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SERIES D CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
("Agreement") is made as of the 12th day of June, 2000, by and between
Xxxxxxx Central Holdings, Inc., a Delaware corporation (the "Company") and
Xxxx X. Xxxx (the "Investor").
WHEREAS, the Company wishes to issue and sell to the Investor 398,406
shares of Series D Convertible Preferred Stock, par value $.001 per share, of
the Company (the "Series D Preferred Stock") at $2.51 per share; and
WHEREAS, the Investor wishes to purchase the Series D Preferred Stock
on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, and for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. PURCHASE AND SALE OF STOCK.
1.1 Issuance of Series D Preferred Stock. The Company shall
adopt and file with the Secretary of State of the State of Delaware on or
before the Closing (as defined below) the certificate of designations,
setting forth the powers, preferences, rights, limitations and restrictions
applicable to the Series D Preferred Stock, in the form attached hereto as
Exhibit A (the "Certificate of Designations").
1.2 Sale of Series D Preferred Stock and Closing. Subject to
the terms and conditions set forth in this Agreement, and in reliance on the
representations and warranties set forth in this Agreement, the Company shall
issue and sell to the Investor at the Closing (as hereinafter defined) and
the Investor agrees to purchase from the Company, 398,406 shares of Series D
Preferred Stock at a purchase price per share of Two Dollars and Fifty-one
Cents ($2.51). The closing of the purchase and sale of the Series D
Preferred Stock (the "Closing") shall take place at the offices of Arnall
Golden & Xxxxxxx, LLP, counsel to the Company, on June 12, 2000, or at such
other time and place as the parties shall mutually agree (the "Closing
Date"). At the Closing, the Company shall deliver to the Investor
certificates for the shares of Series D Preferred Stock being purchased by
the Investor, registered in the Investor's name (or that of its nominee),
against delivery of an electronic wire transfer or a certified check payable
to the order of the Company representing the aggregate purchase price of
$999,999.06.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As of the Closing
Date (except where expressly indicated to be as of a date other than the
Closing Date), the Company hereby represents and warrants to the Investor as
follows:
2.1 Organization of the Company. The Company is a corporation duly
organized and validly existing under the laws of the State of Delaware. The
states in which the Company is qualified to do business are set forth on
Schedule 2.1. The Company has all necessary corporate
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power and authority to own, lease and operate its properties and conduct its
business as it is currently being conducted. Except as set forth on Schedule
2.1, the Company did not own, directly or indirectly, any equity interest in
any corporation, partnership, joint venture, or other entity and did not have
any subsidiaries as of March 7, 2000.
2.2 Corporate Power and Authority; Due Authorization. All corporate
action on the part of the Company, its officers, directors and stockholders
necessary for (i) the authorization, execution and delivery of this
Agreement, (ii) the performance of all obligations of the Company under this
Agreement and (iii) the authorization, issuance (or reservation for issuance)
and delivery of the Series D Preferred Stock being sold hereunder and the
Common Stock issuable upon conversion of the Series D Preferred Stock (the
"Conversion Stock") has been taken, and this Agreement constitutes a valid
and legally binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally, or by general
equitable principles.
2.3 No Conflict; Consents. Except as set forth on Schedule 2.3
hereto, and except for the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), state blue sky laws and the rules of the
NASDAQ Stock Market, Inc., the execution and delivery by the Company of this
Agreement and the transactions contemplated hereby (the "Transactions") do
not and will not (a) require the consent, approval or action of, or any
filing or notice to, any corporation, firm, person or other entity or any
public, governmental or judicial authority; (b) violate the terms of any
instrument, document or agreement to which the Company is a party, or by
which the Company or the property of the Company is bound, or be in conflict
with, result in a breach of or constitute (upon the giving of notice or lapse
of time, or both) a default under any such instrument, document or agreement
or result in the creation of any lien upon any of the property or assets of
the Company, except for such violations, conflicts, breaches and defaults
which, individually or in the aggregate, would not have a Material Adverse
Effect; (c) violate the Company's Certificate of Incorporation or Bylaws; or
(d) violate any order, writ, injunction, decree, judgment, ruling, law, rule
or regulation of any federal, state, county, municipal, or foreign court or
governmental authority applicable to the Company, the business or assets of
the Company, except for such violations which would not, individually or in
the aggregate, have a Material Adverse Effect. The Company is not subject
to, or a party to, any mortgage, lien, lease, agreement, contract,
instrument, order, judgment or decree or any other material restriction of
any kind or character which would prevent or hinder the continued operation
of the business of the Company after the Closing on substantially the same
basis as theretofore operated.
2.4 Ownership of Assets. The Company has title to all of its
properties and assets, other than leased or licensed property, in each case
free and clear of any liens, security interests, claims, charges, options
rights of tenants or other encumbrances, except as disclosed in Schedule 2.4
or reserved against in the Company's financial statements (as described in
Section 2.8(a) (to the extent and in the amounts so disclosed or reserved
against)) and except for liens arising from current taxes not yet due and
payable and other liens not having a Material Adverse Effect. All buildings,
machinery and equipment owned or leased by the Company are in good operating
condition and reasonable state of repair, subject only to ordinary wear and
tear. The Company has not received any notice of violation of any applicable
zoning regulation, ordinance or other
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law, regulation or requirement relating to its operations and properties,
whether owned or leased. All of the accounts receivable of the Company as of
the Closing will reflect actual transactions and will have arisen in the
ordinary course of business.
2.5 Capitalization. The authorized capital stock of the Company
consists of 10,000,000 shares of preferred stock, $.001 par value per share,
of which 5,600,000 shares of Series B Preferred Stock are outstanding and
850,000 shares of Series C Preferred Stock are outstanding, and 20,000,000
shares of common stock, $.001 par value per share ("Common Stock"), of which
3,861,372 shares are outstanding as of the date hereof. In addition, rights
to receive 5,705 shares of the Company's Common Stock, relating to 57,051
unconverted shares from the Company's 1997 reverse stock split ("Company
Conversion Rights"), are outstanding as of the date hereof. All outstanding
shares of the Company's Common Stock and the Company's Series B and Series C
Preferred Stock have been duly authorized, and are validly issued, fully paid
and nonassessable. Except as set forth in Schedule 2.5, no party has any
preemptive (whether statutory or contractual) rights in any capital stock of
the Company. Except for the Company Conversion Rights, and the Company's
outstanding stock options and warrants identified on Schedule 2.5, the
Company has no convertible securities, options, warrants, or other contracts,
commitments, agreements, understandings, arrangements or restrictions by
which it is bound to issue any additional shares of its capital stock or
other securities. All securities of the Company were offered and sold in
compliance with applicable Federal and state securities laws. Each and every
dividend of the Company, if any, whether paid in cash or other property, has
been declared and paid in compliance with applicable law, and the Company has
no further obligation with respect to such payment.
2.6 Compliance with Laws.
(a) The Company is in compliance with, and the Company operated any
businesses previously owned by it in compliance with all applicable laws,
orders, rules and regulations of all governmental authorities, including
applicable Environmental Laws, except for such noncompliance as would not,
individually or in the aggregate, have a Material Adverse Effect. The
Company has not received notice of any noncompliance with the foregoing.
(b) Neither the Company nor any other Persons providing services for
the Company have, to the knowledge of the Company, engaged in any
activities which would be a basis for exclusion from any otherwise
available Medicare, Medicaid or other federally funded programs under
Section 0000x - 0x xx Xxxxx 00 xx xxx Xxxxxx Xxxxxx Code, or prohibited
under any applicable portions of Section 1320a - 7b of such Title 42, or
regulations promulgated thereunder, or related state or local statutes or
regulations, including any "fraud and abuse" provisions, except where such
noncompliance has and will have, individually and in the aggregate, no
Material Adverse Effect.
(c) Without limiting the foregoing, the Company and any other person
or entity for whose conduct the Company is legally held responsible are in
compliance with all applicable federal, state, regional, local or
provincial laws, statutes, ordinances, judgments, rulings and regulations
relating to any matters of pollution, protection of the environment, health
or safety, or environmental regulation or control (collectively,
"Environmental Laws"), except where such noncompliance has and will have,
individually or in the aggregate, no Material Adverse Effect.
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Neither the Company, nor any other person or entity for whose conduct the
Company is legally responsible has received any notice, demand, request for
information, or administrative inquiry relating to any violation of an
Environmental Law or the institution of any suit, action, claim, or
proceedings alleging such violation or investigation by any governmental
authority or any third party of any such violation.
2.7 Licenses and Permits. The Company holds and is in compliance
with all licenses, permits, concessions, grants, franchises, approvals and
authorizations necessary or required for the use or ownership of its assets
and the operation of its business, except where the failure to hold such
license, permit, concession, grant, franchise, approval or authorization has
and will have, individually or in the aggregate, no Material Adverse Effect.
The Company has not received notice of any violations in respect of any such
licenses, permits, concessions, grants, franchises, approvals or
authorizations, which violations, individually or in the aggregate, would
have a Material Adverse Effect. No proceeding is pending or, to the
knowledge of the Company, threatened, which seeks revocation or limitation of
any such licenses, permits, concessions, grants, franchises, approvals or
authorizations, nor is there any basis therefor, the revocation or limitation
of which, individually or in the aggregate, would have a Material Adverse
Effect.
2.8 Liabilities and Obligations of the Company.
(a) Attached hereto as Schedule 2.8 are true, correct and complete
copies of the Company's balance sheets as of December 31, 1998 and December
31, 1999, and unaudited balance sheet as of March 31, 2000, and the related
statements of income, stockholders' equity and cash flows for the years and
three months then ended, together (except in the case of the financial
statements dated March 31, 2000) with the reports of independent public
accountants thereon (collectively, the "Company Financial Statements"). The
Company Financial Statements are complete, have been prepared in accordance
with United States generally accepted accounting principles, consistently
applied, fairly present in all material respects the financial condition of
the Company as of the respective dates thereof, and disclose all
liabilities of the Company, whether absolute, contingent, accrued or
otherwise, existing as of the date thereof that are of a nature required to
be reflected in financial statements prepared in accordance with generally
accepted accounting principles, and except for liabilities that,
individually or in the aggregate, would not have a Material Adverse Effect;
provided, however, that the interim financial statements are subject to
normal year-end adjustments which are not expected to be material in
amount.
(b) The Company has no liability or obligation (whether accrued,
absolute, contingent or otherwise) including, without limitation, any
liability that might result from an audit of its tax returns by any taxing
authority, except for (i) liabilities that, individually or in the
aggregate, would not have a Material Adverse Effect, (ii) the liabilities
and obligations of the Company that are disclosed or reserved against in
the Company Financial Statements or Schedule 2.8 hereto, to the extent and
in the amounts so disclosed or reserved against, and (iii) liabilities
incurred or accrued in the ordinary course of business since March 31, 2000
and liabilities incurred in connection with the Transactions.
(c) Except as disclosed in the Company Financial Statements or
Schedule 2.8, the Company is not in default with respect to any liabilities
or obligations, except for defaults that,
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individually or in the aggregate would not have a Material Adverse Effect,
and all such liabilities or obligations shown or reflected in the Company
Financial Statements or Schedule 2.8 and such liabilities incurred or accrued
subsequent to March 31, 2000 were incurred in the ordinary course of business
except as indicated in Schedule 2.8, and except for liabilities and
obligations, that, individually or in the aggregate, would not have a
Material Adverse Effect.
2.9 Taxes.
Except as to any noncompliance with any of the following provisions
that would not, individually or in the aggregate, have a Material Adverse
Effect:
(a) All tax returns required to be filed by the Company and/or its
Affiliated Group (as defined in Section 1504(a) of the Internal Revenue
Code of 1986, as amended) on or before the date hereof have been timely
filed with the appropriate tax authorities in all jurisdictions in which
such tax returns are required to be filed and all amounts shown as owing
thereon have been paid. All taxes which have become due or payable on or
prior to the date hereof, whether disputed or not, have been paid in full.
All taxes which are required to be collected or withheld by the Company and
its Affiliated Group on or prior to the date hereof have been so collected
or withheld. All deposits required by law to be made by the Company and its
Affiliated Group on or prior to the date hereof with respect to employees'
withholding taxes have been duly made. No employee of the Company or any
member of its Affiliated Group responsible for tax matters (i) has received
notice from any tax authority of the assessment or proposed assessment of
tax liabilities, disallowances, or assessments which remain unpaid and,
(ii) has knowledge of any fact or facts which exist(s) or has existed which
would constitute grounds for the assessment of any tax liability. There is
no examination currently in progress of the tax returns of the Company or
its Affiliated Group by any taxing authority for which any employee of the
Company or any of its Affiliated Group has received any notice, and, to the
knowledge of employees of the Company or any member of its Affiliated Group
responsible for tax matters based upon personal contact with any agent of
such tax authority, no such examination has been threatened by any taxing
authority.
(b) The Company has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations. The Company has not made any
payments which have not yet been reported on any tax return, is not
obligated to make any payments, and is not a party to any agreement that
under certain circumstances could obligate the Company and its Affiliated
Group to make any payments that will not be deductible under Section 280G
of the Code. The Company and its Affiliated Group has disclosed on its
federal income tax returns all positions taken therein that could give rise
to a substantial understatement of federal income tax within the meaning of
Section 6662 of the Code.
(c) Neither the Company nor its Affiliated Group has any contractual
obligation to indemnify any other person with respect to the payment of any
taxes of the other person which could have a Material Adverse Effect.
(d) The Company and its Affiliated Group's financial statements for
the year ended December 31, 1999 and the unaudited interim quarter ending
March 31, 2000 reflect an adequate reserve for deferred taxes established
for timing differences between book and tax accounting
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income/asset basis. The Company and its Affiliated Group have not recognized
a net tax asset for the future benefit of net operating loss carryovers and
research and experimentation tax credit carryovers.
2.10 Contracts, Agreements and Instruments Generally.
(a) Schedule 2.10 hereto consists of a true and complete list of all
contracts, agreements, commitments and other instruments (identified by
title, date and parties) (whether oral or written) to which the Company was
a party as of March 7, 2000 that involve a receipt or an expenditure by the
Company or require the performance of services or delivery of goods to, by,
through, on behalf of or for the benefit of the Company, which in each case
relates to a contract, agreement, commitment or instrument that requires
(or is reasonably expected to require) payments or provides (or is
reasonably expected to provide) for receipts in excess of $25,000 from
March 7, 2000 until March 7, 2001.
(b) The contracts, agreements, commitments and other instruments
listed or required to be listed on Schedule 2.10 or listed on a Schedule
referred to in Section 2.12 hereof are herein referred to as the "Material
Contracts". All of such Material Contracts were in full force and effect as
of March 7, 2000.
(c) None of the Company, and, to the knowledge of the Company, any
other party to any such contract, commitment or arrangement has breached
any provision of, or is in default under, the terms thereof, the breach of
or default under which would, individually or in the aggregate, have a
Material Adverse Effect; and there are no existing facts or circumstances
known to the Company that would prevent the work in process of the Company
or its contracts and agreements from maturing upon performance by the
Company into collectible accounts receivable in the aggregate in amounts
consistent with historical experience. Except as set forth on Schedule 2.10
or as reserved against in the Company Financial Statements, there are no
contracts or commitments that require the performance of services or
provision of goods by the Company at a direct cost for each such contract
or commitment known by the Company to be in excess of the revenue to be
derived pursuant to the terms of such contract or commitment, which,
individually or in the aggregate, would have a Material Adverse Effect.
Except for terms specifically described in Schedule 2.10, the Company has
not received any payment from any contracting party in connection with or
as an inducement for entering into any contract, agreement, policy or
instrument except for payment for actual services rendered or to be
rendered by the Company consistent with amounts historically charged for
such services.
2.11 Customer Contracts. With respect to each contract, agreement,
commitment or other instrument in effect to which the Company is a party with
any customer of the Company (each, a "Customer Contract"), all performance
warranties with respect to computer software represented in writing as owned
by or proprietary to the Company ("Owned Software") made by the Company in
any Customer Contract, including warranties with respect to capacity,
availability, downtime and response time, and Year 2000 compliance have been
satisfied in all material respects upon the terms and conditions and to the
extent provided for in such Customer Contract, except for failures to satisfy
which, individually or in the aggregate, would not have a Material Adverse
Effect.
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2.12 Intellectual Property; Computer Software.
(a) Schedule 2.12(A) hereto sets forth a complete and correct list,
as of March 7, 2000, of (i) all trademarks, trade names, service marks,
service names, and brand names (whether or not any of the same are
registered), and all patents and registered copyrights and all applications
for the foregoing, if any, (setting forth the registration, issue or serial
number of the patents and registered copyrights and a description of the
same) applicable to or used in the business of the Company; (ii) the owner
of such intellectual property and any registration thereof or application
thereof; and (iii) all licenses granted by or to the Company with respect
to any of the above (identified by title, date and parties) (not inclusive
of Customer Contracts). All such trademarks, trade names, service marks,
service names, brand names, copyrights and patents are owned by the Company
free and clear of all liens, claims, security interests and encumbrances,
except for such liens, claims, security interests and encumbrances as
would, individually or in the aggregate, not have a Material Adverse
Effect. Except as set forth on Schedule 2.12(A), the Company is not in
receipt of any notice of any violation of, and, to the Company's knowledge,
the Company is not violating the rights of others in any trademark, trade
name, service xxxx, copyright, patent, trade secret, know-how or other
intangible asset, except such violations as, individually or in the
aggregate, would not have a Material Adverse Effect.
(b) Schedule 2.12(B) contains a complete and accurate list of all
Owned Software as of March 7, 2000. Except as set forth on Schedule
2.12(B), the Company has title to the Owned Software, free and clear of all
claims, including claims or rights of employees, agents, consultants,
inventors, customers, licensees or other parties involved in the
development, creation, marketing, maintenance, enhancement or licensing of
such computer software. Except as set forth on Schedule 2.12(B) and except
for commercially available, over-the-counter "shrink-wrap" software, the
Owned Software is not dependent on any Licensed Software (as defined in
subsection (c) below) in order to operate fully in the manner in which it
is intended. The source code to the Owned Software has not been published
or disclosed to any other parties, except as set forth in the Customer
Contracts or as set forth on Schedule 2.12(B), and except pursuant to
contracts requiring such other parties to keep the Owned Software
confidential. To the knowledge of the Company, no such other party has
breached any such obligation of confidentiality.
(c) Schedule 2.12(C) contains a complete and accurate list as of
March 7, 2000 of all software (other than commercially available
over-the-counter "shrink-wrap" software) under which the Company is a
licensee, lessee or otherwise has obtained the right to use (the "Licensed
Software"). The Company has the right and license to use, sublicense,
modify and copy Licensed Software to the extent set forth in the respective
license, lease or similar agreement pursuant to which the Licensed Software
is licensed to the Company, free of any other limitations or encumbrances,
and the Company is in compliance with all applicable provisions of such
agreement, except for failures to comply which, individually or in the
aggregate, would not have a Material Adverse Effect. Except as disclosed on
Schedule 2.12(C), none of the Licensed Software has been incorporated into
or made a part of any Owned Software or any other Licensed Software. The
Company has not published or disclosed any Licensed Software to any other
party except in accordance with and as permitted by any license, lease or
similar agreement relating to the Licensed Software and except pursuant to
contracts requiring such other parties to keep the Licensed Software
confidential. No party to whom the Company has disclosed
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Licensed Software has, to the knowledge of the Company, breached such
obligation of confidentiality, except for such publications and disclosures
that, individually or in the aggregate, would not have a Material Adverse
Effect.
(d) The Owned Software and Licensed Software and commercially
available over-the-counter "shrink-wrap" software constitute all software
used in the businesses of the Company (collectively, the "Company
Software"). The Transactions will not cause a breach or default under any
licenses, leases or similar agreements relating to Company Software or
impair the Company's ability to use Company Software in the same manner as
such computer software is currently used by the Company. To the knowledge
of the Company, (i) the Company is not infringing any intellectual property
rights of any other person or entity with respect to Company Software, and
(ii) no other person or entity is infringing any intellectual property
rights of the Company with respect to Company Software, except for
infringements that, individually or in the aggregate, would not have a
Material Adverse Effect.
2.13 Labor Matters. Except as set forth on Schedule 2.13, within the
last three (3) years, the Company has not been the subject of any known union
activity or labor dispute, nor has there been any strike of any kind called
or, to the knowledge of the Company, threatened to be called against the
Company. The Company has not violated any applicable federal or state law or
regulation relating to labor or labor practices, except where such violation
has or will have, individually or in the aggregate, no Material Adverse
Effect. Schedule 2.13 sets forth a true, correct and complete list of
employer loans or advances from the Company to its employees as of March 7,
2000. The Company is in compliance with all applicable requirements of the
Immigration and Nationality Act of 1952, as amended by the Immigration and
Nationality Act of 1986 and the regulations promulgated thereunder
(hereinafter collectively referred to as the "Immigration Laws"), except
where such noncompliance has and will have, individually or in the aggregate,
no Material Adverse Effect.
2.14 Work-in-Process, Orders and Returns.
(a) Except as set forth on Schedule 2.14(A), except for any claims
specifically disclosed on other Schedules hereto, to the Company's
knowledge, there are no claims nor does the Company reasonably expect to
make or receive any claims to terminate Customer Agreements, or material
licenses, services, or other orders, or for refunds relating to Customer
Agreements, licenses, maintenance agreements, or other fees by reason of
alleged dissatisfaction with the Company's capabilities or performance
(including those related to Company Software), or defective or
unsatisfactory services or products, except as would not result in,
individually or in the aggregate, a Material Adverse Effect.
(b) Except as set forth on Schedule 2.14(B), the Company has not been
notified that the consummation of the Transactions will result in any
material cancellations or withdrawals of accepted and unfilled orders for
services or Company Software, or maintenance or other services and the
Company will inform Investor promptly upon receipt of any notification to
that effect received after the date hereof, except for cancellations or
withdrawals that, individually or in the aggregate, would not have a
Material Adverse Effect. To the knowledge of the Company, neither the
execution of this Agreement nor the consummation of the Transactions will
result in any material cancellations or withdrawals of accepted and
unfilled orders for the license or sales
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of Company Software, services or merchandise, except for cancellations or
withdrawals that, individually or in the aggregate, would not have a Material
Adverse Effect.
2.15 Absence of Certain Changes. Except as reflected on Schedule
2.15, or elsewhere in this Agreement or specifically identified on any
Schedules hereto, and since March 31, 2000, the Company has not:
(a) Suffered a Material Adverse Effect, or become aware of any
circumstances which might reasonably be expected to result in such a
Material Adverse Effect; or suffered any material casualty loss to the
Assets (whether or not insured), except for losses that, individually or in
the aggregate, would not have a Material Adverse Effect;
(b) Incurred any obligations specifically related to the Assets
(including Customer Agreements), except in the ordinary course of business
consistent with past practices;
(c) Permitted or allowed any of the Company's assets to be mortgaged,
pledged, or subjected to any lien or encumbrance, except for liens for
taxes not yet due and payable and liens and encumbrances that, individually
or in the aggregate, would not have a Material Adverse Effect;
(d) Written down the value of any inventory, contract or other
intangible asset, or written off as uncollectible any notes or accounts
receivable or any portion thereof, except for write-downs and write-offs in
the ordinary course of business, consistent with past practice and at a
rate no greater than during the latest complete fiscal year; cancelled any
other debts or claims, or waived any rights of substantial value, or sold
or transferred any of its material properties or assets, real, personal, or
mixed, tangible or intangible, except in the ordinary course of business
and consistent with past practice and except for those that, individually
or in the aggregate, would not have a Material Adverse Effect;
(e) Sold, licensed or transferred or agreed to sell, license or
transfer, any of the Assets, except in the ordinary course of business and
consistent with past practice;
(f) To the Company's knowledge, received notice of any pending or
threatened adverse claim or an alleged infringement of proprietary
material, whether such claim or infringement is based on trademark,
copyright, patent, license, trade secret, contract or other restrictions on
the use or disclosure of proprietary materials;
(g) Incurred obligations to refund money to customers, except in the
ordinary course of business, all of which will have no Material Adverse
Effect;
(h) Become aware of any event, condition or other circumstance
relating solely to the Company's assets (as opposed to any such event,
condition, or circumstance which is, for example, national or industry-wide
in nature) which might reasonably be expected to materially adversely
affect the Company's assets;
(i) Made any capital expenditures or commitments, any one of which is
more than $50,000, for additions to property, plant, or equipment;
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(j) Made any material change in any method of accounting or
accounting practice;
(k) Paid, loaned, guaranteed, or advanced any material amount to, or
sold, transferred, or leased any material properties or assets (real,
personal, or mixed, tangible or intangible) to, or entered into any
agreement, arrangement, or transaction with any of the Company's officers
or directors, or any business or entity in which any officer or director of
the Company, or any affiliate or associate of any of such Persons has any
direct or indirect interest; or
(l) Agreed to take any action described in this Section 2.15.
The Company and Investor acknowledge and agree that a decrease in the
market price of the Company's Common Stock is not a material adverse change.
2.16 Leases. Schedule 2.16 contains a list as of March 7, 2000 of
all leases pursuant to which the Company leases real or personal property.
As of March 7, 2000, all such leases were in full force and effect, and
except as set forth on Schedule 2.16, no event has occurred which is a
default or which with the passage of time will constitute a default by the
Company thereunder, nor has any such event occurred to the knowledge of the
Company which is a default by any other party to such lease. All property
leased by the Company as lessee is in the possession of the Company. Except
as indicated in Schedule 2.16, no consent of any lessor is required in
connection with the Transactions.
2.17 Litigation. Except as set forth in Schedule 2.17, (i) there are
no actions, proceedings or regulatory agency investigations against the
Company or, to the Company's knowledge, involving the Company's assets
pending (served) or threatened against the Company, (ii) the Company does not
know of any such action, proceeding or investigation against the Company, and
(iii) no such action, proceeding, or regulatory agency investigation has been
pending (served) during the three-year period preceding the date of this
Agreement.
2.18 Employee Benefit Plans: Employees.
Except as to any noncompliance with any of the following provisions
that would not, individually, or in the aggregate, have a Material Adverse
Effect:
(a) Schedule 2.18 sets forth a list of each "employee benefit plan"
(as defined by Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), and any other bonus, profit sharing,
pension, compensation, deferred compensation, stock option, stock purchase,
fringe benefit, severance, scholarship, disability, sick leave, vacation,
bonus, retention, or other plan, agreement, or arrangement (each such plan,
agreement or arrangement is referred to herein as an "Employee Benefit
Plan", and collectively, the "Employee Benefit Plans") that was in effect
as of March 7, 2000 for the benefit of (i) directors or employees of the
Company, (ii) former directors or employees of the Company, or (iii)
beneficiaries of anyone described in (i) or (ii) (collectively, "Company
Employees") or with respect to which the Company or any "ERISA Affiliate"
(hereby defined to include any trade or business, whether or not
incorporated, other than the Company, which has employees who are treated
pursuant to Section 4001(a)(14) of ERISA and/or Section 414 of the Code as
employees of a single employer which includes the Company) has any
obligation on behalf of any Company
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Employee. Except as disclosed on Schedule 2.18 attached hereto, there are no
other benefits to which any Company Employee is entitled for which the
Company has any obligation.
(b) [Intentionally Deleted]
(c) The Company has no obligation to contribute to or provide
benefits pursuant to, and has no other liability of any kind with respect
to, (i) a "multiple employer welfare arrangement" (within the meaning of
Section 3(40) of ERISA), or (ii) a "plan maintained by more than one
employer" (within the meaning of Section 413(c) of the Code).
(d) Except as otherwise set forth on Schedule 2.18 attached hereto,
the Company is not liable for any contribution, tax, lien, penalty, cost,
interest, claim, loss, action, suit, damage, cost assessment or other
similar type of liability or expense of any ERISA Affiliate (including
predecessors thereof) with regard to any Employee Benefit Plan maintained,
sponsored or contributed to by an ERISA Affiliate (if a like definition of
Employee Benefit Plan were applicable to the ERISA Affiliate in the same
manner as it applies to the Company), including, without limitation,
withdrawal liability arising under Title IV, Subtitle E, Part 1 of ERISA,
liabilities to the PBGC, or liabilities under Section 412 of the Code or
Section 302(a) of ERISA.
(e) The Company is in compliance in all respects with the applicable
requirements of Section 4980B of the Code and Section 601 et seq. of ERISA
(such statutory provisions and predecessors thereof are referred to herein
collectively as "COBRA").
(f) With respect to each Employee Benefit Plan and except as
otherwise set forth on Schedule 2.18 attached hereto:
(i) each Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code has received a determination letter from
the IRS to the effect that the Employee Benefit Plan is qualified under
Section 401 of the Code and that any trust maintained pursuant thereto is
exempt from federal income taxation under Section 501 of the Code, and
nothing has occurred or, to the knowledge of the Company, is expected to
occur that caused or could reasonably be expected to cause the loss of such
qualification or exemption or the imposition of any penalty or tax
liability;
(ii) all payments required by the Employee Benefit Plan or by law
(including all contributions, insurance premiums, premiums due the PBGC or
intercompany charges) with respect to all periods through the date hereof
have been made;
(iii) there are no violations of or failures to comply with ERISA
and the Code with respect to the filing of applicable reports, documents,
and notices regarding the Employee Benefit Plan with DOL, the IRS, the PBGC
or any other governmental authority, or any of the assets of the Employee
Benefit Plan or any related trust;
(iv) no claims, lawsuit, arbitration or other action has been
asserted or instituted or, to the knowledge of the Company, threatened in
writing against the Employee Benefit Plan, any trustee or fiduciaries
thereof, the Company or any ERISA Affiliate, any director, officer or
employee thereof, or any of the assets of the Employee Benefit Plan or any
related trust, except for routine claims for benefits;
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(v) any bonding required with respect to the Employee Benefit Plan
in accordance with the applicable provisions of ERISA has been obtained and
is in full force and effect;
(vi) the Employee Benefit Plan complies in all respects with and
has been maintained and operated in all respects in accordance with its
respective terms and the terms and the provisions of applicable law,
including, without limitation, ERISA and the Code (including rules and
regulations thereunder);
(vii) no "prohibited transaction" (within the meaning of Section
4975 of the Code and Section 406 of ERISA) has occurred or is reasonably
expected to occur with respect to the Employee Benefit Plan (and the
transactions contemplated by this Agreement will not constitute or directly
or indirectly result in such a "prohibited transaction") which has
subjected or, to the knowledge of the Company, could reasonably be expected
to subject the Company, any ERISA Affiliate or the Company, or any officer,
director or employee of the Company, any ERISA Affiliate, or the Company,
or the Employee Benefit Plan trustee, administrator or other fiduciary, to
a tax or penalty on prohibited transactions imposed by either Section 502
of ERISA or Section 4975 of the Code or any other liability with respect
thereto, which tax, penalty or liability could have a Material Adverse
Effect;
(viii) to the knowledge of the Company, the Employee Benefit Plan
is not under audit or investigation by the IRS or the DOL or any other
governmental authority and no such completed audit, if any, has resulted in
the imposition of any tax, interest or penalty.
(g) The Company is not subject to any liens, excise or other taxes
under ERISA, the Code or other applicable law relating to any Employee
Benefit Plan.
(h) None of the Employee Benefit Plans is subject to Title IV of
ERISA.
(i) In the case of any Employee Benefit Plan that is a Multiemployer
Plan, the Company has no withdrawal liability under Part 1 of Subtitle E of
Title IV of ERISA as a result of either a "complete withdrawal" (as defined
in Section 4203 of ERISA) or a "partial withdrawal" (as defined in Section
4205 of ERISA) by the Company from such Employee Benefit Plan occurring on
or prior to the date hereof.
(j) The consummation of the Transactions will not give rise to any
liability for any employee benefits, including, without limitation,
liability for severance pay, unemployment compensation, termination pay or
withdrawal liability, or accelerate the time of payment or vesting or
increase the amount of compensation or benefits due to any Company
Employee.
(k) No amounts payable under any Employee Benefit Plan will fail to
be deductible for federal income tax purposes by virtue of Section 280G of
the Code, as such Section of the Code is currently in effect.
(l) Except as set forth on Schedule 2.18 attached hereto, no Employee
Benefit Plan provides for any health benefits (other than under COBRA, the
Federal Social Security Act or any Employee Benefit Plan qualified under
Section 401(a) of the Code) to any Company Employee who, at the time the
health benefit is to be provided, is a former director or former
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employee of the Company (or a beneficiary of any such person), nor, to the
knowledge of the Company, have any representations, agreements, covenants or
commitments been made to provide such health benefits.
(m) Since June 30, 1999 and through the date hereof, except as set
forth on Schedule 2.18 attached hereto or as required by applicable law or
consistent with past practice, neither the Company nor any ERISA Affiliate
has, nor will it, (i) institute or agree to institute any new employee
benefit plan or practice for any Company Employee, (ii) make or agree to
make any change in any Employee Benefit Plan, (iii) make or agree to make
any increase in the compensation payable or to become payable by the
Company or any ERISA Affiliate to any Company Employee, other than
regularly scheduled increases, or (iv) except pursuant to this Agreement
and except for contributions required to provide benefits pursuant to the
provisions of the Employee Benefit Plans, pay or accrue or agree to pay or
accrue any bonus, percentage of compensation, or other like benefit to, or
for the credit of, any Company Employee.
(n) Any contribution, insurance premium, excise tax, interest charge
or other liability or charge imposed or required with respect to any
Employee Benefit Plan which is attributable to any period or any portion of
any period prior to the Closing shall, to the extent required by GAAP, be
reflected as a liability on the Company Financial Statements, including,
without limitation, any portion of the matching contribution required with
respect to the Company Plan for the plan year ending after the Closing
which is attributable to elective contributions made by Company Employees
in such plan prior to the Closing.
2.19 Brokers Fees and Expenses. Neither the Company nor any affiliate
thereof has retained or utilized the services of any advisor, broker,
finder, or intermediary, or paid or agreed to pay any fee or commission to
any other Person or entity for or on account of the Transactions, or had any
communications with any Person or entity which would obligate the Company to
pay any such fees or commissions.
2.20 Bank Accounts. Schedule 2.20 contains a true, complete and
correct list as of March 7, 2000 showing the name and location of each bank
or other institution in which the Company has any deposit account or safe
deposit box, together with a listing of account numbers and names of all
Persons authorized to draw thereon or have access thereto.
2.21 Business Practices. Neither the Company nor anyone acting on its
behalf has made any payment of funds of the Company prohibited by law, and no
funds of the Company have been set aside to be used for any payment
prohibited by law.
2.22 Insurance. The Company maintains property, fire, casualty,
general liability insurance and other forms of insurance relating to its
assets and the operation of its business against risks of the kind
customarily insured against and in amounts customarily insured (and, where
appropriate, in amounts not less than the replacement cost of the assets).
Schedule 2.22 lists all of the insurance policies maintained by the Company
as of March 7, 2000, which Schedule includes the name of the insurance
company, the policy number, a description of the type of insurance covered by
such policy, the dollar limit of the policy, and the annual premiums for such
policy.
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2.23 Shares to be Delivered. The Series D Preferred Stock that is
being purchased by the Investor hereunder, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration expressed
herein, (i) will be duly and validly issued, fully paid, and nonassessable,
(ii) will not have been issued in violation of any preemptive rights, (iii)
assuming the accuracy of the representations and warranties contained in
Section 3 hereof, will be issued in accordance with the registration or
qualification provisions of the Securities Act and any relevant state
securities laws or pursuant to a valid exemption therefrom, and (iv) will be
free of restrictions on transfer other than restrictions on transfer under
this Agreement and under applicable state and federal securities laws. The
Conversion Stock purchased pursuant to the terms of this Agreement has been
duly and validly reserved for issuance and, upon issuance in accordance with
the terms of the Certificate of Designations, will be duly and validly
issued, fully paid, and nonassessable and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws.
2.24 Accuracy of Securities Filings; Financial Statements.
(a) Except as set forth in Schedule 2.24, the Company has made all
filings with the SEC that it has been required to make under the Securities
Act and the Exchange Act, and has done so in a timely manner. The Company
has furnished, or otherwise made available, the Securities Filings to the
Investor. Each of the Securities Filings has complied with the Securities
Act and the Exchange Act in all material respects. None of the Securities
Filings, as of their respective dates, to the Company's knowledge, contain
any untrue statement of any material fact or omit to state a material fact
required therein to be stated or omit to state a material fact in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) The financial statements of the Company included and/or
incorporated by reference into the Securities Filings (including the
related notes and schedules) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby,
present fairly the financial condition of the Company as of the indicated
dates and the results of operations of the Company for the indicated
periods, are consistent with the books and records of the Company and,
except as disclosed on Schedule 2.24, do not contain any material item of
special or non-recurring or other income not earned in the ordinary course
of business; provided, however, that the interim financial statements are
subject to normal year-end adjustments which are not expected to be
material in amount.
(c) Except as and to the extent specifically disclosed in this
Agreement, on the date hereof, there are no liabilities or obligations of
the Company of any nature, whether liquidated, accrued, absolute, continued
or otherwise except for those (i) that are specifically reflected or
reserved against as to amount in the latest balance sheet contained in the
Securities Filings, or (ii) that arose thereafter in the ordinary course of
business, or (iii) that it specifically set forth on Schedule 2.8 or
Schedule 2.24 attached hereto.
2.25 Approvals. The execution and delivery of this Agreement and the
consummation of the Transactions by the Company will not require the consent,
approval, order or authorization of any governmental entity or regulatory
authority or any other Person under any statute, law, rule, regulation (other
than applicable federal and state securities laws), permit,
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license, agreement, indenture or other instrument to which the Company is a
party or to which any of its properties are subject, except for such
consents, approvals, actions, filings or notices the failure of which to make
or obtain will not have a Material Adverse Effect on the Company, and except
for any federal or state filings required by applicable securities laws, no
declaration, filing or registration with any governmental entity or
regulatory authority is required by the Company in connection with the
execution and delivery of this Agreement, the consummation of the
Transactions, or the performance by the Company of its obligations hereunder.
2.26 Accuracy of Representations. No representation or warranty by
the Company contained in this Agreement and no statement contained in any
certificate or schedule furnished to the Investor pursuant to the provisions
hereof contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein not
misleading. To the knowledge of the Company, there is no current event or
condition of any kind or character pertaining to the Company that may
reasonably be expected to have a Material Adverse Effect, except as disclosed
herein.
2.27 NASDAQ Rules. To the Company's knowledge, the consummation of
the Transactions will not result in violation by the Company of any
applicable NASDAQ rules or requirements.
2.28 Definitions. As used in this Agreement:
"knowledge" or "known" means or refers to the actual knowledge of
the chief executive officer or chief financial officer of the Company.
"Material Adverse Effect" means a material adverse effect upon,
or in, or circumstances likely to result in a material adverse effect on (i)
the business, assets, liabilities, operations, results of operations,
properties (including intangible properties), regulatory status or condition
(financial or otherwise) of the Company, taken as a whole, the effect of
which is equal to or greater than $250,000, (ii) the legality, validity,
binding effect or enforceability of this Agreement, or (iii) the ability of
the Company to perform its obligations under this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor
hereby represents and warrants, with respect to himself only, that:
3.1 Authorization. The Investor has full power and authority to enter
into this Agreement, and such agreement constitutes the Investor's valid and
legally binding obligation, enforceable in accordance with its terms, except
as the enforceability of any of the aforementioned agreements may be limited
by bankruptcy, insolvency, reorganization, moratorium, or other similar laws
relating to or affecting the rights of creditors generally and except that
the remedy of specific performance and injunctive relief and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of any court before which any proceeding therefor may be brought.
3.2 Purchase Entirely for Own Account. This Agreement is made with
such Investor in reliance upon such Investor's representation to the Company,
which by the Investor's execution of this Agreement such Investor hereby
confirms, that the Series D Preferred Stock to
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be received by such Investor and the Conversion Stock (collectively, the
"Securities") will be acquired for investment for such Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Investor has no present
intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking,
agreement or arrangement with any Person to sell, transfer or grant
participations to such Person or to any third Person, with respect to any of
the Securities.
3.3 Disclosure of Information. The Investor represents that he has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Securities and the
business, properties, prospects and financial condition of the Company. The
Investor also acknowledges that he is a member of the Board of Directors of
the Company and receives information regarding the Company incident with such
position. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement
or the right of the Investor to rely thereon.
3.4 Investment Experience. The Investor is an investor in securities
of companies in the development stage and acknowledges that he is able to
fend for himself, can bear the economic risk of his investment, and has such
knowledge and experience in financial or business matters that he is capable
of evaluating the merits and risks of the investment in the Securities.
3.5 Accredited Investor. The Investor is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act, as presently in effect.
3.6 Restricted Securities. The Investor understands that the
Securities he is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances.
In this connection, the Investor represents that he is familiar with SEC Rule
144, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.
3.7 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, the Investor further agrees not to make
any disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such Registration Statement; or
(b) (i) The transferee has agreed in writing for the benefit of the
Company to be bound by this Section 3, (ii) Investor shall have notified
the Company of the proposed disposition, and (iii) if reasonably requested
by the Company, the Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company that such
disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144.
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Notwithstanding the provisions of paragraphs (a) and (b) above, no such
registration statement or opinion of counsel shall be necessary for a
transfer by the Investor by gift, will or intestate succession, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he or she were the Investor hereunder.
4. LEGENDS. It is understood that the certificates evidencing the
Securities may bear the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by applicable state securities laws.
5. COMPANY'S OBLIGATIONS AT CLOSING. At the Closing, the Company
shall deliver to the Investor:
5.1 Stock Certificates. A stock certificate representing 398,406
shares of Series D Preferred Stock;
5.2 Opinion of Company Counsel. An opinion from Arnall Golden &
Xxxxxxx, LLP, counsel for the Company, dated as of the Closing, in the form
attached hereto as Exhibit B.
5.3 Resolutions. A copy of resolutions duly adopted by the Board of
Directors of the Company authorizing the execution, delivery, and performance
of this Agreement and each of the Exhibits hereto to which the Company is a
party and a certificate of the secretary of the Company stating that such
resolutions were duly adopted and are in full force and effect as of such
date and setting forth the incumbency of each person executing this Agreement
or any document required by this Section on behalf of the Company.
6. INVESTOR'S OBLIGATIONS AT CLOSING. At the Closing, the Investor
shall deliver to the Company:
6.1 Purchase Price. The purchase price as specified in Section 1.2.
7. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
7.1 Definitions. For purposes of this Section 7:
(a) The term "Closing Date" means the date of this Agreement.
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(b) The term "Form S-3" means such form under the Securities
Act as in effect on the date hereof or any registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents
filed by the Company with the SEC.
(c) The term "Form S-4" means such form under the Securities
Act as in effect on the date hereof or any registration form under the
Securities Act subsequently adopted by the SEC for corporate combinations and
exchange offers which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any permitted transferee or
assignee thereof.
(e) The term "Person" means an individual, a corporation, a
limited liability company, a partnership, an association, a trust or any
other entity organization, including a governmental entity.
(f) The terms "register", "registered", and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(g) The term "Registrable Shares" means (i) the Company's
Common Stock issuable or issued upon conversion of the Series D Preferred
Stock purchased pursuant to this Agreement, and (ii) any Common Stock or
other securities issued or issuable in respect of shares referenced in (i)
above, upon any stock split, stock dividend, recapitalization, or similar
event; excluding in all cases, however, any Registrable Securities sold by a
Person in a transaction in which such Person's rights under this Section 7
are not assigned.
(h) The term "SEC" means the Securities and Exchange Commission.
(i) The term "Subsidiary" means, with respect to any Person,
any corporation, limited liability company, or partnership of which such
Person owns, either directly or through its subsidiaries or affiliates, more
than fifty percent (50%) of (i) the total combined voting power of all
classes of voting securities in the case of a corporation or (ii) the capital
or profit interests therein in the case of a partnership.
7.2 Request for Registration. Upon request of the Investor, the
Company will use its best efforts to file within 45 days of a request from
Investor a registration statement with the SEC (utilizing Form S-3 or a
successor form thereto and Rule 415 to the extent available) to register
Registrable Shares as requested by the Investor. The Company shall not be
required to file more than three such registration statements (excluding any
registration statement which is delayed pursuant to Section 7.4(e) below and
through which the Investor is unable to register eighty percent (80%) or more
of the amount of Registrable Shares that Investor originally
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requested to register in such registration statement), and no such filing
shall be made prior to the date which is six months after the Closing Date.
7.3 Company Registration. If the Company at any time proposes to
register an offering of its securities under the Securities Act, either for
its own account or for the account of or at the request of one or more
Persons holding securities of the Company, the Company will:
(a) give written notice thereof to the Investor (which shall
include a list of the jurisdictions in which the Company intends to attempt
to qualify such securities under the applicable blue sky or other state
securities laws) within 10 days of its receipt of a request from one or
more Persons holding securities of the Company to register securities, or
from its decision to effect a registration of securities for its own
account, whichever first occurs; and
(b) use its best efforts to include in such registration and in
any underwriting involved therein, all the Registrable Shares specified in
a written request by the Investor made within 30 days after receipt of such
written notice from the Company, except as set forth in Section 7.4(e)
below and subject to the currently existing piggyback rights referenced in
Section 7.10.
7.4 Obligations of the Company. If and whenever pursuant to the
provisions of this Section 7 the Company effects registration of Registrable
Shares under the Securities Act and state securities laws, the Company shall:
(a) Prepare and file with the SEC a registration statement with
respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for a period not to
exceed two years after the filing (but which period shall be extended by
the duration of any delay periods under clause (e) below);
(b) Use its best efforts to register or qualify the securities
covered by such registration statement under the securities or blue sky
laws of such jurisdictions as the Investor shall reasonably request, and do
any and all other acts and things which may be necessary or advisable (in
the reasonable opinion of Investor) to enable Investor to consummate the
disposition thereof; provided, however, that in no event shall the Company
be obligated to qualify to do business in any jurisdiction where it is not
now so qualified or to take any action which would subject it to the
service of process in suits other than those arising out of the offer or
sale of the securities covered by such registration statement in any
jurisdictions where it is not now so subject;
(c) As promptly as practicable prepare and file with the SEC
such amendments and supplements to any registration statement and
prospectus used pursuant to or in connection with this Agreement as may be
necessary to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all of
such securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement or for such shorter period as may be required
herein; and
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(d) Furnish to Investor such number of conformed copies of its
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits, such number of copies of the
prospectus comprised in such registration statement (including each
preliminary prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act), and such other related documents as
Investor may reasonably request in order to facilitate the disposition of
the Registrable Shares to be registered.
(e) Anything in this Agreement to the contrary notwithstanding:
(i) The Company may defer the filing ("Filing") of any
registration statement or suspend the use of a prospectus under a currently
effective registration statement under this Agreement at its discretion for
"Good Cause." "Good Cause" means either if (1) the Company is engaged in
active negotiations with respect to the acquisition of a "significant
subsidiary" as defined in Regulation S-X promulgated by the SEC under the
Exchange Act and the Securities Act which would in the opinion of counsel
for the Company be required to be disclosed in the Filing; or (2) in the
opinion of counsel for the Company, the Filing would require the inclusion
therein of certified financial statements other than those in respect of
the Company's most recently ended full fiscal year and any preceding full
fiscal year, and the Company may then, at its option, delay the imposition
of its registration obligations hereof until the earlier of (A) the
conclusion or termination of such negotiations, or the date of availability
of such certified financial statements, whichever is applicable, or (B) 60
days from the date of the registration request.
(ii) In the event the Company has deferred a requested
Filing, pursuant to the preceding paragraph, such deferral period shall end
if the Company registers shares for resale by another stockholder of the
Company. In the event the Company undertakes an underwritten public
offering to issue the Company securities for cash during any period in
which a requested Filing has been deferred or if the registration of which
the Company gives notice under Section 7.3(a) is for an underwritten public
offering to issue the Company securities for cash, the Company shall
include the Registrable Securities in such underwritten offering subject to
(A) the right of the managing underwriters to object to including such
shares, (B) Section 7.10, and (C) the condition that the Investor selling
Registrable Shares in such underwritten offering shall cooperate in the
registration process in all material respects, including execution by the
Investor of the underwriting agreement agreed to by the Company and the
underwriters.
(iii) If the managing underwriter elects to limit the
number or amount of securities to be included in any registration
referenced in the preceding paragraph or in Section 7.3(a), all Persons
holding securities of the Company (including the Investor) who hold
registration rights and who have requested registration (collectively, the
"Security Holders") shall, subject to Section 7.10 hereof, participate in
the underwritten public offering pro rata based upon the ratio of the total
number or amount of securities to be offered in the offering to the total
number or amount of securities held by each Security Holder (including the
number or amount of securities which each such Security Holder may then be
entitled to receive upon the exercise of any option or warrant, or the
exchange or conversion of any security or loan, held by such Security
Holder). If any such Security Holder would thus be entitled to include more
securities than such Security Holder requested to be registered, the excess
shall be allocated
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among the other Security Holders pro rata in a manner similar to that
described in the previous sentence.
(iv) The Company may amend any registration statement to
withdraw registration of the Investor's Registrable Shares if Investor
fails or refuses to cooperate in full and in a timely manner with all
reasonable requests relating to such registration and the public offering
generally made by the Company, the underwriters (if any), their respective
counsel and the Company's auditors.
7.5 Expenses. Without regard to whether the registration statement
relating to the proposed sale of the Registrable Shares is made effective or
the proposed sale of such shares is carried out, the Company shall pay the
fees and expenses in connection with any such registration including, without
limitation, legal, accounting and printing fees and expenses in connection
with such registration statements, the registration filing and examination
fees paid under the Securities Act and state securities laws and the filing
fees paid to the National Association of Securities Dealers, Inc.
Notwithstanding the foregoing, the Investor shall be responsible for the
payment of underwriting discounts and commissions, if any, and applicable
transfer taxes relating to the Registrable Shares sold by Investor and for
the fees and charges of any attorneys or other advisers retained by Investor.
7.6 Indemnification. In the event any Registrable Shares are
included in a registration statement under this Section 7:
(a) To the extent permitted by law, with respect to each
registration, qualification, or compliance that has been effected pursuant
to this Agreement, the Company will indemnify and hold harmless Investor,
his legal counsel and accountants (each a "Representative"), and any
underwriter (as defined in the Securities Act) for Investor and any
controlling Person of such underwriter against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under
the Securities Act, the Exchange Act or other federal or state law, insofar
as such expenses, losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained
in such registration statement, including any preliminary prospectus or
final prospectus contained therein, offering circular or other document or
any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required or allegedly required to
be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any other federal or state securities
law or any rule or regulation promulgated under the Securities Act, the
Exchange Act or any other federal or state securities law; and the Company
will pay Investor, Investor's Representative, underwriter and any
controlling Person of such underwriter or controlling Person any legal or
other expenses reasonably incurred by such Person in connection with
investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such
loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation
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that occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by Investor.
(b) To the extent permitted by law, Investor will indemnify and
hold harmless the Company, each of the Company's directors, each of the
Company's officers who has signed the registration statement, each Person,
if any, who controls the Company within the meaning of the Securities Act,
any underwriter, any other Holder selling securities in such registration
statement and any controlling Person of any such underwriter or other
Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing Persons may become subject, under
the Securities Act, the Exchange Act or other federal or state law, insofar
as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by the Investor
expressly for use in connection with such registration; and the Investor
will pay any legal or other expenses reasonably incurred by any Person
intended to be indemnified pursuant to this subsection, in connection with
investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without
the consent of the Investor, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this
subsection exceed the net proceeds after unreimbursed expenses and
commissions from the offering received by Investor.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume the defense of such
action, with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified
parties that may be represented without conflict by one counsel) shall have
the right to retain one separate counsel, with the fees and expenses to be
paid by the indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified
party and any other party represented by such counsel in such proceeding.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action, if prejudicial to
its ability to defend such action, shall relieve such indemnifying party of
its liability to the indemnified party under this Section 7.6 only to the
extent that the indemnifying party has been injured by the delay. The
omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party
otherwise than under this Section.
(d) If the indemnification provided for in this Section is held
by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying
such indemnified party hereunder, shall contribute to the amount paid or
payable
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by such indemnified party as a result of such loss, liability, claim, damage,
or expense in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and
of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
(e) No indemnifying party, in defense of any such claim or
litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnifying party of a release from all liability in
respect to such claim or litigation.
(f) To the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in
connection with any underwritten public offering are in conflict with the
foregoing provisions, the provisions in this Agreement shall control.
(g) The obligations of the Company and the Investor under this
Section 7.6 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 7.6, and
otherwise.
7.7 Information by the Investor. The Investor of Registrable
Securities shall furnish to the Company such information regarding the
Investor and the distribution proposed by him as the Company may reasonably
request in writing and as shall reasonably be required in connection with any
registration or qualification referred to in this Section 7.
7.8 SEC Rule 144 Reporting and Reports Under Securities Exchange
Act. With a view to making available to the Investor the benefits of SEC
Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit the Investor to sell
securities of the Company to the public without registration or pursuant to a
registration on Form S-3 or its successor, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times from and after ninety
(90) days following the effective date of the first registration statement
filed by the Company for the offering of its securities to the general
public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the Exchange Act, as is necessary to
enable the Investor to utilize Form S-3 or its successor for the sale of
his Registrable Securities, such action to be taken as soon as practicable
after the end of the fiscal year in which the first registration statement
filed by the Company for the offering of its securities to the general
public is declared effective;
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(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act after it has become subject to such reporting requirements; and
(d) furnish to the Investor, so long as the Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC
Rule 144 (at any time from and after ninety (90) days following the
effective date of the first registration statement filed by the Company for
an offering of the securities to the general public), the Securities Act
and the Exchange Act (at any time after it has become subject to such
reporting requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 or its successor (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company (at any time after it has become subject to such reporting
requirements), and (iii) such other information as may be reasonably
requested in availing the Investor of any rule or regulation of the SEC
which permits the selling of any such securities without registration or
pursuant to such Form S-3 or its successor.
7.9 Transfer or Assignment of Registration Rights. The rights to
cause the Company to register Registrable Securities pursuant to this Section
7 may be transferred or assigned (but only with all related obligations) by
the Investor to a transferee or assignee of such securities, provided: (a)
the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and of
the securities with respect to which such registration rights are being
assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement; (c) such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act; and (d) such assignment shall only be
effective if it complies with all applicable federal and state securities
laws. For the purposes of determining the number of shares of Registrable
Securities held by a transferee or assignee, the holdings of transferees and
assignees of a partnership who are partners or retired partners of such
partnership (including spouses and ancestors, lineal descendants and siblings
of such partners or spouses who acquire Registrable Securities by gift, will
or intestate succession) shall be aggregated together and with the
partnership.
7.10 Priority and Limitation on Subsequent Registration Rights.
(a) The parties hereto acknowledge that the rights to
registration contained herein shall be subject to (i) the registration
rights contained in Section 2(k) of those certain Registration Rights
Agreements ("Registration Rights Agreements") dated October 6, 1996 by and
among InfoMed Holdings, Inc. (as predecessor in interest to the Company)
and certain shareholders of the Company named therein, the registration
rights granted pursuant to that certain Second Amended and Restated
Agreement and Plan of Merger and Investment Agreement dated as of October
25, 1999 among MCS, Inc., Mestek, Inc., the Company, the Investor, Xxxxxxx
X. Xxxx and E. Xxxxxxx Xxxx (the "MCS Merger Agreement"), and (iii) the
registration rights granted pursuant to that certain Agreement and Plan of
Merger dated as of July 12, 1999 among CareCentric Solutions, Inc., Xxxxxxx
Acquisition Corporation and the Company (the "CareCentric Merger
Agreement"); provided that the registration rights set forth in the
Registration Rights Agreements, the MCS Merger Agreement and the
CareCentric Merger
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Agreement shall only have priority over the registration rights granted
pursuant to this Agreement to the extent required in such agreements and to
the extent that any such prior rights have not been waived or amended.
(b) Subject to Section 7.10(d), the Company will not grant any
right of registration under the Securities Act relating to any of its
equity securities to any person or entity other than pursuant to this
Agreement unless the Investor shall be entitled to have included in such
registration all Registrable Shares requested by Investor to be so included
prior to the inclusion of any securities requested to be registered by the
persons or entities entitled to any such other registration rights, other
than securities subject to the Registration Rights Agreements, the MCS
Merger Agreement, and the CareCentric Merger Agreement, which shall have
priority (but only to the extent that such prior rights have not been
waived or amended).
(c) Subject to Section 7.10(d), for so long as the Investor
owns securities representing 20% or more of the voting power of the Company
on a fully diluted basis, and except as expressly set forth in this Section
7.10, no other Person shall be entitled to "piggyback" or participate in
any of the demand registrations that Investor initiates pursuant to Section
7.2 without such Investor's prior written consent.
(d) The parties agree that the rights to registration contained
herein shall be pari passu with the rights to registration granted in (i)
that certain Secured Convertible Credit Facility and Security Agreement
between the Company and the Investor, dated of even date herewith, (ii)
that certain Warrant, dated of even date herewith, granted to Mestek, Inc.
("Mestek") in lieu of certain voting rights previously held by Mestek, and
(iii) that certain Warrant to be granted to Mestek in consideration of its
agreement to issue its guaranty on certain senior secured indebtedness of
the Company, terms of which indebtedness are currently being negotiated
between the Company and a commercial bank.
7.11 Suspension of Registration Rights. The right of any Holder to
request registration of shares as provided in this Section 7 shall be
suspended during any period of time that all of the Registrable Securities
held and entitled to be held (as a result of conversion of Series D Preferred
Stock held) by the Investor may immediately be sold under SEC Rule 144.
8. MISCELLANEOUS.
8.1 Survival. The warranties, representations and covenants of the
Company and the Investor contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing
for a period of one (1) year, and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Investor or the Company prior to the Closing.
8.2 Indemnity by the Company.
(a) The Company shall indemnify, defend and hold harmless the
Investor from and against any and all losses, damages, costs and expenses
(including reasonable attorneys' fees but excluding claims for lost profit)
("Damages") resulting from, arising from or caused by any breach of in any
of the representations and warranties of the Company contained
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in this Agreement or any breach by the Company of any covenant contained
herein, to the extent that such breach causes any diminution in value of the
Investor's investment in the Company.
(b) In no event shall the Company be liable to the Investor
with respect to any breaches of representations and warranties or covenants
contained in this Agreement unless the aggregate Damages therefrom exceed
$50,000, at which time all such Damages may be claimed in full. In no event
shall the aggregate liability of the Company for Damages under this
Agreement exceed $1,000,000.
(c) With respect to any indemnifiable claim hereunder, the
amount recoverable by the Investor shall take into account any
reimbursements realized by the Investor from insurance policies or other
indemnification sources, arising from the same incident or set of facts or
circumstances giving rise to the claim for indemnification. Upon the
payment of the indemnified claim from the Company to the Investor, the
Company shall have a right of subrogation with respect to any insurance
proceeds or other rights to third party reimbursement for such claims held
by the Investor.
8.3 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
8.4 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware, without regard to the conflict of
law principles of said State.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.7 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be
delivered (a) by hand, (b) by U.S. mail, certified mail, return receipt
requested, or (c) by facsimile to the party to be notified, at the address
indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice
to the other parties. Notices shall be deemed to have been given and served
(a) where delivered by hand, at time of delivery, (b) where delivered by U.S.
mail, on acknowledgment of receipt as shown by the date indicated on the
return receipt as having been received, and (c) where delivered by facsimile,
24 hours after transmission confirmation by the transmitting machine unless,
within those 24 hours the intended recipient has informed the sender that the
transmission was received in an incomplete or garbled form, or the
transmission report of the sender indicates a faulty or incomplete
transmission. If such receipt is on a day that is not a working day or is
later than 5 p.m. (local time) on a working day, the notice shall be deemed
to have been given and served on the next working day.
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8.8 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to the Investor upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
the Investor, nor shall it be construed to be a waiver of any such breach or
default or an acquiescence thereto, or to any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character
on the part of the Investor of any breach or default under this Agreement, or
any waiver on the part of the Investor of any provisions or conditions of
this Agreement, must be made in writing and shall be effective only to the
extent specifically set forth in such writing.
8.9 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements
in addition to any other relief to which such party may be entitled.
8.10 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders
of a majority of the Common Stock issued or issuable upon conversion of the
Series D Preferred Stock. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each holder of any Securities
purchased under this Agreement at the time outstanding (including securities
into which such Securities are convertible), each future holder of all such
Securities, and the Company.
8.11 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provisions were so excluded and shall be enforceable
in accordance with its terms.
8.12 Entire Agreement. This Agreement, the documents referred to
herein and the documents delivered in connection herewith constitute the
entire agreement among the parties and no party shall be liable or bound to
any other party in any manner by any warranties, representations, or
covenants except as specifically set forth herein or therein.
8.13 No Third Party Beneficiaries. Nothing in this Agreement is
intended to confer upon any person other than the parties hereto any right or
remedies.
[signatures appear on the following page]
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IN WITNESS WHEREOF, the parties have executed this Series D Stock
Purchase Agreement as of the date first above written.
XXXXXXX CENTRAL HOLDINGS, INC.
By: /s/ R. Xxxxx Xxxxx
------------------------------
Name:
Title:
Xxxxxxx Central Holdings, Inc.
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
Attention: R. Xxxxx Xxxxx
President and Chief Executive Officer
INVESTOR:
/s/ Xxxx X. Xxxx
------------------------------
Xxxx X. Xxxx
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
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EXHIBIT A
CERTIFICATE OF DESIGNATIONS
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EXHIBIT B
LEGAL OPINION
