securities Laws.....................................19
6.7 Issuance of Shares........................................19
6.8 Certificates..............................................19
6.9 Organizational Documents..................................19
6.10 Stockholders' Agreement...................................19
SECTION 7 Conditions to Closing of the Company......................19
7.1 Representations...........................................19
7.2 Covenants.................................................19
7.3 Purchase Price............................................19
7.4 Certificate...............................................19
7.5 Stockholders' Agreement...................................20
SECTION 8 Covenants of the Company..................................20
8.1 Information...............................................20
8.2 Preemptive Rights.........................................21
8.3 Shelf Registration........................................22
8.4 Delay and Holdback of Registration........................26
8.5 Negative Covenants........................................26
SECTION 9 Miscellaneous.............................................27
9.1 Amendment; Waiver.........................................27
9.2 Notices...................................................27
9.3 Survival of Representations, Warranties and Covenants.....28
9.4 Severability..............................................28
9.5 Successors and Assigns....................................28
9.6 Entire Agreement..........................................28
9.7 Choice of Law.............................................28
9.8 Counterparts..............................................28
9.9 Costs and Expenses........................................29
9.10 Indemnification...........................................29
9.11 No Third-Party Beneficiaries..............................30
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ANICOM, INC.
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated May 20, 1997
(this "Agreement"), by and between ANICOM, INC., a Delaware corporation (the
"Company") and each purchaser set forth on Exhibit A hereto (each a "Purchaser"
and collectively, the "Purchasers").
WHEREAS, the Company has issued and outstanding the shares of capital stock
described in Section 4.2 hereof and the Company has reserved for issuance
additional shares of capital stock upon the exercise of the outstanding
convertible securities identified in Section 4.2;
WHEREAS, the Company proposes to issue and sell, and the Purchasers wish to
purchase, shares of the Company's Series A Convertible Preferred Stock, par
value $.01 per share (the "Convertible Preferred Stock") on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1
Definitions
1.1 Defined Terms. The following terms are defined as follows:
"Affiliate" means, with respect to any Person, (i) any Person in which such
Person holds direct or indirect beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of voting securities or other voting
interests representing at least 10% of the outstanding voting power of a Person
or equity securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests in a Person and (ii) any
brother, sister, parent, child or spouse of such Person or any Person described
in clause (i).
"Benefit Arrangement" means any benefit arrangement, obligation, custom, or
practice, to provide benefits, other than salary, as compensation for services
rendered, other than any obligation, arrangement, custom or practice that is an
Employee Benefit Plan, including, without limitation, employment or change of
control agreements, severance agreements, executive compensation arrangements,
incentive programs or arrangements, sick leave, vacation pay, severance pay
policies, plant closing benefits, salary continuation for disability,
consulting, or other compensation arrangements, workers' compensation,
retirement, deferred compensation, bonus, stock option or purchase,
hospitalization, medical insurance, life insurance, tuition reimbursement or
scholarship programs and employee discounts, in each case with respect to any
present or former employees, directors, or agents.
"Code" means the Internal Revenue Code of 1986 (or any successor thereto),
as amended from time to time.
"Company Benefit Arrangement" means any Benefit Arrangement sponsored or
maintained by the Company or its Subsidiaries or with respect to which the
Company or a Subsidiary has or will have any liability (whether actual,
contingent, direct or indirect) as of the Closing Date, in each case with
respect to any present or former directors, employees, or agents of the Company
or the Subsidiaries.
"Company Plan" means, as of the Closing Date, any Employee Benefit Plan for
which the Company or any Subsidiary has or will have any liability (whether
actual, contingent, direct or indirect).
"Company's Knowledge" or derivations thereof shall mean knowledge of the
executive officers of the Company, including without limitation, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇ ▇▇▇▇▇.
"Effectiveness Period" means the period commencing on the Closing Date and
ending on the second (2nd) anniversary of the Closing Date.
"Employee Benefit Plan" means any Employee Benefit Plan within the meaning
of Section 3(3) of ERISA.
"Environmental Law" means any foreign, federal, state or local statute,
regulation, ordinance or rule of common law as now or hereafter in effect in any
way relating to the protection of the environment including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. sec.9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
App. sec.1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
sec.6901 et seq.), the Clean Water Act (33 U.S.C. sec.1251 et seq.), the Clean
Air Act (42 U.S.C. sec.7401 et seq.), the Toxic Substances Control Act (15
U.S.C. sec.2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U.S.C. sec.136 et seq.), and the Occupational Safety and Health Act (29
U.S.C. sec.651 et seq.) and the regulations promulgated pursuant thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any Person that is or was at any time treated as a
single employer with the Company under Section 414 of the Code or Section 4001
of ERISA.
"Hazardous Material" means any substance, material or waste that is
regulated by the United States, the foreign jurisdictions in which the Company
or its Subsidiaries conducts business, or any state or local governmental
authority including, without limitation, petroleum and its by-products,
asbestos, and any material or substance that is defined as a "hazardous waste,"
"hazardous substance," "hazardous material," "restricted hazardous waste,"
"industrial waste," "solid waste," "contaminant," "pollutant," "toxic waste" or
"toxic substance" under any provision of Environmental Law.
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"Lien" means any lien, pledge, mortgage, deed of trust, security interest,
claim, lease, charge, option, right of first refusal, easement, servitude,
transfer restriction under any shareholder or similar agreement, encumbrance or
any other restriction or limitation whatsoever.
"Multiemployer Plan" means any Employee Benefit Plan described in Section
3(37) of ERISA.
"New Securities" means shares of Common Stock of the Company and any
securities or other rights convertible or exchangeable into or exercisable for
shares of Common Stock; provided, however, "New Securities" does not include (i)
Common Stock issued or issuable upon conversion of the Convertible Preferred
Stock issued to Purchasers; (ii) securities issued by the Company as part of any
public offering pursuant to an effective registration statement under the
Securities Act; (iii) equity securities issued in connection with any stock
split, stock dividend or recapitalization of the Company; (iv) equity securities
issued to management, directors or employees of the Company pursuant to plans
and options to purchase equity securities issued in accordance with such plans
approved by the Board; or (v) securities issued in connection with any merger,
acquisition or other business combination by the Company.
"Permits" means any approvals, authorizations, consents, licenses, permits
or certificates.
"Permitted Exceptions" means (i) all defects, exceptions, restrictions,
easements, rights of way and encumbrances disclosed in policies of title
insurance that have been made available to the Purchasers; (ii) statutory Liens
for current taxes, assessments or other governmental charges not yet delinquent
or the amount or validity of which is being contested in good faith by
appropriate proceedings, provided an appropriate reserve is established
therefor; (iii) mechanics', carriers', workers', repairers' and similar Liens
arising or incurred in the ordinary course of business that are not material to
the business, operations and financial condition of the property so encumbered
or the Company or its Subsidiaries; (iv) zoning, entitlement and other land use
and environmental regulations by any governmental body, provided that such
regulations have not been violated; and (v) such other imperfections in title,
charges, easements, restrictions and encumbrances that do not materially detract
from the value of or materially interfere with the present use of any Company
Property (as hereinafter defined) subject thereto or affected thereby.
"Person" means an individual, partnership, limited liability company,
corporation, joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Qualified Plan" means any Employee Benefit Plan that meets or is intended
to meet the requirements of Section 401(a) of the Code.
"Registrable Securities" means, (i) shares of Common Stock or other
securities issued or issuable upon exercise of the Convertible Preferred Stock;
(ii) shares issued in connection with the exercise of the Preemptive Rights as
set forth in Section 8.2; and (iii) any other shares of Common Stock or
securities issued in respect of such shares (because of stock splits, stock
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dividends, reclassifications, recapitalization, mergers, consolidation, share
exchange or similar events).
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal or leaching into the indoor or outdoor
environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or in
any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
"Subsidiaries" means each corporation in which the Company owns or
controls, directly or indirectly, capital stock or other equity interests
representing at least 50% of the outstanding voting stock or other equity
interests.
"Welfare Plan" means any Employee Benefit Plan described in Section 3(1) of
ERISA.
SECTION 2
Authorization and Sale of Convertible Preferred Stock
2.1 Authorization of Convertible Preferred Stock. At Closing, the Company
will have authorized the issuance and sale to Purchasers of 27,000 shares of
Convertible Preferred Stock, having the rights, preferences, privileges and
restrictions set forth in the Certificate of Designation attached to this
Agreement as Exhibit B hereto (the "Certificate of Designation").
2.2 Sale and Purchase of Convertible Preferred Stock. In reliance on the
representations and warranties of the Company contained herein and subject to
the terms and conditions hereof, each Purchaser agrees to purchase from the
Company, severally, and the Company agrees to sell to each Purchaser that number
of shares of Convertible Preferred Stock set forth next to its name on Exhibit A
hereto, for the purchase price of $1,000 per share.
2.3 Use of Proceeds. The Company agrees to use the full proceeds from the
sale of the Convertible Preferred Stock to pay acquisition costs, fees and
expenses and other transaction costs and for working capital purposes.
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SECTION 3
Closing Date; Delivery
3.1 Closing Date. The closing of the purchase and sale of the Convertible
Preferred Stock hereunder (the "Closing") shall be held at the offices of ▇▇▇▇▇▇
▇▇▇▇▇▇ & Zavis, ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ on May 23,
1997, or on such other date or at such other place as Purchasers and the Company
shall mutually agree (the date of the Closing being referred to herein as the
"Closing Date"); provided that ▇▇▇▇▇▇▇ US Discovery Fund III, L.P., and ▇▇▇▇▇▇▇
US Discovery Offshore Fund III, L.P. (the "▇▇▇▇▇▇▇ Funds") will close on or
about June 4, 1997, or on such other date as the ▇▇▇▇▇▇▇ Funds and the Company
shall mutually agree.
3.2 Delivery. At the Closing, the Company shall deliver to each Purchaser a
certificate or certificates evidencing the shares of Convertible Preferred Stock
being purchased by it registered in such Purchaser's name against delivery to
the Company of payment in an amount equal to the full purchase price of the
shares of Convertible Preferred Stock being purchased by such Purchaser by
certified check or wire transfer to an account designated by the Company.
SECTION 4
Representations and Warranties of the Company
The Company hereby represents and warrants to, and agrees with, Purchasers
as follows:
4.1 Organization, Good Standing and Qualification. Each of the Company and
its Subsidiaries (i) is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii) has all
requisite power and authority to carry on its business, (iii) is duly qualified
to transact business and is in good standing in all jurisdictions where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except where the failure to be so qualified would
not, and reasonably could not be expected to, have a material adverse effect on
the business, operations, assets, financial condition, results of operations or
business prospects of the Company and its Subsidiaries (a "Material Adverse
Effect"). The Company has the corporate power and authority and is in possession
of all material franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders to (i) own, lease and
operate its properties and to carry on its business as now being conducted and
(ii) execute and deliver this Agreement and the documents and instruments
contemplated hereby and to consummate the transactions contemplated hereby.
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4.2 Capitalization.
(a) The authorized capital stock of the Company consists of 30,000,000
shares of common stock, par value $.001 per share ("Common Stock") of which
15,912,999 shares are issued and outstanding, and 1,000,000 shares of preferred
stock, par value $.01 per share ("Preferred Stock"), of which 27,000 shares are
Convertible Preferred Stock authorized for issuance hereunder. Other than the
Convertible Preferred Stock issued pursuant to this Agreement, there are no
other shares of Preferred Stock outstanding. The Company has reserved for
issuance 3,130,435 shares of Common Stock upon conversion of the authorized
shares of Convertible Preferred Stock. Except as listed on Schedule 4.2 and
other than obligations arising under any Company Plan also identified on
Schedule 4.2, there are no outstanding securities of the Company convertible
into or evidencing the right to purchase or subscribe for any shares of capital
stock of the Company, there are no outstanding or authorized options, warrants,
calls, subscriptions, rights, commitments or any other agreements of any
character obligating the Company to issue any shares of its capital stock or any
securities convertible into or evidencing the right to purchase or subscribe for
any shares of such stock, and there are no agreements or understandings with
respect to the voting, sale, transfer or registration of any shares of capital
stock of the Company. No outstanding options, warrants or other securities
exercisable for or convertible into shares of capital stock of the Company
require anti-dilution adjustments by reason of the consummation of the
transactions contemplated hereby.
(b) The issued and outstanding shares of capital stock of the Company are
duly authorized, validly issued, fully paid and nonassessable. The shares of
Convertible Preferred Stock to be issued pursuant to this Agreement, upon
delivery to Purchaser of certificates therefor against payment in accordance
with the terms of this Agreement, and the shares of Common Stock issuable upon
conversion of such Convertible Preferred Stock of the Company when issued upon
conversion of such Convertible Preferred Stock in accordance with the
Certificate of Designation, (i) will be validly issued, fully paid and
nonassessable, (ii) will be free and clear of all Liens (excluding those of
Purchasers) and (iii) assuming that the representations of Purchasers in Section
5 hereof are true and correct, will be issued in compliance with all applicable
federal and state securities laws.
4.3 Subsidiaries. Schedule 4.3 sets forth a complete and accurate list of
all Subsidiaries of the Company, showing (as to each such Subsidiary) the date
of its incorporation and the jurisdiction of its incorporation. The Company is
the sole stockholder of each Subsidiary. The outstanding shares of capital stock
of each Subsidiary are validly issued, fully paid and nonassessable and all such
shares represented as being owned by the Company are owned by it, free and clear
of all Liens, other than Liens held by ▇▇▇▇▇▇ Trust and Savings Bank, the
Company's senior lender. There are no outstanding securities of any Subsidiary
convertible into or evidencing the right to purchase or subscribe for any shares
of capital stock of any Subsidiary, there are no outstanding or authorized
options, warrants, calls, subscriptions, rights, commitments or any other
agreements of any character obligating any Subsidiary to issue any shares of its
capital stock or any securities convertible into or evidencing the right to
purchase or subscribe
6
for any shares of such stock, and there are no agreements or understandings with
respect to the voting, sale, transfer or registration of any shares of capital
stock of any Subsidiary.
4.4 Partnerships. The Company is not a party to, and does not hold, any
equity interests in any partnership or limited partnership of any kind.
4.5 Authorization. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and each agreement, document or
instrument adopted, entered into or delivered in connection herewith (the
"Transaction Documents") and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of the Agreement and the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate, including stockholder, action on the part of the Company.
Each Transaction Document has been duly and validly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity) and except
to the extent that rights to indemnification and contribution under this
Agreement and may be limited by federal or state securities laws or public
policy relating thereto.
4.6 Consents. Except as set forth in Schedule 4.6, other than filing the
Certificate of Designation with the Delaware Secretary of State
contemporaneously herewith, no material consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, or local governmental authority or other Person
on the part of the Company is required in connection with the valid execution
and delivery by the Company of the Transaction Documents to which it is a party,
or the consummation by the Company of the transactions contemplated by the
Transaction Documents to which it is a party.
4.7 Absence of Litigation. There are no claims, actions, suits, proceedings
or investigations pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, or any properties or rights of
the Company or its Subsidiaries, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, that could
reasonably be expected to have a Material Adverse Effect.
4.8 Insurance. The Company and it Subsidiaries maintain adequate insurance
with respect to their respective businesses and are in compliance with all
material requirements and provisions thereof.
4.9 Patents and Trademarks. The Company and its Subsidiaries have
sufficient title and ownership of (or rights under license agreements to use)
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
proprietary rights and processes ("Intellectual Property") necessary for the
conduct of their businesses in the ordinary course. There are no outstanding
options, licenses or agreements of any kind relating to the foregoing, nor is
the Company or any of its Subsidiaries bound by or a party to any options,
licenses or agreements
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of any kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, proprietary rights and processes of any other Person.
A list of all patents and trademarks owned by the Company or any of its
Subsidiaries is set forth on Schedule 4.9(a). Except as set forth on Schedule
4.9(b), within the past five years, the Company has not received any
communications alleging that the Company or any of its Subsidiaries has violated
or, by conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights, trade secrets, proprietary
rights and processes of any other Person, nor is the Company aware of any such
violations.
4.10 Compliance with Other Instruments and Legal Requirements.
(a) None of the Company or any of its Subsidiaries is in violation or
default of any provisions of its certificate of incorporation, by-laws, or
comparable organizational documents. None of the Company or any of its
Subsidiaries is in violation or default in any material respect under any
provision, instrument, judgment, order, writ, decree, contract or agreement to
which it is a party or by which it is bound or of any provision of any federal,
state or local statute, rule or regulation applicable to the Company or any of
its Subsidiaries (including, without limitation, any law, rule or regulation
relating to protection of the environment and the maintenance of safe and
sanitary premises). The execution, delivery and performance of each Transaction
Document and the consummation of the transactions contemplated hereby and
thereby will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, instrument, judgment, order, writ, decree,
contract or agreement, or require any consent, waiver or approval thereunder, or
constitute an event that results in the creation of any Lien upon any assets of
the Company or any of its Subsidiaries.
(b) The Company and its Subsidiaries have all Permits of all governmental
entities required to conduct their respective businesses as proposed to be
conducted, except to the extent that the failure to have such Permits would not,
and reasonably could not be expected to, have a Material Adverse Effect.
4.11 Material Agreements; Action. Except as set forth on Schedule 4.11,
there are no material contracts, agreements, commitments, understandings or
proposed transactions, whether written or oral, to which the Company or any of
its Subsidiaries is a party or by which it is bound which call for an
expenditure by the Company of over $100,000 in any single year regarding: (i)
any of their respective officers, directors stockholders or partners or any
Affiliate thereof; (ii) the sale of any of the assets of the Company or any of
its Subsidiaries other than in the ordinary course of business; (iii) covenants
of the Company or any of its Subsidiaries not to compete in any line of business
or with any Person in any geographical area or covenants of any other Person not
to compete with the Company or any of its Subsidiaries in any line of business
or in any geographical area, provided, however, that this subsection (iii) is
not subject to the limitation of expenditure of over $100,000 in any single
year; (iv) the acquisition by the Company or any of its Subsidiaries of any
operating business or the capital stock of any other Person; (v) the borrowing
of money; or (vi) the license of any Intellectual Property, other material
proprietary right to or from the Company or any of its Subsidiaries. To the
Company's
8
Knowledge, all such agreements are in full force and effect and are the legal,
valid and binding obligation of the Company or its Subsidiaries, enforceable
against them in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). None of the Company or any of its Subsidiaries
is in material default under any such agreements nor, to the Company's
knowledge, is any other party to any such agreements in material default
thereunder in any respect.
4.12 Disclosure. Neither this Agreement nor any of the Transaction
Documents nor any exhibit hereto, nor any report, certificate, or instrument
furnished to Purchaser or its counsel in connection with the transactions
contemplated by this Agreement, when read together, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading.
4.13 Brokers' Fees. Except for Coopers & ▇▇▇▇▇▇▇ Securities LLC, whose fees
will be paid solely by the Company, no broker, finder, investment banker or
other Person is entitled to any brokerage fee, finder's fee or other commission
in connection with the transactions contemplated by this Agreement.
4.14 Registration Rights. Except as set forth in Schedule 4.14, the Company
has not granted or agreed to grant any registration rights, including piggyback
registration rights, to any Person.
4.15 Real Property.
(a) None of the Company or its Subsidiaries owns real property or interests
in real property. Schedule 4.15 sets forth a complete list of all real property
and interests in real property leased by the Company and its Subsidiaries
(individually, a "Real Property Lease" and the real properties specified in such
leases being referred to herein individually as a "Company Property" and
collectively as the "Company Properties") as lessee or lessor. The Company
Properties constitute all interests in real property currently used or currently
held for use in connection with the business of the Company and its Subsidiaries
and which are necessary for the continued operation of the business of the
Company and its Subsidiaries as the business is currently conducted. The Company
and its Subsidiaries have a valid and enforceable leasehold interest under each
of the Real Property Leases, and none of the Company or any of its Subsidiaries
has received any written notice of any default or event which, with notice or
lapse of time, or both, would constitute a default by the Company or any of its
Subsidiaries under any of the Real Property Leases, except to the extend such
default would not, and reasonably could not be expected to, have a Material
Adverse Effect. All of the Company Property, buildings, fixtures and
improvements thereon owned or leased by the Company and its Subsidiaries are in
good operating condition and repair (subject to normal wear and tear) except for
deficiencies which do not have a Material Adverse Effect.
9
(b) There does not exist any actual, or to the Company's Knowledge,
threatened or contemplated, condemnation or eminent domain proceedings that
affect any Company Property or any part thereof, and none of the Company or any
of its Subsidiaries has received any written notice of the intention of any
governmental body or other Person to take or use all or any part thereof.
4.16 Tangible Personal Property.
(a) Schedule 4.16 sets forth all leases of personal property ("Personal
Property Leases") involving annual payments in excess of $150,000 relating to
personal property used in the business of the Company and its Subsidiaries or to
which the Company or any of its Subsidiaries is a party or by which the
properties or assets of the Company or any of its Subsidiaries is bound.
(b) Each of the Company and its Subsidiaries has a valid leasehold interest
under each of the Personal Property Leases under which it is a lessee, and there
is no material default under any Personal Property Lease by the Company or any
of its Subsidiaries, by any other party thereto, and no event has occurred
which, with the lapse of time or the giving of notice or both would constitute a
material default thereunder.
(c) Except as set forth on Schedule 4.16, each of the Company and its
Subsidiaries has good and marketable title to all of the items of tangible
personal property reflected in the balance sheets referred to in Section 4.18
(except as sold or disposed of subsequent to the date thereof in the ordinary
course of business consistent with past practice), free and clear of any and all
Liens other than the Permitted Exceptions. All such items of tangible personal
property that, individually or in the aggregate, are material to the operation
of the business of the Company and its Subsidiaries are in good condition and in
a state of good maintenance and repair (ordinary wear and tear excepted) and are
suitable for the purposes used.
(d) All of the items of tangible personal property used by the Company and
its Subsidiaries under the Personal Property Leases are in good condition and
repair (ordinary wear and tear excepted) and are suitable for the purposes used
except for deficiencies which do not have a Material Adverse Effect.
4.17 Environmental Matters.
(a) The operations of each of the Company and its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws and
all Permits issued pursuant to Environmental Laws or otherwise;
(b) Each of the Company and its Subsidiaries has obtained all Permits
required under all applicable Environmental Laws necessary to operate its
business;
(c) Neither the Company nor any of its Subsidiaries is the subject of any
outstanding written order, agreement or arrangement with any governmental
authority or Person
10
respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any Release or
threatened Release of a Hazardous Material;
(d) None of the Company or any of its Subsidiaries has received any written
communication alleging either or both that the Company or any of its
Subsidiaries may be in violation of any Environmental Law, or any Permit issued
pursuant to Environmental Law, or may have any liability under any Environmental
Law;
(e) None of the Company or any of its Subsidiaries has any current
contingent liability in connection with any Release of any Hazardous Materials
into the indoor or outdoor environment (whether on-site or off-site);
(f) There are no investigations of the business, operations, or currently
or previously owned, operated or leased property of the Company or any of its
Subsidiaries pending or, to the Company's Knowledge, threatened that could lead
to the imposition of any liability pursuant to Environmental Law; and
(g) There is not located at any of the properties owned, leased or operated
by the Company or any of its Subsidiaries any (i) underground storage tanks,
(ii) asbestos-containing material or (iii) equipment containing polychlorinated
biphenyls.
4.18 Company SEC Reports and Financial Statements.
(a) The Company has delivered to Purchaser true and complete copies of all
periodic reports, statements and other documents that the Company has filed with
the Securities and Exchange Commission (the "SEC") under the Exchange Act of
1934 (the "Exchange Act") since December 31, 1995 (collectively, the "Company
SEC Reports"), each in the form (including exhibits and any amendments thereto)
required to be filed with the SEC. As of their respective dates, each of the
Company's SEC Reports (i) complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and the Exchange Act, and the rules and regulations promulgated thereunder,
respectively, (ii) were filed in a timely manner, and (iii) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. None of the
Subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the audited consolidated financial statements of the Company
(including any related notes and schedules thereto) included (or incorporated by
reference) in its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996, is accurate and complete and fairly presents, in conformity
with generally accepted accounting principles ("GAAP") applied on a consistent
basis through the periods involved (except as may be noted therein), and in
conformity with the SEC's Regulation S-B, the consolidated financial position of
the Company and its consolidated subsidiaries as of its date and the
consolidated results of operations and changes in financial position for the
period then ended.
11
(c) Except as and to the extent set forth (or incorporated by reference) in
the Company's Annual Report on Form 10-KSB for the calendar year ended December
31, 1996, neither the Company nor any of its Subsidiaries has incurred any
liability or obligation of any nature whatsoever (whether due or to become due,
accrued, fixed, contingent, liquidated, unliquidated or otherwise) that would be
required by GAAP to be accrued on, reflected on, or reserved against it, in a
consolidated balance sheet (or in the applicable notes thereto) of the Company
or any of its Subsidiaries prepared in accordance with GAAP consistently
applied, other than liabilities or obligations which arose in the ordinary
course of business and consistent with past practices since such date and which
do not or would not individually or in the aggregate have a Material Adverse
Effect.
4.19 Changes. Except as set forth on Schedule 4.19, since December 31,
1996, there has not been:
(a) any change in the assets, liabilities, financial condition or operating
results of the Company or any of its Subsidiaries, except changes in the
ordinary course of business that have not had, in the aggregate, a Material
Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the assets, properties, financial condition,
operating results or business of the Company or any of its Subsidiaries;
(c) any waiver by the Company or any of its Subsidiaries of a valuable
right or of a material debt owed to it outside of the ordinary course of
business or that otherwise could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect;
(d) any satisfaction or discharge of any Lien or payment of any obligation
by the Company or any of its Subsidiaries that could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect;
(e) any change or amendment to a contract or arrangement by which the
Company or any of its Subsidiaries or any of their respective assets or
properties is bound or subject that could reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect;
(f) other than in the ordinary course of business, any material increase in
any compensation arrangement or agreement with any employee of the Company or
any of its Subsidiaries receiving compensation in excess of $50,000 annually;
(g) any events or circumstances that otherwise could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
or
(h) none of the Company nor any of its Subsidiaries has (i) declared or
paid any dividends, or authorized or made any distribution upon or with respect
to any class or series of its capital stock or equity interests, (ii) incurred
any indebtedness for money borrowed in
12
excess of $100,000, other than bank borrowings in the ordinary course of
business, (iii) made any loans or advances to any Person, other than ordinary
advances for travel expenses not exceeding $50,000, or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights for consideration in excess of
$50,000 in any one transaction or series of related transactions.
4.20 Employee Benefit Plans.
(a) Schedule 4.20(a) contains a complete and accurate list of all Company
Plans and Company Benefit Arrangements. Schedule 4.20(a) specifically identifies
all Company Plans (if any) that are Qualified Plans.
(b) With respect, as applicable, to Employee Benefit Plans and Benefit
Arrangements and except as would not result in liability in excess of $50,000
(for purposes of this Section 4.20, a Material Adverse Effect):
(i) each Qualified Plan that is a Company Plan qualifies under Section
401(a) of the Code, and any trusts maintained pursuant thereto are exempt from
federal income taxation under Section 501 of the Code;
(ii) the Company and the Subsidiaries have no liability (whether actual or
contingent, direct or indirect) with respect to any Employee Benefit Plan
subject to Section 302 of ERISA or Section 412 of the Code or Title IV of ERISA
(including any Multiemployer Plan);
(iii) each Company Plan and each Company Benefit Arrangement has been
maintained in accordance with its constituent documents and with all applicable
provisions of the Code, ERISA and other laws, including federal and state
securities laws;
(iv) there are no pending claims or lawsuits by, against, or relating to
any Employee Benefit Plans or Benefit Arrangements that are not Company Plans or
Company Benefit Arrangements that would, if successful, result in liability of
the Company, and no such claim or lawsuit (other than routine claims for
benefits) has been asserted, instituted or, to the knowledge of the Company and
the Subsidiaries, threatened by, against, or relating to any Company Plan or
Company Benefit Arrangement, or the Company or the Subsidiaries. To the
knowledge of the Company and the Subsidiary, the Company Plans and Company
Benefit Arrangements are not presently under audit or examination (nor has
notice been received of a potential audit or examination) by the IRS, the
Department of Labor, or any other governmental agency or entity, and no matters
are pending with respect to a Qualified Plan under the IRS's Voluntary
Compliance Resolution program, its Closing Agreement Program, or other similar
programs;
(v) no Company Plan or Company Benefit Arrangement contains any provision
or is subject to any law that would prohibit the transactions contemplated by
this Agreement or that would give rise to any vesting of benefits, severance,
termination, or other payments or liabilities as a result of the transactions
contemplated by this Agreement, and no
13
payment under any Company Plan or Company Benefit Plan arising as a result of
the transactions contemplated by this Agreement, would constitute an excess
parachute payment within the meaning of Section 280G of the Code;
(vi) with respect to each Company Plan, there has occurred no non- exempt
"prohibited transaction" (within the meaning of Section 4975 of the Code) or
transaction prohibited by Section 406 of ERISA or breach of any fiduciary duty
described in Section 404 of ERISA that would, if successful, result in any
liability for the Company or any Stockholder, officer, director, or employee of
the Company;
(vii) all material reporting, disclosure, and notice requirements of ERISA
and the Code have been satisfied with respect to each Company Plan and each
Company Benefit Arrangement;
(viii) payment has been made of all amounts that the Company and each
Subsidiary is required to pay as contributions to the Company Benefit Plans as
of the last day of the most recent fiscal year of each of the plans ended before
the date of this Agreement and all benefits accrued under any unfunded Company
Plan or Company Benefit Arrangement will have been paid, accrued, or otherwise
adequately reserved in accordance with GAAP as of the Balance Sheet Date;
(ix) the Company and the Subsidiaries have no liability (whether actual,
contingent, with respect to any of its assets or otherwise) with respect to any
Employee Benefit Plan or Benefit Arrangement that is not a Company Benefit
Arrangement or with respect to any Employee Benefit Plan sponsored or maintained
(or which has been or should have been sponsored or maintained) by any ERISA
Affiliate;
(x) all group health plans of the Company and its ERISA Affiliates have
been operated in material compliance with the requirements of Sections 4980B
(and its predecessor) and 5000 of the Code;
(xi) no employee or former employee of the Company or beneficiary of any
such employee or former employee is, by reason of such employee's or former
employee's employment, entitled to receive any welfare benefits, including,
without limitation, death or medical benefits (whether or not insured) beyond
retirement or other termination of employment as described in Statement of
Financial Accounting Standards No. 106, other than (i) deferred compensation
benefits accrued as liabilities on the Closing Statement or listed in Schedule
4.20(a) or (ii) continuation coverage mandated under Section 4980B of the Code
or other applicable law.
(c) Schedule 4.20(c) hereto sets forth an accurate list, as of the date
hereof, of all officers, directors, and key employees of the Company and lists
all employment agreements with such officers, directors, and key employees and
the rate of compensation (and the portions thereof attributable to salary,
bonus, and other compensation respectively) of each such Person as of
(a) December 31, 1996 and (b) the date hereof.
14
(d) The Company has not declared or paid any bonus compensation in
contemplation of the transactions contemplated by this Agreement.
4.21 Taxes. All federal, state, local and foreign tax returns, reports and
statements required to be filed by the Company and its Subsidiaries have been
filed with the appropriate governmental agencies in all jurisdictions in which
such returns, reports and statements are required to be filed and all such
returns, reports and statements are true, complete and correct in all respects.
All taxes, charges and other impositions due and payable by the Company and its
Subsidiaries have been paid in full on a timely basis except where contested in
good faith and by appropriate proceedings if adequate reserves therefor have
been established on the books and records of the Company or Subsidiary in
accordance with GAAP consistently applied. The provision for taxes of each of
the Company and its Subsidiaries as shown in the Company SEC Reports is
sufficient for all unpaid taxes, charges and other impositions of any nature due
or accrued as of the date hereof, whether or not assessed or disputed. Proper
and accurate amounts have been withheld by the Company and its Subsidiaries from
their respective employees for all periods in full and complete compliance with
the tax, social security and unemployment withholding provisions of applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective governmental agencies. The Company has not received
notice of any audit or of any proposed deficiencies from any governmental
authority, and no controversy with respect to taxes of any type is pending or
threatened. Except for routine filing extensions granted as a matter of right
under applicable law, none of the Company or any of its Subsidiaries has
executed or filed with the Internal Revenue Service or any other governmental
authority any agreement or other document extending, or having the effect of
extending, the period of assessment or collection of any taxes, charges or other
impositions. None of the Company or any of its Subsidiaries has agreed or is
required to make any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise. Further, none of the Company or any of
its Subsidiaries has any obligation under any tax-sharing agreement.
4.22 Minute Books. The minute books of the Company and each of its
Subsidiaries contain a complete summary of all material actions by their
respective directors and stockholders since the date of their respective
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
4.23 Labor and Employment Matters. With respect to employees of and service
providers to the Company and the Subsidiaries: (a) the Company and the
Subsidiaries are and have been in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination, workers' compensation, family
and medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements, and have not and are not engaged in any unfair
labor practice; (b) there is not now, nor within the past three years has there
been, any unfair labor practice complaint against the Company or any Subsidiary
pending or, to the Company's or any Subsidiary's knowledge, threatened before
the National Labor Relations Board or any other comparable
15
authority; (c) there is not now, nor within the past three years has there been,
any labor strike, slowdown or stoppage actually pending or, to the Company's or
any Subsidiary's knowledge, threatened against or directly affecting the Company
or any Subsidiary; (d) to the Company's or any Subsidiary's knowledge, no labor
representation organization effort exists nor has there been any such activity
within the past three years; (e) no grievance or arbitration proceeding arising
out of or under collective bargaining agreements is pending and, to the
Company's or any Subsidiary's knowledge, no claims therefor exist or have been
threatened; (f) the employees of the Company and the Subsidiaries are not and
have never been represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or any Subsidiary or
currently being negotiated by the Company or any Subsidiary; and (g) to the
Company's knowledge, all Persons classified by the Company or its Subsidiaries
as independent contractors do satisfy and have satisfied the requirements of law
to be so classified, and the Company and its Subsidiaries have fully and
accurately reported their compensation on IRS Forms 1099 when required to do so.
To the Company's knowledge, none of the employees of the Company or any of its
Subsidiaries is obligated under any contract or other agreement (including
licenses, covenants or commitments of any nature), or subject to any judgment,
decree or order of any court or administrative agency, that materially
interferes with the use of the employee's best efforts to promote the interests
of the Company and its Subsidiaries or conflicts with the business as proposed
to be conducted by the Company or its Subsidiaries.
SECTION 5
Representations, Warranties and Covenants of the Purchasers
Each Purchaser severally hereby represents and warrants to and agrees with
the Company, as to itself only, as follows:
5.1 Accredited Investor; Experience; Risk. Purchaser is an accredited
investor within the definition of Regulation D promulgated under the Securities
Act. Purchaser has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the purchase of
the Convertible Preferred Stock pursuant to this Agreement.
5.2 Investment. Purchaser is acquiring the Convertible Preferred Stock for
investment purposes only, for its own account and not with a view to, or for
resale in connection with, any distribution thereof in violation of applicable
law.
5.3 Authorization. Purchaser represents that it has all requisite power and
authority to enter into and perform its obligations under the Transaction
Documents to which it is a party. Assuming the due authorization, execution and
delivery of the Transaction Documents by each other party thereto, each
Transaction Document to which Purchaser is a party constitutes a valid and
binding obligation of Purchaser, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and
16
fair dealing (regardless of whether enforcement is sought in a proceeding at law
or in equity) and except to the extent that rights to indemnification and
contribution under this Agreement may be limited by federal or state securities
laws or public policy relating thereto.
5.4 Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority or other Person on the part of
Purchaser is required in connection with the valid execution and delivery by
Purchaser of the Transaction Documents to which it is a party, or the
consummation by Purchaser of the transactions contemplated by the Transaction
Documents to which it is a party, except for such filings as have been made
prior to the Closing.
5.5 Brokers' Fees. No broker, finder, investment banker or other Person is
entitled to any brokerage fee, finder's fee or other commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by the Purchaser.
5.6 Plan Assets. Purchaser is not, and no source of the funds to be used by
Purchaser to acquire the Convertible Preferred Stock are, a "Plan Asset" as such
phrase is defined within the U.S. Department of Labor regulations 2510.3-101.
5.7 Restrictive Legends. Purchaser understands that the certificates or
other instruments representing each of the shares of Convertible Preferred Stock
and the shares of common stock issuable upon conversion thereof (the "Conversion
Shares"), shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such stock
certificates) until such time as the sale of the Conversion Shares have been
registered under the Securities Act as contemplated hereunder:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL,
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
If such Purchaser desires to sell or otherwise dispose of all or any part
of the Convertible Preferred Stock or shares of any Conversion Shares owned by
it under an exemption from registration under the Securities Act, and if
requested by the Company, such Purchaser shall deliver to the Company an opinion
of counsel, which may be counsel for the Company, that such exemption is
available.
17
SECTION 6
Conditions to Closing of Purchasers
Each Purchaser's obligation to purchase the Convertible Preferred Stock at
the Closing is, at the option of that Purchaser, subject to the fulfillment on
or prior to the Closing Date of the following conditions:
6.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 4 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date with the same force
and effect as if they had been made on and as of such date.
6.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects.
6.3 Opinion of Company's Counsel. Purchasers shall have received from
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Company, an opinion addressed to
Purchasers, dated the Closing Date, in substantially the form of Exhibit C
hereto.
6.4 No Material Adverse Change. Since December 31, 1996, there shall not
have occurred any events or circumstances that could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
6.5 Certificate of Designation. The Certificate of Designation shall have
been duly adopted and executed by the Company and filed with the Delaware
Secretary of State.
6.6 State Securities Laws. All registrations, qualifications and Permits
required under applicable state securities laws, if any, shall have been
obtained for the lawful execution, delivery and performance of this Agreement.
6.7 Issuance of Shares. The Company shall have issued at least 19,000
shares of Convertible Preferred Stock at the Closing pursuant to this Agreement.
6.8 Certificates. Purchasers shall have received a certificate of the
President or the Chief Financial Officer of the Company to the effect set forth
in Sections 6.1, 6.2, 6.4, and 6.5.
6.9 Organizational Documents. The Company shall have delivered to each
Purchaser certified copies of the charter and bylaws of the Company in effect at
the Closing.
6.10 Stockholders' Agreement. The Company and ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have
executed and delivered to each Purchaser a stockholders' agreement substantially
in the form of Exhibit D hereto (the "Stockholders' Agreement").
18
6.11 Consents. The Company shall have received the consents, or waivers
thereto, set forth on Schedule 4.2.
SECTION 7
Conditions to Closing of the Company
The Company's obligation to issue and sell the Convertible Stock at the
Closing is, at the option of the Company, subject to the fulfillment of the
following conditions:
7.1 Representations. The representations and warranties made by each
Purchaser in Section 5 hereof shall be true and correct when made, and shall be
true and correct on the Closing Date with the same force and effect as if they
had been made on and as of such date.
7.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by each Purchaser on or prior to the Closing Date
shall have been performed or complied with in all respects.
7.3 Purchase Price. Each Purchaser shall have tendered the purchase price
for the Convertible Preferred Stock as set forth on Exhibit A hereto by
certified check or wire transfer, subject to the later Closing scheduled for the
▇▇▇▇▇▇▇ Funds.
7.4 Certificate. The Company shall have received a certificate from each
Purchaser to the effect set forth in Sections 7.1 and 7.2.
7.5 Stockholders' Agreement. Each Purchaser shall have executed and
delivered to the Company the Stockholders' Agreement.
7.6 Consents. The Company shall have obtained the consents, or waivers
thereto, set forth on Schedule 4.2.
SECTION 8
Covenants of the Company
8.1 Information. After the Closing Date and until a Purchaser (i) no longer
owns any shares of Convertible Preferred Stock or (ii) requests otherwise, the
Company will send each Purchaser any and all materials which it sends to the
holders of its Common Stock. Additionally, commencing on May 1, 1999, in the
event that a Purchaser owns any of the shares of Convertible Preferred Stock,
the Company, upon written request of that Purchaser, shall deliver to that
Purchaser the information specified in this Section 8.1:
19
(a) Monthly Financial Statements. As soon as available, but in any event
not later than forty-five (45) days after the end of each monthly fiscal period
(other than the last monthly fiscal period of the fourth fiscal quarter of the
Company), the unaudited consolidated balance sheet of the Company and its
Subsidiaries as at the end of each such period and the related unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such period and for the elapsed period in such fiscal year, all
in reasonable detail and stating in comparative form the figures as of the end
of and for the comparable periods of the preceding fiscal year. All such
financial statements shall be prepared in accordance with GAAP on a consistent
basis throughout the periods reflected therein except as stated therein and
shall be accompanied by a certificate of the Company's president or chief
financial officer to such effect.
(b) Board Materials. As soon as available, all materials which the Company
distributes to the members of the Board of Directors will be sent to Purchaser.
(c) Other Reports and Statements. Promptly (but in any event within ten
(10) days) after any distribution to its stockholders generally, to its
directors or to the financial community of an annual report, definitive proxy
statement, registration statement or other similar report or communication, a
copy of each such annual report, proxy statement, registration statement or
other similar report or communication and promptly (but in any event within ten
(10) days) after any filing by the Company with the SEC or with any national
securities exchange or market system, of any publicly available annual or
periodic or special report or proxy statement or registration statement, a copy
of such report or statement and copies of all press releases and other
statements made available generally by the Company to the public concerning
material developments in the Company's business.
(d) A Purchaser who requests such information pursuant to this Section 8.1
(a "Requesting Purchaser") hereby acknowledges that it is aware of the
restrictions imposed by federal and state securities laws on a person possessing
material nonpublic information about a company. In this regard, a Requesting
Purchaser hereby agrees that while it is in possession of material nonpublic
information with respect to the Company and its subsidiaries, such Requesting
Purchaser will not purchase or sell any securities of the Company, or
communicate such information to any third party, in violation of any such laws.
Such Requesting Purchaser also agrees that, if requested by the Company, such
Requesting Purchaser will cause any of its representatives, consultants or
advisors who have been or may become apprised of any material nonpublic
information about the Company to give a written undertaking to the same effect
to the Company.
8.2 Preemptive Rights. If, after the Closing Date, the Company shall
propose to issue or sell New Securities or enters into any contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance or sale of any New Securities and a Purchaser still holds twenty
percent (20%) of the Convertible Preferred Stock acquired hereby by such
Purchaser, then each such Purchaser shall have the right to purchase that number
of New Securities at the same price and on the same terms proposed to be issued
or sold by the Company
20
so that such Purchaser would after the issuance and sale of all such New
Securities, hold the same proportional interest of the then outstanding shares
of Common Stock (assuming that any outstanding securities or other rights,
including the Convertible Preferred Stock, convertible or exchangeable into or
exercisable for Common Stock have been converted, exchanged or exercised) as was
held by such Purchaser immediately prior to such issuance and sale (the
"Proportionate Percentage").
The Company shall give each Purchaser written notice of its intention to
issue and sell New Securities, describing the type of New Securities, the price
and the general terms and conditions upon which the Company proposes to issue
the same. Each Purchaser shall have twenty-five (25) days from the giving of
such notice to agree to purchase all (or any part) of its Proportionate
Percentage of New Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased.
If Purchasers fail to exercise in full such right within twenty-five (25)
days, the Company shall have one hundred twenty-five (125) days thereafter to
sell the New Securities in respect of which Purchasers' rights were not
exercised, at a price and upon general terms and conditions no more favorable to
the buyers thereof than specified in the Company's notice to Purchasers pursuant
to this Section. If the Company has not sold the New Securities within such one
hundred twenty-five (125) day period, the Company shall not thereafter issue or
sell any New Securities, except by giving Purchasers the right to purchase their
Proportionate Percentage in the manner provided above.
8.3 Shelf Registration.
(a) Within 45 days after the Closing Date, the Company shall prepare and
file with the SEC a Registration Statement for an offering to be made on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf
Registration") registering the resale from time to time by Purchasers of all of
the Registrable Securities (the "Initial Shelf Registration"). The Registration
Statement for any Shelf Registration shall be on Form S-3 or another appropriate
form permitting registration of such Registrable Securities for resale by
Purchasers in the manner or manners designated by them. The Company shall use
its best efforts to cause the Initial Shelf Registration to become effective
under the Securities Act as promptly as is practicable and to keep the Initial
Shelf Registration continuously effective under the Securities Act until the end
of the Effectiveness Period. If the Company fails to file the Initial Shelf
Registration within 45 days after the Closing Date, then, unless such a delay is
attributable to any Purchaser not timely providing information reasonably
requested by the Company, the dividend payable upon the Convertible Preferred
Stock shall increase to 15% per annum until such Initial Shelf Registration is
filed. In such instance, upon filing such Initial Shelf Registration, the
dividend shall revert to 5%. Notwithstanding the foregoing, until the Initial
Shelf Registration is declared effective by the Securities and Exchange
Commission, no shares of Convertible Preferred Stock shall be converted pursuant
to Section 4(b) of the Certificate of Designation.
21
(b) If the Initial Shelf Registration or any Subsequent Shelf Registration
(as defined below) ceases to be effective for any reason at any time during the
Effectiveness Period (other than because all Registrable Securities shall have
been sold or shall have ceased to be Registrable Securities), the Company shall
use its best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within thirty days of such
cessation of effectiveness amend the Shelf Registration in a manner reasonably
expected to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional Shelf Registration covering all of the
Registrable Securities (a "Subsequent Shelf Registration"). If a Subsequent
Shelf Registration is filed, the Company shall use all reasonable efforts to
cause the Subsequent Shelf Registration to become effective as promptly as is
practicable after such filing and to keep such Registration Statement
continuously effective until the end of the Effectiveness Period.
(c) The Company shall supplement and amend the Shelf Registration if
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration, if required
by the Securities Act or the SEC, or if reasonably requested by Purchasers.
(d) From time to time, the Company shall prepare and file with the SEC a
post- effective amendment to the Shelf Registration or a supplement to the
related Prospectus or a supplement or amendment to any document incorporated
therein by reference or any other required document, so that such Registration
Statement will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and so that, as thereafter delivered to
purchasers of the Registrable Securities being sold thereunder, such Prospectus
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provide Purchasers copies of any documents filed in such numbers as
Purchasers shall reasonably request; and inform Purchasers that the Company has
complied with its obligations and that the Registration Statement and related
Prospectus may be used for the purpose of selling all or any of such Registrable
Securities (or that, if the Company has filed a post-effective amendment to the
Shelf Registration which has not yet been declared effective, the Company will
notify Purchasers to that effect, will use its best efforts to secure promptly
the effectiveness of such post-effective amendment and will immediately so
notify Purchasers when the amendment has become effective).
(e) Registration Expenses. All fees and expenses incident to the Company's
performance of or compliance with a Shelf Registration pursuant to this
Agreement shall be borne by the Company whether or not any Registration
Statement becomes effective. Such fees and expenses shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (x) with respect to filings required to be made with the
National Association of Securities Dealers, Inc. and (y) of compliance with
federal securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel to Purchasers in connection with Blue Sky
qualifications of the Registrable Securities under the laws of such
jurisdictions as Purchaser may designate)), (ii) printing expenses, (iii)
messenger, telephone and
22
delivery expenses, (iv) reasonable fees and disbursements of counsel for the
Company and counsel for Purchasers in connection with the Registration not to
exceed $10,000, (v) fees and disbursements of the Company's independent
certified public accountants (including the expenses of any special audit and
"comfort" letters required by or incident to such performance) and (vi)
Securities Act liability insurance obtained by the Company in its sole
discretion. In addition, the Company shall pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange or the Nasdaq Stock Market, as the case
may be, on which similar securities issued by the Company are then listed and
the fees and expenses of any Person, including special experts, retained by the
Company. Notwithstanding the provisions of this subsection, Purchasers shall pay
all registration expenses to the extent the Company is prohibited by applicable
Blue Sky laws from paying for or on behalf of Purchasers.
(f) Indemnity.
(i) In the event of the registration or qualification of any Registrable
Securities pursuant to a Shelf Registration, the Company agrees to indemnify and
hold harmless each Purchaser, each officer, director, employee, agent and
representative of each Purchaser, each underwriter, broker or dealer, if any, of
such Registrable Securities, and each other Person, if any, who controls such
Purchaser, underwriter, broker or dealer within the meaning of the Securities
Act, Exchange Act or any other applicable securities laws, from and against any
and all losses, claims, damages or liabilities (or actions in respect thereof),
joint or several, to which any of them may become subject under the Securities
Act or any other applicable securities laws or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement (including all documents
incorporated therein by reference) under which such Registrable Securities were
registered or qualified under the Securities Act or any other applicable
securities laws, any preliminary prospectus or final prospectus relating to such
Registrable Securities, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or any violation by the Company of any rule or regulation under
the Securities Act or any other applicable securities laws applicable to the
Company or relating to any action or inaction required by the Company in
connection with any such registration or qualification and will reimburse each
Purchaser, each officer, director, employee, agent and representative of each
Purchaser, each such underwriter, broker or dealer and each such controlling
Person for any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or omission made in such
Registration Statement, such preliminary prospectus, such final prospectus or
such amendment or supplement thereto or violation in reliance upon and in
conformity with written information furnished to the Company by any Purchaser,
or any officer, director, employee, agent or representative of any Purchaser
specifically and expressly for use in the preparation thereof; and provided,
further, that the Company shall
23
not be liable to any Person who participates as an underwriter in the offering
or sale of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the Prospectus, as the same may be then supplemented or amended, to
the Person asserting an untrue statement or alleged untrue statement or omission
or alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such Prospectus so long as such Prospectus, and any amendments or
supplements thereto, have been furnished to such underwriter in sufficient
numbers and in a timely-manner to permit distribution thereof.
(ii) In the event of the registration or qualification of any Registrable
Securities pursuant to a Shelf Registration, each Purchaser severally agrees to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 8.3(f)(i) above) the Company, its officers and directors and
each other Person, if any, who controls the Company within the meaning of the
Securities Act with respect to any untrue statement or alleged untrue statement
in, or omission or alleged omission from, such registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, if such statement or omission (i) arises from information
provided by that Purchaser and (ii) was made in reliance upon and in conformity
with written information which that Purchaser furnished to the Company through
an instrument duly executed by it specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, amendment or supplement. Such indemnity shall remain in full force
and effect, regardless of any investigation made by or on behalf of the Company
or any such director, officer or controlling Person and shall survive the
transfer of such securities by that Purchaser. Notwithstanding the foregoing, no
Purchaser shall be liable under this Section 8.3(f)(ii) for an amount in excess
of that Purchaser's purchase price as set forth on Exhibit A.
(iii) Promptly after receipt by a Person entitled to indemnification under
this Section 8.3(f) (an "Indemnified Party") of notice of the commencement of
any action or claim relating to any Registration Statement filed pursuant to a
Shelf Registration or as to which indemnity may be sought hereunder, such
Indemnified Party will, if a claim for indemnification hereunder in respect
thereof is to be made against any other party hereto (an "Indemnifying Party"),
give written notice to such Indemnifying Party of the commencement of such
action or claim, but the omission to so notify the Indemnifying Party will not
relieve the Indemnifying Party from any liability that it may have to any
Indemnified Party except to the extent that the Indemnifying Party is actually
prejudiced thereby. In case any such action is brought against an Indemnified
Party, and it notifies an Indemnifying Party of the commencement thereof, the
Indemnifying Party will be entitled (at its own expense) to participate in and,
to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense, with counsel reasonably satisfactory
to such Indemnified Party, of such action provided that the Indemnifying Party
shall not settle or compromise such action, except upon the prior written
consent of the Indemnified Party and, after notice from the Indemnifying Party
to such Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party will not be liable to such Indemnified Party for any legal or
other expenses subsequently incurred by
24
such Indemnified Party in connection with the defense thereof, other than the
reasonable cost of investigation; provided, however, that the assumption of such
defense shall not give rise in the reasonable opinion of the Indemnified Party
or its counsel to any conflict. Notwithstanding the foregoing, the Indemnified
Party shall have the right to employ its own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless (A) the employment of such counsel shall have been authorized in
writing by the Indemnifying Party in connection with the defense of such suit,
action, claim or proceeding, (B) the Indemnifying Party shall not have employed
counsel (reasonably satisfactory to the Indemnified Party) to take charge of the
defense of such action, suit, claim or proceeding, or (C) such Indemnified Party
shall have reasonably concluded, based upon the advice of counsel, that there
may be defenses available to it that are different from or additional to those
available to the Indemnifying Party which, if the Indemnifying Party and the
Indemnified Party were to be represented by the same counsel, could result in a
conflict of interest for such counsel or materially prejudice the prosecution of
the defenses available to such Indemnified Party. If any of the events specified
in clauses (A), (B) or (C) of the preceding sentence shall have occurred or
shall otherwise be applicable, then the fees and expenses of one counsel or firm
of counsel selected by the Indemnified Party (and reasonably acceptable to the
Indemnifying Party) shall be borne by the Indemnifying Party. If, in any such
case, the Indemnified Party employs separate counsel, the Indemnifying Party
shall not have the right to direct the defense of such action, suit, claim or
proceeding on behalf of the Indemnified Party and the Indemnified Party shall
assume such defense and/or settle or compromise such action; provided, however,
that an Indemnifying Party shall not be liable for the settlement or compromise
of any action, suit, claim or proceeding effected without its prior written
consent, which consent shall not be unreasonably withheld.
(g) Mergers, Etc. The Company shall not, directly or indirectly, enter into
any merger, consolidation, or reorganization in which the Company shall not be
the surviving corporation unless the proposed surviving corporation shall, prior
to such merger, consolidation, or reorganization, agree in writing to assume the
obligations of the Company under this Section, and for that purpose references
hereunder to "Registrable Securities" shall be deemed to be references to the
securities that Purchasers would be entitled to receive in exchange for
Registrable Securities under any such merger, consolidation, or reorganization.
8.4 Delay and Holdback of Registration.
(a) With regard to and notwithstanding Section 8.3, the Company may delay
filing a registration statement for a period of time not to exceed thirty (30)
trading days, and may withhold efforts to cause the registration statement to
become effective, if the Company determines in good faith that such registration
might (i) interfere with or affect the negotiation or completion of any
transaction that is being contemplated by the Company (whether or not a final
decision has been made to undertake such transaction) at the time the right to
delay is exercised, or (ii) involve initial or continuing disclosure obligations
that might not be in the best interest of the Company's stockholders. The
Company may exercise its rights under this Section 8.4(a) no more than two times
per calendar year. During any period (a "Tolling Period") for which the Company
has exercised its rights under this Section 8.4(a), any mandatory conversion
25
under Section 4(b) of the Certificate of Designation will be delayed until the
first business day after the Tolling Period.
(b) If, after a registration statement becomes effective, the Company
advises Purchasers that the Company considers it appropriate for the
registration statement to be amended, the Company shall use its best reasonable
efforts to amend such registration statement as soon as practicable and the
holders of such shares shall suspend any further sales of their registered
shares until the Company advises them that the registration statement has been
so amended.
8.5 Negative Covenants. So long as twenty percent (20%) of the shares of
Convertible Preferred Stock issued hereunder are then outstanding, without the
prior written consent of holders owning a majority of the then outstanding
shares of Convertible Preferred Stock, the Company shall not:
(a) Issue any shares or class or series of Preferred Stock or Common Stock
which is senior to, or pari passu with, the Convertible Preferred Stock (other
than the Convertible Preferred Stock issued pursuant hereto);
(b) Declare or pay any dividend on its Common Stock if any dividends are
unpaid on the Convertible Preferred Stock; or
(c) Redeem for cash any other securities issued by the Company.
(d) Directly or indirectly, enter into any merger, consolidation or other
reorganization in which the Company shall not be the surviving corporation,
unless (i) such merger, consolidation or reorganization is completed in
compliance with Section 8.3(g) of this Agreement and Section 4(d)(iv) of the
Certificate of Designations, and (ii) the surviving corporation shall, prior to
such merger, consolidation or reorganization, agree in writing to assume the
obligations of the Company under this Agreement and the Certificate of
Designations.
SECTION 9
Miscellaneous
9.1 Amendment; Waiver. Neither this Agreement nor any provision hereof may
be amended, modified, supplemented or waived, except by a written instrument
executed by (i) the Company and (ii) Purchasers holding a majority in interest
of the Convertible Preferred Stock issued and sold pursuant to this Agreement
and the shares of Common Stock issuable upon conversion thereof.
9.2 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing and delivered in Person,
transmitted by facsimile transmission (fax) or sent by registered or certified
mail (return receipt requested) or recognized overnight delivery service,
postage pre-paid, addressed as follows, or to such other address has such party
may notify to the other parties in writing:
26
(a) if to the Company:
Anicom, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Purchaser:
To the address listed next to each such purchaser on
Exhibit A hereto.
A notice or communication will be effective (i) if delivered in Person or
by overnight courier, on the business day it is delivered, (ii) if transmitted
by telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, three (3) business
days after dispatch.
9.3 Survival of Representations, Warranties and Covenants. All
representations and warranties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement, any
investigation at any time made by or on behalf of any Purchaser, and the sale
and purchase of the Convertible Preferred Stock and payment therefor for a
period of two (2) years; provided, however, that the representations and
warranties made in Sections 4.17 (Environmental), 4.20 (Benefits) and 4.21
(Taxes) shall survive the applicable statutory period of limitations with
respect to any liabilities covered thereby.
9.4 Severability. Whenever possible, each provision of this Agreement shall
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 prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
9.5 Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto, including, without limitation,
each transferee of all or any portion of the Convertible Preferred Stock. No
party hereto may assign its rights or delegate its obligations under this
Agreement without the prior written consent of the other parties hereto;
provided, however, a Purchaser may assign its rights and delegate its
obligations under this Agreement upon the
27
Company's prior written consent which consent will not be unreasonably
withheld. The Parties agree that, among other reasons, it will be reasonable for
the Company to withhold such consent if the proposed assignee is a competitor to
the Company or an Affiliate thereof.
9.6 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede and cancel all prior representations, alleged warranties, statements,
negotiations, undertakings, letters, acceptances, understandings, contracts and
communications, whether verbal or written, among the parties hereto and thereto
or their respective agents with respect to or in connection with the subject
matter hereof.
9.7 Choice of Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to principles
of conflict of laws.
9.8 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
9.9 Costs and Expenses. The Company shall pay all reasonable fees and
disbursements of Purchasers' legal counsel as well as other reasonable
out-of-pocket expenses incurred by Purchasers in connection with the negotiation
and execution of the Transaction Documents (including amounts paid or owed to
third parties), not to exceed the amounts set forth in Schedule 9.9.
9.10 Indemnification.
(a) The Company agrees to indemnify and hold harmless each Purchaser and
its Affiliates, and its respective partners, co-investors, officers, directors,
employees, agents, consultants, attorneys and advisers (each, a "Purchaser
Indemnified Party"), from and against any and all actual losses, claims,
damages, liabilities, costs and expenses (including, without limitation,
environmental liabilities, costs and expenses and all reasonable fees, expenses
and disbursements of counsel), joint or several (hereinafter collectively
referred to as a "Loss" or "Losses"), which may be incurred by or asserted or
awarded against any Purchaser Indemnified Party in connection with or in any
manner arising out of or relating to any investigation, litigation or proceeding
or the preparation of any defense with respect thereto, arising out of or in
connection with or relating to this Agreement, the other Transaction Documents
or the transactions contemplated hereby or thereby or any use made or proposal
to be made with the proceeds of Purchasers' purchase of the Convertible
Preferred Stock pursuant to this Agreement, whether or not such investigation,
litigation or proceeding is brought by the Company, any of its Subsidiaries,
shareholders or creditors, whether or not any of the transactions contemplated
by this Agreement or the other Transaction Documents are consummated, except to
the extent such Loss is found in a final judgment by a court of competent
jurisdiction to have resulted from such Purchaser Indemnified Party's gross
negligence or willful misconduct.
28
(b) Each Purchaser severally agrees to indemnify and hold harmless the
Company and its Affiliates, and its respective officers, directors, employees,
agents, consultants, attorneys and advisers (each, a "Company Indemnified
Party"), from and against any and all Losses, which may be incurred by or
asserted or awarded against any Company Indemnified Party in connection with or
in any manner arising out of or relating to any investigation, litigation or
proceeding or the preparation of any defense with respect thereto, arising out
of or in connection with or relating to any breach of any representation,
warranty or covenant made by such Purchaser in this Agreement. Notwithstanding
the foregoing, no Purchaser shall be liable under this Section 9.10(b) for an
amount in excess of that Purchaser's purchase price as set forth on Exhibit A.
(c) An indemnified party shall give written notice to the indemnifying
party of any claim with respect to which it seeks indemnification within ten
(10) days after the discovery by such parties of any matters giving arise to a
claim for indemnification pursuant to this Section 9.10; provided that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under this Section 9.10,
except to the extent that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action or claim is brought against any
indemnified party, the indemnifying party shall be entitled to participate in
and, unless in the reasonable good faith judgment of the indemnified party a
conflict of interest between such indemnified party and the indemnifying party
may exist in respect of such action or claim, to assume the defense thereof,
with counsel satisfactory to the indemnified party and after notice from the
indemnifying party to the indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. In any event, unless and until the indemnifying party elects in
writing to assume and does so assume the defense of any such action or claim the
indemnified party's costs and expenses arising out of the defense, settlement or
compromise of any such action or claim shall be Losses subject to
indemnification hereunder. If the indemnifying party elects to defend any such
action or claim, then the indemnified party shall be entitled to participate in
such defense with counsel of its choice at its sole cost and expense. The
indemnifying party shall not be liable for any settlement of any action or claim
effected without its written consent. Anything in this Section 9.10 to the
contrary notwithstanding, the indemnifying party shall not, without the
indemnified party's prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof that imposes any future
obligation on the indemnified party or that does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party, a release from all liability in respect of such claim.
9.11 No Third-Party Beneficiaries. Nothing in this Agreement will confer
any third party beneficiary or other rights upon any Person (specifically
including any employees of the Company and its Subsidiaries) or entity that is
not a party to this Agreement.
[Remainder of page intentionally left blank]
29
CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed effective as of the date first above written.
ANICOM, INC.
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Chief Financial Officer
PURCHASERS:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC PARTNERS FUND, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC PARTNERS, L.P., its
general partner
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, a general partner
STRATEGIC ASSOCIATES, L.P.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & COMPANY, L.L.C., its general
partner
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, a managing member
30
▇▇▇▇▇▇▇ US DISCOVERY FUND III, L.P.
By: ▇▇▇▇▇▇▇ US DISCOVERY PARTNERS, L.P., its
general partner
By: ▇▇▇▇▇▇▇ US DISCOVERY, LLC, its
general partner
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇, member
▇▇▇▇▇▇▇ US DISCOVERY OFFSHORE FUND III, L.P.
By: ▇▇▇▇▇▇▇ US DISCOVERY PARTNERS, L.P., its
general partner
By: ▇▇▇▇▇▇▇ US DISCOVERY, LLC, its
general partner
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇, member
/S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ TESTAMENTARY TRUST
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Trustee
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ TRUST
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Trustee
31
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ TRUST
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Trustee
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. TRUST
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Trustee
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ TRUST
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: Trustee
SUMMER HILL PARTNERS, L.P.
By: Summer Hill, Inc., its general partner
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
32
SUMMER ▇▇▇▇ ▇.▇. ENTERPRISES LIMITED PARTNERSHIP
By: Summer Hill, Inc., its general partner
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
GARFAM INVESTORS LLC
By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Treasurer
S. ▇▇▇▇▇ ▇▇▇▇▇▇
/S/ S. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
/S/ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
/S/ ▇▇▇▇ ▇▇▇▇▇▇
KA TRADING
By: /S/ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
Title:
KA MANAGEMENT
By: /S/ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
Title:
33
CEW PARTNERS
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:
TRUST INVESTMENTS, INC.
By: /S/ M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title:
THE LINCOLN FUND, L.P.
By: MATLINS FINANCIAL CONSULTING, INC.,
its general partner
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, President
THE LINCOLN FUND TAX ADVANTAGE, L.P.
By: MATLINS FINANCIAL CONSULTING, INC.,
its general partner
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, President
THE ▇▇▇▇▇▇ FUND, L.P.
By: LIGHTHOUSE CAPITAL MANAGEMENT, L.L.C.
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, President
34
Exhibit A
Number of Shares
of Convertible
Purchaser Address Preferred Stock Purchase Price
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ One South Street 7,580 $7,580,000
Strategic Partners Suite 2150
Fund, L.P. ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇ (▇▇▇▇)
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Strategic Associates, L.P. One South Street 420 420,000
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇ (▇▇▇▇)
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ US Discovery ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 6,895 6,895,000
Fund III, L.P. ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
Morgan, Lewis, Bockius, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Number of Shares
of Convertible
Purchaser Address Preferred Stock Purchase Price
▇▇▇▇▇▇▇ US Discovery ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ 1,105 1,105,000
Offshore Fund III, L.P. ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
Morgan, Lewis, Bockius, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Testamentary Trust 3,000 3,000,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1,000 1,000,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 500 500,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Trust 125 125,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Trust 125 125,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. Trust 125 125,000
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ Trust 125 125,000
in each case, c/o:
▇▇▇▇▇▇▇▇ Capital ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇
with a copy to:
Hlustik, ▇▇▇▇▇▇▇▇ &
Vander Woude
▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇ Woude
Summer Hill Partners, L.P. 1,000 1,000,000
Summer ▇▇▇▇ ▇.▇. Enterprises
Limited Partnership 1,000 1,000,000
Garfam Investors, L.L.C. 200 200,000
in each case, c/o:
Summer Hill, Inc. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
S. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇. 334 334,000
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Number of Shares
of Convertible
Purchaser Address Preferred Stock Purchase Price
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇. ▇▇▇ ▇▇▇,▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇. 333 333,000
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
KA Trading 1712 ▇▇▇▇▇▇▇ Crossroads 825 825,000
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
KA Management 1712 ▇▇▇▇▇▇▇ Crossroads 425 425,000
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
CEW Partners ▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 500 500,000
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Trust Investments, Inc. ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ 500 500,000
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
The Lincoln Fund, L.P. ▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ 300 300,000
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The Lincoln Fund Tax ▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ 100 100,000
Advantage, L.P. ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The ▇▇▇▇▇▇ Fund, L.P. ▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ 150 150,000
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TOTAL 27,000 $27,000,000
