Exhibit 2.1
ECONOMETRICS, INC.
8% CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
THIS 8% CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "Agreement") is
made as of September 30, 1999, by and among Econometrics, Inc., a Colorado
corporation ("Parent"), Econometrics, Inc., an Illinois corporation and a wholly
owned subsidiary of Parent ("Sub"; Sub and Parent hereinafter are collectively
referred to as the "Companies" and individually as a "Company"), and Xxxxxxx
Healthcare, Inc., a Delaware corporation (the "Investor").
R E C I T A L S:
A. The Companies have, jointly and severally, authorized the issuance
of $2,000,000 aggregate principal amount of 8% Convertible Debentures due 2004
(the "Debenture"), with the terms, rights and privileges set forth in EXHIBIT A
hereto (the "Debenture Certificate").
B. The Companies desire to sell the Debenture to the Investor, and the
Investor desires to purchase the Debenture from the Companies, on the terms and
subject to the conditions set forth in this Agreement.
C. Certain capitalized terms shall have the meanings sets forth in
APPENDIX A hereto.
THE PARTIES AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF DEBENTURE.
1.1 SALE AND ISSUANCE OF DEBENTURE. Subject to
the terms and conditions hereof, the Companies, jointly and severally, shall
issue and sell to the Investor and the Investor agrees to purchase from the
Companies the Debenture at an aggregate purchase price of $2,000,000 (the
"Purchase Price").
1.2 CLOSING. Subject to the satisfaction or
waiver of the conditions set forth herein, the closing of the purchase and sale
of the Debenture shall take place at the offices of the Companies, 000 Xxxx
Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000, on the date hereof and
simultaneously with the execution and delivery of this Agreement, or at such
other place and time as the Companies and the Investor mutually agree (which
date, time and place are designated the "Closing").
1.3 DELIVERY. At the Closing, the Companies
shall deliver to the Investor the Debenture Certificate, duly executed by each
Company, against delivery to the Companies by the Investor of (i) an executed
copy of this Agreement, and (ii) the Purchase Price payable by certified check
or wire transfer in immediately available funds.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES TO THE
INVESTOR. The Companies (references herein to the Company shall mean the Company
and each Subsidiary of the Company) hereby, jointly and severally, represent and
warrant to the Investor as follows:
1
2.1 CORPORATE ORGANIZATION AND AUTHORITY.
(a) Each Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and has all requisite corporate power and authority to own,
lease and operate the assets used in its business and to carry on its business
as presently conducted and as proposed to be conducted. SCHEDULE 2.1(A) hereto
contains a true, correct and complete copy of each Company's certificate or
articles of incorporation and bylaws. Each Company has made available to the
Investor and its counsel true, correct and complete copies of all minutes of
meetings and all written consents of its directors and stockholders.
(b) Each Company has all requisite
corporate power to execute, deliver and perform the transactions contemplated by
this Agreement, the Debenture Certificate, the Stockholders Agreement (as
defined below) and the Registration Rights Agreement (as defined below) (the
Stockholders Agreement and the Registration Rights Agreement are referred to as
the "Related Agreements"), in each case to the extent to which such Company is a
party thereto.
(c) Each Company is qualified as a
foreign corporation and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on the business,
finances, assets (including levels of working capital and components thereof),
condition (financial or otherwise), operating results, liabilities, operations,
customer, supplier or employee relations, business prospects or properties of
such Company (a "Material Adverse Effect").
2.2 CAPITALIZATION.
Immediately prior to the Closing, the authorized capital of the
Companies shall consist of:
(a) PREFERRED STOCK. (i) Ten million
(10,000,000) shares of Preferred Stock, $.10 par value per share, of Parent are
duly authorized, none of which shares are issued and outstanding. No shares of
Preferred Stock of Sub are authorized, issued or outstanding.
(b) COMMON STOCK. Seven hundred and fifty
million (750,000,000) shares of Common Stock, no par value per share, of Parent
(the "Common Stock") are duly authorized, of which 11,141,342 shares are issued
and outstanding. The issued and outstanding shares of Common Stock are held of
record as set forth on SCHEDULE 2.2(b). All of such issued and outstanding
shares of Common Stock are duly and validly issued and outstanding and are fully
paid and non-assessable with no personal liability attached to the ownership
thereof, and were issued in compliance with applicable state and federal
securities laws. Such shares were issued without violation of any preemptive
rights. Except as set forth in the articles or certificate of incorporation of
Parent, this Agreement, the Debenture Certificate or SCHEDULE 2.2(b), there are
no outstanding warrants, options, conversion privileges, preemptive rights, or
other rights or agreements to purchase or otherwise acquire or issue any equity
securities of the Company (which Schedule sets forth the name of the holder of
such warrants, options or other rights, the number of shares issuable thereunder
and the exercise price thereof). Immediately after the Closing, 4,635,299 shares
of Common Stock will be reserved for issuance upon conversion of the Debenture.
Except as set forth on SCHEDULE 2.2(b), (i) no Securities of
2
Parent are issued and outstanding, (ii) there are no outstanding plans,
contracts, agreements or commitments relating to the issuance or purchase by
Parent, directly or indirectly, of any Securities and (iii) there are no
preemptive or similar rights to purchase or otherwise acquire any Securities of
Parent.
Five hundred thousand (500,000) shares of Common Stock, no par value
per share, of Sub (the "Sub Common Stock") are duly authorized, of which
205,013.24 shares are issued and outstanding. All of the issued and outstanding
shares of Sub Common Stock are owned by Parent. All of such issued and
outstanding shares of Sub Common Stock are duly and validly issued and
outstanding and are fully paid and non-assessable with no personal liability
attached to the ownership thereof, and were issued in compliance with applicable
state and federal securities laws. Such shares were issued without violation of
any preemptive rights. There are no outstanding warrants, options, conversion
privileges, preemptive rights, or other rights or agreements to purchase or
otherwise acquire or issue any equity securities of the Company. Except as set
forth herein, (i) no Securities of Sub are issued and outstanding, (ii) there
are no outstanding plans, contracts, agreements or commitments relating to the
issuance or purchase by Sub of any Securities and (iii) there are no preemptive
or similar rights to purchase or otherwise acquire any Securities of Sub.
2.3 SUBSIDIARIES. Except as set forth in
SCHEDULE 2.3, the Companies do not own, have any investment in, or control,
directly or indirectly, any capital or other equity interest or participation in
any Subsidiaries, associations or other business entities nor is any Company a
participant in any joint venture or partnership nor is any Company, directly or
indirectly, subject to any obligation or requirement to provide funds to, or
invest in, any Person.
2.4 AUTHORIZATION. All corporate actions on
the part of each Company and its respective officers, directors and stockholders
necessary for the authorization, execution, delivery and performance of all
obligations under this Agreement, the Debenture Certificate and the Related
Agreements, and for the sale, issuance, grant and delivery of the Debenture and
the Common Stock issuable upon conversion of the Debenture have been taken, and
this Agreement, the Debenture Certificate and the Related Agreements constitute
legally binding and valid obligations of each Company that is a party thereto
enforceable in accordance with their terms, except as limited by applicable
bankruptcy, insolvency, reorganization, and similar laws affecting enforcement
of creditors' rights generally and rules of law concerning equitable remedies.
The sale and issuance of the Debenture and the subsequent conversion of the
Debenture into Common Stock are not and will not be subject to any preemptive
rights or rights of first refusal.
2.5 VALIDITY OF DEBENTURE AND COMMON STOCK. The
Debenture, when sold, issued and delivered in accordance with the terms and for
the consideration expressed in this Agreement and the shares of Common Stock
issued upon conversion of the Debenture (the "Conversion Shares"), shall be duly
and validly issued, fully-paid and non-assessable, and will be free of any liens
or encumbrances; provided, however, that the Debenture and the Conversion Shares
may be subject to restrictions on transfer under applicable state and/or federal
securities laws as set forth herein or as may be required by such laws at the
time a transfer is proposed.
2.6 NO CONFLICT WITH OTHER INSTRUMENTS. The
execution, delivery and performance of this Agreement, the Debenture Certificate
and the Related Agreements will not result in any violation of, be in conflict
with, constitute a default or give rise to any right of
3
termination, cancellation or acceleration under, with or without the passage of
time or the giving of notice or both: (i) any provision of either Company's
articles or certificate of incorporation or bylaws; (ii) any provision of any
judgment, decree, writ or order to which either Company is a party or by which
it or any of its property is bound; (iii) any contract, obligation or commitment
to which either Company is a party or by which it or any of its property is
bound; or (iv) any statute, governmental rule or regulation applicable to either
Company. The execution, delivery and performance of and compliance with this
Agreement, the Debenture Certificate and the Related Agreements, and the
issuance and sale of the Debenture pursuant hereto and of the Conversion Shares
pursuant to the Debenture Certificate will not, with or without the passage of
time or giving of notice or both, result in any such violation, or be in
conflict with or constitute a default under any such term, or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of either Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to either Company, its business or operations or any of its
assets or properties.
2.7 FINANCIAL STATEMENTS. (a) The audited
consolidated balance sheets of Parent dated as of December 31, 1997 and 1998
(the "Audited Balance Sheets") together with the related audited consolidated
statements of operations and retained earnings (deficit), the consolidated
statements of stockholders' equity and the consolidated statements of cash flow,
each for the years ended December 31, 1997 and 1998 (collectively with the
Audited Balance Sheets, the "Audited Financial Statements"), the unaudited
consolidated balance sheets of Parent dated as of June 30, 1998 and 1999 (the
"Interim Balance Sheet"), together with the related unaudited consolidated
statements of operations and retained earnings (deficit) and the unaudited
consolidated statement of cash flows, each for the three and six months ended
June 30, 1998 and 1999 (collectively with the Interim Balance Sheets, the
"Interim Financial Statements" and together with the Audited Financial
Statements and the Interim Balance Sheets, the "Financial Statements") are
attached hereto as SCHEDULE 2.7(a). The Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis ("GAAP") for the periods covered (except as may be indicated in
the notes thereto). The Financial Statements fairly present the consolidated
financial position of the Companies as of the dates and for the periods
indicated thereon and the results of operations, retained earnings and changes
in cash flows of the Companies as of such dates and for the periods then ended
in accordance with GAAP.
(b) Except as set forth on SCHEDULE 2.7(b),
the Companies have no liabilities, absolute or contingent, which are,
individually or in the aggregate, material to the financial condition or
operating results of either Company that are not reflected on the Interim
Balance Sheet. There are no "loss contingencies" (as defined in Statement of
Financial Accounting Standards No. 5 issued March 1975), that are not adequately
provided for on the Interim Balance Sheet or set forth on SCHEDULE 2.7(b).
Except as set forth in SCHEDULE 2.7(b), neither Company has any indebtedness for
borrowed money that either Company has directly or indirectly created, incurred,
assumed, or guaranteed, or with respect to which either Company has otherwise
become directly or indirectly liable.
(c) SCHEDULE 2.7(c) sets forth an accurate and
complete list of indebtedness for borrowed money owed to persons or entities
brought to the Company by Xxxxxxx Xxxxxxxx, including the date the Company
received the loan proceeds, the identity of the lender, the amount borrowed, the
amount previously repaid by the Company, the principal balance outstanding as of
the date hereof, the interest rate applicable to such loans, the interest
accrued
4
and unpaid through the date hereof, the maturity date of such loans, and the
number and terms of warrants to purchase Common Stock granted in connection
therewith. The persons and entities identified as lenders on such SCHEDULE
2.7(c) are referred to collectively as the "Xxxxxxxx Group" and the debt owed by
the Company to the members of the Xxxxxxxx Group is referred to as the "Xxxxxxxx
Group Loans." The Company has the right to prepay all or any portion of the
Xxxxxxxx Loans at any time or from time to time without penalty and without the
consent of any member of the Xxxxxxxx Group or any other third party.
2.8 CHANGES IN CONDITION. Except as
contemplated herein or as described on SCHEDULE 2.8, since the date of the
Interim Balance Sheet, there has not been:
(a) any material damage, destruction
or loss to either Company's business, finances, assets, liabilities, operations,
properties or prospects, whether or not covered by insurance;
(b) any waiver by either Company of a
material right or a debt owed to it;
(c) any satisfaction or discharge of
any liability, lien, claim or encumbrance or payment of any obligation by either
Company, except those which have occurred in the ordinary course of business and
which have not had a Material Adverse Effect;
(d) any material change in any
compensation arrangement or agreement with any employee, officer, director or
stockholder;
(e) any adverse change in the condition
(financial or otherwise) of the business, finances, assets, liabilities (fixed
or contingent), operations, properties or prospects of either Company from that
reflected in the Interim Balance Sheet;
(f) any declaration or payment of any
dividend or other distribution with respect to any share of Parent's capital
stock;
(g) any mortgage, pledge or other
encumbrance of any of either Company's assets or properties, tangible or
intangible, nor any commitment to do any of the foregoing, except for liens for
current taxes that are not yet due and payable;
(h) any commitment to borrow money or
provide financial support to any Person entered into by either Company;
(i) any disposal of, or agreement to
dispose of, any asset or property, tangible or intangible, except in the
ordinary course of business, and in each case for a consideration at least equal
to the fair market value of such asset or property, nor any lease or license to
others, or agreement so to lease or license, any asset or property, except in
the ordinary course of business;
(j) any write-down of the value of any
inventory of either Company, or any write-off as uncollectible of any accounts
or notes receivable of either Company;
5
(k) any purchase or agreement to
purchase or otherwise acquire any debt or equity securities of any corporation,
partnership, joint venture, firm or other entity;
(l) any expenditure or commitment
for the purchase, acquisition, construction or improvement of a capital asset in
excess of $10,000;
(m) any material change or agreement
to change any employee profit sharing, stock option, stock purchase, pension,
bonus, incentive, retirement, medical reimbursement, life insurance, deferred
compensation or any other employee benefit plan or arrangement;
(n) any resignation or termination of
any key officers of either Company; and neither Company knows of the impending
resignation or termination of employment of any such officer;
(o) any liability or loss contingency
incurred by either Company that would have to be disclosed on financial
statements (including the notes thereto) in accordance with GAAP, or any change
in the contingent obligations of either Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(p) any direct or indirect loans
made by either Company to any stockholder, employee, officer or director of
either Company;
(q) any sale, assignment or transfer of
any patents, trademarks, copyrights, trade secrets or other intangible assets;
(r) any change in any material agreement
to which either Company is a party or by which it is bound including
compensation agreements with either Company's employees;
(s) any labor organization activity;
(t) any change in the accounting or tax
methods, practices or assumptions followed by either Company;
(u) any other event or condition of
any character that, either individually or cumulatively, has had or is
reasonably expected to have a Material Adverse Effect.
2.9 LITIGATION. Except as set forth on
SCHEDULE 2.9, there is no action, suit, proceeding or investigation pending or
to either Company's knowledge currently threatened against either Company that
questions the validity of this Agreement, the Debenture Certificate, or the
Related Agreements or the right of either Company to enter into this Agreement,
the Debenture Certificate or any of such Related Agreements, or to consummate
the transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse change in the
business, finances, assets, liabilities, operations, properties or prospects of
either Company, or any change in the current equity ownership of either Company.
The foregoing includes, without limitation, actions pending or threatened
involving the prior employment of any of either Company's employees, their use
in connection
6
with either Company's business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations under any
agreements with prior employers. Neither Company is a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. Except as set forth in SCHEDULE 2.9, there
is no action, suit, proceeding or investigation by either Company currently
pending or which either Company intends to initiate.
2.10 PROPERTIES; TITLE; LIENS AND ENCUMBRANCES.
Except as set forth in SCHEDULE 2.10, neither Company owns or leases any real
property. Except as set forth in SCHEDULE 2.10, the Interim Balance Sheet
reflects all of the personal property used by either Company in its business or
otherwise held by either Company, except for (i) property acquired or disposed
of in the ordinary course of the business of either Company since the date of
the Interim Balance Sheet, and (ii) property not required under generally
accepted accounting principles to be reflected thereon. Except as set forth in
SCHEDULE 2.10, each Company has good and marketable title to all of its
properties and assets. Each Company has good title to all its leasehold
interests, in each case subject to no material mortgage, pledge, lien, security
interest, conditional sale agreement, encumbrance or charge. All of the fixed
assets and properties included in the Interim Financial Statements or thereafter
acquired are in satisfactory condition and repair and are adequate and suitable
for the requirements of each Company's business as presently conducted. There
does not exist any condition which interferes with the economic value or use of
such assets.
2.11 PATENTS AND TRADEMARKS. (a) Each Company
owns or possesses sufficient legal rights to all domestic and foreign patents,
trademarks, service marks, trade names, copyrights, trade secrets, information
and other proprietary rights and processes, and applications and registrations
therefore, and designs, customer lists, inventions and know-how, other
confidential or proprietary information and other intellectual property rights
(collectively "Intellectual Property Rights") necessary to permit each Company
to carry on its business as now conducted or as proposed to be conducted without
any known infringement of the rights of others. SCHEDULE 2.11 sets forth a full
and complete list of all Intellectual Property Rights. Except as set forth on
SCHEDULE 2.11, there are no outstanding options, licenses or agreements of any
kind relating to the foregoing, nor is either Company bound by or a party to any
options, licenses or agreements of any kind with respect to the Intellectual
Property Rights of any other person or entity (other than such licenses or
agreements arising from the purchase of "off the shelf" or standard products).
Except as set forth on SCHEDULE 2.11, neither Company has received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the Intellectual Property Rights of
any other Person. Except as set forth in agreements with either Company, neither
Company is aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company or that would
conflict with the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, the consummation of the transactions
contemplated hereby, nor the carrying on of the Companies' business by the
employees of either Company, nor the conduct of either Company's business as
proposed, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any employee is now obligated. Neither Company believes
it is or will be necessary to utilize any inventions, trade secrets or
proprietary information of any of its
7
employees made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been assigned to either
Company.
(b) All registered patents, copyrights,
trademarks, and service marks of each Company are in full force and effect and
are not subject to any taxes or maintenance fees. To the knowledge of the
Companies, neither Company markets or sells, or proposes to market or sell, any
product or service that violates or would violate any Intellectual Property
Rights of a third party. There is no pending or, to the best knowledge of the
Companies, threatened claim or litigation against either Company contesting the
right to use its Intellectual Property Rights, asserting the invalidity,
unenforceability or misuse of any thereof, or asserting the infringement or
other violation of, or conflict with, any Intellectual Property Rights of a
third party. The Intellectual Property Rights of the Companies do not infringe,
violate or conflict with any Intellectual Property Rights of a third party and
no third party infringes, violates or is in conflict with the Intellectual
Property Rights of either Company. All prior art known to the Companies which
may be or may have been pertinent to the examination of any patent or patent
application listed on SCHEDULE 2.11 has been cited to the United States Patent
and Trademark Office. Each Company has taken all reasonable security measures to
protect the secrecy, confidentiality and value of its customer lists, trade
secrets, proprietary processes and formulae, inventions, know-how and other
confidential and proprietary information. All inventions and know-how conceived
by employees or consultants of either Company and related to the business of
either Company were "works for hire", and all right, title, and interest therein
were transferred and assigned to the Company.
(c) None of the Intellectual Property Rights
of either Company are subject to any outstanding judgment or contract
restricting the use thereof by either Company. Neither Company has entered into
any agreement to indemnify any other Person against any charge of infringement
of any Intellectual Property Rights.
(d) All licenses, sublicenses or other rights
of use of the Intellectual Property Rights licensed by either Company (the
"LICENSED RIGHTS") are valid and authorized by the terms under which the Company
licenses or otherwise uses such Licensed Rights. Neither Company is in default
in the payment of any royalties, license fees or other consideration to any
owner or licensor of any Licensed Rights used in or necessary for the conduct of
either Company's business as now conducted and as proposed to be conducted or to
any agent or representative of any such owner or licensor by reason of the use
thereof by either Company and neither Company is otherwise in default in the
performance of any of its obligations to any such owner or licensor, and no such
owner or licensor, nor any such agent or representative, has notified either
Company of any claim of any such default.
2.12 TAXES. All federal, state, local and
foreign tax returns and reports required to be filed by either Company have been
filed, and all taxes, interest, assessments or deficiencies, fees and other
governmental charges upon either Company, or upon any of its properties, income
or franchises, shown in such returns and on assessments received by either
Company to be due and payable or claimed to be due and payable by any
governmental authority, have been paid. Neither Company has executed or filed
with any taxing authority any agreement, waiver or consent for the extension of
the period for assessment or collection of any taxes or the audit of any tax
returns or reports. Neither Company is a party to any pending action or
proceeding, nor, to the knowledge of either Company, is any such action or
proceeding threatened by any governmental authority for the assessment or
collection of taxes, interest,
8
penalties, assessments or deficiencies, and no claim for assessment or
collection of taxes, interest, penalties, assessments or deficiencies has been
asserted against either Company. No material issue has been raised by any
federal, state, local or foreign taxing authority in connection with an audit or
examination of the tax returns, reports, business or properties of either
Company which has not been settled or resolved. Neither Company has agreed to
extend the statute of limitations with respect to any tax period or the review
or audit of any tax return. No material, special charges, penalties, fines,
liens or similar encumbrances have been asserted against either Company with
respect to the payment or failure to pay any taxes which have not been paid or
received without further liability to either Company.
2.13 MATERIAL AGREEMENTS. (a) SCHEDULE 2.13(a)
sets forth all written or oral agreements or understandings to which either
Company is a party and which:
(i) provide for the future purchase of
products or services in excess of $10,000 per year or
otherwise call for expenditures in excess of $10,000 per year;
(ii) provide for the employment of, or any
covenant not to compete by, any director, officer, key
employee or consultant;
(iii) provide for the borrowing of money or
a line of credit or a leasing transaction of a type required
to be capitalized in accordance with GAAP;
(iv) provide for the sale, assignment,
license, or other disposition of any asset outside the
ordinary course of business;
(v) provide for the lease of any real or
personal property with lease payments in excess of $5,000 per
year;
(vi) were entered into with any labor union;
(vii) provide for a tax sharing;
(viii) restrict either Company or any
officer or key employee of either Company from engaging in any
business activity anywhere in the world, restrict any such
officer or key employee in the performance of his or her
obligations and responsibilities to either Company, or create
any other obligation or liability of any such officer or key
employee arising from his or her prior employment;
(ix) grant to any Person other than either
Company any right, title, or interest in any Intellectual
Property Rights;
9
(x) provide for the licensing or
distribution of products or services by, or establish an
agency relationship with, any other party;
(xi) provide for a loan, guaranty, surety,
indemnity or other financial support to any Person, including,
without limitation, any director, officer, employee, or
consultant;
(xii) grant to any Person a security
interest in any asset or right;
(xiii) any agreement not terminable by the
Company with less than 30 days' advance notice and without
penalty;
(xiv) provide for the purchase within the
last two years of any entity, all or substantially all assets
of any entity or any other business operation, in each case
with consideration in excess of $10,000; or
(xv) are otherwise material to either
Company.
(b) Each Company has delivered to the
Investor correct and complete copies of all agreements and understandings listed
on SCHEDULE 2.13(a) (the "MATERIAL DOCUMENTS"). Each Material Document is in
full force and effect and constitutes a valid and binding obligation of the
Company that is a party thereto, and, to the best knowledge of each Company, all
other parties thereto. Each Company has in all respects performed the
obligations required to be performed by it and is not in default or alleged to
be in default in any material respect under any Material Document. There exists
no event or condition which, after notice or lapse of time, or both, would
constitute such default. To the best knowledge of the Companies, there are no
material defaults by any other party to any Material Document.
(c) Except as set forth in SCHEDULE
2.13(c), neither Company has granted any rights to license, market, or sell its
products or services to any Person and is not bound by any agreement that
affects either Company's exclusive right to develop, manufacture, assemble,
distribute, market or sell its products or services.
2.14 NO DEFAULTS, VIOLATIONS OR CONFLICTS.
Neither Company is in violation of any term or provision of its articles or
certificate of incorporation or bylaws, or any judgment, decree, order, statute,
rule or regulation, which has had or could have a Material Adverse Effect.
2.15 SECURITIES ACT. Subject to the accuracy of
the Investor's representations in Section 4 hereof, the offer, sale, grant and
issuance of the Debenture and the Conversion Shares upon the conversion of the
Debenture, constitute transactions exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and the
securities acts and laws of any other applicable jurisdictions.
10
2.16 PRIOR REGISTRATION RIGHTS. Except as
described in SCHEDULE 2.16, neither Company is under any contractual obligation
to register under the Securities Act (whether upon demand or upon filing any
other registration statement) any of its presently outstanding securities or any
of its securities that may subsequently be issued.
2.17 DISTRIBUTIONS. There has been no declaration
or payment by either Company of any dividend, nor any other distribution by
either Company of any assets of any kind, to any of its stockholders.
2.18 EMPLOYEE BENEFIT PLANS. Except for those
plans described on SCHEDULE 2.18 (the "Plans"), neither Company now has,
maintains or contributes to (and each Company has not previously had, maintained
or contributed to) any "employee benefit plans" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). With
respect to the Plans described on SCHEDULE 2.18, each Company warrants and
represents that such Plans have been maintained in material compliance with all
applicable laws and regulations. The consummation of the transactions
contemplated by this Agreement will not constitute a triggering event under any
Plan that will, or upon the occurrence of subsequent events would, accelerate
the time of payment or vesting, or increase the amount of compensation or
benefits, for any director, officer, employee, or former employee of either
Company.
2.19 BROKERS AND FINDERS. Neither Company has
incurred or will incur, directly or indirectly, any liability for any brokerage
or finders' fees or agents commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
2.20 COMPLIANCE WITH LAWS; PERMITS. To its
knowledge, neither Company is in violation of any applicable statute, rule,
regulation, order or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business or
the ownership of its properties which violation would materially and adversely
affect the business, finances, assets, liabilities, operations, properties or
prospects of either Company. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution and
delivery of this Agreement and the issuance of the Debentures or the Conversion
Shares, except (i) filings that have been duly and validly obtained or filed,
(ii) with respect to any filings that must be made after the Closing, filings
that will be filed in a timely manner or (iii) such consents or filings which
the failure to obtain or file would not, individually or in the aggregate, have
a Material Adverse Effect. Each Company has all material franchises, permits,
licenses and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which has had or could have a Material
Adverse Effect and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
2.21 FULL DISCLOSURE. This Agreement
(including the Schedules and Exhibits attached hereto and instruments delivered
in connection herewith, including, without limitation the Debenture Certificate
and the Related Documents) does not contain any untrue statement of a material
fact or omit any material fact necessary to make the statements contained herein
or therein not misleading. There is no fact which either Company has not
disclosed to the Investor and its counsel in writing and of which either Company
is aware which may have a Material Adverse Effect. The financial projections and
other estimates prepared by the Companies and presented to the Investor were
prepared by the Companies in good faith based on
11
the Companies' experience in the industry and on assumptions of fact and opinion
as to future events which the Companies, at the date hereof, believed to be
reasonable. As of the date hereof, no facts have come to the attention of either
Company which would, in its opinion, require either Company to revise the
assumptions underlying such projections and other estimates or the conclusions
derived therefrom.
2.22 PATENT, COPYRIGHT AND NONDISCLOSURE
AGREEMENTS. Except as set forth on SCHEDULE 2.22, each employee, officer and
consultant (other than outside legal counsel and independent accounting firms)
of each Company has entered into a Patent, Copyright and Nondisclosure Agreement
substantially in the form attached hereto as EXHIBIT E, with such changes as may
have been approved by the Board of Directors of the respective Company.
2.23 INSURANCE. The Companies maintain valid
and effective insurance policies, issued by financially sound and reputable
insurers, to insure them against all risks usually insured against by Persons
conducting businesses similar to that of the Companies in the locality in which
such businesses are conducted. The Companies have paid all due premiums with
respect to all policies of insurance currently maintained by it. The Companies
have not received any notice that any insurance policy held by it has been or
shall be canceled or terminated or will not be renewed on substantially the same
terms as are now in effect or that the premium on such policy shall be
materially increased on the renewal thereof.
2.24 OBLIGATIONS TO RELATED PARTIES. Except as
set forth on SCHEDULE 2.24, there are no obligations of either Company to
officers, directors, stockholders, or employees of either Company other than (i)
for payment of salary for services rendered, (ii) reimbursement for reasonable
expenses incurred on behalf of the Company and (iii) for other standard employee
benefits made generally available to all employees (including stock option
agreements outstanding under any stock option plan approved by the Board of
Directors of either Company). Except as set forth on SCHEDULE 2.24, none of the
officers, directors or stockholders of the Company, or any members of their
immediate families, are indebted to either Company or have any direct or
indirect ownership interest in any firm or corporation with which either Company
is affiliated or with which either Company has a business relationship, or any
firm or corporation which competes with either Company, except that officers,
directors and/or stockholders of either Company may own stock in publicly traded
companies which may compete with either Company. Except as set forth on SCHEDULE
2.24, no officer, director or stockholder, or any member of their immediate
families, is, directly or indirectly, interested in any material contract with
either Company (other than such contracts as relate to any such person's
ownership of capital stock or other securities of Parent). Except as may be
disclosed in the Financial Statements or as set forth on SCHEDULE 2.24, neither
Company is a guarantor or indemnitor of any indebtedness of any other person,
firm or corporation.
2.25 FOREIGN CORRUPT PRACTICES ACT. Neither
Company has taken any action which would cause it to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended, or any rules and regulations
thereunder. To the best of each Company's knowledge, there is not now, and there
has never been, any employment by either Company of, or beneficial ownership in
either Company by, any governmental or political official in any country in the
world.
2.26 USE OF PROCEEDS. The Companies shall use the
funds from the purchase of the Debentures by the Investor as follows:
12
(a) $175,000 shall be used to repay a portion
of the Company's debt to American National Bank and Trust Company of Chicago
(the "Bank");
(b) $250,000 shall be used to repay a portion of the
Xxxxxxxx Group Loans;
(c) $225,789 to pay all amounts owed by the Company
to Trans Union Corp.; and
(d) the balance to fund working capital and for other
general corporate purposes.
In addition to the foregoing, the Company shall use
the proceeds from the Xxxxxxxx and Xxxxxxx Investments (as defined below), the
Trenkman Investment (as defined below) and the prior sale of shares of Common
Stock to Hathaway Partners Investment Limited Partnership to repay an additional
$275,000 of the principal and interest outstanding under the Xxxxxxxx Group
Loans. The Companies will use their best efforts to obtain financing or capital
from other sources to repay the balance of the Xxxxxxxx Group Loans within 30
days after the Closing Date. The Companies will not use the proceeds from any of
the foregoing transactions, including the sale of the Debenture hereunder, to
obtain the release of any personal guarantees provided by any Person with
respect to indebtedness of either Company.
2.27 YEAR 2000. All of the software code and
product developed by either Company, if any, and, to the best knowledge of each
Company after due inquiry, any other software code or product owned or used by
either Company, (i) will not abnormally end or provide invalid or incorrect
results as a result of date data, specifically including date data which
represents or references different centuries or more than one century, and (ii)
have been designed to ensure Year 2000 compatibility, including, but not limited
to, date data century recognition, calculations which accommodate same century
and multi-century formulas and date values and date data interface values that
reflect the century.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR TO THE
COMPANIES. The Investor hereby represents and warrants to the Companies as
follows:
3.1 AUTHORIZATION. When executed and delivered
by the Investor, and assuming due execution and delivery by the Companies, this
Agreement will constitute a valid obligation of the Investor, enforceable in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and rules of law
concerning equitable remedies.
4. SECURITIES LAWS.
4.1 EXEMPTIONS FROM REGISTRATION REQUIREMENTS.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN
REGISTERED FOR SALE UNDER THE SECURITIES ACT, THE GEORGIA ACT, OR THE SECURITIES
ACTS AND LAWS OF ANY OTHER JURISDICTION, AND SUCH SECURITIES WILL BE OFFERED AND
ISSUED IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF ALL
SUCH APPLICABLE ACTS AND
13
LAWS, INCLUDING WITHOUT LIMITATION THE EXEMPTIONS CONTAINED IN SECTION 4(2) OF
THE SECURITIES ACT AND SECTION 10-5-9(13) OF O.C.G.A.
4.2 SECURITIES LAWS REPRESENTATIONS AND
COVENANTS OF THE INVESTOR.
(a) This Agreement is made with the
Investor in reliance upon the Investor's representation to the Companies', which
by the Investor's execution of this Agreement the Investor hereby confirms, that
the Debenture and the Conversion Shares to be received by the Investor will be
acquired for such Investor's own account, not as a nominee or agent, and not
with a view to the direct or indirect sale or distribution of any part thereof
in violation of applicable securities laws, and that the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same.
(b) The Investor understands and
acknowledges that the offering of the Debenture and the Conversion Shares
pursuant to this Agreement will not be registered under the Securities Act or
any other applicable securities act or law or any other jurisdiction on the
grounds that the offering and sale of securities contemplated by this Agreement
are exempt from registration pursuant to Section 4(2) of the Securities Act and
Section 10-5-9(13) of the O.C.G.A. and under such other applicable securities
acts or laws, and that the Company's reliance upon such exemptions is predicated
upon such Investor's representations set forth in this Agreement.
(c) The Investor acknowledges that
the Debenture and the Conversion Shares being acquired by Investor must be held
indefinitely unless such securities are subsequently registered under the
Securities Act or an exemption from such registration is available with respect
to such shares. The Investor is aware of the provisions of Rule 144 promulgated
under the Securities Act which permits limited resales of securities purchased
in a private placement subject to the satisfaction of certain conditions, and
the Investor is aware that the conditions for resale set forth in Rule 144 have
not been satisfied and that, except as set forth herein or in the Registration
Rights Agreement, Parent has no plan to satisfy these conditions in the
foreseeable future. In no event will the Investor dispose of any of the
Debenture or the Conversion Shares other than pursuant to a registration
statement under the Securities Act or an exemption from such registration.
(d) The Investor represents that:
(i) the Investor is an "Accredited Investor" as that term is defined in Rule 501
of Regulation D promulgated by the Securities Exchange Commission under the
Securities Act and has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the Investor's
prospective investment in the Debenture and Conversion Shares; (ii) the Investor
has received all the information requested by it from the Companies and
considered necessary or appropriate for deciding whether to purchase the
Debenture; and (iii) the Investor has the ability to bear the economic risks of
such Investor's prospective investment.
4.3 LEGENDS. All certificates for the Debenture
and Conversion Shares shall bear the following legends:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE (THE "SECURITIES") HAVE
BEEN ISSUED AND SOLD IN RELIANCE
14
UPON EXEMPTIONS FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 (THE
"1933 ACT"), AND APPROPRIATE EXEMPTIONS
FROM REGISTRATION UNDER THE SECURITIES
LAWS OF OTHER APPLICABLE JURISDICTIONS.
THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD OR TRANSFERRED OTHER THAN
PURSUANT TO AN EFFECTIVE REGISTRATION
OR AN EXEMPTION FROM REGISTRATION. THE
ISSUER SHALL BE ENTITLED TO REQUIRE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY
TO IT WITH RESPECT TO COMPLIANCE WITH
THE 1933 ACT."
4.4 BLUE SKY COMPLIANCE. Parent shall register
or qualify the Debenture for offer and sale to the Investor under, or ensure the
availability of exemptions from the registration or qualification requirements
of, all applicable state securities or Blue Sky laws.
5. CONDITIONS OF INVESTORS' OBLIGATIONS AT THE CLOSING.
The obligations of the Investor to purchase the Debenture at Closing are subject
to the fulfillment of each of the following conditions, any of which may be
waived in writing by the Investor;
5.1 REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Companies contained herein shall be true
and correct on and as of the Closing with the same effect as if made on and as
of the Closing.
5.2 PERFORMANCE. Each Company, on or before
Closing, shall have performed or fulfilled all agreements, obligations and
conditions contained herein required to be performed or fulfilled by such
Company before the Closing.
5.3 LEGAL COMPLIANCE. As of the closing date,
the sale and issuance of the Debenture, and the proposed issuance of the
Conversion Shares shall be legally permitted by all laws and regulations to
which the Investor and the Companies are subject.
5.4 BOARD OF DIRECTORS. As of the Closing,
the bylaws of Parent and Sub shall provide for a Board of seven (7) members. The
Board of Directors of each Company shall elect Xxxxxx X. Xxxxxxx, Xx. and
Xxxxxxx X. Xxxxxxxxx as directors of each Company immediately after the Closing
such that the Board shall consist of Xxxxxx X. XxXxxxx, Xxxxxx X. Xxxxxxx III,
X. Xxxx XxXxxxx, Xxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxx, Xx.
and Xxxxxxx X. Xxxxxxxxx.
5.5 PROCEEDINGS SATISFACTORY. At or before
Closing, all corporate and legal proceedings in connection with the transactions
contemplated at the Closing and all documents and papers relating to such
transactions shall be reasonably satisfactory in form and substance to the
Investor. The Investor shall have received certified copies of all requisite
corporate actions taken by the Companies to authorize the execution and delivery
of this Agreement, the Debenture Certificate and the Related Agreements, their
respective performance
15
thereunder (including required amendments to the bylaws), and the consummation
of the transactions contemplated thereby.
5.6 STOCKHOLDERS AGREEMENT. At or prior to
the Closing, Parent, Xxxxxx X. XxXxxxx, Xxxxxx X. Xxxxxxx III, WCI, Inc., and
the Investor shall have entered into the Stockholders Agreement in the form
attached hereto as EXHIBIT 5.6 (the "Stockholders Agreement").
5.7 REGISTRATION RIGHTS AGREEMENT. At or prior
to the Closing, Parent and the Investor shall have entered into the Registration
Rights Agreement in the form attached as EXHIBIT 5.7 hereto (the "Registration
Rights Agreement").
5.8 REQUIRED CONSENTS. All consents, approvals
and other actions of, and notices and filings with, all Persons as may be
necessary or required with respect to the execution and delivery by the
Companies of this Agreement, the Debenture Certificate, and the Related
Agreements and the transactions contemplated thereby, shall have been obtained
or made.
5.9 DUE DILIGENCE. The Investor shall be
reasonably satisfied in all respects with the results of its business, legal and
accounting due diligence review of the Companies.
5.10 RESERVATION OF CONVERSION SHARES. At or
before Closing, the Conversion Shares issuable upon conversion of the Debenture
shall have been duly authorized and reserved for issuance upon such conversion.
5.11 LEGAL OPINION. At or before Closing, the
Investor shall have received an opinion from Xxxx & Xxxxxxx substantially in the
form of EXHIBIT 5.11.
5.12 EXTENSION OF MATURITY OF BANK DEBT. The
Bank shall have extended, or shall have agreed in writing to extend, to no
earlier than December 15, 2000 the date on which the principal balance is due to
be paid by the Company pursuant to the Installment Note (Secured) dated June 30,
1999, between Sub, as borrower, and the Bank as lender. The only condition to
the Bank's agreement to extend the maturity date of the Installment Note shall
be the consummation of the purchase and sale of the Debenture hereunder and the
Company's use of $175,000 of the proceeds therefrom to repay $175,000 of the
principal balance outstanding under the Installment Note.
5.13 ADDITIONAL INVESTMENTS. Prior to or
simultaneous with the Closing, Parent shall sell to Xxxxxxx Xxxxxxxxx, Xxxxxxx
X. Xxxxxxxx and Xxxxxx X. Xxxxxxx III (or affiliates that they control) the
number of shares of Common Stock set forth opposite its or his respective name
below at a purchase price per share of $.4315 payable by wire transfer or
certified check in immediately available funds:
16
Name Shares Total Price
---- ------ -----------
Xxxxxxx Xxxxxxxxx 231,765 shares $100,000
Xxxxxxx X. Xxxxxxxx 144,853 shares 62,500
Xxxxxx X. Xxxxxxx III 144,853 shares 62,500
------
Total 521,471 shares $225,000
The Company shall have received payment in full for such shares prior to or
simultaneous with the Closing. The purchase of such shares by Xx. Xxxxxxxx and
Xx. Xxxxxxx is referred to as the "Xxxxxxxx and Xxxxxxx Investments" and the
purchase of shares by Xxxxxxx Xxxxxxxxx is referred to as "Trenkmann
Investment."
6. CONDITIONS OF THE COMPANIES' OBLIGATIONS AT THE
CLOSING. The obligations of the Companies under this Agreement are subject to
the representations and warranties of the Investors contained in Sections 3 and
4 having been satisfied and being true and correct on and as of the Closing with
the same effect as though said representations and warranties had been made on
and as of such Closing. This condition may be waived in writing by the Companies
at any time.
7. COVENANTS OF THE COMPANIES. Each Company hereby
covenants and agrees as follows:
7.1 ELECTION OF DIRECTORS. Immediately
following the Closing, the Board of Directors of each Company shall take such
action as may be necessary to increase the number of directors to seven and to
elect Xxxxxx X. Xxxxxxx, Xx. and Xxxxxxx X. Xxxxxxxxx as directors of each
Company. Each year thereafter during the Applicable Period in connection with
the Annual Meeting of Stockholders or any other meeting of stockholders of each
Company at which directors are nominated or elected, the Investor shall be
entitled to designate two individuals (the "Investor Nominees") for nomination
for election as directors. The Board of Directors of each Company and each
Company agrees to nominate the Investor Nominees for election as directors and
to recommend that the stockholders vote in favor of their election. During the
Applicable Period, the size of the Board of Directors of either Company shall
not be expanded without the approval of the Investor Nominees then serving on
the respective Board of Directors. Notwithstanding the foregoing, in the event
that during the Applicable Period the number of directors of either Company is
increased, the number of Investor Nominees that the Investor is entitled to
designate shall be increased such that the number of Investor Nominees shall not
be less than 20% of the total number of directors on such Board. The Bylaws of
each Company shall be amended as soon as practicable after the date hereof to
provide for the nominations as set forth in this Section 7.1, which bylaw
provision may not thereafter be amended or changed during the Applicable Period
without the consent of the Investor Nominees then serving as directors.
7.2 USE OF PROCEEDS. The Companies shall use
the proceeds received upon the sale of the Debenture to pay transaction fees and
expenses related to the transactions contemplated by this Agreement, and for the
purposes specified in Section 2.26.
7.3 ACCESS TO RECORDS. At all times during the
Applicable Period, the Companies shall afford to the Investor and its authorized
employees, counsel, accountants and other representatives, upon reasonable
notice and during ordinary business hours, (a) free and
17
full access, at all reasonable times and for any reasonable purpose, to all
books, records and properties of the Companies, and (b) the opportunity to
interview any directors, officers, and employees of the Companies regarding the
affairs of either Company.
7.4 BUDGET. At least 30 days before the
beginning of each fiscal year of Parent that begins during the Applicable
Period, Parent shall deliver to the Investor a budget for such fiscal year,
including consolidated and consolidating projected balance sheets and statements
of income and cash flows of the Companies for each quarter of such fiscal year
(the "BUDGET") and a copy of each Company's annual business plan. Parent shall
deliver, in a timely fashion, to the Investor any updated or revised budget or
business plan presenting the information required hereunder.
7.5 FINANCIAL STATEMENTS. During the Applicable
Period, Parent shall deliver to the Investor the following:
(a) within 45 days after the end of each
of the first three quarters of each fiscal year (i) consolidated and
consolidating balance sheets of the Companies at the end of such quarter, (ii)
consolidated and consolidating statements of income and cash flows for such
quarter and for the period from the beginning of the current fiscal year to the
end of such quarter, together with comparisons to such statements for the
corresponding periods in the prior year and to the current Budget, and (iii) a
management discussion of the results for such quarter compared with the previous
quarter and the projections in the Budget for such quarter; and
(b) within 90 days after the end of each
fiscal year of Parent, (i) audited consolidated and consolidating balance sheets
of the Companies at the end of such fiscal year, together with comparisons to
such balance sheets of the Companies at the end of the prior fiscal year, (ii)
audited consolidated and consolidating statements of income and cash flows of
the Companies for such fiscal year, together with comparisons to such statements
for the prior fiscal year, and (iii) an audit report of Parent's independent
accounting firm on such consolidated balance sheets and statements.
All financial statements to be delivered under this Section
shall be in accordance with the books and records of the Companies and shall
have been prepared in accordance with GAAP applied on a consistent basis.
7.6 PROCEEDINGS. Promptly after obtaining
knowledge thereof, the Companies shall notify the Investor of (i) the
commencement or threat of any material action, suit, claim, investigation or
other proceeding by or before any governmental authority or arbitrator against
either Company, (ii) any survey that contains material adverse findings with
respect to any Company property or assets, (iii) any material judgment, decree,
injunction, or order of any governmental authority or arbitrator entered
against, or any settlement agreement entered into by, either Company, (iv) any
default by either Company under any material agreement and (v) any other event
that may result in a Material Adverse Effect.
7.7 CONDUCT OF BUSINESS. Each Company shall
take all actions required to assure that it (i) remains duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) maintains all requisite governmental
18
authority, licenses, and permits to conduct its business, and (iii) complies in
all material respects with all of its contractual obligations and applicable
laws and regulations.
7.8 PROPRIETARY INFORMATION AND CONFIDENTIALITY
AGREEMENT. Each Company shall cause each employee or consultant of such Company
to enter into a Proprietary Information and Confidentiality Agreement as a
condition to employment by or engagement with such Company.
7.9 INSURANCE. Each Company shall maintain
insurance coverage of a type and amount customary for corporations of similar
size engaged in similar lines of business. The Board of Directors of Parent
shall use its reasonable best efforts to obtain directors' and officers'
insurance, in an amount reasonably acceptable to the Investor Nominees.
7.10 USE OF XXXXXXX HEALTHCARE, INC. NAME.
Each Company acknowledges that the Investor has no responsibility for managing
the Companies and agrees that any use or reference to the Investor in any
publicly available or otherwise widely disseminated document or communication
must be approved, in writing, in advance by the Investor.
7.11 SUBSIDIARIES. Each Subsidiary of either
Company, whether now existing or hereafter formed or acquired, is (and shall be)
wholly-owned by the Company. Each Subsidiary shall be bound by and comply with
all covenants contained herein and in the Related Agreements.
7.12 OPTIONS. Parent shall only grant options or
warrants to acquire capital stock of the Company based on the recommendations of
management of the Company and with the approval of the Board of Directors and
the compensation committee, including approval of the Investor Nominees then
serving as directors. All such options or warrants shall be granted pursuant
customary stock option or warrant agreements, including vesting and other
typical provisions.
7.13 INDEMNIFICATION OF DIRECTORS. Each Company
shall take all actions (including, without limitation, any amendment of the
articles or certificate of incorporation or the bylaws) required to assure that
the articles or certificate of incorporation and the bylaws of each Company
provide at all times for exculpation from liability and indemnification of the
directors of the Company to the full extent permitted by law.
7.14 SECURITIES ACT REGISTRATION. As soon as
practicable but in no event later than December 31, 1999, Parent shall file with
the Securities and Exchange Commission (the "SEC") a registration statement on
Form 10 or Form 10-SB (or other appropriate form) to register the Common Stock
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Thereafter, Parent shall timely file with the SEC all reports required to be
filed under the Exchange Act, including without limitations Forms 10-K and 10-Q
or Forms 10-KSB and 10-QSB, in order to maintain such registration under the
Exchange Act.
7.15 FUTURE OPTION GRANTS. Parent agrees that
it will not issue any options, warrants or other rights to acquire Common Stock
(including securities convertible into shares of Common Stock) after the Closing
Date unless such options, warrants or other rights have an exercise price per
share of Common Stock of no less than the market value per share of
19
the Common Stock at the time of grant or $1.00 per share, whichever is greater.
Notwithstanding the foregoing, Parent shall be entitled to grant to (a) Xxxxxxx
X'Xxxxx options to purchase 100,000 shares of Common Stock at an exercise price
of $.75 per share, (b) Xxxxxxx Xxxxx options to purchase 100,000 shares of
Common Stock at an exercise price of $.65 per share, (c) Xxxxxxxx Surety IBC
warrants to purchase Common Stock at an exercise price of $.75 per share in
accordance with the terms of the existing agreement between Parent and Xxxxxxxx
Securities IBC and (d) Xxxxxxxxx Securities, Inc. warrants to purchase 18,750
shares of Common Stock at an exercise price of $.60 per share pursuant to the
existing agreement between Parent and Xxxxxxxxx Securities, Inc. Additionally,
nothing in this Agreement shall prohibit Parent from extending the exercise
period of the following options and warrants; provided that such extension is
for no more than three years and is approved by the Board of Directors of Parent
after the election of the Investor Nominees to such Board: (i) options to
purchase 321,931 shares of Common Stock at an exercise price of $.3728
previously granted to Xxxxxx XxXxxxx; (ii) options to purchase 321,931 shares of
Common Stock at an exercise price of $.3728 previously granted to A. Xxxx
XxXxxxx; (iii) options to purchase 40,242 shares of Common Stock at an exercise
price of $.6212 previously granted to Xxxxx X. XxXxxxx; (iv) warrants to
purchase 1,207,240 shares of Common Stock at an exercise price of $.7455
previously granted to Xxxxxx XxXxxxx; (v) warrants to purchase 1,207,240 shares
of Common Stock at an exercise price of $.7455 previously granted to WCI, Inc.;
and (vi) warrants to purchase 603,620 shares of Common Stock at an exercise
price of $.7455 previously granted to A. Xxxx XxXxxxx.
7.16 RELATED PARTY TRANSACTIONS. From and after
the date hereof, all compensation paid by the Company or its Subsidiaries to any
director of the Company (other than compensation paid to directors who are full
time employees of the Company) must be approved in advance by a majority of the
disinterested directors of Parent then serving as directors. 7.17 CONSULTANTS.
The Company agrees not to renew, amend or replace any of the existing contracts
with its consultants and financial advisors.
8. MISCELLANEOUS.
8.1 SURVIVAL OF WARRANTIES. The warranties and
representations of the parties contained in or made pursuant to this Agreement
shall survive any investigation made by any Investor and shall survive the
execution and delivery of this Agreement and the Closing until the expiration of
the applicable statute of limitations.
8.2 NOTICES. All notices, claims, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered or if sent by
nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to the Companies:
Econometrics, Inc.
One Illinois Center
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Chairman and Chief Executive Officer
20
With copy to:
Xxxx & Xxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxx
If to Investor:
Xxxxxxx Healthcare, Inc.
000 Xxxxxxxxxx Xxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Xx.,
Chairman of the Board, President and
Chief Executive Officer
With copy to:
Xxxxxx, Xxxxxxx & Xxxxxx, L.L.P.
1600 Atlanta Financial Center
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
Telephone (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the fifth business day following that on which the piece
of mail containing such communication is posted.
8.3 GOVERNING LAW. This Agreement is made
and entered into in the State of Illinois and the internal laws of the State of
Illinois (without giving effect to the principles of conflicts of laws or choice
of law) shall govern the validity and interpretation hereof and the performance
by the parties hereto of their respective duties and obligations hereunder.
8.4 COUNTERPARTS. This Agreement may be
executed in multiple counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.
8.5 CAPTIONS AND SECTION HEADINGS. Section
titles or captions contained in this Agreement are inserted as a matter of
convenience and for reference purposes
21
only, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
8.6 SINGULAR AND PLURAL, ETC. Whenever the
singular number is used herein and where required by the context, the same shall
include the plural, and the neuter gender shall include the masculine and
feminine genders.
8.7 AMENDMENTS AND WAIVERS. This Agreement
may be amended only by a written instrument signed by the Company and by the
Investor. No failure to exercise and no delay in exercising, on the part of any
party, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law. The failure of
any party to insist upon a strict performance of any of the terms or provisions
of this Agreement, or to exercise any option, right or remedy herein contained,
shall not be construed as a waiver or as a relinquishment for the future of such
term, provision, option, right or remedy, but the same shall continue and remain
in full force and effect. No waiver by any party of any term or provision of
this Agreement shall be deemed to have been made unless expressed in writing and
signed by such party.
8.8 SUCCESSORS AND ASSIGNS. All rights,
covenants and agreements of the parties contained in this Agreement shall,
except as otherwise provided herein, be binding upon and inure to the benefit of
their respective successors and assigns.
8.9 EXPENSES. The Companies and the Investor
will each bear their respective legal and other fees and expenses in connection
with the transactions contemplated in this Agreement.
8.10 FURTHER ASSURANCES. Each party hereto
agrees to do all acts and to make, execute and deliver such written instruments
as shall from time to time be reasonably required to carry out the terms and
provisions of this Agreement.
8.11 ENTIRE AGREEMENT. This Agreement, the
Exhibits and Schedules hereto, the Related Agreements and the other documents
delivered pursuant hereto and thereto constitute the full and entire
understanding and agreement between the parties with respect to the subjects
hereof, and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreement except as specifically set
forth herein or therein.
8.12 SEVERABILITY. In case any provision of
the Agreement shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
(signatures on next page)
22
IN WITNESS WHEREOF, the parties hereto have executed this 8%
Convertible Debenture Purchase Agreement as of the day and year first above
written. PARENT:
ECONOMETRICS, INC.,
a Colorado corporation
By: /s/ Xxxxxx X. XxXxxxx
Name: Xxxxxx X. XxXxxxx
Title: Chairman/CEO
SUB:
ECONOMETRICS, INC.,
an Illinois corporation
By: /s/ Xxxxxx X. XxXxxxx
Name: Xxxxxx X. XxXxxxx
Title: Chairman/CEO
INVESTOR:
XXXXXXX HEALTHCARE, INC.
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
Name: Xxxxxx X. Xxxxxxx, Xx.
Title: Chairman, President and Chief Executive Officer
23
ECONOMETRICS, INC.
8% CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
DATED AS OF
SEPTEMBER 30, 1999
24
APPENDIX A
DEFINED TERMS
"APPLICABLE PERIOD" shall mean the period beginning on the date hereof
and ending at such time as both (i) all principal and interest under the
Debenture has been repaid in full or converted into Conversion Shares and (ii)
the Investor, together with its "affiliates" (as defined in Section ___ of the
Securities Act) holds, directly or indirectly, fewer than 15% of the Conversion
Shares that the Investor acquired or could have acquired upon conversion in full
of the Debenture.
"EQUITY SECURITIES" shall mean (i) all shares of capital stock of the
Company, (ii) all options, warrants, or other rights to purchase or otherwise
acquire from the Company shares of its capital stock or securities convertible
or exchangeable into, or exerciseable for, capital stock, and (iii) all
securities of the Company convertible into or exchangeable or exercisable for
shares of capital stock of the Company.
"PERSON" shall be construed broadly and shall include an individual, a
partnership, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization or a
governmental entity (or any department, agency or political subdivision
thereof).
"SECURITIES" means "securities" as defined in Section 2(1) of the
Securities Act.
"SUBSIDIARIES" means, with respect to any Person, any other Person
whose shares of stock or other Securities having a majority of the general
voting power in electing the board of directors or equivalent governing body of
such other Person are, at the time as of which any determination is made, owned
by such Person either directly or indirectly through one or more other entities
constituting Subsidiaries.
The following terms shall have the meanings ascribed to such terms in
the Section of the Agreement reference below:
TERM SECTION
"Agreement" Preamble
"Audited Balance Sheets" 2.7
"Audited Financial Statements" 2.7(a)
"Bank" 2.26(a)
"Budget" 7.4
"Closing" 1.2
"Common Stock" 2.2(b)
"Company" Preamble
"Conversion Shares" 2.5
"Debenture" Recitals
"Debenture Certificate" Recitals
"ERISA" 2.18
"Exchange Act" 7.14
"Financial Statements" 2.7(a)
"GAAP" 2.7(a)
"Georgia Act" 2.15
"Xxxxxxxx Group" 2.7(c)
"Xxxxxxxx Group Loans" 2.7(c)
"Intellectual Property Rights" 2.11
"Interim Balance Sheet" 2.7(a)
"Interim Financial Statements" 2.7(a)
"Investor" Preamble
"Investor Nominees" 7.1
"Licensed Rights" 2.11(d)
"Material Adverse Effect" 2.1(c)
"Material Documents 2.13(b)
"Plans" 2.18
"Purchase Price" 1.1
"Registration Rights Agreement" 5.7
"Related Agreements" 2.1(b)
"SEC" 7.14
"Securities Act" 2.15
"Stockholders Agreement" 5.6
