Exhibit 4.4
INVESTMENT AGREEMENT
by and between
SELECTQUOTE, INC.
and
HIGH RIDGE CAPITAL PARTNERS II, L.P.
Dated as of December 27, 1999
S-1
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this "AGREEMENT") is made as of the 27th day
of December, 1999 by and between SelectQuote, Inc., a Delaware corporation (the
"COMPANY"), and High Ridge Capital Partners II, L.P., a Delaware limited
partnership (the "PURCHASER").
WHEREAS, the Purchaser wishes to subscribe for and purchase shares of
the Company's Series D Preferred Stock, par value $0.01 per share (the "SERIES D
PREFERRED");
WHEREAS, the Company wishes to issue and sell to the Purchaser shares
of Series D Preferred;
WHEREAS, the Company and the Purchaser wish to provide, as set forth
herein, for certain rights and obligations of the parties hereto relating to the
Series D Preferred;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF SERIES D PREFERRED
1.1 SALE AND PURCHASE. Subject to the terms and conditions of this
Agreement, the Company will issue and sell to the Purchaser, and the Purchaser
will purchase from the Company, 50,000 shares of Series D Preferred at a price
of $100 per share for a total purchase price of $5,000,000 (the "PURCHASE
PRICE") on the Closing Date.
1.2 CERTAIN DEFINED TERMS.
(a) "AGREEMENT AND PLAN OF REORGANIZATION" shall mean the Amended and
Restated Agreement and Plan of Reorganization, dated as of August 17, 1999, as
amended on December 17, 1999, by and among SQIS, SelectTech, the Company and
Merger Sub.
(b) "CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations of the Company with respect to the Series D Preferred, the form of
which is attached as EXHIBIT 1.
(c) "CHANGE IN CONTROL" shall have the meaning set forth in Section
5.2(a).
(d) "COMMON STOCK" shall mean the common stock, $0.01 par value, of the
Company.
(e) "CONVERTED SHARES" shall have the meaning set forth in Section 3.18
of this Agreement.
(f) "DEBENTURES" shall mean the 12% Senior Secured Convertible
Debentures issued by SelectTech on October 15, 1998 and assumed by the Company
under the
Agreement and Plan of Reorganization and $1,900,000 aggregate principal amount
of 12% Senior Secured Convertible Debentures of the Company issued in exchange
for the same principal amount of such Debentures of SelectTech following the
Merger.
(g) "ENFORCEABILITY EXCEPTIONS" shall have the meaning set forth in
Section 3.5 of this Agreement.
(h) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(i) "HOLDER" shall have the meaning set forth in Section 5.2(a) of this
Agreement.
(j) "INTELLECTUAL PROPERTY" shall mean any or all of the following and
all rights associated therewith: (i) all domestic and foreign patents and
applications therefor and all reissues, divisions, renewals, extensions,
continuations and continuations-in-part thereof; (ii) all inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, proprietary rights and processes, know how, technology
rights and licenses, research and development in progress, technical data and
customer lists, and all documentation relating to any of the foregoing; (iii)
all copyrights, copyrights registration and applications therefor, and all other
rights corresponding thereto throughout the world; (iv) all mask works, mask
work registrations and applications therefore; (v) all industrial designs and
any registrations and applications therefor; (vi) all trade names, logos, common
law trademarks and service marks; trademark and service xxxx registrations and
applications therefor and all goodwill associated therewith; and (vii) all
computer software including all source code, object code, firmware, development
tools, files, records and data, all media on which any of the foregoing is
recorded and all documentation related to any of the foregoing.
(k) "JOINT SOLICITATION STATEMENT" shall mean the Joint Solicitation
Statement dated October 6, 1999 soliciting the written consent of the
shareholders of SQIS and SelectTech approving the Merger.
(l) "LIQUIDATION AMOUNT" shall have the meaning set forth in Section
3.1 of the Certificate of Designations.
(m) "MANDATORY REDEMPTION DATE" shall mean the fifth anniversary of the
date of issuance of the Series D Preferred.
(n) "MERGER" shall mean the merger of SelectTech and Merger Sub with
and into SQIS pursuant to the Merger Agreement.
(o) "MERGER AGREEMENT" shall mean the Merger Agreement, dated as of
December 21, 1999, by and among SQIS, SelectTech, the Company and Merger Sub.
(p) "MERGER SUB" shall mean SelectQuote Acquisition Sub, a California
corporation and a wholly-owned subsidiary of the Company.
(q) "NEW SECURITIES" shall have the meaning set forth in Section 5.2(b)
of this Agreement.
(r) "1940 ACT" shall mean the Investment Company Act of 1940, as
amended.
(s) "PERSON" or "PERSONS" shall mean any individual, corporation,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof.
(t) "PURCHASE PRICE" shall have the meaning set forth in Section 1.1 of
this Agreement.
(u) "PURCHASED SHARES" shall have the meaning set forth in Section 3.18
of this Agreement.
(v) "PURCHASER DIRECTOR" shall have the meaning set forth in Section
8.2(a) of this Agreement.
(w) "QUALIFYING PUBLIC OFFERING" shall mean the consummation of a firm
commitment underwritten public offering of Common Stock by the Company on or
before December 31, 2000 of at least $25,000,000 and a price per share (subject
to appropriate adjustment in the event of a stock split, reverse stock split,
stock dividend, subdivision, reclassification, combination, exchange,
recapitalization or other similar transaction) of at least $10.
(x) "REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement, dated as of December 23, 1999, by and among the Company, the
Purchaser, and the other investors listed on Exhibit A thereto.
(y) "RELATED PARTY TRANSACTION" shall mean any transaction to which the
Company or any of its Subsidiaries is a party and in which any of the following
persons had or will have a direct or indirect material interest: (i) any
director or executive officer of the Company or any of its Subsidiaries, (ii)
any nominee for election as a director of the Company or any of its
Subsidiaries, (iii) any security holder who is known to the Company to own of
record or beneficially more than five percent of any class of the Company's
voting securities and (iv) any member of the immediate family of any of the
foregoing persons.
(z) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(aa) "SELECTTECH" shall mean SelectTech, a Nevada corporation.
(bb) "SERIES A PREFERRED" shall mean the Series A Preferred stock, par
value $0.01 per share, of the Company.
(cc) "SERIES B PREFERRED" shall mean the Series B Preferred stock, par
value $0.01 per share, of the Company.
(dd) "SERIES C PREFERRED" shall mean the Series C Preferred stock, par
value $0.01 per share, of the Company.
(ee) "SERIES D PREFERRED" shall have the meaning set forth in the first
recital.
(ff) "SHARES" shall mean, collectively, (i) the Series D Preferred
issued and sold pursuant to this Agreement, and (ii) the Common Stock issued
upon conversion of the Series D Preferred in accordance with the Company's
Restated Certificate of Incorporation and the Certificate of Designations.
(gg) "SIGNIFICANT SUBSIDIARY" shall mean any Subsidiary of the Company
which is a "significant subsidiary" as defined in Section 1.02(w) of Regulation
S-X of the Securities and Exchange Commission.
(hh) "SUBSIDIARY" of any Person shall mean (i) a corporation, a
majority of whose outstanding shares of capital stock or other equity interests
with voting power, under ordinary circumstances, to elect directors, is at the
time, directly or indirectly, owned by such Person, by one or more subsidiaries
of such Person or by such Person and one or more subsidiaries of such Person,
and (ii) any other Person (other than a corporation) in which such Person, a
subsidiary of such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has (x) at
least a majority ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person.
(ii) "SQIS" shall mean SelectQuote Insurance Services, a California
corporation.
ARTICLE II
CLOSING DATE; DELIVERIES
2.1 CLOSING DATE. The closing of the purchase and sale of the Series D
Preferred contemplated hereby shall be held at the offices of McCutchen, Doyle,
Xxxxx & Enersen, LLP, 0000 Xxxxxx Xxxxx, Xxxx Xxxx, Xxxxxxxxxx at 10:00 A.M. on
December 23, 1999 or at such time and place as the Company and the Purchaser may
mutually agree. Such time is hereinafter referred to as the "CLOSING," and the
date of the Closing is hereinafter referred to as the "CLOSING DATE."
2.2 DELIVERIES.
(a) At or prior to the Closing, the Company shall deliver to the
Purchaser all documents required by Section 7.1 hereof,
(b) At the Closing, the Purchaser shall pay to the Company, by wire
transfer of immediately available funds, the Purchase Price, and the Company
shall deliver to the Purchaser a stock certificate representing 50,000 shares of
Series D Preferred.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION AND GOOD STANDING. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and has
full corporate power and authority to carry on its business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified or
authorized to do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of its business or the ownership, leasing
or operation of its properties requires such qualification or authorization,
except where the failure so to qualify or be authorized would not individually
or in the aggregate have a material adverse effect (financial or other) on the
Company and its Subsidiaries, taken as a whole.
3.2 CAPITALIZATION.
(a) After the effective time of the Merger and immediately prior to the
Closing, the Company's authorized capital stock will consist of (i) 50,000,000
shares of Common Stock, 10,498,083 shares of which will be issued and
outstanding and 1,111,111 shares of which will be reserved for issuance upon
conversion of the Series D Preferred, 2,028,892 shares of which, in the
aggregate, will be reserved for issuance upon conversion of the Series A
Preferred, Series B Preferred and Series C Preferred, 6,510,635 shares of which
will be reserved for issuance upon the exercise of outstanding options under the
Company's Stock Option Plan (a copy of which has been delivered to the
Purchaser), and 962,395 shares of which will be reserved for issuance under the
Debentures, (ii) 10,000,000 shares of preferred stock, par value $0.01 per
share, 2,500,000 shares of which are designated Series A Preferred (1,137,251
shares of which will be issued and outstanding); 1,250,000 shares of which are
designated Series B Preferred (821,713 shares of which will be issued and
outstanding); 750,000 shares of which are designated Series C Preferred (69,928
shares of which will be issued and outstanding); and 50,000 shares of which are
designated Series D Preferred (none of which will be issued and outstanding). As
of the Closing, all issued and outstanding shares of Common Stock, Series A
Preferred, Series B Preferred, Series C Preferred and Series D Preferred will
have been duly and validly authorized and issued and will be fully paid and
nonassessable.
(b) Except as set forth in Section 3.2(a) or on SCHEDULE 3.2(b) hereto,
there exist no (i) outstanding options, warrants or other rights to purchase or
subscribe for any equity securities or other ownership interests of the Company
or any of its Subsidiaries, (ii) obligations of the Company or any of its
Subsidiaries, whether absolute or contingent, to issue any shares of equity
securities, (iii) securities directly or indirectly convertible into or
exercisable or exchangeable for any equity securities of the Company or any of
its Subsidiaries, (iv) preemptive or similar rights with respect to the issuance
of any equity securities of the Company or any of its Subsidiaries, (v)
registration or similar rights with respect to any capital stock of the Company
or any of its Subsidiaries or (vi) other
stockholder agreements, voting agreements or trusts, proxies or other agreements
or contractual obligations among the stockholders of the Company with respect to
voting or disposition of any capital stock or other equity interests of the
Company or any of its Subsidiaries. SCHEDULE 3.2(b) sets forth the aggregate
number of shares covered by the options, warrants and other rights,
respectively, referred to in item (i) of this Section 3.2(b), as well as the
respective expiration dates and exercise prices with respect to such options,
warrants and rights.
3.3 THE MERGER; DISSENTERS.
(a) On or prior to the Closing Date, the Merger will have been
consummated in accordance with the terms set forth in the Agreement and Plan of
Reorganization and the Merger Agreement and all applicable filings with
governmental authorities will have been made in accordance with applicable law.
(b) Except for Section 1301 of the California General Corporation Law
as it applies to the SQIS shareholders or the SelectTech shareholders and
Section 92A.380 of the Nevada Revised Statutes on General Corporation Law as it
applies to the SelectTech shareholders, the SQIS and SelectTech shareholders
have no appraisal, dissenters or other similar rights with respect to the
Merger. Except as set forth in SCHEDULE 3.3(b), no shareholder of SQIS or
SelectTech has elected to pursue any appraisal, dissenters or other similar
rights with respect to the Merger.
3.4 SUBSIDIARIES.
(a) SCHEDULE 3.4(a) sets forth a true and complete list of all of the
corporations, partnerships and joint ventures in which the Company owns,
directly or indirectly, any shares of capital stock or any partnership or joint
venture interest, together with a listing, as to each such corporation,
partnership or joint venture, of the nature and ownership of its capital stock
or partnership or joint venture interests and of the other equity holders in
such entities.
(b) SQIS is the surviving corporation under the Merger Agreement. All
of the outstanding shares of capital stock of SQIS and the Subsidiaries of SQIS
have been duly authorized and validly issued, are fully paid and nonassessable
and are wholly owned by the Company or SQIS, as the case may be, free and clear
of any liens, encumbrances, security agreements, options, claims, charges or
restrictions of any nature whatsoever.
3.5 AUTHORIZATION. The Company has all requisite corporate power and
authority to issue and sell the Series D Preferred, to enter into this Agreement
and the Registration Rights Agreement, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby
(including, without limitation, the conversion of shares of Series D Preferred
into shares of Common Stock). The execution and delivery of this Agreement and
the Registration Rights Agreement, the execution, acknowledgment and filing with
the Delaware Secretary of State of the Certificate of Designations and the
performance by the Company of its obligations hereunder and under the
Certificate of Designations and the Registration Rights Agreement have been duly
and validly authorized by all requisite corporate proceedings on the part of the
Company. This Agreement and the Registration Rights Agreement have been duly
executed and delivered by
the Company and, assuming the due authorization, execution and delivery of this
Agreement and the Registration Rights Agreement by the Purchaser, constitute
valid and legally binding agreements of the Company, enforceable against the
Company in accordance with their terms except (a) as the same may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws of general
application relating to or affecting creditors' rights, including, without
limitation, the effect of statutory or other laws regarding fraudulent
conveyances and preferential transfers, and (b) for the limitations imposed by
general principles of equity. The foregoing exceptions set forth in subsections
(a) and (b) of this Section 3.5 are hereinafter referred to as the
"ENFORCEABILITY EXCEPTIONS."
3.6 CONSENTS AND APPROVALS. Except as set forth in SCHEDULE 3.6,
neither the execution and delivery of this Agreement or the Registration Rights
Agreement nor the consummation of the transactions contemplated hereby or
thereby (including, without limitation, the conversion of shares of Series D
Preferred into shares of Common Stock) will violate, result in a breach of,
constitute a default (or an event which, with the giving of notice or the
passage of time or both, would constitute a default) under, result in the
acceleration of any indebtedness, conflict with, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of its Subsidiaries pursuant to (i) the respective certificate of
incorporation or charter or by-laws of the Company or any of its Subsidiaries,
(ii) any agreement, indenture or other instrument to which the Company or any of
its Subsidiaries is a party or by which any of their respective properties is
bound, or (iii) any judgment, decree, order or award of any court or
governmental body applicable to any of them, except, in the case of clauses (ii)
and (iii), to the extent that the occurrence of any such event would not have a
material adverse effect (financial or other) on the Company and its
Subsidiaries, taken as a whole. To the knowledge of the Company and its
Subsidiaries, no consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority or any other
person (either governmental or private), is required to be obtained or made by
the Company or any of its Subsidiaries in connection with the execution and
delivery by the Company of this Agreement or the Registration Rights Agreement
or the consummation by the Company of the transactions contemplated hereby or
thereby.
3.7 FINANCIAL STATEMENTS OF SQIS.
(a) The audited financial statements of SQIS and its Subsidiaries, on a
consolidated basis, as of and for the twelve months ended on June 30, 1999 and
the unaudited financial statements of SQIS and its Subsidiaries as of and for
the three months ended on September 30, 1999 (collectively, the "SQIS FINANCIAL
STATEMENTS") have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except that the notes to the financial statements as of and for the three
months ended September 30, 1999 may not be in accordance with GAAP) and fairly
present the financial position of SQIS and its Subsidiaries as at the dates
thereof and the results of its operations and changes in financial position for
the periods then ended (subject, in the case of unaudited statements, to normal
recurring audit adjustments, provided that the notes and accounts receivable are
collectible in the amounts shown less any reserve shown thereon and inventories
are not subject to write-down, except in either case in an amount not material).
Except as contemplated by the
Agreement and Plan of Reorganization, since June 30, 1999, there has not been
any material adverse change in the results of operations, financial condition,
assets or business of SQIS and its Subsidiaries, taken as a whole. Copies of the
SQIS Financial Statements are attached hereto as SCHEDULE 3.7(a).
(b) SQIS and its Subsidiaries, taken as a whole, have no material
liabilities, obligations or loss contingencies that are required to be reflected
in SQIS financial statements under GAAP, other than: (i) liabilities disclosed
or provided for in the SQIS Financial Statements including the notes thereto;
(ii) liabilities of SelectTech assumed under the Agreement and Plan of
Reorganization and the Merger Agreement and (iii) liabilities incurred by
SelectTech, SQIS and its Subsidiaries in the ordinary course of business since
June 30, 1999.
3.8 FINANCIAL STATEMENTS OF SELECTTECH.
(a) The audited financial statements of SelectTech as of and for the
twelve months ended on June 30, 1999 and the unaudited financial statements of
SelectTech as of and for the three months ended on September 30, 1999
(collectively, the "SELECTTECH FINANCIAL STATEMENTS") have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of SelectTech as at the dates thereof and the
results of its operations and changes in financial position for the periods then
ended (subject, in the case of unaudited statements, to normal recurring audit
adjustments, provided that the notes and accounts receivable are collectible in
the amounts shown less any reserve shown thereon and inventories are not subject
to write-down, except in either case in an amount not material). Except as
contemplated by the Agreement and Plan of Reorganization, since June 30, 1999,
there has not been any material adverse change in the results of operations,
financial condition, assets or business of SelectTech. Copies of the SelectTech
Financial Statements are attached hereto as SCHEDULE 3.8(a).
(b) As of the effective time of the Merger, SelectTech had no material
liabilities, obligations or loss contingencies that were required to be
reflected in SelectTech financial statements under GAAP, other than: (i)
liabilities disclosed or provided for in the SelectTech Financial Statements
including the notes thereto and (ii) liabilities incurred in the ordinary course
of business since June 30, 1999.
3.9 FINANCIAL STATEMENTS OF THE COMPANY.
(a) The unaudited balance sheet of the Company as at September 30, 1999
and the statement of operations for the period from the incorporation of the
Company to September 30, 1999, together with the related notes thereto
(collectively, the "COMPANY FINANCIAL STATEMENTS"), copies of all of which are
attached as SCHEDULE 3.9, were prepared from the books and records of the
Company and present fairly the financial position and results of operations of
the Company as of September 30, 1999 and for the period then ended in accordance
with GAAP consistently applied subject to normal and recurring year end
adjustments.
(b) The Company has no material liabilities, obligations or loss
contingencies that are required to be reflected in the Company's financial
statements under GAAP, other than: (i) liabilities disclosed or provided for in
the Company Financial Statements including the notes thereto; (ii) liabilities
expressly assumed under the Agreement and Plan of Reorganization and the Merger
Agreement and (iii) liabilities incurred in the ordinary course of business
since September 30, 1999.
3.10 NO MATERIAL ADVERSE CHANGE. Subsequent to June 30, 1999, there has
not been any development involving a material adverse change (financial or
other) with respect to the Company and its Subsidiaries, taken as a whole.
3.11 COMPLIANCE WITH ORGANIZATIONAL DOCUMENTS AND LAWS. Attached hereto
as EXHIBIT 2 and EXHIBIT 3, respectively, are true, complete and accurate copies
of the Restated Certificate of Incorporation and Bylaws of the Company as will
be in full force and effect on the Closing Date. Neither the Company nor any of
its Subsidiaries is in violation of its articles of incorporation or charter or
by-laws. The operation, conduct, lease and ownership of the property and
business of the Company and each of its Subsidiaries is being conducted in
compliance, in all material respects, with all federal, state and local laws,
rules, regulations and ordinances and all judgments and orders of any court or
governmental authority that the Company or any of its Subsidiaries knows to be
applicable to it, except where such violations would not individually or in the
aggregate have a material adverse effect (financial or otherwise) on the Company
and its Subsidiaries, taken as a whole.
3.12 LICENSES AND PERMITS; APPOINTMENTS. Each of the Company and its
Subsidiaries is duly licensed and possesses all requisite permits, licenses,
consents and qualifications required by applicable law for the purpose of
conducting its business and owning its properties in each jurisdiction in which
the conduct of its business or the ownership of its properties requires such
license, permit or qualification, except where the failure to have any such
license, permit, consent or qualification would not individually or in the
aggregate have a material adverse effect (financial or other) on the Company and
its Subsidiaries, taken as a whole. Without limiting the generality of the
foregoing, SQIS possesses state insurance licenses or permits in the District of
Columbia and every state other than Hawaii and South Dakota, and has national
appointments by the insurance carriers identified on SCHEDULE 3.12. The Company
has no reason to believe that consummation of the Merger will result in the
termination or other loss of any such state insurance license or permit. None of
such permits, licenses, consents or qualifications or appointments was
terminated or limited as a result of the Merger, and there are no proceedings
pending or, to the Company's knowledge, threatened, to revoke, terminate or
limit any such license, permit, consent or qualification or appointment.
3.13 CONTRACTS; NO VIOLATION OF CONTRACTS, ETC. Attached hereto as
SCHEDULE 3.13 is a list of all contracts, agreements, indentures, leases or
other instruments to which the Company or any of its Subsidiaries is a party
which are material to the business, operations or properties of the Company and
its Subsidiaries, taken as a whole, including, without limitation, any
shareholder, registration rights or employment agreements to which the Company
or any of its Subsidiaries is a party. The Purchaser may receive a copy of any
items listed on SCHEDULE 3.13 upon request. Neither the Company nor any of its
Subsidiaries
is in default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any contract, agreement, indenture, lease or other instrument to which the
Company or any of its Subsidiaries is a party or by which any of them or any of
their respective properties may be bound, except for any such default that would
not individually or in the aggregate have a material adverse effect (financial
or other) on the Company and its Subsidiaries, taken as a whole.
3.14 LITIGATION. Except as set forth in SCHEDULE 3.14, there is no
legal, administrative, arbitral or other proceeding, or any governmental or
regulatory investigation pending or, to the knowledge of the Company or any of
its Subsidiaries, threatened against the Company or any of its Subsidiaries or
any of their respective properties. There are no judgments, decrees or orders
enjoining the Company or any of its Subsidiaries in respect of, or the effect of
which is to prohibit or limit, any business practice or the acquisition of any
property or the conduct of business in any area which would not individually or
in the aggregate have a material adverse effect (financial or other) on the
Company and its Subsidiaries, taken as a whole.
3.15 EMPLOYEE BENEFIT PLANS; ERISA.
(a) SCHEDULE 3.15 hereto sets forth each plan, agreement, arrangement
or commitment which is an employment or consulting agreement, executive or
incentive compensation plan, bonus plan, deferred compensation agreement,
employee pension, profit sharing, savings or retirement or welfare plan,
(including, but not limited to, "employee benefit plans", as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), maintained by the Company or any Subsidiary of the Company for any
present or former employees, officers or directors of the Company, SQIS,
SelectTech or their respective Subsidiaries ("COMPANY PERSONNEL") or with
respect to which the Company or any Subsidiary of the Company has liability or
makes or has an obligation to make contributions ("EMPLOYEE PLANS").
(b) All contributions or payments due under any Employee Plan have been
made. Each Employee Plan by its terms and operation is in compliance in all
material respects with all applicable laws (including, but not limited to,
ERISA, the Code and the Age Discrimination in Employment Act of 1967, as
amended).
(c) Neither the Company nor any Subsidiary of the Company nor any
entity that is or was at any time treated as a single employer with the Company
or SQIS or SelectTech or their respective Subsidiaries under Section 414(b),
(c), (m) or (o) of the Code has at any time maintained, contributed to or been
required to contribute to or had any liability with respect to a plan subject to
Title IV of ERISA or Section 412 of the Code (including, without limitation, a
multiemployee plan within the meaning of Section 3(37) of ERISA.
(d) Neither the Company nor SQIS, SelectTech or any of their respective
Subsidiaries nor any other person, including any fiduciary, has engaged in any
"prohibited transaction" (as defined in Section 4975 of the Code or Section 406
of ERISA), which could subject the Company, SelectTech or any of their
respective Subsidiaries, or any entity the
Company or any Subsidiary of the Company has an obligation to indemnify, to any
tax or penalty imposed under Section 4975 of the Code or Section 502 of ERISA.
(e) None of the events contemplated by the Agreement and Plan of
Reorganization, the Merger Agreement or this Agreement (either alone or together
with any other event) will (i) entitle any Company Personnel to severance pay,
unemployment compensation, or other similar payments under any Employee Plan or
law, (ii) accelerate the time of payment or vesting or increase the amount of
benefits due under any Employee Plan or increase the compensation payable to any
Company Personnel or (iii) result in any payments (including parachute payments
within the meaning of that term under Section 280G of the Code) under any
Employee Plan or law becoming due to any Company Personnel.
(f) Each of the Company, SQIS, SelectTech and their respective
Subsidiaries has complied with the Worker Adjustment and Retraining Notification
Act, to the extent applicable.
3.16 TAXES. Each of the Company, SQIS and SelectTech and their
respective Subsidiaries has timely filed all tax returns required to be filed
(or has timely filed for appropriate extensions thereof), which returns are
complete and correct in all material respects, and has paid, or has made
adequate provision or set up an adequate accrual or reserve for the payment of
all taxes required to be paid and has no material liability for taxes in excess
of the amount so paid or accruals or reserves so established. Neither the
Company nor its Subsidiaries is delinquent in the payment of any material tax,
assessment or governmental charge and is not delinquent in the filing of any tax
returns, and no material deficiencies for any tax assessment or governmental
charge have been threatened, claimed, proposed or assessed against it.
3.17 BROKERAGE FEES. Neither the Company nor SQIS, SelectTech or any of
their respective Subsidiaries has taken any action in connection with this
Agreement or the Registration Rights Agreement or the transactions contemplated
hereby or thereby, which would give rise to any valid claim against the Company,
SQIS, SelectTech, or any of their respective Subsidiaries, or the Purchaser for
any brokerage or finder's fee, except for the fees owing to Xxxxxxx, Xxxxxxx &
Co., under an engagement letter agreement, a copy of which has been provided to
the Purchaser, which fees will be paid by the Company.
3.18 EXEMPT TRANSACTION. Subject to the accuracy of the Purchaser's
representations in Section 4.1 of this Agreement, each of the issuance and sale
of the shares of Series D Preferred as provided hereunder (the "PURCHASED
SHARES") and the issuance of shares of Common Stock upon conversion of such
shares of Series D Preferred (the "CONVERTED SHARES") will constitute a
transaction exempt from the registration requirements of Section 5 of the
Securities Act; and neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act) or any agent acting on behalf
of the Company or any such affiliate has, directly or indirectly, sold, offered
for sale or solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act) which is or will be integrated with
the issuance of the Purchased Shares or the issuance
of the Converted Shares in a manner that would require registration under the
Securities Act of the issuance of the Purchased Shares or the Converted Shares.
3.19 INVESTMENT COMPANY ACT. The Company is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
1940 Act, and the Company will not be required to register as an "investment
company" as a result of the transactions contemplated herein.
3.20 NO INVESTMENT ADVISOR AFFILIATION. The Company is not an
"investment advisor," "affiliated company" or an "affiliated person" of an
"investment advisor" within the meaning of the 1940 Act.
3.21 INTELLECTUAL PROPERTY.
(a) No person or entity has any rights to use any of the respective
Intellectual Property of the Company or any of its Subsidiaries, except for
licenses entered into in the normal course of business.
(b) The Company and its Subsidiaries own, are licensed to use, or have
the right to use or operate under, all of their respective Intellectual
Property.
(c) To the knowledge of the Company and its Subsidiaries, the operation
of the business of the Company and its Subsidiaries as it is currently conducted
does not infringe the Intellectual Property of any other person or entity, and
neither the Company nor any of its Subsidiaries has received notice of any claim
concerning such infringement.
(d) To the knowledge of the Company and its Subsidiaries, no person is
infringing or misappropriating any of the respective Intellectual Property of
the Company and its Subsidiaries.
3.22 PROPERTIES, LIENS, ETC. Except as reflected in the SQIS Financial
Statements, the SelectTech Financial Statements or the Company Financial
Statements, including the notes thereto, and except for statutory mechanics and
materialmen's liens, liens for current taxes not yet delinquent and liens or
encumbrances which do not confer upon secured parties any rights to property
which are material to the Company or its Subsidiaries, the Company and its
Subsidiaries own, free and clear of any liens or other encumbrances, all of
their tangible and intangible property, real and personal.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
4.1 ACQUISITION OF SECURITIES. All of the Series D Preferred to be
purchased by the Purchaser hereunder will be acquired for investment for the
Purchaser's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof,
and the Purchaser has no present intention of selling, granting any
participation in or otherwise distributing any of the Series D Preferred to be
purchased.
4.2 NO REGISTRATION. The Purchaser understands and acknowledges that
the offer and sale of the Series D Preferred pursuant to this Agreement will not
be registered or qualified under the Securities Act or under any other
applicable blue sky or state securities law on the grounds that the offering and
sale of the Series D Preferred contemplated by this Agreement are exempt from
registration and qualification, and that the Company's reliance upon applicable
exemptions is predicated in substantial part upon the Purchaser's
representations set forth in this Article IV.
4.3 DISPOSITION OF SECURITIES. The Purchaser covenants that in no event
will it transfer, assign, convey or otherwise dispose of any Shares unless and
until it shall have (i) furnished the Company with an opinion of counsel
reasonably satisfactory to the Company, or other evidence reasonably
satisfactory to the Company, to the effect that such disposition will not
require registration under the Securities Act or appropriate action necessary
for compliance with the Securities Act and any other applicable state, local or
foreign law has been taken by it and (ii) complied with the other provisions of
this Agreement governing the transfer of Shares.
4.4 UNDERSTANDING. The Purchaser understands that if a registration
statement under the Securities Act covering the Shares is not in effect when the
Purchaser desires to sell the Shares, the Purchaser may be required to hold the
Shares for an indeterminate period unless an exemption under the Securities Act
and under any applicable blue sky or state securities law is available to the
Purchaser.
4.5 AUTHORIZATION. The Purchaser has all requisite power and authority
to enter into this Agreement and the Registration Rights Agreement and to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Registration Rights Agreement and the performance by the
Purchaser of its obligations hereunder and thereunder have been duly and validly
authorized by all requisite action on the part of the Purchaser. This Agreement
and the Registration Rights Agreement have been duly executed and delivered by
the Purchaser and, assuming the due authorization, execution and delivery of
this Agreement and the Registration Rights Agreement by the Company, constitute
valid and binding agreements of the Purchaser, enforceable in accordance with
their terms, subject to the Enforceability Exceptions.
4.6 BROKERAGE FEES. The Purchaser has not taken any action in
connection with this Agreement or the Registration Rights Agreement or the
transactions contemplated hereby or thereby, which would give rise to any valid
claim against the Company, SQIS, SelectTech, or any of their respective
Subsidiaries, or the Purchaser for any brokerage or finder's fee, except for the
fees owing to Xxxxxxx, Xxxxxxx & Co., which fees will be paid by the Company.
4.7 ACCREDITED INVESTOR. The Purchaser acknowledges and represents that
it is an "accredited investor" as defined in Rule 501(a) of Regulation D under
the Securities Act
and has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its prospective investment in the
Shares.
4.8 ACCESS TO INFORMATION. The Purchaser has had access to such
financial and other information concerning the business and financial condition
of the Company as the Purchaser desires for the purposes of making this
investment. The Purchaser has had an opportunity to discuss the Company's
business, management, and financial affairs with the Company's management and
the opportunity to review the Company's facilities and business plan. The
Purchaser has also had an opportunity to ask questions of officers of the
Company, which questions were answered to its satisfaction.
4.9 NO RELIANCE. The Purchaser has had a full opportunity to consult
legal counsel and tax counsel of its choosing, is fully aware of the legal and
tax implications of his or its investment in the Company and is not placing
reliance on the Company or its counsel with respect to any legal and/or tax
advice.
ARTICLE V
COMPANY COVENANTS.
The Company hereby covenants and agrees as follows:
5.1 FINANCIAL AND OTHER INFORMATION. Until the Company shall register
any of its securities pursuant to Section 12 of the Exchange Act or becomes
subject to Section 15(d) of the Exchange Act, the Company will furnish the
following information to the Purchaser so long as the Purchaser and its
affiliates beneficially own any Shares:
(a) As soon as practicable after the end of each fiscal year, and in
any event within 90 days thereafter, an audited consolidated balance sheet as of
the end of such fiscal year and the related audited consolidated statements of
operations, changes in shareholders' equity and cash flows from operations for
the year then ended, including the related notes, of the Company and its
Subsidiaries. Such financial statements shall be prepared from the books and
records of the Company and its Subsidiaries and present fairly the consolidated
financial position and results of operations of the Company and its Subsidiaries
as of the respective dates thereof or for the respective periods covered thereby
in accordance with GAAP consistently applied and shall be accompanied by the
report thereon of the Company's independent public accountant.
(b) As soon as practicable after the end of each of the first three
fiscal quarters of each fiscal year, and in any event within 60 days thereafter,
an unaudited consolidated balance sheet as of the end of the fiscal quarter then
ended and the related unaudited consolidated statements of operations,
shareholders' equity and cash flows from operations of the Company for the
quarter then ended and for the portion of the fiscal year through such date. The
Company shall use its best efforts to prepare such financial statements in
accordance with GAAP consistently applied, subject to normal and recurring year
end adjustments and except that the notes thereto may not be included.
(c) Such additional information as may be reasonably requested.
5.2 RIGHTS OF PARTICIPATION.
(a) The Company hereby grants to the Purchaser and each other holder of
Series D Preferred (each of the Purchaser and each such holder, a "HOLDER") the
right to purchase such Holder's pro rata share, as determined based on such
Holder's percentage of the Company's issued and outstanding Common Stock (on an
as converted basis) ("PRO RATA SHARE"), of any New Securities (as hereinafter
defined) which the Company may from time to time propose to issue. Such right to
purchase New Securities shall terminate upon (i) a Qualifying Public Offering or
(ii) the closing date of an acquisition of the Company by another entity by way
of merger or consolidation (other than a merger or consolidation in which the
holders of voting securities of the Company or their affiliates immediately
before the merger or consolidation own, immediately after the merger or
consolidation, voting securities of the surviving or acquiring corporation, or
of a parent party of such surviving or acquiring corporation, possessing more
than fifty percent (50%) of the voting power of the surviving or acquiring
corporation or parent party) resulting in the exchange of the outstanding shares
of capital stock of the Company for securities or consideration issued, or
caused to be issued, by the acquiring corporation or its subsidiary (a "CHANGE
IN CONTROL").
(b) "NEW SECURITIES" shall mean any shares of capital stock of the
Company, or options, warrants or other securities of the Company that are
convertible into or exchangeable or exercisable for capital stock of the
Company, that are issued by the Company; PROVIDED, HOWEVER, that "New
Securities" shall not include (i) securities offered to the public pursuant to a
Qualifying Public Offering, (ii) securities issued for the acquisition of
another corporation or other entity by the Company pursuant to a stock purchase,
merger or similar business combination, purchase of substantially all of such
other entity's assets, or other reorganization whereby the Company will own not
less than fifty-one percent (51%) of the voting power of such entity, (iii) any
securities issued as a dividend or upon a recapitalization or stock split of
existing securities, (iv) any stock options and other securities issued to
directors, officers and employees of the Company or any other Subsidiary of the
Company as compensation pursuant to an officer, director or employee stock
option plan or similar plan approved by the Board of Directors of the Company,
and any shares issued pursuant to the exercise of such options, (v) Common Stock
issued upon conversion of the Series D Preferred and (vi) securities purchased
pursuant to this Agreement.
(c) In the event the Company receives a bona fide written offer to
purchase New Securities, which offer it intends to accept, or in the event the
Company otherwise intends to issue New Securities, it shall give each Holder
written notice of its intention. Such notice shall describe the type of New
Securities and the terms upon which the Company proposes to issue the same. Each
Holder shall have 20 days from the date of receipt of any such notice to agree
to acquire such Holder's Pro Rata Share of such New Securities, upon the terms
specified in the notice by giving written notice to the Company. The closing of
the purchase of New Securities by an acquiring Holder shall take place on the
date of the closing of the sale of New Securities described in the Company's
notice. If the sale described in the Company's notice does not occur, then each
Holder's right to purchase its Pro Rata Share of the New Securities identified
in such notice shall terminate. Such termination shall not affect each Holder's
subsequent right to purchase New Securities under this Section 5.2 pursuant to a
subsequent Company notice. Each Holder's Pro Rata Share shall be reduced
proportionately if the Company sells less than the aggregate number of shares
identified in the Company's notice.
(d) The Company shall have 90 days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within 90 days from the date of said agreement) to sell the
New Securities, at a price and upon terms no more favorable to the purchaser
thereof than specified in the Company's notice. In the event the Company has not
sold the New Securities within said 90-day period or, if later, within 90 days
from the date of an agreement entered into within said 90-day period or, if
later, within 10 days of receipt of all governmental approvals required in
connection with the sale of such New Securities pursuant to such agreement, the
Company shall not thereafter issue or sell any New Securities without first
offering such New Securities to the Holder's in the manner provided in this
Section 5.2.
ARTICLE VI
SECURITIES RESTRICTIONS
6.1 RESTRICTIONS ON TRANSFER.
(a) No sale, transfer, assignment, gift, pledge, creation of a security
interest in, mortgage, hypothecation, encumbrance, placing in trust or other
disposition of any Shares by the Purchaser shall be made unless (subject to
Section 9.11) each person to whom such disposition is proposed to be made shall
have executed and delivered to the Company a written instrument, in form and
substance reasonably satisfactory to the Company, evidencing the agreement of
such person to become bound by the provisions of this Article VI and Article
VIII hereof, effective upon the acquisition by such person of all or any part of
the Shares (or any interest therein) which are the subject of such disposition.
(b) In addition to the other provisions contained herein restricting or
governing the transfer of Shares, the Purchaser agrees that the Shares may not
be sold, transferred or disposed of, and the Company will be entitled to refuse
to register any transfer of the Shares, unless such sale, transfer or
disposition is effected pursuant to (i) an effective registration statement
under the Securities Act and in compliance with all applicable state laws or
(ii) an opinion of counsel reasonably satisfactory to the Company, or other
evidence reasonably satisfactory to the Company, to the effect that such sale,
transfer or disposition without registration may be effected without violation
of the Securities Act or any applicable state laws.
6.2 LEGENDS. .
(a) All certificates representing the Shares shall bear the following
securities law legend unless and until the resale of the Shares pursuant to an
effective Registration Statement or until the Shares may be sold under Rule 144
under the Securities Act without restrictions:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. 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) The legend set forth in Section 6.2(a) shall be removed and the
Company shall issue a certificate without such legend to the holder of the
Purchased Shares or Converted Shares, as the case may be, upon which it is
stamped (and no legend shall be placed on any Purchased Shares or Converted
Shares relating thereto), if, unless otherwise required by state securities
laws, the legend is no longer required to identify the Converted Shares as
"restricted securities" within the meaning of Rule 144.
ARTICLE VII
CONDITIONS OF CLOSING OF PURCHASE AND SALE OF THE SERIES D PREFERRED
7.1 CONDITIONS TO THE PURCHASER'S OBLIGATIONS.
The obligations of the Purchaser to purchase the Series D Preferred and
to perform at the Closing its other obligations hereunder related to the
purchase and sale of the Series D Preferred are subject to the fulfillment on or
prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT: PERFORMANCE OF OBLIGATIONS.
The representations and warranties made by the Company in Article III hereof
shall be true and correct as of the Closing Date as if made on and as of the
Closing Date; and on or prior to the Closing Date the Company shall have
performed all obligations and satisfied all conditions herein required to be
performed or satisfied by it on or prior to the Closing Date.
(b) AUDITOR'S REPORT. The Company shall have delivered to the Purchaser
copies of the audit opinion of Deloitte & Touche LLP, independent public
accountants, with respect to the June 30, 1999 SelectTech Financial Statements
and the June 30, 1999 SQIS Financial Statements, which opinions shall not
contain a going concern qualification and shall otherwise be in form and
substance reasonably acceptable to the Purchaser.
(c) CONSENTS AND WAIVERS. The Company shall have obtained any and all
consents, permits and waivers necessary or appropriate to be obtained by the
Company for consummation of the transactions contemplated by this Agreement and
the Registration Rights Agreement.
(d) LEGAL INVESTMENT. At the time of the Closing, the purchase and sale
of the Series D Preferred hereunder shall be legally permitted by all laws and
regulations to which the Company and the Purchaser are subject and all filings
by the Company necessary under state securities laws shall have been made.
(e) COMPLIANCE CERTIFICATE. The Company shall have delivered a
certificate, executed by the Chairman, President or any Vice President of the
Company, dated the
Closing Date, certifying as to the fulfillment of the conditions specified in
Sections 7.1(a), (c) and (d) (as it applies to the Company).
(f) EVIDENCE OF CORPORATE ACTION. The Company shall have delivered a
certificate of the Secretary or any Assistant Secretary of the Company, dated
the Closing Date, certifying as to a complete and correct copy of the
resolutions of the Board of Directors of the Company (i) approving the form and
provisions of, and authorizing the execution and delivery of and consummation of
the transactions contemplated by, this Agreement and the Registration Rights
Agreement, (ii) approving the execution, acknowledgment and filing with the
Delaware Secretary of State of the Certificate of Designations and (iii)
authorizing the issuance and sale of the Series D Preferred at a price of $100
per share.
(g) DELIVERY OF SHARE CERTIFICATES. The Company shall deliver to the
Purchaser certificates for the Series D Preferred described in Section 1.1
hereto.
(h) LEGAL OPINION. The Company shall have delivered the opinion of
McCutchen, Doyle, Xxxxx & Enersen, LLP substantially in the form set forth in
EXHIBIT 4 hereto.
(i) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and the
Registration Rights Agreement and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
Purchaser and the Purchaser's counsel.
(j) MERGER CERTIFICATES. As contemplated by the Merger Agreement,
merger certificates meeting the requirements of the California General
Corporation Law and the Nevada General Corporation Law shall have been properly
filed with the Secretary of State of California and the Secretary of State of
Nevada. The Company shall have delivered to the Purchaser facsimile evidence
that the merger certificates have been so filed.
(k) CERTIFICATE OF DESIGNATIONS. The Certificate of Designations shall
have been duly exercised and acknowledged and properly filed with the Delaware
Secretary of State. The Company shall have delivered to the Purchaser facsimile
evidence that the Certificate of Designations has been so filed.
(l) REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement
shall have been duly executed by the Company, the Purchaser and a sufficient
number of the Existing Investors (as defined in the Registration Rights
Agreement) so as to cause the Registration Rights Agreement to supersede and
amend the Prior Agreement (as defined in the Registration Rights Agreement) and
to be in full force and effect.
(m) DIRECTOR. Xx. Xxxxxx X. Xxxxx shall have been elected as a member
of the Board of Directors of the Company, as the Purchaser Director, effective
upon the issuance to the Company of directors' and officers' liability
insurance, reasonably acceptable to the Purchaser, covering the Purchaser
Director.
(n) EMPLOYEE AGREEMENT REGARDING PROPRIETARY INFORMATION AND
INVENTIONS. Each officer and key employee of the Company and SQIS shall have
entered into an Employee Agreement Regarding Proprietary Information and
Inventions in the form attached as EXHIBIT 5.
7.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of the
Company to issue and sell the Series D Preferred and to perform at the Closing
its other obligations hereunder related to the purchase and sale of the Series D
Preferred are subject to the fulfillment on or prior to the Closing Date of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Purchaser in Article IV hereof shall be true and correct
as of the Closing Date as if made on and as of the Closing Date.
(b) LEGAL INVESTMENT. At the time of the Closing, the purchase and sale
of the Series D Preferred hereunder shall be legally permitted by all laws and
regulations to which the Company and the Purchaser are subject.
(c) PAYMENT BY PURCHASER. The payment by the Purchaser required by
Section 2.2(b) hereof shall have been made by wire transfer of immediately
available funds to the Company's account designated by the Company.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 PUT RIGHTS OF THE PURCHASER.
(a) The Purchaser shall have the right, upon at least 30 days prior
written notice given prior to the expiration of the right as set forth in
Section 8.1(b), to cause the Company to purchase any of the Shares from the
Purchaser, for a per share amount equal to the Liquidation Amount, determined as
of the date of such purchase, in the event of:
(i) a sale of assets representing 50% or more of the total
value of all assets of the Company determined on a consolidated basis,
in any single transaction or series of related transactions or any
sale, merger, reorganization or other transaction or series of related
transactions that results in the Company beneficially owning less than
50.1% of the voting stock of any Significant Subsidiary;
(ii) a Change in Control;
(iii) two or more of the following officers of the Company no
longer being employed by the Company: Xxxxxx X. Xxxxx, Xxxxxx X.
Xxxxxx, Xxxxxxx X. Xxxxxx and Xxxxx X. Xxxxxxx;
(iv) a repurchase by the Company of any of its equity
securities;
(v) the incurrence of indebtedness for money borrowed by the
Company exceeding $5,000,000 in aggregate principal amount;
(vi) a material Related Party Transaction, other than such a
transaction negotiated on an arm's-length basis; or
(vii) the sale or issuance by the Company of Common Stock for
less than $4.50 per share (subject to appropriate adjustment in the
event of a stock split, reverse stock split, stock dividend,
subdivision, reclassification, combination, exchange, recapitalization
or other similar transaction) or any securities convertible into or
exchangeable for Common Stock for an amount which, when converted or
exchanged, as the case may be, results in the acquisition of Common
Stock for an amount which is less than $4.50 per share (subject to
appropriate adjustment in the event of a stock split, reverse stock
split, stock dividend, subdivision, reclassification, combination,
exchange, recapitalization or other similar transaction).
(b) The put right set forth in Section 8.1(a) shall expire upon the
closing of a Qualifying Public Offering.
8.2 BOARD REPRESENTATION.
(a) The Company and the Purchaser shall take all reasonable action
within their respective powers to cause one person named by the Purchaser to be
appointed a member of the Board of Directors of the Company (the "PURCHASER
DIRECTOR") to serve for a period commencing on the date that the Company obtains
directors' and officers' liability insurance pursuant to Section 8.3 (or such
date after the Closing Date as the Purchaser waives the requirement of such
directors' and officers' liability insurance) and ending on the third
anniversary of the Closing Date, PROVIDED, that the Purchaser's right to appoint
a member to the Board of Directors of the Company shall be extended to the
Mandatory Redemption Date if the Company does not complete a Qualifying Public
Offering. At such time as the Purchaser and its affiliates no longer own any
Shares, the Purchaser shall cause the Purchaser Director to resign from the
Company's Board of Directors. The reasonable actions required of the Company and
the Purchaser in this Section 8.2 shall include, without limitation, to the
extent within their respective powers, the nomination of the Purchaser Director,
the execution of written consents, the calling of special meetings, the removal
of directors, the filling of vacancies on the Board of Directors and the waiving
of notice. During the period from the Closing Date until the term on the Board
of Directors of the individual named by the Purchaser as the Purchaser Director
begins, such individual shall receive all notices and materials sent to the
Board of Directors of the Company, shall be entitled to attend all meetings of
the Board of Directors as an observer, and shall be entitled to receive
compensation and benefits pursuant to Section 8.2(b) as though he were a member
of the Board of Directors.
(b) The Purchaser Director shall receive the same compensation and
benefits as those paid by the Company to other non-employee directors.
8.3 DIRECTORS' AND OFFICERS' INSURANCE. The Company shall obtain,
promptly following the Closing, and thereafter shall use its reasonable best
efforts to maintain in effect, directors' and officers' liability insurance
covering the Purchaser Director on terms reasonably acceptable to the Purchaser
during the period in which the Purchaser Director serves on the Company's Board
of Directors.
8.4 INFORMATION CONFIDENTIAL. The Purchaser acknowledges that the
information received by it pursuant hereto is confidential and for its use only.
The Purchaser will not use such information in violation of the Securities
Exchange Act or reproduce, disclose or disseminate such information to any other
person (other than its employees, agents or advisors having a need to know the
contents of such information), except in connection with the exercise of rights
under this Agreement, unless the Company has made such information available to
the public generally or such Purchaser is required to disclose such information
by law or a governmental body.
8.5 SELECTION OF INVESTMENT BANKERS AND APPRAISERS. So long as the
Purchaser owns shares of Series D Preferred, the choice of a firm of independent
investment bankers or qualified appraisers to determine the value of assets or
of the Series D Preferred under Section 3.5 or 6.2, respectively, of the
Certificate of Designations shall be made jointly by the Company and the
Purchaser; PROVIDED, that if the Company and the Purchaser are unable to agree,
then such firm shall be chosen by the American Arbitration Association.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATIONS, AMENDMENTS AND WAIVERS. Any modification, amendment
or waiver hereof shall not be effective unless in writing and signed by the
parties hereto.
9.2 SURVIVAL. The representations and warranties made herein shall
survive the Closing of the purchase and sale of the Series D Preferred for a
period of two years. The covenants and agreements made herein shall survive the
Closing in accordance with their terms.
9.3 SUCCESSORS AND ASSIGNS. Subject to Section 9.11, the provisions of
this Agreement which bind, or are for the benefit of, the Purchaser also bind,
or are for the benefit of, and enforceable by, any subsequent holders of Shares
(except any subsequent holder who acquires any such Shares in a registered
public offering); PROVIDED, HOWEVER, that no provisions of this Agreement shall
be for the benefit of, or enforceable by, any subsequent holders unless and
until such third-party transferee has executed and delivered to the Company an
Additional Party Signature Page in the form attached hereto as EXHIBIT 6 and
thereby becomes bound by those terms of this Agreement by which its transferor
is subject.
9.4 ENTIRE AGREEMENT. This Agreement and any other documents delivered
pursuant hereto constitute the full and entire understanding and agreement among
the parties with regard to the subject matter hereof and thereof.
9.5 NOTICES. All notices and other communication required or permitted
hereunder shall be effective upon receipt and shall be in writing and delivered
personally, by confirmed facsimile transmission, by overnight delivery service
or by mail, postage prepaid, addressed as follows:
(a) if to the Company, to:
SelectQuote, Inc.
000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, President
Telephone: (000) 000-0000 x0000
Telecopy: (000) 000-0000
with a copy to:
McCutchen, Doyle, Xxxxx & Enersen, LLP
0000 Xxxxxx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) if to the Purchaser, to:
High Ridge Capital, LLC
00 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
High Ridge Capital, LLC
000 Xxxxxx Xxxxx Xxxx
Xxx Xxxxxx, Xxxxxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. XxxxXxxxxxx, Xx., Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Either party may by notice given in accordance with this Section 9.5 to the
other party designate another address or person for receipt of notice hereunder.
9.6 SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (i) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (ii) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability.
9.7 EXPENSES.
(a) The Company will be responsible for paying its own attorneys' and
other fees and expenses and disbursements incurred in connection with the
preparation, negotiation and execution of this Agreement ("EXPENSES"). The
Company shall also pay the fees and disbursements of one firm of attorneys for
Purchaser in connection with the preparation, negotiation and execution of this
Agreement in an amount not exceeding $70,000.
(b) Notwithstanding subsection (a) of this Section 9.7, in the event
that the transactions contemplated herein are not consummated, each party shall
be responsible for paying its own Expenses; provided, that if failure to
consummate such transactions is a result of the Company's refusal to proceed
when the Purchaser has fulfilled or agreed to fulfill its obligations hereunder,
then the Company shall pay all of the Purchaser's Expenses, including legal fees
and expenses.
9.8 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
9.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
9.10 CONSTRUCTION OF AGREEMENT. The language in all parts of this
Agreement shall in all cases be construed according to its fair meaning, and not
strictly for or against any party hereto.
9.11 ASSIGNMENT; BINDING EFFECT. This Agreement may not be assigned or
delegated, in whole or in part, by any party hereto without the prior written
consent of other
party hereto, which consent shall not be unreasonably withheld. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
9.12 NO THIRD PARTY BENEFICIARIES. This Agreement is for the benefit of
the parties hereto and is not intended to confer upon any other person any
rights or remedies hereunder.
9.13 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of California applicable to
contracts made and to be performed therein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SELECTQUOTE, INC.
By:
---------------------------------
Name:
Title:
HIGH RIDGE CAPITAL PARTNERS II, L.P.
By: HIGH RIDGE XX XX, LLC,
as General Partner
By: LIBERTY STREET PARTNERS LP, as
Member
By: LIBERTY STREET CORP., as General
Partner
By:
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
ADDITIONAL PARTY SIGNATURE PAGE
The undersigned hereby executes that certain Investment Agreement, dated as of
December 23, 1999, by and between SelectQuote, Inc. and High Ridge Capital
Partners II, L.P. (the "AGREEMENT"), authorizes this signature page to be
attached as a counterpart of such Agreement, and agrees to be bound by such
Agreement as if the undersigned had executed such Agreement on the date of its
original execution.
--------------------------------
Name (printed)
--------------------------------
Address
--------------------------------
Telephone Number
--------------------------------
Telecopy Number
--------------------------------
Signature
S-1
AMENDMENT NO. 1
TO
INVESTMENT AGREEMENT
BY AND BETWEEN
SELECTQUOTE, INC.
AND
HIGH RIDGE CAPITAL PARTNERS II, L.P.
This AMENDMENT NO. 1 TO INVESTMENT AGREEMENT (the "AMENDMENT") is made
as of the 29th day of February, 2000 by and between SelectQuote, Inc., a
Delaware corporation (the "COMPANY") and High Ridge Capital Partners II, L.P., a
Delaware limited partnership ("HIGH RIDGE"). Capitalized terms used but not
defined herein shall have the meanings set forth in the Investment Agreement,
dated as of December 27, 1999, by and between the Company and High Ridge (the
"INVESTMENT AGREEMENT").
In accordance with the provisions of Section 9.1 of the Investment
Agreement, which states that any modification, amendment or waiver of the terms
of the Investment Agreement shall not be effective unless in writing and signed
by the parties thereto, the parties to this Amendment hereby agree as follows:
1. The Company and High Ridge hereby amend and restate Section
8.1(a)(vii) of the Investment Agreement relating to put rights of High Ridge in
its entirety as follows:
"(vii) the sale or issuance by the Company of Common Stock for
less than $5.15 per share (subject to appropriate adjustment in the
event of a stock split, reverse stock split, stock dividend,
subdivision, reclassification, combination, exchange, recapitalization
or other similar transaction) or any securities convertible into or
exchangeable for Common Stock for an amount which, when converted or
exchanged, as the case may be, results in the acquisition of Common
Stock for an amount which is less than $5.15 per share (subject to
appropriate adjustment in the event of a stock split, reverse stock
split, stock dividend, subdivision, reclassification, combination,
exchange, recapitalization or other similar transaction)."
2. This Amendment shall be governed by the laws of the State of
California, with any terms relating to United States securities laws to be
interpreted in accordance with the federal
laws of the United States of America. Any dispute arising under or with respect
to this Amendment shall be resolved exclusively in the appropriate court in San
Francisco, California.
3. This Amendment and the Investment Agreement shall constitute the
entire agreement among the parties regarding the transactions contemplated
herein and therein, and may not be amended except in writing. Except as set
forth herein, all of the terms of the Investment Agreement shall remain
unchanged and be in full force and effect and are hereby ratified and confirmed
in all respects. In the event of any conflict between the provisions of this
Amendment and the Investment Agreement, the provisions of this Amendment shall
control. On and after the date hereof, each reference in the Investment
Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like
import shall mean and be a reference to the Investment Agreement as amended
hereby.
4. This Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
* * *
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to
Investment Agreement as of the date first above written.
SELECTQUOTE, INC.
By:
--------------------------------
Name:
Title:
HIGH RIDGE CAPITAL PARTNERS II, L.P.
By: HIGH RIDGE XX XX, LLC,
as General Partner
By: LIBERTY STREET PARTNERS LP, as
Member
By: LIBERTY STREET CORP., as General Partner
By:
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
