EXHIBIT 10.6
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement"), is made as of this ____
day of September, 2001, between NETPLEX SYSTEMS, INC., a Delaware corporation
("Systems"), and WATERSIDE CAPITAL CORPORATION, a Virginia corporation
(collectively, with its successors and assigns, the "Investor").
R E C I T A L S
---------------
A. The Netplex Group, Inc., New York corporation ("Group") has authorized
40,000,000 shares of common stock (the "Group Common Stock");
B. Group has also authorized 6,000,000 shares of Preferred Stock, of which
1,500 shares are owned by the Investor and have been designated Class C
Preferred Stock (the "Investor Group Preferred Stock") with such terms as have
been set forth in the Group's Certificate of Incorporation, as amended (the
"Group Certificate of Incorporation");
C. Group holds 1,000 shares of Preferred Stock of Systems, designated
Class A Preferred Stock (the "Systems Preferred Stock").
D. The Investor holds a warrant (the "Investor Warrant") exercisable for
300,000 shares of Group Common Stock.
E. The Investor has executed a limited guaranty of up to a maximum of
$400,000 of a $3,000,000 revolving credit facility extended to Systems.
F. Contemporaneously with the execution and delivery of this Agreement,
pursuant to that certain Master Agreement between Group and Systems and the
Investor (the "Master Agreement"):
(a) Group redeems from WSCC 1,500 shares of the Investor Group
Preferred Stock for $1,000,000 cash and two secured commercial promissory notes
in the original principal amounts of $900,000 and $154,697.45, respectively, and
Investor surrenders the Investor Warrant to Group; and
(b) WSCC purchases from Group 1,000 shares of Systems Preferred
Stock for $1,000,000 cash.
G. One of the conditions to the execution of and entry into the Master
Agreement and the Investor Guaranty by the Investor is the execution and
delivery of this Agreement by Systems.
NOW, THEREFORE, in consideration of the following mutual covenants and
other good and valuable consideration, its receipt and sufficiency acknowledged,
Systems and the Investor agree:
1
ARTICLE 1
BOARD OF DIRECTORS
Section 1.1 Election of Board. Systems will cause the appointment of an
individual designated by the Investor to its Board of Directors. The director
designated by the Investor is referred to as the "Investor Director." In the
event the Investor's designee/nominee is not elected by Systems' shareholders at
any such meeting, the Investor shall have the right to appoint an individual
(reasonably acceptable to Systems) to receive notice of, attend and observe all
meetings of the Board of Directors. Any Investor Director who is not an employee
of Systems shall be entitled to receive those fees and benefits, including the
issuance of stock options, afforded the other non-employee members of the Board
of Directors, plus out-of-pocket expenses.
Section 1.2 Removal of Investor Designee. Any Investor Director may be
removed during his or her term of office, without cause, by and only by the
written consent of the Investor.
Section 1.3 Insurance. Systems shall maintain directors' and officers'
liability insurance coverage consistent with its current coverage.
ARTICLE 2
SPECIAL RIGHTS
Section 2.1 General. In addition to such rights as are forth in the
Articles of Incorporation of Systems, the Investor shall have the rights set
forth in this Article 2.
Section 2.2 Investor Put of Systems Preferred Stock. At any time after the
earliest of (a) a Change of Control (as defined below) and, (b) the occurrence
of an event of default by Systems under the Master Agreement or any documents
evidencing, guaranteeing, securing or executed by Systems in connection with the
execution of the Master Agreement and, (c) the failure of Systems to make timely
dividend payments on the Investor Systems Preferred Stock and (d) System
defaults in its payment or other material obligations under that certain credit
facility with American Commercial Financial Corporation, the Investor shall have
the right to require Systems to redeem or repurchase up to all of the shares of
the Investor Systems Preferred Stock for $1,000,000, plus accrued and unpaid
dividends. If a redemption has not occurred by December 31, 2003, the Investor
shall have the right to require Systems to convert up to all of the shares of
Systems Preferred Stock into shares of Systems Common Stock at the rate of 200
shares of Systems Common Stock for each share of Systems Preferred Stock.
Following such notice, Systems shall within 5 business days convert all of such
outstanding shares of Systems Preferred Stock held by the Investor by delivering
to the Investor a stock certificate in the appropriate amount of shares of
Systems Common Stock. A "Change of Control" shall be deemed to occur on (y) the
date Xxxx Xxxxx ("Xxxxx") shall cease to be the Chairman of the Board of
Systems, or (z) any consolidation, merger, reorganization, sale of substantially
all the assets of Systems or other similar transaction with or into any other
corporation or other entity or person, or any other corporate reorganization in
which the shareholders of Systems immediately before such consolidation, merger
or reorganization, or any transaction or series of related transactions do not
hold shares possessing a majority of votes in the election of directors
2
immediately after such consolidation, merger or reorganization, or any
transaction or series of transactions; provided, however, a Change of Control
caused by the Systems Rights Offering, as defined in the Master Agreement, shall
not be deemed a Change in Control under this Section 2.2. If Systems voluntarily
redeems the Investor Systems Preferred Stock on or before December 31, 2003,
Systems shall pay the Investor a $133,000 early redemption fee.
ARTICLE 3
TERMINATION
This Agreement, and the respective rights and obligations of the parties,
shall terminate on the satisfaction by Systems, of all of the respective
Obligations, as defined in the Master Agreement, of each, this Agreement and any
other document entered by the parties in connection therewith.
ARTICLE 4
MISCELLANEOUS
Section 4.1 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given when delivered by hand or
mailed via a nationally recognized overnight delivery service, by first class
mail registered or certified mail (air mail if to or from outside the United
States), postage prepaid, facsimile transmission that is acknowledged as
received by the recipient, if to the Investor, at 000 Xxxx Xxxx Xxxxxx, Xxxxx
0000, Xxxxxxx Xxxxxxxx 00000, if to Systems at 0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx
000, XxXxxx, XX 00000, or to such other address as the addressee shall have
furnished to the other parties in the manner prescribed by this Section 4.1.
Section 4.2 Specific Performance. The rights of the parties under this
Agreement are unique and, accordingly, the parties shall have the right, in
addition to such other remedies as may be available to any of them at law or in
equity, to enforce their rights hereunder by actions for specific performance in
addition to any other legal or equitable remedies they might have to the extent
permitted by law.
Section 4.3 Entire Agreement. This Agreement, the Master Agreement and the
documents contemplated thereby, constitute the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings between them or any of them as to such subject
matter.
Section 4.4 Waivers and Further Agreements. Any of the provisions of this
Agreement may be waived by an instrument in writing with the consent of the
party or parties whose rights are being waived.
Section 4.5 Amendments. This Agreement may be amended by and shall be
effective upon the receipt of the written consent of Systems and the Investor.
Section 4.6 Assignment: Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
heirs, executors, legal
3
representatives, successors and permitted transferees, except as may be
expressly provided otherwise herein.
Section 4.7 Severability. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement and such invalid, illegal
and unenforceable provision shall be reformed and construed so that it will be
valid, legal, and enforceable to the maximum extent permitted by law.
Section 4.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 4.9 Section Headings. The headings contained in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 4.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive laws of the Commonwealth of
Virginia.
Section 4.11 Jurisdiction and Venue. Systems consents to the jurisdiction
of the United States District Court for the Eastern District of Virginia,
Norfolk Division, and of all Virginia state courts sitting in Norfolk, Virginia,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising under this Agreement or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in such court.
IN WITNESS, the undersigned have executed this Investor Rights Agreement
as of the day and year first above written.
NETPLEX SYSTEMS, INC.
By:
---------------------------------------
Xxxx X. Xxxxx, Chief Executive Officer
WATERSIDE CAPITAL CORPORATION
By:
---------------------------------------
---------------------------------------
4
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement"),
made as of this 28th day of September, 2001, between THE NETPLEX GROUP, INC., a
New York corporation ("Group"), and XXXX X. XXXXX (the "Stockholder") and
WATERSIDE CAPITAL CORPORATION, a Virginia corporation (collectively, with its
successors and assigns, the "Investor"), amends and restates the Investor Rights
Agreement made as of September 30, 1998, between Group and the Investor. (Group,
the Stockholder and the Investor are each a "Party" and, collectively, the
"Parties".)
R E C I T A L S
---------------
A. Group has authorized 40,000,000 shares of common stock (the "Group
Common Stock");
B. Group has also authorized 6,000,000 shares of Preferred Stock, of which
1,500 shares are owned by the Investor and have been designated Class C
Preferred Stock (the "Investor Group Preferred Stock") with such terms as have
been set forth in the Group's Certificate of Incorporation, as amended (the
"Group Certificate of Incorporation");
C. Group holds 1,000 shares of Preferred Stock of Netplex Systems, Inc. a
Delaware corporation ("Systems"), designated Class A Preferred Stock (the
"Systems Preferred Stock").
D. The Investor holds a warrant (the "Investor Warrant") exercisable for
300,000 shares of Group Common Stock.
E. The Investor has executed a limited guaranty of up to a maximum of
$400,000 of a $3,000,000 revolving credit facility extended to Systems .
F. Contemporaneously with the execution and delivery of this Agreement,
pursuant to that certain Master Agreement between Group and Systems and the
Investor (the "Master Agreement"):
(a) Group redeems from WSCC 1,500 shares of the Investor Group
Preferred Stock for $1,000,000 cash and two secured commercial promissory notes
in the original principal amounts of $900,000 and $154,697.45, respectively, and
Investor surrenders the Investor Warrant to Group; and
(b) WSCC purchases from Group 1,000 shares of Systems Preferred
Stock for $1,000,000 cash.
G. The Stockholder is the record and beneficial owner of 1,938,350 shares
(including vested and unvested stock options) of Group Common Stock; and
1
H. One of the conditions to the execution of and entry into the Master
Agreement and the Investor Guaranty by the Investor is the execution and
delivery of this Agreement by Group and the Stockholder.
NOW, THEREFORE, in consideration of the following mutual covenants and
other good and valuable consideration, its receipt and sufficiency acknowledged,
Group and the Stockholder and the Investor agree:
ARTICLE 1
BOARD OF DIRECTORS
Section 1.1 Election of Board. Group has previously appointed an
individual designated by the Investor to its Board of Directors. The director
designated by the Investor is referred to as the "Investor Director." In
addition, so long as any Obligations of Group, as that term is defined in the
Master Agreement or other documents executed in connection herewith, remain
outstanding, the Board of Directors of Group shall nominate one individual
designated by the Investor (reasonably acceptable to Group) and two Directors,
who shall not be officers of Group (each an "Outside Director") for election as
a board member at any shareholder meeting called for the purpose of electing
directors. The Group Board will not nominate more nominees at any such election
than there are board seats up for election at such meeting. The Stockholder
shall vote as a shareholder at any such Group shareholder meeting for the
Investor's nominee. In the event the Investor's designees/nominees are not
elected by Group's shareholders at any such meeting, the Investor shall have the
right to appoint an individual (reasonably acceptable to Group) to receive
notice of, attend and observe all meetings of its Board of Directors. Any
Investor Director who is not an employee of Group shall be entitled to receive
those fees and benefits, including the issuance of stock options, afforded the
other non-employee members of the Board of Directors, plus out-of-pocket
expenses.
Section 1.2 Removal of Investor Designee. Any Investor Director may be
removed during his or her term of office, without cause, by and only by the
written consent of the Investor.
Section 1.3 Insurance. Group shall maintain directors' and officers'
liability insurance coverage consistent with its current coverage.
ARTICLE 2
TERMINATION
This Agreement, and the respective rights and obligations of the parties,
shall terminate on the satisfaction by Group of all of the respective
Obligations, as defined in the Master Agreement, this Agreement and any other
document entered by the parties in connection therewith.
2
ARTICLE 3
LEGEND
Any certificates representing shares of capital stock subject to this
Agreement shall bear on their face the following legend prominently displayed:
THE SHARES REPRESENTED BY THIS CERTIFICATE, AND THE TRANSFER
THEREOF, ARE SUBJECT TO THE PROVISIONS OF THAT CERTAIN INVESTOR
RIGHTS AGREEMENT, DATED AS OF SEPTEMBER 28, 2001, BETWEEN THE
CORPORATION AND WATERSIDE CAPITAL CORPORATION, A COPY OF WHICH IS ON
FILE AND MAY BE EXAMINED AT, THE PRINCIPAL OFFICE OF THE
CORPORATION.
All such shares hereafter issued to the Stockholder shall bear the same legend.
ARTICLE 4
MISCELLANEOUS
Section 4.1 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been given when delivered by hand or
mailed via a nationally recognized overnight delivery service, by first class
mail registered or certified mail (air mail if to or from outside the United
States), postage prepaid, facsimile transmission that is acknowledged as
received by the recipient, if to the Investor, at 000 Xxxx Xxxx Xxxxxx, Xxxxx
0000, Xxxxxxx Xxxxxxxx 00000 and if to Group, at 0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx
000, Xxxxxx, Xxxxxxxx 00000, or to such other address as the addressee shall
have furnished to the other parties hereto in the manner prescribed by this
Section 4.1.
Section 4.2 Specific Performance. The rights of the parties under this
Agreement are unique and, accordingly, the parties shall have the right, in
addition to such other remedies as may be available to any of them at law or in
equity, to enforce their rights hereunder by actions for specific performance in
addition to any other legal or equitable remedies they might have to the extent
permitted by law.
Section 4.3 Entire Agreement. This Agreement and the Master Agreement and
the documents contemplated thereby, constitute the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings between them or any of them as to such subject
matter.
Section 4.4 Waivers and Further Agreements. Any of the provisions of this
Agreement may be waived by an instrument in writing with the consent of the
party or parties whose rights are being waived.
Section 4.5 Assignment: Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
heirs, executors, legal
3
representatives, successors and permitted transferees, except as may be
expressly provided otherwise herein.
Section 4.6 Severability. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement and such invalid, illegal
and unenforceable provision shall be reformed and construed so that it will be
valid, legal, and enforceable to the maximum extent permitted by law.
Section 4.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 4.8 Section Headings. The headings contained in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 4.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive laws of the Commonwealth of
Virginia.
Section 4.10 Jurisdiction and Venue. Group consents to the jurisdiction of
the United States District Court for the Eastern District of Virginia, Norfolk
Division, and of all Virginia state courts sitting in Norfolk, Virginia, for the
purpose of any suit, action or other proceeding arising out of any of its
obligations arising under this Agreement or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in such court.
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Investor Rights Agreement as of the day and year first above written.
THE NETPLEX GROUP, INC.
By: (SEAL)
---------------------------------
Xxxx X. Xxxxx, President
WATERSIDE CAPITAL CORPORATION
By:
--------------------------------
--------------------------------
4
