EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
Dated as of March 1, 2001 among
UNITED SHIPPING & TECHNOLOGY, INC.,
AND THE PURCHASERS NAMED HEREIN
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................ 1
Section 1.01 Definitions.............................................. 1
ARTICLE II PURCHASE AND SALE OF SECURITIES............................ 4
Section 2.01 Commitment to Purchase................................... 4
Section 2.02 The Closings............................................. 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE ISSUER............... 5
Section 3.01 Organization, Corporate Power and Licenses............... 5
Section 3.02 Capital Stock and Related Matters........................ 5
Section 3.03 Subsidiaries; Investments................................ 6
Section 3.04 Authorization; No Breach................................. 6
Section 3.05 Securities Law Compliance................................ 7
Section 3.06 Commission Documents..................................... 7
Section 3.07 Financial Statements..................................... 7
Section 3.08 Absence of Undisclosed Liabilities....................... 8
Section 3.09 No Material Adverse Change............................... 8
Section 3.10 Absence of Certain Developments.......................... 8
Section 3.11 Assets................................................... 9
Section 3.12 Real Property............................................ 9
Section 3.13 Tax Matters.............................................. 10
Section 3.14 Contracts and Commitments................................ 11
Section 3.15 Intellectual Property Rights............................. 12
Section 3.16 Litigation, etc.......................................... 13
Section 3.17 Brokerage................................................ 13
Section 3.18 Governmental Consent, etc................................ 14
Section 3.19 Insurance................................................ 14
Section 3.20 Employees................................................ 14
Section 3.21 ERISA.................................................... 14
Section 3.22 Compliance with Laws..................................... 16
Section 3.23 Environmental and Safety Matters......................... 16
Section 3.24 Affiliated Transactions.................................. 17
Section 3.25 Disclosure............................................... 17
Section 3.26 Customers and Suppliers.................................. 18
Section 3.27 Reports with the Securities and Exchange Commission...... 18
Section 3.28 Regulatory Matters....................................... 18
Section 3.29 Shareholder Vote Required................................ 19
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TABLE OF CONTENTS
(continued)
Page
Section 3.30 Knowledge................................................ 19
ARTICLE IV AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS................................................. 19
ARTICLE V COVENANTS OF THE ISSUER.................................... 20
Section 5.01 Access to Information.................................... 20
Section 5.02 Certificate of Designation............................... 20
Section 5.03 Restrictions Pending the Closings........................ 20
Section 5.04 Reservation of Shares.................................... 21
Section 5.05 Tax Consistency.......................................... 21
Section 5.06 Use of Proceeds.......................................... 21
ARTICLE VI COVENANTS OF THE PURCHASERS................................ 21
Section 6.01 Confidentiality.......................................... 21
ARTICLE VII COVENANTS OF THE ISSUER AND THE PURCHASERS................. 21
Section 7.01 Certain Filings.......................................... 21
Section 7.02 Public Announcements..................................... 22
ARTICLE VIII CONDITIONS PRECEDENT TO THE CLOSINGS....................... 22
Section 8.01 Conditions to Each Party's Obligations................... 22
Section 8.02 First Closing: Conditions to Each Purchaser's
Obligations.............................................. 22
Section 8.03 Second Closing: Conditions to Each Purchaser's
Obligations.............................................. 23
Section 8.04 Conditions to the Issuer's Obligations................... 23
ARTICLE IX MISCELLANEOUS.............................................. 24
Section 9.01 Notices.................................................. 24
Section 9.02 No Waivers; Amendments................................... 25
Section 9.03 Survival................................................. 25
Section 9.04 Indemnification.......................................... 25
Section 9.05 Procedures............................................... 26
Section 9.06 Termination.............................................. 26
Section 9.07 Successors and Assigns................................... 26
Section 9.08 GOVERNING LAW; WAIVER OF JURY TRIAL...................... 27
Section 9.09 JURISDICTION............................................. 27
Section 9.10 Counterparts............................................. 27
Section 9.11 Entire Agreement......................................... 27
Section 9.12 Remedies................................................. 27
Section 9.13 Severability............................................. 28
Section 9.14 Descriptive Headings; Interpretation..................... 28
Section 9.15 No Strict Construction................................... 28
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SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of March 1, 2001 among United Shipping & Technology,
Inc., a Utah corporation (the "Issuer"), and the purchasers listed in Schedule A
(together, the "Purchasers" and each a "Purchaser").
WHEREAS, the Issuer desires to sell the Securities (as defined below) to
the Purchasers, and the Purchasers desire to purchase the Securities from the
Issuer, upon the terms and subject to the conditions hereinafter set forth;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. The following terms, as used herein, have the
following meanings:
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person, where
"control" means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through ownership of voting
securities, contract or otherwise; provided that none of the Purchasers shall be
considered an Affiliate of the Issuer or any of its Subsidiaries.
"Agreement" means this Agreement, as it may be amended from time to time.
"Applicable Law" means any applicable constitution, treaty, statute, rule,
regulation, ordinance, order, directive, code, interpretation, judgment, decree,
injunction, writ, determination, award, permit, license, authorization,
directive, requirement, ruling or decision of, agreement with, or by any
Governmental Authority.
"Certificate of Designation" means the Certificate of Designation for the
Series D Shares, in the form attached as Exhibit A hereto with such changes and
modifications as may be agreed to by the Issuer and the Purchasers.
"Benefit Plan" has the meaning set forth in Section 3.21.
"Bridge Note Warrants" means the stock purchase warrants to acquire Series
D Shares originally issued by the Issuer to THLi as of January 4, 2001.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Closings" and "Closing" shall have the meaning set forth in Section 2.03.
"Closing Date" shall have the meaning set forth in Section 2.03.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the U.S. Securities and Exchange Commission or any
governmental body or agency succeeding to the functions thereof.
"Common Stock" means the common stock, par value $.004 per share, of the
Issuer.
"Common Warrants" means the stock purchase warrants to purchase shares of
the Issuer's Common Stock originally issued by the Issuer to TH ▇▇▇ and TH ▇▇▇
Parallel as of May 31, 2000.
"Convertible Bridge Notes" means the Convertible Bridge Notes in the
aggregate amount of $5,000,000, dated January 4, 2001 and January 31, 2001,
issued by the Issuer to THLi.
"Common Stock Equivalents" has the meaning set forth in Section 3.02.
"Credit Agreement" means the credit agreement between UST Delivery Systems,
Inc., a Subsidiary of the Issuer, and General Electric Capital Corporation,
dated September 24, 1999, and all documents executed in connection therewith.
"ERISA" has the meaning set forth in Section 3.21.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"First Closing" shall have the meaning set forth in Section 2.03.
"Governmental Authority" means any governmental body, agency or official of
any country or political subdivision of any country, including, but not limited
to, federal, state, county and local governments, administrative agencies and
courts.
"Indebtedness" means at a particular time, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade payables
and other current liabilities incurred in the ordinary course of business which
are not more than six months past due or being contested in good faith), (iv)
any commitment by which a Person assures a creditor against loss (including,
without limitation, contingent reimbursement obligations with respect to letters
of credit), (v) any indebtedness guaranteed in any manner by a Person
(including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse), (vi) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) any indebtedness secured by a Lien on a Person's
assets and (viii) any unsatisfied obligation for "withdrawal liability" to a
"multiemployer plan" as such terms are defined under ERISA.
"Intellectual Property Rights" means all (i) patents, patent applications
and patent disclosures, (ii) trademarks, service marks, trade dress, trade
names, logos, corporate names, websites and internet domain names and
registrations and applications for registration thereof together with all of the
goodwill associated therewith, (iii) copyrights and copyrightable works and
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer software,
data, data bases and documentation thereof, (vi) trade secrets and other
confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, financial and marketing plans and
customer and supplier lists and information), (vii) other intellectual property
rights and (viii) copies and tangible embodiments thereof (in whatever form or
medium).
"Investment" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests, limited liability company interests and joint venture interests) of
any other Person and (ii) any capital contribution by such Person to any other
Person.
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"Issuable Securities" has the meaning set forth in Section 3.05.
"Issuer SEC Reports" has the meaning given to it in Section 3.25.
"Latest Balance Sheet" means the audited balance sheet of the Issuer for
the most recent fiscal year ended July 1, 2000.
"Leased Property" has the meaning set forth in Section 3.12.
"Licenses" means all licenses, permits, construction permits, certificates
of public convenience and necessity and other authorizations issued by any
federal, state, county or local Governmental Authorities to the Issuer and its
Subsidiaries and used or necessary in connection with the operation and conduct
of their business, and including any applications for any such licenses,
permits, construction permits and other authorizations applied for by the Issuer
and its Subsidiaries that are currently pending.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to
Lien any asset that it has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Market Price" of any security means the average of the closing prices of
such security's sales on all securities exchanges on which such security may at
the time be listed, or, if there has been no sales on any such exchange on any
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor organization,
in each such case averaged over a period of the two (2) consecutive trading days
immediately prior to the day as of which "Market Price" is being determined. If
at any time such security is not listed on any securities exchange or quoted in
the NASDAQ System or the over-the-counter market, the "Market Price" shall be
the fair value thereof determined jointly by the Corporation and the Required
Holders. If such parties are unable to reach agreement within a reasonable
period of time, such fair value shall be determined by an independent appraiser
experienced in valuing securities jointly selected by the Corporation and the
Required Holders. The determination of such appraiser shall be final and binding
upon the parties, and the Corporation shall pay the fees and expenses of such
appraiser.
"Material Adverse Effect" means any change or effect (or aggregation of
changes and effects) that is or could reasonably be expected to be materially
adverse to the business, assets, condition (financial or otherwise) or results
of operations of the Issuer and its Subsidiaries, taken as a whole.
"Owned Property" has the meaning set forth in Section 3.12.
"Person" means an individual or a corporation, partnership, limited
liability company, association, a joint stock company, trust, a joint venture,
an unincorporated organization, or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Real Property" has the meaning set forth in Section 3.12.
"Registration Rights Agreement" shall mean the Second Amended and Restated
Registration Rights Agreement to be dated as of the First Closing Date by and
among the Issuer and the Purchasers, substantially in the form attached hereto
as Exhibit D.
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"SEC Documents" means all reports, schedules, registration statements and
other documents (including all Exhibits and Schedules thereto) filed by the
Issuer with the Commission.
"Second Closing" shall have the meaning set forth in Section 2.03.
"Securities" means the Series D Shares.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Series B Shares" means the shares of Series B Convertible Preferred Stock,
par value $.004 per share, of the Issuer.
"Series C Shares" means the shares of Series C Convertible Preferred Stock,
par value $.004 per share, of the Issuer.
"Series D Shares" means the shares of Series D Convertible Preferred Stock,
par value $.004 per share, of the Issuer.
"Series C Warrants" means the stock purchase warrants to purchase Series C
Shares originally issued by the Issuer to THLi as of September 1, 2000 and
September 22, 2000.
"Subsidiary" means, with respect to any Person any other Person of which a
majority of the capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person.
"THLi" means, collectively, TH ▇▇▇ ▇▇▇▇▇▇ Internet Partners, L.P., TH
▇▇▇.▇▇▇▇▇▇ Internet Parallel Partners, L.P., THLi Coinvestment Partners LLC, and
Blue Star I, LLC.
"Transaction Agreements" means this Agreement, the Registration Rights
Agreement and the Certificate of Designation.
"Warrants" means the Series C Warrants and the Common Warrants and the
Bridge Note Warrants.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
Section 2.01 Commitment to Purchase. Upon the basis of the representations
and warranties herein contained of each Purchaser, but subject to the terms and
conditions hereinafter stated, the Issuer agrees to sell to each Purchaser, and
each Purchaser, upon the basis of the representations and warranties herein
contained of the Issuer, but subject to the terms and conditions hereinafter
stated, agrees to purchase from the Issuer at the Closings, the Series D Shares
in the amount and for the aggregate purchase price set forth opposite the name
of such Purchaser on Annex I hereto. The purchase price per Series D Share shall
be (a) $8.00 in the case of all Purchasers other than THLi and (b) in the case
of THLi, the "conversion price" as defined in the Convertible Bridge Notes. The
Series D Shares shall have the rights, terms and privileges set forth in the
Certificate of Designation, a copy of which is attached hereto as Exhibit A.
Section 2.02 The Closings.
(a) The first closing (the "First Closing") and the second closing
(the "Second Closing") (each a "Closing" and together, the "Closings") of
the purchase and sale of the Securities hereunder shall take place at the
offices of ___________, ______________, ___________. The First Closing
shall occur immediately following fulfillment of each of the conditions set
forth in Sections 8.01, 8.02
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and 8.04, or at such other time and place as the Issuer and the Purchasers
shall agree in their sole discretion. Subject to fulfillment of the
conditions set forth in Sections 8.03 and 8.04, the Second Closing shall
occur on a date specified in writing by the Issuer following the First
Closing and following the execution of this Agreement by additional
Investors who become parties to this Agreement following the First Closing.
The date and time of each Closing are referred to herein as the "First
Closing Date" and the "Second Closing Date" (each a "Closing Date" and
together the "Closing Dates").
(b) At the Closings, each Purchaser, other than THLi, shall deliver to
the Issuer, by wire transfer to an account designated by the Issuer not
later than three Business Days prior to each Closing Date, an amount, in
immediately available funds, equal to the aggregate purchase price of the
Securities being purchased by such Purchaser. At the First Closing, ThLi
shall deliver and surrender the Convertible Bridge Notes, which shall be
converted to Series D Preferred Stock in accordance with its terms.
(c) At each Closing, the Issuer shall deliver to each Purchaser,
against payment of the purchase price by such Purchaser to the Issuer (or
in the case of THLi, deliver the Convertible Bridge Notes) as set forth in
2.03(b) above, certificates evidencing the Series D Shares being purchased
by such Purchaser in definitive form and registered in such names as such
Purchaser shall request not later than two Business Days prior to the
Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
The Issuer represents and warrants to each Purchaser that:
Section 3.01 Organization, Corporate Power and Licenses. The Issuer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Utah and is qualified to do business in every jurisdiction in
which its ownership of property or conduct of business requires it to qualify,
except where the failure to be so qualified would not have a Material Adverse
Effect. The Issuer possesses all requisite corporate power and authority and all
material Licenses necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to carry
out the transactions contemplated by this Agreement. The copies of the Issuer's
and each Subsidiary's charter documents and bylaws which have been furnished to
the Purchasers' counsel reflect all amendments made thereto at any time prior to
the date of this Agreement and are correct and complete.
Section 3.02 Capital Stock and Related Matters.
(a) As of the First Closing (except as set forth below with respect to
the Series C Preferred as of the First Closing and the Second Closing, and
immediately thereafter, the authorized capital stock of the Issuer shall
consist of (a) 25,000,000 shares of preferred stock, of which (i) 4,500,000
shares have been designated as Series A Cumulative Convertible Preferred
Stock (none of which shall be issued and outstanding as of each Closing)
and (ii) 10,000,000 shares shall be designated as Series B Convertible
Preferred Stock (2,806,797 of which shall be issued and outstanding as of
each Closing) and (iii) 5,000,000 shares have been designated as Series C
Convertible Preferred Stock (2,000,000 of which shall be issued and
outstanding as of each Closing and the remainder of which shall be reserved
for issuance upon exercising the Series C Warrants), (iv) 3,000,000 shall
be designated as Series D Convertible Preferred Stock (none of which shall
be issued and outstanding prior to the First Closing and up to ________ of
which shall be issued and outstanding as of the Second Closing after giving
effect to the Closings (including Series D Shares reserved for conversion
of a Convertible Bridge Notes dated January 4, 2001 and pursuant to
exercise of the Bridge Warrant and (v) ________ shares have been designated
as Series E Convertible Preferred Stock (________ of which shall be issued
and outstanding as of each closing) and (b)
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75,000,000 shares of Common Stock, of which (i) 16,646,399 shares shall be
issued and outstanding as of each Closing, (ii) 10,000,000 shares shall be
reserved for issuance upon conversion of the Series B Shares, (iii)
5,000,000 shares shall be reserved for issuance upon conversion of the
Series C Shares, (iv) 12,099,847 shares shall be reserved for issuance upon
exercise of stock options, warrants (including the Common Warrants but
excluding the securities described in clause (v) below) and convertible
securities, (v) certain of the remaining shares are reserved for issuance
upon the exercise of warrants issued to Bayview Capital Partners L.P., the
Convertible Subordinated Promissory Note issued to CEX Holdings, Inc, and
the 9% Convertible Subordinated Promissory Note issued to J. Iver &
Company, (vi) the issuance of shares of Common Stock to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇ (or a trust solely for his benefit) in respect of a court-approved
settlement of his claim against Corporate Express Delivery Systems, Inc.
solely to meet any shortfall in the market value between the 600,000 shares
of Common Stock that have been issued for the benefit of ▇▇. ▇▇▇▇▇▇▇▇▇▇▇ in
respect of such settlement and the sum of $550,000, pursuant to the terms
of such settlement. As of each Closing, neither the Issuer nor any
Subsidiary shall have outstanding any stock or securities convertible or
exchangeable for any shares of its capital stock or containing any profit
participation features, nor shall it have outstanding any rights or options
to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock or any
stock appreciation rights or phantom stock plans ("Common Stock
Equivalents"), except for the Series B Shares, the Series C Shares, the
Series D Shares, the Series E Shares and the Warrants and except as set
forth on Schedule 3.02 (a). Schedule 3.02 (a) accurately sets forth the
following information with respect to all outstanding Common Stock
Equivalents: the holder, the number of shares covered, the exercise price
and the expiration date. As of each Closing, neither the Issuer nor any
Subsidiary shall be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock
or any warrants, options or other rights to acquire its capital stock,
except as set forth on Schedule 3.02 (a) and except pursuant to the
Certificate of Designation. As of each Closing, all of the outstanding
shares of the Issuer's capital stock shall be validly issued, fully paid
and nonassessable.
(b) Except as set forth on Schedule 3.02 (b) hereto, there are no
statutory or contractual stockholders' preemptive rights or rights of first
refusal with respect to the issuance of the Securities hereunder or the
issuance of the Common Stock upon conversion of the Securities. Except as
set forth on Schedule 3.02 (b) hereto, the Issuer has not violated any
applicable federal or state securities laws in connection with the offer,
sale or issuance of any of its capital stock. There are no agreements
between the Issuer and any of the Issuer's stockholders with respect to the
voting or transfer of the Issuer's capital stock.
Section 3.03 Subsidiaries; Investments. Schedule 3.03 correctly sets forth
the name of each Subsidiary of the Issuer, the jurisdiction of its incorporation
and the Persons owning the outstanding capital stock of such Subsidiary. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, possesses all requisite corporate
or other power and authority necessary to own its properties and to carry on its
businesses as now being conducted and as presently proposed to be conducted and
is qualified to do business in every jurisdiction in which its ownership of
property or the conduct of business requires it to qualify, except where the
failure to be so qualified would not have a Material Adverse Effect. Except as
set forth on Schedule 3.03, all of the outstanding shares of capital stock or
other equity interests of each Subsidiary are validly issued, fully paid and
nonassessable or not subject to a capital call or capital contribution
requirement, as applicable, and all such shares are owned by the Issuer or
another Subsidiary free and clear of any Lien and not subject to any option or
right to purchase any such shares. Except as set forth on the Schedule 3.03,
neither the Issuer nor any Subsidiary owns or holds the right to acquire any
shares of stock or any other security or interest in any other Person.
Section 3.04 Authorization; No Breach. The execution, delivery and
performance of the Transaction Agreements and all other agreements contemplated
hereby or thereby to which the Issuer or any of its Subsidiaries is a party, the
filing of the Certificate of Designation have been duly and validly authorized
by the Issuer. The Transaction Agreements and all other agreements contemplated
hereby to which the Issuer or
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any of its Subsidiaries is a party each constitutes a valid and binding
obligation of the Issuer or such Subsidiary, as applicable, enforceable in
accordance with its terms. The issuance of the Common Stock upon conversion of
the Series D Shares will not require any further corporate action (except for
action related to any anti-dilution adjustments) on the part of the Issuer
except as required pursuant to Section 5.07 and, except as set forth on Schedule
3.02 (b), will not be subject to any preemptive right, right of first refusal or
other similar right. The execution and delivery by the Issuer of this Agreement
and all other agreements contemplated hereby to which the Issuer is a party, the
offering, sale and issuance of the Securities hereunder, the issuance of Common
Stock upon conversion of the Series D Shares, the filing of the Certificate of
Designation, and the fulfillment of and compliance with the respective terms
hereof and thereof by the Issuer, do not and shall not (i) conflict with or
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default under, (iii) result in the creation of any Lien upon the Issuer's or any
Subsidiary's capital stock or assets pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency pursuant to, the articles of
incorporation or bylaws of the Issuer or any Subsidiary, or any law, statute,
rule or regulation, order, judgment or decree to which the Issuer or any
Subsidiary is subject, or any material agreement or instrument to which the
Issuer or any Subsidiary is subject, except for such matters that would not have
a Material Adverse Effect.
Section 3.05 Securities Law Compliance. Assuming the representations and
warranties of the Purchasers set forth in Article 4 hereof are true and correct
in all material respects, the offer and sale of the Series D Shares and the
shares of Common Stock issuable upon conversion of the Series C Shares (the
"Issuable Securities") pursuant to this Agreement will be exempt from the
registration requirements of the Securities Act. Neither the Issuer nor any
Person acting on its behalf has, in connection with the offering of the Issuable
Securities, engaged in (i) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 502(c) under the
Securities Act), (ii) any action involving a public offering within the meaning
of Section 4(2) of the Securities Act, or (iii) any action that would require
the registration under the Securities Act of the offering and sale of the
Issuable Securities pursuant to this Agreement. The Issuer has not made and will
not prior to each Closing make, directly or indirectly, any offer or sale of the
Issuable Securities or of securities of the same or similar class as the
Issuable Securities if, as a result, the offer and sale contemplated hereby
could fail to be entitled to exemption from the registration requirements of the
Securities Act. As used herein, the terms "offer" and "sale" have the meanings
specified in Section 2(3) of the Securities Act.
Section 3.06 Commission Documents. Upon request, the Issuer will make
available to the Purchasers true and complete copies of all SEC Documents filed
with the Commission prior to the date hereof and will furnish the Purchasers a
true and correct copy of each amendment thereto and any SEC Documents filed by
the Issuer with the Commission on or before each Closing Date. As of their
respective filing dates, the SEC Documents complied (or will comply) in all
material respects with the requirements of the Securities Act, Exchange Act and
the rules and regulations of the Commission thereunder applicable to such SEC
Documents, and as of their respective dates none of the SEC Documents contained
(or will contain) any untrue statement of a material fact or omitted (or will
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.
Section 3.07 Financial Statements. Each of the financial statements
(including, in each case, any notes and schedules thereto) contained in the
Issuer SEC Reports complied as to form in all material respects with the
applicable accounting requirements and rules and regulations of the Commission
and was prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto), and each fairly
presented the consolidated financial position, results of operations and cash
flows of the Issuer and its consolidated subsidiaries as at the respective dates
thereof and for the respective periods indicated therein in accordance with GAAP
(subject, in the case of unaudited statements, to normal and recurring year-end
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adjustments and the absence of footnotes none of which would, individually or in
the aggregate, reflect or be reasonably expected to reflect a Material Adverse
Effect).
Section 3.08 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 3.08 or as disclosed in the Issuer SEC Reports, the Issuer and its
Subsidiaries do not have any material obligation or liability of a nature
required to be reflected on a balance sheet prepared in accordance with GAAP
arising out of transactions entered into at or prior to each Closing, or any
action or inaction at or prior to each Closing, or any state of facts existing
or any occurrence at or prior to each Closing other than: (i) liabilities set
forth on the Latest Balance Sheet (including any liabilities expressly disclosed
in any notes thereto), (ii) liabilities and obligations which have arisen after
the date of the Latest Balance Sheet in the ordinary course of business (none of
which is a liability resulting from breach of contract, breach of warranty,
tort, infringement, claim or lawsuit) and (iii) other liabilities and
obligations expressly disclosed in the other Schedules to this Agreement.
Section 3.09 No Material Adverse Change. Since September 30, 2000, except
as disclosed in the Issuer SEC Reports, there has been no change in the
financial condition, operating results, assets, operations, employee relations
or customer or supplier relations of the Issuer and its Subsidiaries taken as a
whole that could reasonably be expected to have a Material Adverse Effect.
Section 3.10 Absence of Certain Developments. Except as expressly
contemplated by the Transaction Agreements or as set forth on Schedule 3.10, and
except as disclosed in the Issuer SEC Reports filed prior to the date of this
Agreement, since the date of the Latest Balance Sheet, neither the Issuer nor
any Subsidiary has:
(a) issued any notes, bonds or other debt securities or any capital
stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity
securities;
(b) borrowed any amount in excess of $250,000 or incurred or become
subject to any material liabilities, except current liabilities incurred in
the ordinary course of business and liabilities under contracts entered
into in the ordinary course of business;
(c) discharged or satisfied any material Lien or paid any material
obligation or liability, other than current liabilities paid in the
ordinary course of business;
(d) declared or made any payment or distribution of cash or other
property to its stockholders with respect to its capital stock or other
equity securities or purchased or redeemed any shares of its capital stock
or other equity securities (including, without limitation, any warrants,
options or other rights to acquire its capital stock or other equity
securities;
(e) mortgaged or pledged any of its properties or assets or subjected
them to any material Lien, except Liens for current property taxes not yet
due and payable;
(f) sold, assigned or transferred any of its tangible assets in excess
of $50,000 individually or $250,000 in the aggregate or any interest in any
Subsidiary, except in the ordinary course of business, or canceled any
material debts or claims;
(g) sold, assigned, transferred or abandoned any material patents or
patent applications, trademarks, service marks, trade names, corporate
names, copyrights or copyright registrations, trade secrets or other
Intellectual Property Rights, or disclosed any material proprietary
confidential information to any Person;
(h) suffered any material extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of business or
consistent with past practice;
8
(i) made any Investment in or taken steps to incorporate any
Subsidiary; or
(j) entered into any other material transaction, other than in the
ordinary course of business.
Section 3.11 Assets. Except as disclosed in the Issuer SEC Reports filed
prior to the date of this Agreement or as set forth on Schedule 3.11, the Issuer
and each Subsidiary have good and marketable title to, a valid leasehold
interest in, or has the right or use, the material assets (other than Real
Property, which is addressed in Section 3.10) used by them, or shown on the
Latest Balance Sheet or acquired thereafter, free and clear of all Liens, except
for (i) assets disposed of in the ordinary course of business since the date of
the Latest Balance Sheet, (ii) Liens disclosed on the Latest Balance Sheet,
(iii) Liens for Taxes not yet due and payable, and (iv) covenants, conditions
and restrictions of record and minor title defects none of which individually or
collectively could reasonably be expected to interfere with Issuer's business as
presently conducted or planned to be conducted ("Permitted Liens"). The Issuer
and each Subsidiary owns, or has a valid leasehold interest in, or has the right
to use, all material tangible assets necessary for the conduct of their
respective businesses as presently conducted and as presently proposed to be
conducted.
Section 3.12 Real Property.
(a) Schedule 3.12(a) sets forth the address and description of each
parcel of real property owned by the Issuer or any of its Subsidiaries (the
"Owned Property"). The Issuer or its applicable Subsidiary has good and
marketable fee simple title in and to each parcel of the Owned Property
with a fair market value in excess of $250,000, subject to no liens,
encroachments, encumbrances, claims, leases, rights of possession or other
defects in title (collectively, "Encumbrance" ), except (i) as disclosed on
the Latest Balance Sheet, (ii) Liens for Taxes not yet due and payable or
as disclosed in the Issuer SEC Reports, (iii) covenants, conditions and
restrictions of record and minor title defects none of which individually
or collectively could reasonably be expected to interfere with Issuer's
business as presently conducted or as planned to be conducted and (iv) for
Permitted Liens or as described on Schedule 3.12(a).
(b) Schedule 3.12(b) sets forth a list of all leases, subleases and
other occupancy agreements providing for annual payments in excess of
$50,000, including all amendments, extensions and other modifications
thereto (the "Leases") for real property (the "Leased Property"; and
collectively with the Owned Property, the "Real Property") to which the
Issuer or any of its Subsidiaries is a party. To the best of their
respective knowledge, the Issuer or its applicable Subsidiary has a good
and valid leasehold interest in and to all of the Leased Property, subject
to no Encumbrances except for Permitted Liens or as described on such
Schedule. Each Lease is in full force and effect and is enforceable in
accordance with its terms in all material respects. To the knowledge of the
Issuer, there exists no default or condition which with the giving of
notice, the passage of time or both could become a default under any Lease.
Except as described on the Schedule 3.12(b), no consent, waiver, approval
or authorization is required from the landlord under any Lease as a result
of the execution of this Agreement or the consummation of the transactions
contemplated hereby.
(c) The Real Property constitutes all of the real property owned,
leased, occupied or otherwise utilized in connection with the business of
the Issuer and its Subsidiaries which is material to the conduct of the
business of the Issuer and its Subsidiaries. To the knowledge of the
Issuer, other than the Issuer, its Subsidiaries and the landlords under the
Leases, there are no parties in possession or parties having any current or
future right to occupy any of the Real Property which are material to the
conduct of the business of the Issuer and its Subsidiaries. The Real
Property and all plants, buildings and improvements located thereon conform
in all material respects to all applicable building, zoning and other laws,
ordinances, rules and regulations. All permits, licenses and other
approvals necessary to the current occupancy and use of the Real Property
which are material to the
9
conduct of the business of the Issuer and its Subsidiaries have been
obtained, are in full force and effect and have not been violated in any
material respect. To the knowledge of the Issuer or any of its
Subsidiaries, there exists no violation of any covenant, condition,
restriction, easement, agreement or order affecting any portion of the Real
Property which is material to the conduct of the business of the Issuer and
its Subsidiaries. There is no pending or, to the knowledge of the Issuer,
any threatened condemnation proceeding affecting any portion of the Real
Property which is material to the conduct of the business of the Issuer and
its Subsidiaries. There are no outstanding options, rights of first offer
or rights of first refusal to purchase the Owned Property or any portion
thereof or interest therein.
Section 3.13 Tax Matters.
(a) Except as set forth on Schedule 3.13: the Issuer, each Subsidiary
and each Affiliated Group have filed all Tax Returns which they are
required to have filed under Applicable Law, except where the failure to do
so would not have a Material Adverse Effect; all such Tax Returns are
complete and correct in all material respects and have been prepared in
compliance with Applicable Law; the Issuer, each Subsidiary and each
Affiliated Group in all material respects have paid all Taxes due and owing
by them (whether or not such Taxes are required to be shown on a Tax
Return) in all material respects and have withheld and paid over to the
appropriate taxing authority all Taxes which they are required to withhold
from amounts paid or owing to any employee, stockholder, creditor or other
third party; neither the Issuer, any Subsidiary nor any Affiliated Group
have outstanding any waiver of any statute of limitations with respect to
any material Taxes or agreement to extend the time with respect to any
material Tax assessment or deficiency; to the extent required by GAAP, the
accrual for Taxes on the Latest Balance Sheet would be adequate to pay all
Tax liabilities of the Issuer and its Subsidiaries if their current tax
year were treated as ending on the date of the Latest Balance Sheet
(excluding any amount recorded which is attributable solely to timing
differences between book and Tax income); since the date of the Latest
Balance Sheet, neither the Issuer nor any of its Subsidiaries have incurred
any material liability for Taxes other than in the ordinary course of
business; the federal income Tax Returns of the Issuer and its Subsidiaries
have been audited and closed for all tax years through 1998; to the
knowledge of the Issuer or its Subsidiaries, no foreign, federal, state or
local tax audits or administrative or judicial proceedings are pending or
being conducted with respect to the Issuer, any Subsidiary or any
Affiliated Group; except with respect to such audits or proceedings, to the
knowledge of the Issuer or its Subsidiaries, no information related to Tax
matters has been requested by any foreign, federal, state or local taxing
authority and no written notice indicating an intent to open an audit or
other review has been received by the Issuer from any foreign, federal,
state or local taxing authority; and there are no material unresolved
questions or claims raised by any such taxing authority concerning the
Issuer's, any Subsidiary's or any Affiliated Group Tax liability.
(b) Except as set forth on Schedule 3.13, neither the Issuer nor any
of its Subsidiaries has made an election under (S) 341(f) of the Internal
Revenue Code of 1986, as amended. Neither the Issuer nor any Subsidiary is
liable for the Taxes of another Person that is not a Subsidiary in a
material amount under (a) Treas. Reg. (S) 1.1502-6 (or comparable
provisions of state, local or foreign law), (b) as a transferee or
successor, (c) by contract or indemnity or (d) otherwise by operation of
Applicable Law. Neither the Issuer nor any Subsidiary is a party to any tax
sharing agreement except as a member of an Affiliated Group. Neither the
Issuer nor any Subsidiary has made any payments, is obligated to make
payments or is a party to an agreement that could obligate it to make any
payments that would not be deductible under IRC Section 280G.
(c) "Tax" or "Taxes" means federal, state, county, local, foreign or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications,
real or personal property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind
whatsoever (including, without limitation,
10
deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not. "Tax Return" means any return,
information report or filing with respect to Taxes, including any schedules
attached thereto and including any amendment thereof. "Affiliated Group"
means any affiliated group as defined in IRC (S) 1504 that has filed a
consolidated return for federal income tax purposes (or any similar group
under state, local or foreign law) for a period and that includes any of
the Issuer or any of its Subsidiaries as a member.
Section 3.14 Contracts and Commitments.
(a) Except as expressly contemplated by this Agreement or as disclosed
in the Issuer SEC Reports filed prior to the date of this Agreement or on
Schedule 3.14 under either the heading Contracts or the heading Employee
Benefits or Schedule 3.12, neither the Issuer nor any Subsidiary is a party
to or bound by any written or oral:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(ii) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or
other basis providing annual compensation in excess of $100,000 or
contract relating to loans to officers, directors or Affiliates;
(iii) contract under which the Issuer or Subsidiary has advanced
or loaned any other Person amounts in the aggregate exceeding
$250,000;
(iv) agreement or indenture relating to borrowed money or other
Indebtedness or the mortgaging, pledging or otherwise placing a Lien
on any material asset or material group of assets of the Issuer and/or
its Subsidiaries;
(v) guarantee of any obligation in excess of $100,000 (other than
by the Issuer of a wholly-owned Subsidiary's debts or a guarantee by a
Subsidiary of the Issuer's debts or of another wholly-owned
Subsidiary's debts) other than in connection with the Credit
Agreement;
(vi) lease or agreement under which the Issuer or any Subsidiary
is lessee of or holds or operates any personal property owned by any
other party, except for any lease of personal property under which the
aggregate annual rental payments do not exceed $50,000;
(vii) lease or agreement under which the Issuer or any Subsidiary
is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the Issuer or any
Subsidiary, respectively;
(viii) contract or group of related contracts with the same party
or group of affiliated parties the performance of which involves
consideration in excess of $250,000;
(ix) assignment, license, indemnification or agreement with
respect to any material intangible property (including, without
limitation, any Intellectual Property Rights);
(x) express warranty agreement with respect to its services
rendered or its products sold or leased;
11
(xi) agreement under which it has granted any Person any
registration rights (including, without limitation, demand and
piggyback registration rights);
(xii) sales, distribution or franchise agreement the performance
of which involves consideration in excess of $250,000;
(xiii) agreement, the performance of which involves consideration
in excess of $250,000, with a term of more than six months which is
not terminable by the Issuer or any Subsidiary upon less than 30 days
notice without penalty;
(xiv) contract or agreement prohibiting it from freely engaging
in any business or competing anywhere in the world;
(xv) any joint venture agreement or other agreement pursuant to
which the Issuer or any Subsidiary has made, or any agreement
governing the Issuer's or any Subsidiary's investment in any other
person; or
(xvi) any other agreement which is material to its operations and
business prospects or involves a consideration in excess of $250,000
annually.
(b) All of the contracts, agreements and instruments set forth or
required to be set forth on Schedule 3.14 are valid, binding and
enforceable in accordance with their respective terms. Except as set forth
on Schedule 3.12, Schedule 3.14, Schedule 3.16, or Schedule 3.08, the
Issuer and each Subsidiary has performed all material obligations required
to be performed by it under the contracts, agreements and instruments
listed on Schedule 3.14 or required to be set forth and are not in default
under or in breach of nor in receipt of any claim of default or breach
under any material contract, agreement or instrument to which the Issuer or
any Subsidiary is subject and no event has occurred which with the passage
of time or the giving of notice or both would result in a default, breach
or event of noncompliance by the Issuer or any Subsidiary under any
material contract, agreement or instrument to which the Issuer or any
Subsidiary is subject; the Issuer has no present intention of not fully
performing all such obligations; the Issuer has no knowledge of any breach
or anticipated breach by the other parties to any material contract,
agreement, instrument or commitment to which it is a party; and neither the
Issuer nor any Subsidiary is a party to any contract or commitment or group
of contracts or commitments the performance of which could have a Material
Adverse Effect.
(c) Upon request, the Issuer will make available to the Purchasers a
true and correct copy of each of the written instruments, plans, contracts
and agreements and an accurate description of each of the oral
arrangements, contracts and agreements which are listed on, referred to or
required to be listed on or referred to on Schedule 3.14, together with all
amendments, waivers or other changes thereto.
Section 3.15 Intellectual Property Rights.
(a) Schedule 3.15 contains a complete and accurate list of all (a)
patented or registered Intellectual Property Rights owned or used by the
Issuer or any Subsidiary and material to the business of the Issuer and its
Subsidiaries, (b) pending patent applications and applications for
registration of other Intellectual Property Rights filed by the Issuer or
any Subsidiary material to the business of the Issuer and its Subsidiaries,
(c) material unregistered trade names and corporate names owned or used by
the Issuer or any Subsidiary and (d) material unregistered trademarks,
service marks, copyrights, mask works and computer software (other than
commercially available computer software) owned or used by the Issuer or
any Subsidiary and material to the business of the Issuer and its
Subsidiaries. Schedule 3.15 also contains a complete and accurate list of
all material licenses and other material rights granted by the Issuer or
any Subsidiary to any third party with respect to any
12
Intellectual Property Rights and all material licenses and other material
rights granted by any third party to the Issuer or any Subsidiary with
respect to any Intellectual Property Rights, in each case identifying the
subject Intellectual Property Rights. The Issuer or one of its Subsidiaries
is the beneficial and record owner of all right, title and interest to, or
has the right to use pursuant to a valid and enforceable license, all
Intellectual Property Rights necessary for the operation of the businesses
of the Issuer and its Subsidiaries as presently conducted and as presently
proposed to be conducted, free and clear of all Liens, except where the
failure to have such right would not have a Material Adverse Effect. The
loss or expiration of any Intellectual Property Right or related group of
Intellectual Property Rights owned or used by the Issuer or any Subsidiary
would not reasonably be expected to have a Material Adverse Effect and no
such loss or expiration is, to the best of the Issuer's knowledge,
threatened, pending or reasonably foreseeable. The Issuer and its
Subsidiaries have taken all necessary actions to maintain and protect the
Intellectual Property Rights which they own, except where the failure to
have taken such actions would not have a Material Adverse Effect. To the
best of the Issuer's knowledge, the owners of any Intellectual Property
Rights licensed to the Issuer or any Subsidiary have taken all necessary
actions to maintain and protect the Intellectual Property Rights which are
subject to such licenses.
(b) Except as set forth on Schedule 3.15 or Schedule 3.16, (i) to the
best of the Issuer's knowledge, there have been no claims made against the
Issuer or any Subsidiary within the past five (5) years asserting the
invalidity, misuse or unenforceability of any of the Issuer's or its
subsidiaries' Intellectual Property Rights or alleging infringement,
misappropriation or other conflict of any third Person's Intellectual
Property Rights by the Issuer or any of its Subsidiaries (including,
without limitation, any demand or request that the Issuer or any Subsidiary
license any rights from a third party), and, to the best of the Issuer's
knowledge, there are no grounds for the same, (ii) neither the Issuer nor
any Subsidiary has received any notices of, and is not aware of any facts
which indicate a likelihood of, any infringement or misappropriation by any
third party with respect to the Issuer's or its Subsidiaries' Intellectual
Property Rights (including, without limitation, any demand or request that
the Issuer or any Subsidiary license any rights from a third party) and
(iii) to the best of the Issuer's knowledge, the conduct of the Issuer's
and each Subsidiary's business has not infringed, misappropriated or
conflicted with and does not infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons, nor would any future conduct
as presently contemplated infringe, misappropriate or conflict with any
Intellectual Property Rights of other Persons. All Intellectual Property
Rights owned or used by the Issuer or any Subsidiary immediately prior to
each Closing will be owned or available for use by the Issuer or any such
Subsidiary on identical terms and conditions immediately subsequent to such
Closing.
Section 3.16 Litigation, etc. Except as disclosed in the Issuer SEC Reports
filed prior to the date of this Agreement or on Schedule 3.16, there are no
actions, suits, proceedings, orders, investigations or claims pending or, to the
best of the Issuer's knowledge, threatened against or, to the Issuer's
knowledge, affecting the Issuer or any Subsidiary that individually or in the
aggregate have a Material Adverse Effect (or to the best of the Issuer's
knowledge, pending or threatened against or affecting any of the officers,
directors or employees of the Issuer and its Subsidiaries with respect to their
respective businesses or proposed business activities), or pending or threatened
by the Issuer or any Subsidiary against any third party, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); nor has there been any such actions, suits, proceedings, orders,
investigations or claims pending against or affecting the Issuer or any
Subsidiary during the past three years that individually or in the aggregate
have a Material Adverse Effect; and, to the best of the Issuer's knowledge,
there is no reasonable basis for any of the foregoing. Neither the Issuer nor
any Subsidiary is subject to any judgment, order or decree of any court or
Governmental Authority which could have a Material Adverse Effect.
Section 3.17 Brokerage. Except as set forth on Schedule 3.17, for which
Issuer shall be solely responsible, there are no claims for brokerage
commissions, finders' fees or similar compensation in
13
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon the Issuer or any Subsidiary. The Issuer
shall pay, and hold each Purchaser harmless against, any liability, loss or
expense (including, without limitation, reasonable attorneys' fees and
out-of-pocket expenses) arising in connection with any such claim.
Section 3.18 Governmental Consent, etc. No permit, license, consent,
approval or authorization of, or declaration to or filing with, any governmental
authority or any other Person is required in connection with the execution,
delivery and performance by the Issuer of this Agreement or the other agreements
contemplated hereby, or the consummation by the Issuer of any other transactions
contemplated hereby or thereby, except as set forth on Schedule 3.18.
Section 3.19 Insurance. Neither the Issuer nor any Subsidiary is in default
with respect to its obligations under any insurance policy maintained by it, and
since January 1, 1996 neither the Issuer nor any Subsidiary has been denied
insurance coverage. The insurance coverage of the Issuer and its Subsidiaries is
consistent with the best insurance practices for corporations of similar size
engaged in similar lines of business, is adequate and sufficient to cover all
material liabilities encountered in the ordinary course of business of the
Issuer and all material liabilities reasonably foreseen or projected by the
Issuer, and includes, without limitation, insurance in respect of pollution and
environmental liability, and personal injury liability. All of the insurers
through which the Issuer has sought insurance coverage in the past 10 years have
been and remain solvent. Except as set forth on Schedule 3.19, and excluding
deductibles under the Issuer's current insurance policies, neither the Issuer
nor its Subsidiaries have any self-insurance or co-insurance programs.
Section 3.20 Employees. The Issuer is not aware that any executive or key
employee of the Issuer or any Subsidiary or any group of employees of the Issuer
or any Subsidiary has any plans to terminate employment with the Issuer or any
Subsidiary. The Issuer and each Subsidiary have complied in all material
respects with all laws relating to the employment of labor (including, without
limitation, provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes), and
the Issuer is not aware that it or any Subsidiary has any material labor
relations problems or concerns (including, without limitation, any union
organization activities, threatened or actual strikes or work stoppages or
material grievances). Except as disclosed on Schedule 3.14, neither the Issuer,
its Subsidiaries nor, to the best of the Issuer's knowledge, any of their
employees is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreements relating to, affecting or in
conflict with the present or proposed business activities of the Issuer and its
Subsidiaries, except for agreements between the Issuer and its present and
former employees.
Section 3.21 ERISA.
(a) Schedule 3.21 sets forth an accurate and complete list of each
"employee benefit plan" (as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that
is material to the Issuer and each other employee benefit plan, program or
arrangement that is material to the Issuer maintained, sponsored, or
contributed to by the Issuer at any time in the last three years, or with
respect to which the Issuer has any material actual or potential liability.
Each such item listed on such attached schedule is referred to herein as a
"Benefit Plan" and collectively as the "Benefit Plans".
(b) All material contributions to and payments from any Benefit Plan
that may have been required to be made in accordance with the terms of the
Benefit Plan, any applicable collective bargaining agreement, and Section
302 of ERISA or Section 412 of the Code have been timely made in all
material respects. There has been no application for or waiver of the
minimum funding standards imposed by Section 412 of the Code with respect
to any Benefit Plan, and the Issuer is not aware of any facts or
circumstances that would materially change the funded status of any such
Benefit Plan at any time in the last three years. To the knowledge of the
Issuer, no asset of the Issuer is or is reasonably likely to become subject
to any lien under ERISA or the Code, and the Issuer has not
14
incurred any material liability under Title IV of ERISA (other than for
contributions not yet due) or to the Pension Benefit Guaranty Corporation
(other than for payment of premiums not yet due).
(c) Except as set forth on Schedule 3.21, each Benefit Plan that is
intended to be qualified under Section 401(a) of the Code has received a
determination from the IRS that such Benefit Plan is so qualified, and, to
the best knowledge of the Issuer, nothing has occurred since the date of
such determination that could adversely affect the qualified status of such
Benefit Plan.
(d) Each of the Benefit Plans and all related trusts, insurance
contracts and funds have been maintained, funded and administered in
compliance in all material respects with their terms and the terms of any
applicable collective bargaining agreements and in compliance in all
material respects with the applicable provisions of ERISA, the Code, and
any other applicable laws. To the knowledge of the Issuer, there are no
pending or threatened actions, suits, investigations or claims with respect
to any Benefit Plan (other than routine claims for benefits) that could
reasonably be expected to have a Material Adverse Effect. With respect to
each Benefit Plan, all required material payments, premiums, contributions,
distributions, or reimbursements for all periods ending prior to or as of
each Closing Date have been made or properly accrued in all material
respects.
(e) To the knowledge of the Issuer, neither the Issuer nor any other
"disqualified person" (within the meaning of Section 4975 of the Code) or
any "party in interest" (within the meaning of Section 3(14) of ERISA) has
engaged in any "prohibited transaction" (within the meaning of Section 4975
of the Code or Section 406 of ERISA) with respect to any of the Benefit
Plans which could subject any of the Benefit Plans, the Issuer, or any
officer, director or employee of any of the foregoing to a penalty or tax
under Section 502 of ERISA or Section 4975 of the Code that could
reasonably be expected to have a Material Adverse Effect.
(f) Except as set forth otherwise on Schedule 3.14, each Benefit Plan
which is subject to the health care continuation requirements of Part 6 of
Subtitle B of Title I of ERISA or Section 4980B of the Code ("COBRA") has
been administered in compliance in all material respects with such
requirements. No Benefit Plan provides medical or life or other welfare
benefits to any current or future retired or terminated employee (or any
dependent thereof) of the Issuer other than as required pursuant to COBRA
or applicable State law.
(g) To the knowledge of the Issuer, no Benefit Plan subject to Title
IV of ERISA which is a "multiemployer plan" (as such term is defined in
Section 3(37) of ERISA) (a "Multiemployer Plan") has been terminated; to
the knowledge of the Issuer, no proceeding has been initiated to terminate
any such Multiemployer Plan and there has been no "reportable event" within
the meaning of Section 4043(c) of ERISA) with respect to any such
Multiemployer Plan; to the knowledge of the Issuer, no Multiemployer Plan
is in reorganization as described in Section 4241 of ERISA and, to the
knowledge of the Issuer, no Multiemployer Plan is insolvent as described in
Section 4245 of ERISA. To the knowledge of the Issuer, the Issuer has not
incurred any liability on account of a "partial withdrawal" or a "complete
withdrawal" (within the meaning of Sections 4205 and 4203, respectively, of
ERISA) from any Multiemployer Plan, no such liability has been asserted,
and, to the knowledge of the Issuer, there are no events or circumstances
which could result in any such partial or complete withdrawal. The Issuer
is not bound by any contract or agreement nor does it have any obligation
or liability described in Section 4204 of ERISA.
(h) With respect to each Benefit Plan, upon request, the Issuer will
provide the Purchaser with true, complete and correct copies of (to the
extent applicable): (i) all documents pursuant to which the Benefit Plan is
maintained, funded and administered (including the plan and trust
documents, any amendments thereto, the summary plan descriptions, and any
insurance contracts or service provider agreements); (ii) the three most
recent annual reports (Form 5500 series) filed with
15
the IRS (with applicable attachments); (iii) the most recent actuarial
valuation report; and (iv) the most recent determination letter received
from the IRS.
(i) The Issuer has no liability with respect to any "employee benefit
plan" (as defined in Section 3(3) of ERISA) solely by reason of being
treated as a single employer under Section 414 of the Code with any trade,
business or entity other than the Issuer.
Section 3.22 Compliance with Laws. Each of the Issuer and each Subsidiary
has operated its business and conducted its activities in compliance in all
material respects with all laws, regulations and governmental requirements,
which the failure to be in compliance with would reasonably be expected to have
a Material Adverse Effect and neither the Issuer nor any Subsidiary has violated
any law or any governmental regulation or requirement which violation has had or
would reasonably be expected to have a Material Adverse Effect, and neither the
Issuer nor any Subsidiary has received notice of any such violation.
Section 3.23 Environmental and Safety Matters.
(a) For purposes of this Agreement, the term "Environmental and Safety
Requirements" shall mean all federal, state and local statutes,
regulations, ordinances and other provisions having the force or effect of
law, all judicial and administrative orders and determinations, all
contractual obligations and all common law, in each case concerning public
health and safety, worker health and safety and pollution or protection of
the environment (including, without limitation, all those relating to the
presence, use, production, generation, handling, transport, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
Release, threatened Release, control or cleanup of any hazardous or
otherwise regulated materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or
radiation); "Release" shall have the meaning set forth in CERCLA (as
defined below); and "Environmental Lien" shall mean any Lien, whether
recorded or unrecorded, in favor of any governmental entity, relating to
any liability of the Issuer or any Subsidiary arising under any
Environmental and Safety Requirements.
(b) Except as set forth on Schedule 3.23:
(i) The Issuer and its Subsidiaries have complied in all material
respects with and are currently in compliance in all material respects
with all Environmental and Safety Requirements, which the failure to
be in compliance with would have a Material Adverse Effect, and since
January 1, 1997, neither the Issuer nor its Subsidiaries have received
any oral or written notice, report or information regarding any
liabilities (whether accrued, absolute, unliquidated or otherwise) or
any corrective, investigatory or remedial obligations arising under
Environmental and Safety Requirements, which liabilities or
obligations would have a Material Adverse Effect and which relate to
the Issuer or its Subsidiaries or any of their properties or
facilities.
(ii) Without limiting the generality of the foregoing, the Issuer
and its Subsidiaries have obtained and complied in all material
respects with and are currently in compliance in all material respects
with, all Environmental Permits. A list of all such permits, licenses
and other authorizations which are material to the Issuer and its
Subsidiaries is set forth on Schedule 3.23 ("Environmental Permits").
(iii) None of the following exists at any property or facility
owned, occupied or operated by the Issuer or any of its Subsidiaries:
(1) underground storage tanks or surface impoundments;
16
(2) asbestos-containing materials in any form or condition;
or
(3) materials or equipment containing polychlorinated
biphenyls; the existence of which could reasonably be expected to
have a Material Adverse Effect.
(iv) To the knowledge of the Issuer, neither the Issuer nor any
of its Subsidiaries has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or Released any
hazardous substance or owned, occupied or operated any facility or
property, so as to give rise to liabilities of the Issuer or its
Subsidiaries for response costs, natural resource damages or attorneys
fees pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended, or any
other Environmental and Safety Requirements.
(v) Without limiting the generality of the foregoing, to the
knowledge of the Issuer, no facts, events or conditions relating to
the past or present properties, facilities or operations of the Issuer
or its Subsidiaries shall prevent, hinder or limit continued
compliance with Environmental and Safety Requirements, give rise to
any corrective, investigatory or remedial obligations pursuant to
Environmental and Safety Requirements or give rise to any other
liabilities pursuant to Environmental and Safety Requirements
(including, without limitation, those liabilities relating to onsite
or offsite Releases or threatened Releases of hazardous materials,
substances or wastes, personal injury, property damage or natural
resources) damage that could reasonably be expected to have a Material
Adverse Effect.
(vi) Neither the Issuer nor any of its Subsidiaries has, either
expressly or by operation of law, assumed or undertaken any material
liability or corrective, investigatory or remedial obligation of any
other Person relating to any Environmental and Safety Requirements
that could reasonably be expected to have a Material Adverse Effect.
(vii) No Environmental Lien has attached to any property owned,
leased or operated by the Issuer or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect.
Section 3.24 Affiliated Transactions. Except as set forth on Schedule 3.24
or in the Issuer's SEC Reports, no officer, director, significant stockholder or
Affiliate of the Issuer or any Subsidiary, to the knowledge of the Issuer, or
any member of such individual's immediate family or any entity in which any such
Person or individual owns any beneficial interest (other than less than 5% of
the outstanding securities of a publicly traded company), is a party to any
agreement, contract, commitment or transaction with the Issuer or any Subsidiary
or has any material interest in any material property used by the Issuer or any
Subsidiary.
Section 3.25 Disclosure. Neither this Agreement nor any of the exhibits,
schedules, attachments, written statements, documents, certificates or other
items prepared or supplied to any Purchaser by or on behalf of the Issuer with
respect to the transactions contemplated hereby contain any untrue statement of
a material fact or omit a material fact necessary to make each statement
contained herein or therein not misleading; provided that with respect to the
financial projections furnished to the Purchasers by the Issuer, the Issuer
represents and warrants only that such projections were based upon assumptions
reasonably believed by the Issuer to be reasonable and fair as of the date the
projections were prepared in the context of the Issuer's history and current and
reasonably foreseeable business conditions. There is no fact which the Issuer
has not disclosed to the Purchasers in writing and of which any of its officers,
directors or executive employees is aware (other than general economic
conditions) and which has had or would reasonably be expected to have a Material
Adverse Effect.
17
Section 3.26 Customers and Suppliers.
(a) Schedule 3.26 lists the ten (10) largest customers and suppliers
of the Issuer (on a consolidated basis) for each of the two most recent
fiscal years and sets forth opposite the name of each such customer or
supplier the amount of revenues to such customer in the case of any such
customer or the amount of expenditures to such supplier in the case of any
such supplier. Schedule 3.26 also lists any additional current customers
and suppliers which the Issuer anticipates shall be among the ten (10)
largest customers or suppliers for the current fiscal year.
(b) Since the date of the Latest Balance Sheet, no Supplier set forth
on Schedule 3.26 has stopped or materially decreased the rate of or
indicated that it shall stop, or materially decrease the rate of, supplying
materials, products or services to the Issuer or any Subsidiary, and no
customer listed on Schedule 3.26 has stopped or materially decreased or, to
the Issuer's knowledge, indicated that it shall stop, or materially
decrease the rate of, buying materials, products or services from the
Issuer or any Subsidiary.
Section 3.27 Reports with the Securities and Exchange Commission. Since
January 1, 1997, the Issuer has filed with the Commission all forms, statements,
reports and documents (including all exhibits, amendments and supplements
thereto) required to be filed by it under the Securities Act and the Exchange
Act, all of which complied when filed in all material respects with all
applicable requirements of the appropriate act and the rules and regulations
thereunder. Upon request, the Issuer will furnish the Purchasers with complete
and accurate copies of its annual report on Form 10-K for its three most recent
fiscal years, all other reports or documents required to be filed by the Issuer
pursuant to Section 13(a) or 15(d) of the Exchange Act since the filing of the
most recent annual report on Form 10-K and its most recent annual report to its
stockholders (collectively, the "Issuer SEC Reports"). Such reports and filings
did not as of the date of filing contain any material false statements or any
misstatement of any material fact and do not omit to state any fact necessary to
make the statements set forth therein not misleading. The Issuer has made all
filings with the Commission which it is required to make, and the Issuer has not
received any request from the Commission to file any amendment or supplement to
any of the reports described in this paragraph.
Section 3.28 Regulatory Matters.
(a) Except as disclosed on Schedule 3.16, the Issuer and its
Subsidiaries have all requisite power and authority and hold or have
applied for all Licenses required under any Applicable Law to own and
operate their properties and to carry on the business of the Issuer and its
Subsidiaries as such business is conducted on the date hereof and as
proposed to be conducted. Each material License issued to the Issuer or its
Subsidiaries is validly issued and is in full force and effect. The Issuer
does not know of any reason why any Governmental Authority might revoke any
License. The Issuer does not know of any party who has a current filing
pending in specific opposition to or expressed an interest in opposing the
grant of the material Licenses held or applied for by the Issuer or its
Subsidiaries, or of any reason why any Governmental Authority might not
grant any of the material Licenses or that have been applied for.
(b) Except as disclosed on Schedule 3.16, none of the Issuer or its
Subsidiaries is a party to nor, to the best knowledge of the Issuer and
each Subsidiary, is there threatened any investigation, notice of apparent
liability, violation, show cause order, forfeiture or other notice, order
or complaint issued by or before any Governmental Authority, or of any
other proceeding (other than proceedings of general applicability) that
could in any manner threaten or adversely affect the validity, future grant
or continued effectiveness of the material Licenses of the Issuer and its
Subsidiaries. None of the Issuer and its Subsidiaries has any reason to
believe that each of the material Licenses will not be renewed in the
ordinary course.
18
Section 3.29 Shareholder Vote Required. To the extent the number of shares
of Common Stock of the Company into which the Series D Shares are convertible
would exceed twenty percent (20%) of the Issuer's outstanding common stock,
approval of the holders of the Issuer's capital stock is required by the rules
of the NASDAQ Stock Market. If required to comply with Nasdaq shareholder
approval requirements, the Company will take all steps as soon as practicable
following the date of this Agreement, the Issuer will take all steps to call and
hold a special meeting of its stockholders for the purpose of approving the
issuance of common stock that would exceed such 20% requirement.
Section 3.30 Knowledge. As used in this Section 3, the terms "knowledge" or
"aware" shall mean and include the actual knowledge or awareness, following due
inquiry, of the executive officers of the Issuer.
ARTICLE IV
AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Issuer as of
the date hereof and as of each Closing Date that:
(a) Such Purchaser understands that the offering and sale of the
Securities is intended to be exempt from registration under the Securities
Act pursuant to Section 4(2) of the Securities Act and any applicable state
securities or blue sky laws.
(b) The Securities to be acquired by such Purchaser pursuant to this
Agreement are being acquired for its own account and without a view to the
resale or distribution of such Securities or any interest therein other
than in a transaction exempt from registration under the Securities Act.
(c) Such Purchaser is an "Accredited Investor" as such term is defined
in Regulation D under the Securities Act.
(d) Such Purchaser has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits
and risks of its investment in the Securities and such Purchaser is capable
of bearing the economic risks of such investment, including a complete loss
of its investment in the Securities. Such Purchaser understands that
Purchaser's investment in the Securities involves a high degree of risk.
(e) Such Purchaser has been furnished with and carefully read a copy
of the Issuer SEC Reports and this Agreement (including the Schedules
hereto) and has been given the opportunity to ask questions of, and receive
answers from, the Issuer concerning the terms and conditions of the
Securities and other related matters. To such Purchaser's knowledge, the
Issuer has made available to such Purchaser or its agents all documents and
information relating to an investment in the Securities requested by or on
behalf of such Purchaser.
(f) Such Purchaser understands that the Securities shall bear a
restrictive legend in a form agreed between the parties.
(g) Each Purchaser who holds Series B Shares or Series C Shares,
consents to the issuance of the Series D Shares with rights pari passu to
the Series B Shares and the Series C Shares.
19
ARTICLE V
COVENANTS OF THE ISSUER
The Issuer agrees that:
Section 5.01 Access to Information.
(a) From the date hereof until the First Closing Date, the Issuer will
(i) furnish to each Purchaser and its authorized representatives such
financial and operating data and other information relating to the Issuer
and its Subsidiaries as such Persons may reasonably request and (ii)
instruct its officers, employees, counsel, independent accountants and
financial advisors to cooperate with such Purchaser and its authorized
representatives in its investigation of the Issuer and its Subsidiaries.
Any investigation pursuant to this Section shall be conducted in a manner
that does not interfere unreasonably with the conduct of the business of
the Issuer and its Subsidiaries.
(b) After the First Closing Date, for so long as the Purchasers, in
the aggregate, own 20% of the Series D Shares issued to the Purchasers at
the Closings, the Purchasers shall be entitled to (i) receive, within 90
days of the issuer's financial year end, audited annual financial
statements, and receive within 45 and 30 days of the relevant respective
periods, unaudited quarterly and monthly financial statements, (ii) receive
all information made available to shareholders of the Issuer or members of
the Board of Directors, in each case, at the same time as such materials
are distributed to the shareholders or directors, as the case may be, (iii)
designate up to two persons who shall be entitled to observation rights at
all meetings of the Issuer's Board of Directors, (iii) meet on a quarterly
basis with members of senior management, (v) receive copies of management
reports, and (vi) have reasonable access to the Issuer's outside auditors.
(c) Each Purchaser agrees that any nonpublic information furnished to
such Purchaser pursuant to this Section 5.01 shall be deemed confidential
information and shall not be used by it as the basis for any market
transactions in the securities of the Issuer unless and until such
information is made generally available to the public.
Section 5.02 Certificate of Designation. Prior to the First Closing,
subject to the terms of this Agreement, the Issuer shall cause to be filed the
Certificate of Designation as required pursuant to the laws of the State of
Utah.
Section 5.03 Restrictions Pending the Closings. After the date hereof and
prior to the Closing Dates, except as expressly provided for in this Agreement
or as consented to in writing by the Purchasers, the Issuer shall not:
(i) amend its Articles of Incorporation or bylaws;
(ii) split, combine or reclassify any shares of its capital stock
without appropriately adjusting the conversion price and/or ratio and
exercise price applicable to the Series D Shares prior to their issuance at
the Closings;
(iii) declare or pay any dividend or distribution (whether in cash,
stock or property) in respect of its Common Stock;
(iv) take any action, or knowingly omit to take any action, that could
reasonably be expected to result in (A) any of the representations and
warranties of the Issuer set forth in Article 3 becoming untrue or (B) any
of the conditions to the obligations of the Purchasers set forth in Section
8.01 or 8.02 not being satisfied; or
20
(v) enter into any agreement or commitment to do any of the foregoing.
Section 5.04 Reservation of Shares. For so long as any of the Securities
are outstanding, the Issuer shall keep reserved for issuance a sufficient number
of shares of Common Stock to satisfy its conversion obligations under the
Certificate of Designation and its issuance obligations under the Warrants.
Section 5.05 Tax Consistency. The Issuer will not treat the Series D Shares
as "preferred stock" for Tax purposes, unless otherwise required pursuant to a
final determination or a change in Applicable Law.
Section 5.06 Use of Proceeds. The Issuer shall use the proceeds received
upon the sale of the Series D Shares at the Closings solely for the purposes set
forth in Schedule 5.06 attached hereto.
ARTICLE VI
COVENANTS OF THE PURCHASERS
Section 6.01 Confidentiality. Each Purchaser will hold, and will use its
reasonable best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors, financing sources, financial
institutions, and agents (the "Representatives") to hold, in confidence, unless
required to disclose by judicial or administrative process or by other
requirements of law, regulation or national stock exchange, all confidential
documents and information concerning the Issuer or any of its Affiliates that
are furnished to such Purchaser, except to the extent that such information can
be shown to have been (i) previously known on a nonconfidential basis by such
Purchaser or such Representatives, (ii) in the public domain through no fault of
such Purchaser or its Representatives (with respect to information received in
their capacity as such) or (iii) later acquired by such Purchaser or such
Representatives from sources other than the Issuer or any of its Affiliates not
known by such Purchaser or such Representatives, as applicable, to be bound by
any confidentiality obligation; provided that such Purchaser may disclose such
information to any of its Representatives in connection with the transactions
contemplated by this Agreement and the Certificate of Designation so long as
such Persons are informed by such Purchaser of the confidential nature of such
information and are directed by such Purchaser to treat such information
confidentially. The obligation of each Purchaser to hold and to cause its
Representatives to hold any such information in confidence shall be satisfied if
such Purchaser exercises the same care with respect to such information as such
Purchaser would take to preserve the confidentiality of its own similar
information. If any Purchaser or any of its Representatives is requested to
disclose any confidential information by judicial or administrative process or
by other requirements of law or a national stock exchange, such Purchaser will
promptly notify the Issuer of such request so that the Issuer may seek an
appropriate protective order. Each Purchaser agrees that it will not, and will
use its reasonable best efforts to cause its Representatives not to, use any
confidential documents or information for any purpose other than monitoring and
evaluating its investment in the Issuer and in connection with the transactions
contemplated by this Agreement and the Certificate of Designation. If this
Agreement is terminated, each Purchaser will, and will use its reasonable best
efforts to cause its Representatives to, destroy or deliver to the Issuer, upon
request, all documents and other materials, and all copies thereof, obtained by
such Purchaser or on its behalf from the Issuer, or any of the Representatives,
in connection with this Agreement that are subject to such confidence.
ARTICLE VII
COVENANTS OF THE ISSUER AND THE PURCHASERS
Section 7.01 Certain Filings. The Issuer and each Purchaser will, and will
cause their Affiliates to, cooperate with one another (i) in determining whether
any action by or in respect of, or filing with, any Governmental Authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and the
Certificate of Designation, the conversion by such Purchaser of such Purchaser's
Series D Shares or the exercise by such Purchaser of such Purchaser's Warrants,
and (ii) in taking such actions or making any such filings, furnishing
information required in connection therewith and seeking timely to
21
obtain any such actions, consents, approvals or waivers. The Issuer and each
Purchaser shall (A) give the other parties prompt notice of the commencement of
any action, suit, litigation, arbitration, preceding or investigation by or
before any governmental body with respect to the transactions contemplated by
this Agreement and the Certificate of Designation, (B) keep the other parties
informed on a current basis as to the status of any such action, suit,
litigation, arbitration, preceding or investigation, and (C) promptly inform the
other parties of any communication to or from the Department of Justice or any
other governmental body regarding the transactions contemplated by this
Agreement and the Certificate of Designation.
Section 7.02 Public Announcements. In connection with the execution of this
Agreement, the Issuer shall issue a press release (a "Signing Release") and
shall file with the Commission a Report on Form 8-K with respect to the
transactions contemplated hereby (the "Signing 8-K" and together with the
Signing Release, the "Agreed Disclosure"). The Signing Release shall be in form
and substance as agreed by the parties hereto. The Signing 8-K shall be provided
to the Purchasers prior to filing and the Purchasers shall be given a reasonable
opportunity to comment thereon. The Issuer shall accept all reasonable changes
suggested by the Purchasers. If the Issuer does not accept any changes suggested
in good faith by the Purchasers, the provisions of this Section 7.02 shall
immediately terminate and be of no further force or effect as to the Purchasers.
If the Issuer accepts all such changes, the Agreed Disclosure shall serve as the
basis for any public disclosure by the parties of the transactions contemplated
hereby and neither the Issuer nor any Purchaser shall make any statement or
representation regarding the transactions contemplated hereby, publicly or in a
manner which could reasonably be expected to result in its public dissemination,
which is materially inconsistent with the Agreed Disclosure. Except as otherwise
permitted pursuant to this Section 7.03, the Issuer shall not use or refer to
the name of any Purchaser in any public statement or disclosure without the
consent of such Purchaser.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE CLOSINGS
Section 8.01 Conditions to Each Party's Obligations. The obligation of each
party hereto to consummate the Closings is subject to the satisfaction, at or
prior to each Closing Date, of the following conditions:
(a) All filings with, notifications to and consents from Governmental
Authorities required for the consummation of such Closing shall have been
made or obtained, as applicable; and
(b) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of such
Closing.
Section 8.02 First Closing: Conditions to Each Purchaser's Obligations. The
obligation of each Purchaser to consummate the First Closing is further subject
to the satisfaction, at or prior to the First Closing Date, of the following
additional conditions:
(a) The representations and warranties of the Issuer contained herein
that are qualified as to materiality or Material Adverse Effect shall be
true and correct in all respects on and as of the First Closing Date and
the representations and warranties of the Issuer contained herein that are
not so qualified shall be true and correct in all material respects on and
as of the First Closing Date, in each case as if made on and as of such
date; the Issuer shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be
performed or complied with by it at or prior to the First Closing Date; and
such Purchaser shall have received a certificate dated the First Closing
Date signed by an authorized officer of the Issuer to the foregoing effect;
(b) The Certificate of Designation shall have been filed with the
Division of Corporations and Commercial Code of the State of Utah in
accordance with the law of the State of Utah;
22
(c) The Registration Rights Agreement shall have been executed and
delivered by the parties thereto and be in full force and effect;
(d) Each Purchaser shall have received opinions, dated the First
Closing Date, of counsel to the Issuer, addressing such matters as shall be
reasonably requested by the Purchasers;
(e) No action, suit, investigation, litigation or proceeding
challenging this Agreement or the transactions contemplated hereby or
seeking to prohibit, alter, prevent or materially delay the First Closing
or which could have an adverse affect on the ability of the Issuer to
perform its obligations under this Agreement shall have been instituted by
any Governmental Authority before any court, arbitrator or governmental
body, agency or official binding on any party hereto and be pending;
(f) Each Purchaser shall have received all documents reasonably
requested by it relating to the existence of Issuer, the corporate
authority for Issuer entering into, and the validity of, this Agreement,
the Certificate of Designation, and the Series D Shares, all in form and
substance reasonably satisfactory to it; and
(g) The Issuer shall have received all consents and waivers by third
parties that are required for the issuance of the Securities and the
consummation of the transactions contemplated hereby on terms reasonably
satisfactory to Purchaser (including (i) waivers of all shareholders'
contractual or other preemptive and similar rights, and (ii) any consents
required in order that the transactions contemplated hereby do not
constitute a breach of, a default under, or a termination or modification
of any material agreement to which the Issuer or any Subsidiary is a party
or to which any portion of the property of the Issuer or any Subsidiary is
subject).
Section 8.03 Second Closing: Conditions to Each Purchaser's Obligations.
The obligation of each Purchaser to consummate the Second Closing is further
subject to the satisfaction, at or prior to the Second Closing Date, of the
following conditions:
(a) The representations and warranties of the Issuer contained herein
that are qualified as to materiality or Material Adverse Effect shall be
true and correct in all respects on and as of the Second Closing Date and
the representations and warranties of the Issuer contained herein that are
not so qualified shall be true and correct in all material respects on and
as of the Second Closing Date, in each case as if made on and as of such
date; the Issuer shall have performed and complied in all material respects
with all covenants and agreements required by this Agreement to be
performed or complied with by it at or prior to the Second Closing Date;
and such Purchaser shall have received a certificate dated the Second
Closing Date signed by an authorized officer of the Issuer to the foregoing
effect; and
(b) No action, suit, investigation, litigation or proceeding
challenging this Agreement or the transactions contemplated hereby or
seeking to prohibit, alter, prevent or materially delay the Second Closing
or which could have an adverse affect on the ability of the Issuer to
perform its obligations under this Agreement shall have been instituted by
any Governmental Authority before any court, arbitrator or governmental
body, agency or official binding on any party hereto and be pending.
Section 8.04 Conditions to the Issuer's Obligations. The obligation of the
Issuer to consummate each Closing is further subject to the satisfaction, at or
prior to each Closing Date, of the following additional conditions:
(a) The representations and warranties of each Purchaser contained
herein shall be true and correct in all respects on and as of each Closing
Date. Each Purchaser shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
23
performed or complied with by such Purchaser at or prior to each Closing
Date; and the Issuers shall have received a certificate dated as of each
Closing Date signed by an authorized officer of such Purchaser to the
foregoing effect; and
(b) No proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially
delay either Closing shall have been instituted by any Governmental
Authority before any court, arbitrator or governmental body, agency or
official binding on any party hereto and be pending;
(c) The Issuer shall have received all consents and waivers by third
parties that are required for the issuance of the Securities and the
consummation of the transactions contemplated hereby on terms reasonably
satisfactory to Purchaser (including (i) waivers of all shareholders'
contractual or other preemptive and similar rights, and (ii) any consents
required in order that the transactions contemplated hereby do not
constitute a breach of, a default under, or a termination or modification
of any material agreement to which the Issuer or any Subsidiary is a party
or to which any portion of the property of the Issuer or any Subsidiary is
subject).
ARTICLE IX
MISCELLANEOUS
Section 9.01 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party at its address or facsimile number set forth below,
or such other address or facsimile number as such party may hereinafter specify
for the purpose to the party giving such notice. Each such notice, request or
other communication shall be effective (i) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified pursuant to this
Section 9.01 and the appropriate confirmation is received, (ii) if given by
mail, three days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (iii) if given by any other
means, when delivered at the address specified below:
The Issuer:
United Shipping & Technology, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ and ▇▇▇▇▇▇ Professional Association
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
24
The Purchasers:
TH ▇▇▇.▇▇▇▇▇▇ Internet Partners, L.P.
TH ▇▇▇.▇▇▇▇▇▇ Internet Parallel Partners, L.P.
THLi Coinvestment Partners, LLC
Blue Star I, LLC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
RS Investment Management, Inc.
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Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
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Section 9.02 No Waivers; Amendments.
(a) No failure or delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
(b) Any provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by all the
parties hereto.
Section 9.03 Survival. All representations and warranties contained herein
or made in writing by any party in connection herewith shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby for a period of 2 years following each Closing,
regardless of any investigation made by any Purchaser or on its behalf;
provided, however, that the representations and warranties contained in Sections
3.01, 3.02, and 3.04 shall survive the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby indefinitely.
Section 9.04 Indemnification. Effective upon the First Closing, the Issuer
hereby indemnifies each Purchaser and its Affiliates against and agrees to hold
such Purchaser and its Affiliates harmless from any and all actions, causes of
action or suits brought by third parties ("Third Party Claims") damages, losses,
liabilities and expenses (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding) ("Damages") arising from such Third Party Claim
incurred or suffered by such Purchaser or its Affiliates arising out of (a) any
misrepresentation or breach of warranty, covenant or agreement made or to be
performed by the Issuer pursuant to this Agreement, or (b) the breach by the
Issuer of any listing or other rules of any exchange upon
25
which the Issuer's securities are listed, or of any other laws or rules relating
to the issue and purchase of the Series D Shares pursuant to this Agreement.
Section 9.05 Procedures. The party seeking indemnification under Section
9.04 (the "Indemnified Party") agrees to give prompt notice to the party against
whom indemnity is sought (the "Indemnifying Party") and to all other Purchasers
of the assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought under such Section. The
Indemnifying Party may at its election participate in and control the defense of
any such suit, action or proceeding at its own expense. The Indemnifying Party
shall not be liable under Section 9.04 for any settlement effected without its
consent of any claim, litigation or proceeding in respect of which indemnity may
be sought hereunder.
Section 9.06 Termination.
(a) This Agreement may be terminated at any time prior to each
Closing:
(i) by mutual written agreement of the Issuer and each Purchaser;
(ii) by the Issuer or the Purchasers if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable,
final order, decree or judgment of any court or governmental body
having competent jurisdiction.
(iii) by the Issuer if the Second Closing has not occurred on or
before the end of business on March 31, 2001, or by the Purchasers if
the First Closing has not occurred on or before the end of business on
March 1, 2001. The party desiring to terminate this Agreement pursuant
to clauses 9.07(a)(ii) or (iii) shall give notice of such termination
to the other parties hereto.
(b) If this Agreement is terminated as permitted by Section 9.07(a),
such termination shall be without liability of either party (or any
stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other parties to this Agreement;
provided that if such termination shall result from the willful (i) failure
by any party to fulfill a condition to the performance of the obligations
of the other parties, (ii) failure by any party to perform a covenant of
this Agreement or (iii) breach by any party hereto of any representation,
warranty, covenant or agreement contained herein, such party shall be fully
liable for any and all Damages incurred or suffered by the other parties as
a result of such failure or breach. The provisions of Sections 6.01, 9.01,
9.07, 9.09, 9.10, 9.11, 9.12, 9.13, 9.14, 9.15 and 9.16 shall survive any
termination hereof pursuant to Section 9.06(a).
(c) Expenses; Documentary Taxes. The Issuer shall reimburse each
Purchaser at the Closing for all of their respective reasonable
out-of-pocket expenses, including, without limitation, the fees and
disbursements of their counsel incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement (including the
exhibits hereto) and the consummation of the transactions contemplated by
this Agreement. The Issuer shall pay any and all stamp, transfer and other
similar taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement or the Certificate of Designation
or the issuance of the Securities or any shares of Common Stock issued upon
conversion or exercise of the Securities.
Section 9.07 Successors and Assigns. No party may assign any of its rights
and obligations hereunder without the prior written consent of the other parties
hereto. This Agreement shall be binding upon the parties hereto and their
respective successors and permitted assigns.
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Section 9.08 GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR
PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF NEW YORK. EACH OF THE PARTIES HERETO WAIVES TO THE FULLEST EXTENT PERMITTED
BY LAW ANY RIGHT TO TRIAL BY JURY IN RESPECT OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN
STATEMENT OR ACTION OF ANY PARTY HERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE
PARTIES TO THIS AGREEMENT EACH HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF A ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE
PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
Section 9.09 JURISDICTION. THE PARTIES HERETO AGREE THAT ANY SUIT, ACTION
OR PROCEEDING SEEKING TO ENFORCE ANY PROVISION OF, OR BASED ON ANY MATTER
ARISING OUT OF OR IN CONNECTION WITH, THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY MAY ONLY BE BROUGHT IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK OR ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY, AND EACH OF THE PARTIES HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION
OF SUCH COURTS (AND OF THE APPROPRIATE APPELLATE COURTS THEREFROM) IN ANY SUCH
SUIT, ACTION OR PROCEEDING AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT
ANY SUCH SUIT, ACTION OR PROCEEDING WHICH IS BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING
MAY BE SERVED ON ANY PARTY ANYWHERE IN THE WORLD, WHETHER WITHIN OR WITHOUT THE
JURISDICTION OF ANY SUCH COURT. WITHOUT LIMITING THE FOREGOING, EACH PARTY
AGREES THAT SERVICE OF PROCESS ON SUCH PARTY AS PROVIDED IN SECTION 9.01 SHALL
BE DEEMED EFFECTIVE SERVICE OF PROCESS ON SUCH PARTY.
Section 9.10 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Section 9.11 Entire Agreement. This Agreement, the Registration Rights
Agreement, the Certificate of Designation and any other documents executed
concurrently herewith constitute the entire agreement and understanding among
the parties hereto and supersede any and all prior agreements and
understandings, written or oral, relating to the subject matter hereof.
Section 9.12 Remedies. Each holder of Securities and Common Stock issuable
upon conversion or exercise thereof shall have all rights and remedies set forth
in this Agreement, the Warrants, the Articles of Incorporation and the
Certificate of Designation and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
27
Section 9.13 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 shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
Section 9.14 Descriptive Headings; Interpretation. The descriptive headings
of this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
Section 9.15 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement
as of the date first written above.
UNITED SHIPPING & TECHNOLOGY, INC. RS INVESTMENT MANAGEMENT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------ ----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Executive Officer Its: Managing Director
Portfolio Mgr. RS Diversified Growth
Fund
TH ▇▇▇.▇▇▇▇▇▇ INTERNET PARTNERS, L.P.
By: TH ▇▇▇.▇▇▇▇▇▇ Internet Advisors L.P.
Its: General Partner
By:
----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Managing Director
TH ▇▇▇.▇▇▇▇▇▇ INTERNET PARALLEL PARTNERS, L.P.
By: TH ▇▇▇.▇▇▇▇▇▇ Internet Advisors L.P.
Its: General Partner
By:
----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Managing Director
THLI COINVESTMENT PARTNERS, LLC
By:
----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Its: Managing Member
BLUE STAR I, LLC
By:
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇
Its: Managing Member
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SCHEDULE A
PURCHASERS
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Number of Consideration for Number of Series D Consideration for
Series D Shares to Shares to be Shares to be Shares to be
be Purchased at Purchased at the Purchased at the Purchased at the
Purchaser the First Closing First Closing Second Closing Second Closing
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TH ▇▇▇.▇▇▇▇▇▇
Internet
Partners, LP
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TH ▇▇▇.▇▇▇▇▇▇
Internet
Parallel
Partners, LP
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TH Li
Coinvestment
Partners LLC
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Blue Star I, LLC
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RS Investment 250,000 $2,000,000
Management, Inc.
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