EXHIBIT 2
TeleHubLink Corporation
24 New England Executive Park
Xxxxxxxxxx, XX 00000
March 6, 2000
To: Each of the Persons Named
on ANNEX A to this Agreement
Ladies and Gentlemen:
The undersigned, TeleHubLink Corporation (the "COMPANY"), a Delaware
corporation, hereby agrees with you (sometimes referred to herein individually
as an "INVESTOR" and sometimes collectively as the "INVESTORS") as follows:
1. AUTHORIZATION OF SECURITIES. The Company has authorized (a) the
issuance and sale of an aggregate of 3,166,667 shares of its common stock, $0.01
par value per share (the "Common Stock") to Investors at a price of $3.00 per
share and (b) the issuance to Investors for no additional consideration of
warrants (the "WARRANTS") to purchase Common Stock, the form of which is
attached here to as ANNEX B. The Common Stock, the Warrants and the Common Stock
issuable upon exercise of the Warrants are sometimes referred to collectively
herein as the "SECURITIES."
2. SALE AND PURCHASE OF COMMON STOCK AND WARRANTS. Upon the terms and
subject to the conditions herein contained, the Company agrees to sell to the
Investors, and the Investors agree to purchase from the Company, at the Closing
(as hereinafter defined) on the Closing Date (as hereinafter defined), 2,699,999
shares of Common Stock and Warrants to purchase up to 2,699,999 shares of Common
Stock, such commitment allocated among the Investors in the numbers set forth
opposite each such Investor's name on ANNEX A attached hereto, and the Investors
shall pay to the Company an aggregate amount of up to Eight Million One Hundred
Thousand Dollars ($8,100,000) (the "REQUIRED PAYMENT"), allocated among the
Investors as set forth on ANNEX A attached hereto.
3. CLOSING. The closing (the "CLOSING")of the sale to and purchase by
the Investors of the Common Stock and Warrants for the Required Payment shall
occur at the offices of Paul, Hastings, Xxxxxxxx & Xxxxxx LLP in Atlanta,
Georgia, at the hour of
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10:00 A.M., eastern standard time, on March 6, 2000, or at such different time
or day as the Investors and the Company shall agree (the "CLOSING DATE"). At the
Closing, the Company will deliver to each Investor purchasing shares a
certificate evidencing the number of shares of Common Stock and a warrant
certificate evidencing the number of Warrants set forth opposite such Investor's
name on ANNEX A hereto, which shall be registered in such Investor's name as
stated on the signature page hereto, against delivery to the Company of payment
by wire transfer in an amount equal to its pro rata portion of the Required
Payment by such Investor.
4. REGISTER OF SECURITIES; RESTRICTIONS ON TRANSFER OF SECURITIES;
REMOVAL OF RESTRICTIONS ON TRANSFER OF SECURITIES.
4.1 REGISTER OF SECURITIES. The Company or its duly appointed
agent shall maintain, or cause its agent to maintain, a separate register for
the shares of Common Stock and Warrants, in which it shall register the issue
and sale of all such Securities. All transfers of Common Stock or Warrants shall
be recorded on the register maintained by the Company or its agent, and the
Company shall be entitled to regard the registered holder of such Securities as
the actual holder of the Securities so registered until the Company or its agent
is required to record a transfer of such Securities on its register. Subject to
SECTION 4.2(C) hereof, the Company or its agent shall be required to record any
such transfer when it receives the Security to be transferred, duly and properly
endorsed by the registered holder thereof or by its attorney-in-fact duly
authorized in writing.
4.2 SECURITIES ACT RESTRICTIONS ON TRANSFER.
(a) Each Investor understands and agrees that the Securities
it will be acquiring have not been registered under the Securities Act of 1933,
as amended (the "SECURITIES ACT"), and that accordingly such Securities will not
be transferable except as permitted under various exemptions contained in the
Securities Act and any applicable state securities laws, or upon satisfaction of
the registration and prospectus delivery requirements of the Securities Act and
applicable state securities laws. Each Investor acknowledges that it must bear
the economic risk of its investment in the Common Stock, the Warrants and the
Common Stock issuable upon exercise of the Warrants for an indefinite period of
time (subject, however, to the Company's obligation to effect the registration
under the Securities Act of the Common Stock purchased pursuant hereto and
issuable upon exercise of the Warrants in accordance with the Registration
Agreement) because such stock has not been registered under the Securities Act
and therefore cannot be sold, unless such stock is subsequently registered or an
exemption from registration is available.
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(b) Each Investor hereby represents and warrants to the
Company that (i) it is acquiring the Common Stock and Warrants it has agreed to
purchase for investment purposes, for its own account, and not with the view to,
or for resale in connection with, any distribution thereof within the meaning of
the Securities Act, (ii) it is an "accredited investor" as that term is defined
in Rule 501 under the Securities Act, (iii) it has the power and authority under
Applicable Law and its organizational documents, and has taken all necessary
corporate or similar action to authorize it, to enter into this Agreement and to
purchase the Securities, (iv) its execution and performance of this Agreement
will not conflict with, result in a breach of or a violation under any material
agreement to which it is a party, and (v) it has reviewed the Company SEC
Reports and has had the opportunity to ask questions and receive answers from
representatives of the Company concerning the business and financial condition
of the Company and all of such questions have been answered to the satisfaction
of such Investor. In addition, CFE hereby represents that it is a wholly-owned
subsidiary of General Electric Capital Corporation.
(c) Each Investor hereby agrees with the Company as follows:
(i) Subject to SECTION 4.3 hereof, the certificates
evidencing the Common Stock it has agreed to purchase, each certificate issued
in transfer thereof, and each certificate evidencing the Common Stock issued
upon exercise of the Warrants will bear the following legend:
"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended, or under
any applicable state securities laws. These securities may not be
sold or transferred in the absence of such registration or unless
the request for transfer is accompanied by an opinion of counsel,
reasonably satisfactory to the Company, stating that such transfer
is exempt therefrom under such Act and under any applicable state
securities laws."
(ii) The certificates representing such Common Stock,
each certificate issued in transfer thereof, and each certificate evidencing the
Common Stock issued upon exercise of the Warrants will also bear any legend
required under any applicable state securities laws.
(iii) Absent an effective registration statement under
the Securities Act covering the disposition of the Securities, such Investor
will not sell, transfer, assign, pledge, hypothecate or otherwise dispose of any
of such securities except
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in compliance with the Securities Act and the registration or qualification
requirements of any applicable state Securities laws or any exemption therefrom.
(iv) The Company shall make a notation on its records
and may give instructions to any transfer agent of the Common Stock in order to
implement the restrictions on transfer set forth in this subsection (c).
4.3 REMOVAL OF SECURITIES ACT TRANSFER RESTRICTIONS. Any legend
endorsed on a certificate evidencing a Security pursuant to SECTION 4.2(C)(I)
hereof and the stop transfer instructions and record notations with respect to
such Security shall be removed and the Company shall issue a certificate without
such legend to the Holder of such Security (a) if such Security is registered
under the Securities Act, (b) if such Security may be sold under Rule 144(k) of
the Commission under the Securities Act or (c) if the Holder provides the
Company with an opinion of counsel (which may be counsel for the Company)
reasonably acceptable to the Company to the effect that a sale or transfer of
such Security may be made without registration under the Securities Act.
5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. In order to induce
the Investors to enter into this Agreement and to purchase the Common Stock and
Warrants, the Company hereby covenants with, and represents and warrants to,
each Investor as follows:
5.1 ORGANIZATION; POWER; QUALIFICATION; CAPITAL STOCK.
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(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has the corporate power and authority to own or lease and operate its
properties and to carry on its business as it is now being and hereafter
proposed to be conducted. The Company is duly qualified, in good standing and
authorized to do business in each jurisdiction in which the character of its
properties or the nature of its businesses requires such qualification or
authorization, except for such jurisdictions where the failure to so qualify or
be authorized would not be reasonably likely to have a Materially Adverse
Effect. ANNEX 5.1 correctly sets forth and identifies the number of authorized
shares of each class and series of capital stock of the Company, the par value
per share, and the number of issued and outstanding shares of each such class
and series on the date hereof, after giving effect to the transactions
contemplated hereby. Except as described on ANNEX 5.1 attached hereto, the
Company does not have outstanding any stock or securities convertible into or
exchangeable for any shares of its Common Stock, nor are there any preemptive or
similar rights to subscribe for or to purchase, or any other rights to subscribe
for or to purchase, or any options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments, or claims of any character relating to, any Common Stock or any
stock or securities convertible into or exchangeable for any Common Stock.
Except as set forth on ANNEX 5.1, the Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its Common Stock or to register any shares of its Common Stock, and
there are no agreements restricting the transfer of any shares of the Company's
Common Stock. The Company has no authorized classes of Preferred Stock and there
are no shares of Preferred Stock outstanding.
(b) The Common Stock to be issued pursuant hereto has been
duly authorized and, when issued and paid for pursuant to the terms of this
Agreement, will be validly issued, fully paid and nonassessable and will be free
and clear of all Liens and restrictions, other than Liens that might have been
created by the Investors and restrictions on transfer imposed by SECTION 4.2
hereof; and the Common Stock issuable upon exercise of the Warrants has been
duly authorized and reserved for issuance upon exercise of the Warrants and,
when issued will be duly authorized, validly issued, fully paid and
nonassessable Common Stock, free and clear of all Liens and restrictions, other
than Liens that might have been created by the Investors and restrictions
imposed by SECTION 4.2 hereof.
5.2 AUTHORIZATION. The Company has the corporate power and has
taken all necessary corporate action to authorize it to issue the Common Stock
and to execute, deliver and perform this Agreement, the Registration Agreement,
the Stockholders Agreement and the Warrants, in accordance with their respective
terms, and
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to consummate the transactions contemplated hereby and thereby. This Agreement
has been duly executed and delivered by the Company and is, along with the
Registration Agreement, the Stockholders Agreement and the Warrants, a legal,
valid and binding obligation of the Company enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
moratorium, or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in an action, suit or proceeding in equity or at
law).
5.3 SUBSIDIARIES. The Subsidiaries of the Company are listed on
ANNEX 5.3. Each such Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each such Subsidiary has the corporate power and authority to own
or lease and operate its properties and to carry on its business as it is now
being and hereafter proposed to be conducted. Each Subsidiary is duly qualified,
in good standing and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification or authorization. The Company owns all of the outstanding capital
stock of each Subsidiary, except as set forth on ANNEX 5.3.
5.4 COMPLIANCE WITH OTHER DOCUMENTS AND CONTEMPLATED TRANSACTIONS.
The execution, delivery and performance by the Company of this Agreement, the
Warrants, the Registration Agreement and the Stockholders Agreement, each in
accordance with their respective terms, and the consummation of the transactions
contemplated hereby and thereby, do not and will not (i) require any consent,
approval, authorization, permit or license which has not already been obtained
from, or require the Company to effect any filing or registration which has not
already been effected with, any federal, state or local regulatory authority,
(ii) violate any Applicable Law with respect to the Company, except any such
violation which would not be reasonably likely to have a Materially Adverse
Effect, (iii) conflict with, result in a breach of, or constitute a default
under (a) the Certificate of Incorporation or the Bylaws of the Company or (b)
any indenture, agreement, credit facility or other instrument to which the
Company or any Subsidiary of the Company is a party or by which any such company
or its properties may be bound or (iv) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by the Company or any of its Subsidiaries.
5.5 COMPLIANCE WITH LAW. The Company is in substantial compliance
with all Applicable Laws, except any non-compliance which would not be
reasonably likely to have a Materially Adverse Effect.
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5.6 TITLE TO PROPERTIES. Except as set forth on ANNEX 5.6, the
Company has good and marketable title to, or a valid leasehold interest in, all
of its assets. None of such assets is subject to any Liens, except for Permitted
Liens. Except for financing statements evidencing Permitted Liens, no financing
statement under the Uniform Commercial Code and no other filing which names the
Company as debtor or which covers or purports to cover any of the Company's
assets is on file in any state or other jurisdiction, and the Company has not
signed any such financing statement or filing (except as described above) or any
security agreement that has not been terminated, authorizing any secured party
thereunder to file any such financing statement or filing.
5.7 LITIGATION. There is no action, suit or proceeding pending or,
to the best of the Company's knowledge, threatened against or in any other
manner relating directly and adversely to, the Company or any of its properties
in any court or before any arbitrator of any kind or before or by any
governmental body, except as described on ANNEX 5.7 attached hereto, and no such
action, suit, proceeding or investigation (i) calls into question the validity
of this Agreement, or (ii) if determined adversely to the Company, would be
reasonably likely to have a Materially Adverse Effect.
5.8 TAXES. All federal, state and other tax returns of the Company
and its Subsidiaries required by law to be filed have been duly filed and all
federal, state and other taxes, assessments and other governmental charges or
levies upon the Company and any of its Subsidiaries and any of their properties,
income, profits and assets, which are due and payable, have been paid, except
any such taxes, assessments or other governmental charges or levies (i) the
payment of which is being contested in good faith by appropriate proceedings,
(ii) for which adequate reserves have been provided on the books of the Company
and (iii) as to which no Lien other than a Permitted Lien has attached and no
foreclosure, distraint, sale or similar proceedings have been commenced. The
charges, accruals and reserves on the books of the Company in respect of taxes
are, in the judgment of the Company, adequate.
5.9 FINANCIAL STATEMENTS. The Company has furnished or caused to
be furnished to each Investor its consolidated audited balance sheet and
statements of operations and cash flows for the fiscal year ended January 30,
1999 and its consolidated unaudited balance sheet and statements of operations
and cash flows for the nine months ended October 30, 1999 (collectively, the
"FINANCIALS"), which as of the date hereof are complete and correct in all
respects and present fairly in accordance with generally accepted accounting
principles the Company's financial position on and as at such dates and the
results of operations for the periods then ended. There are no liabilities,
contingent or otherwise, of the Company which are not disclosed in such
Financials.
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5.10 NO ADVERSE CHANGE. Since January 30, 1999, there has occurred
no event which is reasonably likely to have a Materially Adverse Effect.
5.11 ERISA. The Company and each ERISA Affiliate and each of their
respective Plans are in substantial compliance with ERISA and the Internal
Revenue Code, and neither the Company nor any of its ERISA Affiliates has
incurred any accumulated funding deficiency with respect to any such Plan within
the meaning of ERISA or the Internal Revenue Code. The Company has not incurred
any material liability to the Pension Benefit Guaranty Corporation or any
successor thereto in connection with any such Plan. The assets of each such Plan
which is subject to Title IV of ERISA are sufficient to provide the benefits
under such Plan for which the Pension Benefit Guaranty Corporation or any
successor thereto would guarantee payment if such Plan were terminated, and such
assets are also sufficient to provide all other benefits due under the Plan
prior to and upon termination. No Reportable Event has occurred and is
continuing with respect to any such Plan. No such Plan or trust created
thereunder, or any party in interest, fiduciary, trustee or administrator
thereof, has engaged in a "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code) which would
subject such Plan or any other Plan of the Company, or any of its ERISA
Affiliates, any trust created thereunder, or any party in interest, fiduciary,
trustee or administrator thereof, or any party dealing with any such Plan or any
such trust to the tax or penalty on "prohibited transactions" imposed by Section
502 of ERISA or Section 4975 of the Internal Revenue Code. Neither the Company
nor any of its ERISA Affiliates is a participant in or obliged to make any
payment to a Multiemployer Plan.
5.12 ABSENCE OF DEFAULT, ETC. The Company is in compliance with
all the provisions of its Certificate of Incorporation and Bylaws, and no event
has occurred or failed to occur, which has not been remedied or waived, the
occurrence or non-occurrence of which constitutes, or which with the passage of
time or giving of notice or both would constitute a default or breach by the
Company under any indenture, agreement, credit facility or other instrument
(collectively, the "COMPANY AGREEMENTS") or under any judgment, decree or order
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or their properties may be bound or affected,
except any such default or breach which would not be reasonably likely to have a
Materially Adverse Effect. All Company Agreements are in full force and effect,
and the Company has no knowledge that any party to any Company Agreement is
seeking or presently intends to seek to (i) terminate, amend or modify such
Company Agreement or (ii) upon expiration of such Company Agreement, not renew
such Company Agreement on terms substantially similar to those currently
contained in such Company Agreement.
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5.13 INTELLECTUAL PROPERTY RIGHTS. The Company owns or possesses
sufficient legal rights to all patents, patent applications, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, know-how, concepts,
computer programs and software, technical data, proprietary rights, proprietary
processes and other information necessary for its business as previously
conducted, as now conducted and as currently proposed to be conducted by the
Company (each such item, the "COMPANY INTELLECTUAL PROPERTY") without any
conflict with or infringement of the rights of others. ANNEX 5.13 contains a
complete list of all issued patents, service marks, trademarks and registered
copyrights of the Company, any pending applications therefor and registrations,
renewals, extensions and the like thereof and all other patentable Company
Intellectual Property as to which the Company intends to file applications
describing where the Company is currently in the application process. Except for
proprietary information agreements with its employees and consultants, and
licenses or agreements entered into in the ordinary course of the Company's
business, consistent with past practices, there are no outstanding options,
licenses, or agreements of any kind relating to any of the Company Intellectual
Property, nor is the Company bound by or a party to any options, licenses, or
agreements of any kind with respect to the patents, patent applications,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
know-how, concepts, computer programs, technical data, proprietary rights,
proprietary processes and information of any other person or entity. No person
or entity has the right to purchase any of the Company Intellectual Property
owned by the Company. Each of the federal, state and other governmental
registrations with any country pertaining to the Company Intellectual Property
is valid and in full force and effect. No claims are pending against the Company
by any person with respect to the use of any Company Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement relating to the same. To the best of the Company's knowledge, none of
its employees, agents or contractors is obligated under any contract (including
licenses, covenants, or commitments of any nature) or other agreement, or is
subject to any judgment, decree, or order of any court or administrative agency,
that would interfere with the use of such employee's best efforts to promote the
interests of the Company, or that would conflict with the Company's business as
it is currently proposed to be conducted. To the best of the Company's
knowledge, neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as currently proposed will conflict with or
result in a breach of the terms, conditions, or provisions of, or constitute a
default under, any contract, covenant, or instrument under which any of such
employees is now obligated. The Company has no plan to, and does not believe it
is or will be necessary to utilize, any inventions of any of its employees (or
individuals it currently intends to hire) made prior to their employment by the
Company that would infringe the
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rights of others. ANNEX 5.13 sets forth a list of all jurisdictions in which the
Company is operating under a trade name, and each jurisdiction in which any such
trade name is registered. No patent listed on ANNEX 5.13 has been or is now
involved in any interference, reissue, reexamination or opposition proceeding,
nor is the Company aware of any potentially interfering patent or patent
application of any third party. No person or entity is presently selling or
marketing a product which is covered by such patents, and such patents have not
been challenged or threatened in any way. None of the current or former
employees of the Company are named as an inventor on any pending patent
application. All patents listed on ANNEX 5.13 are currently in compliance with
formal legal requirements (including payment of filing, examination and
maintenance fees and proofs of working or use), and, there is nothing which
would render such patents invalid or unenforceable, and they are not subject to
any maintenance fees or taxes or actions falling due within ninety days after
the date of Closing.
5.14 ENVIRONMENTAL MATTERS. Except as is described on ANNEX 5.14
attached hereto:
(i) The Property does not contain, in, on or under,
including, without limitation, the soil and groundwater thereunder, any
Hazardous Materials in violation of Environmental Laws or in amounts that could
give rise to material liability under Environmental Laws.
(ii) The Company is in substantial compliance with all
applicable Environmental Laws, and there is no condition which could interfere
with the continued operation of any of the Properties in substantial compliance
with Environmental Laws, or impair the financial condition of Company.
(iii) The Company has not received from any governmental
authority or any other Person any complaint, notice of violation, alleged
violation, investigation or advisory action or notice of potential liability
regarding matters of environmental protection or permit compliance under
applicable Environmental Laws with regard to the Properties, nor is the Company
aware that any governmental authority is contemplating delivering to the Company
any such notice. There has been no pending or, to the Company's knowledge,
threatened complaint, notice of violation, alleged violation, investigation or
notice of potential liability under Environmental Laws with regard to any of the
Properties.
(iv) Hazardous Materials have not been generated, treated,
stored, disposed of, at, on or under any of the Property, except in substantial
compliance with all Environmental Laws, or in a manner that could give rise to
material
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liability under Environmental Laws nor have any Hazardous Materials been
transported or disposed of from any of the Properties to any other location,
except in substantial compliance with all Environmental Laws, nor in a manner
that could reasonably be anticipated to give rise to material liability under
Environmental Laws.
(v) The Company is not a party to any governmental,
administrative actions or judicial proceedings pending under any Environmental
Law with respect to any of the Properties, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to any of the Properties.
(vi) There has been no release or threat of release of
Hazardous Materials into the environment at or from any of the Properties, or
arising from or relating to the operations of the Company, in violation of
Environmental Laws or in amounts that could give rise to material liability
under Environmental Laws.
5.15 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
The Company (i) is not an "investment company" or a company "controlled by an
investment company" and (ii) is not required to register, in each case, under
the provisions of the Investment Company Act of 1940, as amended, and neither
the entering into or performance by the Company of this Agreement violates any
provision of such Act or requires under such Act any consent, approval or
authorization of, or registration with, the Securities and Exchange Commission
(the "Commission") or any other governmental or public body or authority
pursuant to any provisions of such Act. The Company is not a "public utility
holding company" within the meaning of the Public Utility Holding Company Act of
1935, as amended. None of the transactions contemplated by this Agreement
(including, without limitation, the use of proceeds from the sale of the
Securities) will violate or result in a violation of Section 7 of the Exchange
Act or any regulation issued pursuant thereto including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System.
5.16 PAYMENT OF WAGES. The Company is in compliance in all
material respects with the Fair Labor Standards Act, as amended, and the Company
has in all material respects paid all minimum and overtime wages required by law
to be paid to its employees.
5.17 SECURITIES LAWS. The Company and, to the best of the
Company's knowledge, any underwriters, sales agents, representatives or brokers
representing or acting, or who have in the past represented or acted, on behalf
of the Company have
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complied with all material federal and state securities laws in connection with
the offer and sale of and securities in the Company, including the Common Stock
and Warrants to be issued and sold pursuant to this Agreement. The offer, sale
and issuance of the Common Stock and Warrants are, the issuance of the shares of
Common Stock in connection with the exercise of the Warrants will be, and any
previous private placement of securities effected by the Company was, exempt
from the registration requirements of the Securities Act and from the
registration or qualification requirements of the laws of any applicable state
or other jurisdiction, and neither the Company nor anyone on its behalf will
take any action hereafter that would or would likely cause the loss of such
exemption.
5.18 AGREEMENTS WITH AFFILIATES AND MANAGEMENT AGREEMENTS. Except
as set forth on ANNEX 5.18 attached hereto, the Company does not have (i) any
material agreements or binding arrangements of any kind with any Affiliates, or
(ii) any management or consulting agreements of any kind with any third party.
5.19 DISCLOSURE; SEC FILINGS. There is no fact which the Company
has not disclosed to the Investors in writing which has or will have a
Materially Adverse Effect. The information contained in this Agreement, the
Financials and in any writing furnished pursuant hereto or in connection
herewith, does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or herein or necessary to
make the statements therein or herein not misleading. Additionally, the Company
has delivered to CFE, as lead investor, true and complete copies of each
registration statement, report and proxy or information statement, including,
without limitation, any annual reports to Stockholders incorporated by reference
in any of such reports, in form (including exhibits and any amendments thereto)
required to be filed with the Commission since December 31, 1997 (collectively,
the "COMPANY SEC REPORTS"). As of the respective dates the Company SEC Reports
were filed, or, if any such Company SEC Report was amended, as of the date such
amendment was filed, each of the Company SEC Reports (i) complied in all
respects with all applicable requirements of the Securities Act and the Exchange
Act, and the rules and regulations promulgated thereunder, and (ii) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, misleading.
Each of the audited financial statements and unaudited interim financial
statements of the Company (including any related notes and schedules) included
(or incorporated by reference) in its Annual Reports on Form 10-KSB for each of
the last two fiscal years and its Quarterly Reports on Form 10-QSB for all
interim periods subsequent thereto fairly present, in conformity with generally
accepted accounting principles, the financial position of the Company as of its
date and the results of
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operations and changes in financial position for the period then ended (subject
to normal year-end adjustments in the case of any unaudited interim financial
statements).
6. CONDITIONS PRECEDENT TO INVESTOR'S OBLIGATIONS AT THE CLOSING. The
obligation of each Investor to execute this Agreement is subject to the prior
fulfilment of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company under this Agreement shall be true and correct as of
the date hereof.
6.2 SIMULTANEOUS PURCHASE BY INVESTORS. The Company shall be
contemporaneously consummating the sale of an aggregate of at least 2,500,000
shares of Common Stock to the Investors listed on ANNEX A attached hereto for a
Required Payment of at least Seven Million Five Hundred Dollars ($7,500,000).
6.3 NO MATERIAL ADVERSE CHANGE. There shall not have occurred (i)
a change in the financial condition, business, assets or prospects of the
Company or any of its Subsidiaries that constitutes a Materially Adverse Effect
with respect to the Company and its Subsidiaries taken as a whole, (ii) any
substantive change in local, state or federal governmental regulations affecting
the business of the Company or any of its Subsidiaries or the business proposed
to be conducted by the Company or any of its Subsidiaries that would be
reasonably likely to have a Materially Adverse Effect, (iii) any material
adverse change in the Company's industry generally or (iv) any threatened,
instituted or pending action, proceeding, application or counterclaim by or
before any governmental, regulatory or administrative agency or authority,
domestic or foreign, which seeks to restrain or prohibit the transactions
contemplated by this Agreement or seeks damages in connection therewith or
resulting therefrom, seeks to impose any limitations on the ability of the
Investors effectively to acquire or to hold or to exercise full rights of
ownership of the Securities, including, without limitation, the right to vote
the Securities in accordance with their terms or would otherwise be reasonably
likely to have a Materially Adverse Effect on the Company.
6.4 QUALIFICATION UNDER STATE SECURITIES LAWS. All registrations,
qualifications, permits and approvals required under applicable state securities
laws necessary for the lawful execution, delivery and performance of this
Agreement, including without limitation all such registrations, qualifications,
permits and approvals required prior to the sale of the Securities shall have
been obtained.
13
6.5 DELIVERY OF DOCUMENTS. Each Investor shall have received the
following:
(a) copies of resolutions of the Board, certified by an
Authorized Signatory of the Company, authorizing and approving the execution,
delivery and performance of this Agreement, and all other documents and
instruments to be delivered pursuant hereto and thereto;
(b) a copy of the Bylaws of the Company certified by an
Authorized Signatory of the Company;
(c) a true and complete copy of each and any agreements or
arrangements of any kind among the shareholders of the Company, or otherwise
with respect to the ownership of the Company;
(d) good standing certificates for the Company and each
Subsidiary of the Company, issued by the Secretary of State of each state in
which each such corporation is incorporated or qualified to do business as a
foreign corporation;
(e) this Agreement duly executed by the Company;
(f) the Registration Agreement and the Stockholders Agreement
duly executed by all parties thereto, other than the Investors;
(g) a favorable opinion of Blank Rome Xxxxxx Xxxxxxxxxx LLP,
counsel for the Company, dated the Closing Date substantially in the form of
ANNEX 6.5(G) attached hereto;
(h) a certificate representing the shares of Common Stock and
a certificate representing the Warrants to be purchased by such Investor;
(i) a certificate of incumbency with respect to each
Authorized Signatory; and
(j) such additional supporting documentation and other
information with respect to the transactions contemplated hereby as the
Investors or their special counsel, Paul, Hastings, Xxxxxxxx & Xxxxxx LLP, may
reasonably request.
6.6 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
and actions taken in connection with the transactions contemplated hereby and
all certificates, opinions, agreements, instruments and documents mentioned
herein or incident to
14
any such transactions, shall be reasonably satisfactory in form and substance to
the Investors and to their special counsel, Paul, Hastings, Xxxxxxxx & Xxxxxx
LLP.
6.7 STRUCTURING FEE. CFE shall have received payment of the
Structuring Fee.
7. AFFIRMATIVE COVENANTS. The Company agrees, that, unless, with
respect to Sections 7.1 through 7.10 and Section 7.12, Investors holding at
least 66_% of the shares of Common Stock sold hereunder then held by Investors
otherwise agree in writing, so long as at least 375,000 shares of Common Stock
are held by Investors, the Company (and each of its Subsidiaries unless the
context otherwise requires) will do the following:
7.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. Preserve and
maintain, or timely obtain and thereafter preserve and maintain, its existence,
material rights, franchises and licenses and its material privileges used in
connection with or relating to the operations of its business, including without
limiting the foregoing, all Necessary Authorizations, and qualify and remain
qualified and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualifications or authorizations, except in such cases where the failure to take
such action would not be reasonably likely to have a Materially Adverse Effect.
7.2 COMPLIANCE WITH APPLICABLE LAW. Comply in all respects with
the requirements of all Applicable Laws except where compliance is being
contested in good faith by appropriate proceedings and adequate reserves have
been set aside therefor or where non-compliance with which would be reasonably
likely to have a Materially Adverse Effect.
7.3 MAINTENANCE OF PROPERTIES. Maintain or cause to be maintained
in the ordinary course of business in good repair, working order and condition
(reasonable wear and tear excepted) all properties used or useful in its
business (whether owned or held under lease), and from time to time make or
cause to be made all needed and appropriate repairs, renewals, replacements,
additions, betterments and improvements thereto, except in such cases where the
failure to take such action would not be reasonably likely to have a Materially
Adverse Effect; PROVIDED, HOWEVER, that the provisions of this SECTION 7.3 shall
not prevent the Company from disposing of obsolete equipment in the ordinary
course of its business.
7.4 ACCOUNTING METHODS AND FINANCIAL RECORDS. Maintain a system of
accounting established and administered in accordance with generally accepted
accounting principles consistently applied, keep adequate records and books of
account in
15
which complete entries will be made in accordance with such accounting
principles consistently applied and reflecting all transactions required to be
reflected by such accounting principles. The Company shall also maintain its
current fiscal year; provided that the Company may change to a fiscal year
ending December 31st without the prior consent of the Investors.
7.5 MAINTAIN INSURANCE. Maintain in full force and effect a policy
or policies of insurance issued by insurers of recognized responsibility,
insuring it and its properties and business against such losses and risks, and
in such amounts, as are customary in the case of corporations of established
reputation engaged in the same or a similar business and similarly situated.
7.6 PAY TAXES AND OTHER LIABILITIES. Pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or any of its
Subsidiaries or their income or profits or upon any properties belonging to them
prior to the date on which penalties attach thereto, and all lawful claims for
labor, materials and supplies which, if unpaid, would be reasonably likely to
have a Materially Adverse Effect or become a Lien or charge upon any of their
properties; except that no such tax, assessment, charge, levy or claim need be
paid which is being contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside on the appropriate books, but
only so long as such tax, assessment, charge, levy or claim does not become a
Lien or charge other than a Permitted Lien and no foreclosure, distraint, sale
or similar proceedings shall have been commenced, subject to a cure period of
thirty (30) days. The Company shall timely file all information returns required
by federal, state or material local tax authorities.
7.7 REPORTS. The Company shall provide the following reports and
other information to the Investors at the times specified below:
(a) Promptly upon learning of the occurrence of a Default or
a condition or event which with the giving of notice or the lapse of time, or
both, would constitute a Default, a certificate signed by the chief executive
officer or chief financial officer of the Company describing such Default, or
condition or event and stating what steps are being taken to remedy or cure the
same;
16
(b) Promptly upon the earlier of providing such information
to the Common Stockholders of the Company or filing such information with the
Commission, written notice to the Investors of the commencement of any material
proceeding or investigation by or before any governmental body and any material
actions or proceedings in any court or before any arbitrator (i) against, or
(ii) in any other way relating materially adversely and directly to, the Company
or any Subsidiary or any of their properties, assets or businesses;
(c) Promptly upon filing with the Commission, all such
filings that are not otherwise distributed to the Common Stockholders of the
Company; and
(d) Promptly upon request such other information relating to
the finances, properties, business and affairs of Company, and each Subsidiary
as any Investor reasonably may request from time to time, subject to execution
of a mutually acceptable confidentiality agreement to the extent such
information is likely to include material, non-public information.
7.8 REPLACEMENT OF CERTIFICATES. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of any certificate representing any of the Securities, and, if
requested by the Company, the posting of a reasonable bond and the execution of
a reasonable agreement of indemnity, issue a new certificate representing such
Securities in lieu of such lost, stolen, destroyed, or mutilated certificate.
7.9 COMPLIANCE WITH CERTIFICATE OF INCORPORATION AND BYLAWS.
Perform and observe all requirements of the Company's Certificate of
Incorporation and Bylaws.
7.10 BOARD OBSERVATION RIGHTS. So long as CFE or any of its
Affiliates hold at least 375,000 shares of Common Stock, CFE shall have the
right to appoint an observer to attend all meetings of the Board of Directors
and of any committees thereof. CFE will be entitled to receive information
provided to any other Board members in connection with such observer rights,
including all monthly financial, operating, performance and budgetary reports
and data. Such observer shall be entitled to notice of all Board of Directors
meetings upon provision of such notice to members of the Board of Directors and
shall enter into a reasonable confidentiality agreement with the Company upon
request.
7.11 USE OF PROCEEDS. Use the proceeds of this offering to fund
research and development, marketing and working capital needs.
17
8. ANTI-DILUTION ADJUSTMENT. The shares of Common Stock purchased
hereunder, but not including the shares of Common Stock issuable upon exercise
of the Warrants (the "ADJUSTED SHARES") shall be subject to adjustment from
time-to-time in accordance with the following. If at any time within one (1)
year and six (6) months after the Closing, the Company shall do any of the
following, and immediately upon the occurrence of the following:
(a) Issue any options, warrants or other rights entitling the
Holder thereof to subscribe for or purchase shares of Common Stock or other
securities of the Company convertible or exchangeable for Common Stock at a
price per share which, when added to the amount of consideration received or
receivable by the Company for such options, warrants or rights is less than
$3.00 per share or, at any time following the first adjustment made pursuant to
this Section 8, the then effective purchase price per share paid by the
Investors hereunder (the "THRESHOLD PRICE");
(b) Issue or sell securities of the Company convertible into
or exchangeable for Common Stock at a price per share which, when added to the
amount of consideration received or receivable by the Company for such
exchangeable or convertible securities, is less than the Threshold Price; or
(c) Issue or sell additional shares of its Common Stock for
consideration less than the Threshold Price;
then the Company shall promptly issue to the Holders of Adjusted Shares that
number of shares of Common Stock that, when added to the number of shares of
Common Stock previously issued to the Holders of Adjusted Shares, equals in the
aggregate that number of shares of Common Stock that would have been purchased
with the Required Payment if the Investors had initially paid a price per share
equal to the price paid for the additional shares of Common Stock issued or
deemed issued pursuant to this Section 8. The price paid for additional shares
of Common Stock issued or deemed issued pursuant to this Section 8 shall be
equal to, (i) if shares of Common Stock are sold, the price per share paid for
such Common Stock; and (ii) if options, warrants or other rights to purchase
Common Stock or securities convertible or exchangeable for Common Stock are
issued or sold, the lowest price per share payable upon exercise, conversion or
exchange of such securities, plus the price per share paid for such options,
warrants or other rights or convertible securities.
For example, if, prior to the one (1) year six (6) month anniversary of
the Closing, the Company were to sell 1,000,000 additional shares of Common
Stock at a
18
price of $2.00 a share, the Company would be required to issue additional shares
of Common Stock to Investors determined as follows, assuming that the Investors
made an aggregate Required Payment of $5,000,000: Required Payment ($5,000,000),
DIVIDED BY new price per share ($2.00), EQUALS 2,500,000 shares, minus 1,666,667
shares previously issued, equals 83,000 shares of additional Common Stock. Such
additional shares would be issued pro rata among the Investors at no additional
cost.
Upon any adjustment pursuant to this Section 8, the Company shall
give written notice thereof, by first class mail, postage prepaid, return
receipt requested addressed to the registered Holder of Adjusted Shares at the
address of such Holder as shown on the books of the Company and in case of a
Holder with an address of record outside the United States, by facsimile, and
confirmed in writing by first class air mail. The notice shall be signed by the
Company's chief financial officer and shall state the nature of such adjustment,
setting forth in reasonable detail the method of effecting the adjustment and
the facts upon which such adjustment is based. Notwithstanding the above, this
Section 8 shall not apply to the following: (i) exercise of any of the 2,595,000
options issued and outstanding as of the date hereof as reflected on ANNEX 5.1
hereto; (ii) the issuance to directors, officers or independent consultants of
the Company as incentive compensation of options to purchase shares of Common
Stock pursuant to an option plan duly adopted by the Company's Board of
Directors and stockholders subject to a limit of options to purchase 3,000,000
shares of Common Stock; and (iii) any issuance of securities approved by
Investors holding 66_% of the shares of Common Stock issued hereunder and then
held by Investors.
9. ENFORCEMENT.
9.1 REMEDIES AT LAW OR IN EQUITY. If any Default shall occur or if
any representation or warranty made by or on behalf of the Company in this
Agreement or in any certificate, report or other instrument delivered under or
pursuant to any term hereof shall be untrue or misleading in any respect as of
the date of this Agreement or as of the date it was made, furnished or
delivered, the Holder of any Security may proceed to protect and enforce its
rights by suit in equity or action at law, whether for the specific performance
of any term contained in this Agreement or for an injunction against the breach
of any such term or in aid of the exercise of any power granted in this
Agreement, or to enforce any other legal or equitable right of such Holder of
any such Securities, or to take any one or more of such actions. In the event a
Holder brings such an action against the Company, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including, without limitation,
19
such reasonable fees and expenses of attorneys and accountants, which shall
include, without limitation, all fees, costs and expenses of appeals.
9.2 CUMULATIVE REMEDIES. None of the rights, powers or remedies
conferred upon any Investor shall be mutually exclusive, and each such right,
power or remedy shall be cumulative and in addition to every other right, power
or remedy, whether now or hereafter available at law, in equity, by statute or
otherwise.
9.3 NO IMPLIED WAIVER. Except as expressly provided in this
Agreement, no course of dealing between the Company and the Investors and no
delay in exercising any such right, power or remedy conferred hereby now or
hereafter existing at law, in equity, by statute or otherwise, shall operate as
a waiver of, or otherwise prejudice, any such right, power or remedy.
10. DEFINITIONS. Unless the context otherwise requires, the terms
defined in this SECTION 10 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined.
"ADJUSTED SHARES" shall have the meaning assigned to it in SECTION
8 hereof.
"AFFILIATE" shall mean any Person which directly or indirectly
controls, is controlled by, or is under common control with, the indicated
Person. For purposes of this definition "control" when used with respect to any
Person includes, without limitation, the direct or indirect beneficial ownership
of more than fifty percent (50%) of the voting securities or voting equity or
partnership interests of such Person, or the power to direct or cause the
direction of the management or policies of such Person, whether by contract or
otherwise.
"AGREEMENT" shall mean this Agreement.
"APPLICABLE LAW" shall mean all provisions of constitutions,
statutes, rules, regulations, and orders of governmental bodies or regulatory
agencies applicable to the Company, including, without limitation, Environmental
Laws, and Title 17 of the United States Code and all orders and decrees of all
courts and arbitrators in proceedings or actions to which the Company is a party
or by which it is bound.
"AUTHORIZED SIGNATORY" shall mean such senior personnel of the
Company as may be duly authorized and designated in writing by the Company to
execute documents, agreements and instruments on behalf of the Company.
20
"BOARD" shall mean the Board of Directors of the Company.
"BUSINESS DAY" shall mean a day on which banks and foreign
exchange markets are open for the transaction of business required for this
Agreement in New York.
"COMMON STOCK" shall have the meaning assigned to it in SECTION 1
hereof.
"COMMISSION" shall have the meaning assigned to it in SECTION 5.15
hereof.
"COMPANY AGREEMENTS" shall have the meaning assigned to it in
SECTION 5.12 hereof.
"COMPANY SEC REPORTS" shall have the meaning assigned to it in
SECTION 5.19 hereof.
"COMPANY INTELLECTUAL PROPERTY" shall have the meaning assigned to
it in SECTION 5.13 hereof.
"DEFAULT" shall mean (i) a default or failure in the due
observance or performance of any covenant, condition oragreement on the part of
the Company or any of its Subsidiaries to be observed or performed under the
terms of this Agreement or the Registration Agreement, if such default or
failure in performance shall remain unremedied for ten (10) days, or (ii) a
default under any senior credit facility of the Company.
"ENVIRONMENTAL LAWS" shall mean any and all federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
permit conditions, decrees or requirements of any governmental authority
regulating, relating to or imposing liability or standards of conduct concerning
environmental protection matters, including, without limitation, those relating
to releases, discharges, emissions or disposals to air, water, land or ground
water, to the withdrawal or use of ground water, to the use, handling or
disposal of polychlorinated biphenyals, asbestos or urea formaldehyde, to the
treatment, storage, disposal or management of hazardous substances (including,
without limitation, petroleum, crude oil or any fraction thereof, or other
hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous or
other controlled, prohibited or regulated substances, including, without
limitation, any provisions under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as
21
amended (42 U.S.C. ss. 9601 ET SEQ.) or the Resource Conservation and Recovery
Act of 1976, as amended (42 U.S.C. ss. 6901, ET SEQ.).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as in effect on the date hereof and as such Act may be amended thereafter
from time to time.
"ERISA AFFILIATE" shall mean any Person which is an "Affiliate" of
the Company within the meaning of Section 414 of the Internal Revenue Code and
which, together with the Company, is treated as a single employer for purposes
of such Section 414.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FINANCIALS" shall have the meaning ascribed thereto in SECTION
5.9 hereof.
"CFE" shall mean CFE, Inc.
"HAZARDOUS MATERIALS" shall mean all toxic and hazardous
substances and wastes and petroleum products.
"HOLDER" of any Security shall mean the record owner of such
Security.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of
1986, as amended.
"INVESTOR" and "INVESTORS" shall have the meaning assigned to it
in the introductory paragraph of this Agreement.
"LIEN" shall mean with respect to any Property, any mortgage,
lien, pledge, charge, security interest or other encumbrance of any kind,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement and any lease
deemed to constitute a security interest and any option or other agreement to
give any security interest).
"MATERIALLY ADVERSE EFFECT" shall mean any materially adverse
effect upon the business operation, assets, liabilities, financial condition,
results of operations or business prospects of the Company or any of its
Subsidiaries, or upon the ability of the
22
Company to operate its current teleservices business or to develop and market
its encryption security technology, or the ability of the Company to perform
this Agreement, or to perform under the Registration Agreement, resulting from
any act, omission, situation, status, event or undertaking, either singly or
taken together; PROVIDED, HOWEVER, that in no event shall Materially Adverse
Effect include the effects of any future general economic conditions or
technological changes, including, without limitation, conditions or changes
which affect prevailing interest rates.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"NECESSARY AUTHORIZATIONS" shall mean all authorizations,
consents, permits, exemptions, approvals and licenses from, and all filings and
legislations with, and all required reports to, any governmental or regulatory
authority, necessary for the operation of the Company's business.
"PERMITTED LIENS" shall mean (a) Liens existing on the Closing
Date and disclosed on ANNEX 5.6 hereto; (b) Liens imposed by governmental
authorities for taxes, assessments or other charges not yet subject to penalty
or which are being contested in good faith and by appropriate proceeding, if
adequate reserves with respect thereto are maintained on the books of the
Company in accordance with generally accepted accounting principles; (c)
statutory Liens of carriers, warehousemen, mechanics, materialmen, landlords,
repairmen, or other like Liens arising by operation of law in the ordinary
course of business; (d) Liens securing the performance of bids, trade contracts
(other than borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (e) easements, rights of way, zoning, similar
restrictions and other similar encumbrances or title defects which, singularly
or in the aggregate, do not in any case materially detract from the value of the
property, or materially interfere with the ordinary conduct of the business of
the Company and its Subsidiaries; and (f) pledges or deposits made in the
ordinary course of business in connection with workers compensation,
unemployment insurance and other types of Social Security legislation.
"PERSON" shall include any natural person, corporation, limited
liability company, trust, association, company,
partnership, joint venture and other entity and any government, governmental
agency, instrumentality or political subdivision.
"PLAN" shall mean an employee benefit plan within the meaning of
Section 3(3) of ERISA or any other plan maintained for employees of any Person
or any ERISA Affiliate of such Person.
23
"PROPERTY" shall mean any real property or personal property,
plant, building, facility, structure, underground storage tank or unit,
equipment, inventory or other asset, owned, leased or operated by the Company or
any Subsidiary of the Company (including, without limitation, any surface water
thereon or adjacent thereto, and soil and groundwater thereunder).
"REGISTRATION AGREEMENT" shall mean the Registration Agreement by
and between the Company and the Investors relating to the registration of the
Common Stock sold pursuant hereto, dated as of the date of the Closing.
"REPORTABLE EVENT" shall have the meaning set forth in Title IV of
ERISA.
"REQUIRED PAYMENT" shall have the meaning assigned to it in
SECTION 2 hereof.
"SECURITIES" shall have the meaning assigned to it in SECTION 1
hereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"STOCKHOLDERS AGREEMENT" shall mean the Stockholders Agreement by
and among the Investors, the Company, and certain other Holders of Common Stock
of the Company, dated as of the date of the Closing.
"STRUCTURING FEE" shall mean the $75,000 fee payable to CFE at
Closing in consideration for its services as lead investor hereunder.
"SUBSIDIARY" shall mean (i) any corporation of which fifty (50%)
percent or more of the voting stock, or any partnership of which 50% or more of
outstanding partnership interests, is at any time owned by the Company, or by
one or more Subsidiaries of the Company, or by the Company and one or more
Subsidiaries of the Company, and (ii) any other entity which is controlled or
capable of being controlled by the Company or by one or more Subsidiaries of the
Company or by the Company and one or more Subsidiaries of the Company.
"THRESHOLD PRICE" shall have the meaning assigned to it in SECTION
9 hereof.
"WARRANTS" shall have the meaning assigned to it in SECTION 1
hereof.
24
11. MISCELLANEOUS.
11.1 WAIVERS AND AMENDMENTS. With the written consent of the
Holders of 66_% of the outstanding shares of Common Stock issued pursuant hereto
and then held by Investors, the obligations of the Company and the rights of the
Holders of the Securities under this Agreement may be waived (either generally
or in a particular instance, either retroactively or prospectively and either
for a specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board, may enter into a
supplementary agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement or of any
supplemental agreement or modifying in any manner the rights and obligations
hereunder of the Holders of the Securities and the Company; PROVIDED, HOWEVER,
that no such waiver or supplemental agreement shall (a) affect any of the rights
of any Holder of a Security created by the Company's Certificate of
Incorporation or by the Delaware General Corporation Law without compliance with
all applicable provisions of the Certificate of Incorporation or the Delaware
General Corporation Law, as the case may be, or (b) reduce the aforesaid
proportion of Common Stock, the Holders of which are required to consent to any
waiver or supplemental agreement, without the consent of all of the Investors
then holding shares of Common Stock sold hereunder. Upon the effectuation of
each such waiver, consent or agreement of amendment or modification, the Company
shall promptly give written notice thereof to all the Investors, but failure to
give such notice shall not affect the validity of any consent. Neither this
Agreement nor any provision hereof, may be amended, waived, discharged or
terminated orally or by course of dealing, but only by a statement in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, except to the extent provided in this SECTION 11.1.
Specifically, but without limiting the generality of the foregoing, the failure
of any Holder at any time or times to require performance of any provision
hereof or of the Certificate by the Company shall in no manner affect the right
of any Holder at a later time to enforce the same. No waiver by any party of the
breach of any term or provision contained in this Agreement in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such breach, or a waiver of the breach of any other term or
covenant contained in the Agreement.
11.2 RIGHTS OF HOLDERS INTER SE. Each Investor shall have the
absolute right to exercise or refrain from exercising any right or rights which
such Investor may have by reason of this Agreement or any Security, including,
without limitation, the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into an agreement with the Company for
the purpose of modifying this Agreement or any agreement effecting any such
modification, and such Investor shall not incur any
25
liability to any other Investor with respect to exercising or refraining from
exercising any such right or rights.
11.3 NOTICES. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first class postage prepaid, registered or certified mail,
(a) If to the Investors to each of them at their respective
addresses listed on ANNEX A attached hereto.
or
(b) If to the Company, at the address first above written or
at such other address as the Company may specify by written notice to Investor,
and each such notice, request, consent and other communication shall for all
purposes of the Agreement be treated as being effective or having been given
when delivered, if delivered personally, by e-mail or facsimile with
confirmation of receipt or by overnight courier or, if sent by mail, at the
earlier of its actual receipt or three (3) days after the same has been
deposited in a regularly maintained receptacle for the deposit of United States
mail, addressed and postage prepaid as aforesaid.
11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made in, pursuant to or in connection with this
Agreement shall survive the execution and delivery of this Agreement, any
investigation at any time made by or on behalf of the Investors, and the sale
and purchase of the Securities and payment therefor. All statements contained in
any certificate, instrument or other writing delivered by or on behalf of the
Company pursuant hereto or in connection with or contemplation of the
transactions herein contemplated shall constitute representations and warranties
by the Company hereunder. Any claim against the Company based upon any
inaccuracy in any of the representations or breach of any of the warranties
hereunder must be asserted against the Company, either by written notice given
to the Company specifying with reasonable particularity the claimed inaccuracy
or breach or by institution of an action at law or suit in equity against the
Company and the serving of the process and complaint with respect thereto upon
the Company, within two (2) years from the Closing Date.
11.5 SEVERABILITY. Should any one or more of the provisions of
this Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other
26
agreement entered into pursuant to this Agreement, shall be given effect
separately from the provision or provisions determined to be illegal or
unenforceable and shall not be affected thereby.
11.6 PARTIES IN INTEREST. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not, and, in particular, shall inure to the benefit of and be
enforceable by the Holder or Holders at the time of any of the Securities.
Subject to the immediately preceding sentence, this Agreement shall not run to
the benefit of or be enforceable by any Person other than a party to this
Agreement and its successors and assigns.
11.7 HEADINGS. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
11.8 CHOICE OF LAW. It is the intention of the parties that the
internal substantive laws, and not the laws of conflicts, of the State of New
York shall govern the enforceability and validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of the
parties.
11.9 EXPENSES. The Company will promptly pay (i) all out-of-pocket
expenses of the Investors in connection with the preparation, negotiation,
execution and delivery of this Agreement, the Registration Agreement and the
Stockholders Agreement and the transactions contemplated hereunder and
thereunder, whether or not the transactions contemplated by this Agreement are
consummated, including, but not limited to, the reasonable fees and
disbursements of one counsel for the Investors, being Paul, Hastings, Xxxxxxxx &
Xxxxxx LLP, special counsel for CFE as lead investor, and (ii) all costs and
out-of-pocket expenses of obtaining performance under this Agreement and the
other agreements referenced herein or of preparing, negotiating, executing and
delivering any amendment of or consent or waiver under this Agreement or the
other agreements referenced herein at the Company's request, including but not
limited to, reasonable fees and expenses of counsel for the Investors.
11.10 COUNTERPARTS; FACSIMILE. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, with the same effect as if all parties had signed the same
document. All such counterparts shall be deemed an original, shall be construed
together and shall constitute one and the same instrument. Delivery of an
executed counterpart of this Agreement by facsimile transmission shall be as
effective as delivery of a manually executed counterpart hereof.
27
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
28
[Common Stock Purchase Agreement Signature Page]
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract between you
and the undersigned.
Very truly yours,
TELEHUBLINK CORPORATION
By:__________________________
President
and _________________________
Secretary
The foregoing Agreement is hereby accepted as of the date first above written.
INVESTORS:
CFE, INC.
By:___________________________
Name:_________________________
Title:________________________
By:___________________________
Name:_________________________
Title:________________________
================================================================================
TELEHUBLINK CORPORATION
----------------------------------
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
-----------------------------------
Dated as of March 6, 2000
=================================================================
TABLE OF CONTENTS
(Not Part of Agreement)
PAGE
----
1. AUTHORIZATION OF SECURITIES..............................................................................1
2. SALE AND PURCHASE OF COMMON STOCK AND WARRANTS...........................................................1
3. CLOSING..................................................................................................1
4. REGISTER OF SECURITIES; RESTRICTIONS ON TRANSFER OF SECURITIES; REMOVAL OF RESTRICTIONS ON TRANSFER OF
SECURITIES...............................................................................................2
4.1 REGISTER OF SECURITIES..........................................................................2
4.2 SECURITIES ACT RESTRICTIONS ON TRANSFER.........................................................2
4.3 REMOVAL OF SECURITIES ACT TRANSFER RESTRICTIONS.................................................4
5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY............................................................4
5.1 ORGANIZATION; POWER; QUALIFICATION; CAPITAL STOCK...............................................4
5.2 AUTHORIZATION...................................................................................5
5.3 SUBSIDIARIES....................................................................................6
5.4 COMPLIANCE WITH OTHER DOCUMENTS AND CONTEMPLATED TRANSACTIONS...................................6
5.5 COMPLIANCE WITH LAW.............................................................................7
5.6 TITLE TO PROPERTIES.............................................................................7
5.7 LITIGATION......................................................................................7
5.8 TAXES...........................................................................................7
5.9 FINANCIAL STATEMENTS............................................................................7
xxxii
5.10 NO ADVERSE CHANGE...............................................................................8
5.11 ERISA...........................................................................................8
5.12 ABSENCE OF DEFAULT, ETC.........................................................................8
5.13 INTELLECTUAL PROPERTY RIGHTS....................................................................9
5.14 ENVIRONMENTAL MATTERS..........................................................................10
5.15 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.....................................11
5.16 PAYMENT OF WAGES...............................................................................12
5.17 SECURITIES LAWS................................................................................12
5.18 AGREEMENTS WITH AFFILIATES AND MANAGEMENT AGREEMENTS...........................................12
5.19 DISCLOSURE; SEC FILINGS........................................................................12
6. CONDITIONS PRECEDENT TO INVESTOR'S OBLIGATIONS AT THE CLOSING...........................................13
6.1 REPRESENTATIONS AND WARRANTIES.................................................................13
6.2 SIMULTANEOUS PURCHASE BY INVESTORS.............................................................13
6.3 NO MATERIAL ADVERSE CHANGE.....................................................................13
6.4 14
6.5 DELIVERY OF DOCUMENTS..........................................................................14
6.6 PROCEEDINGS AND DOCUMENTS......................................................................15
6.7 STRUCTURING FEE................................................................................15
7. AFFIRMATIVE COVENANTS...................................................................................15
7.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS..................................................15
7.2 COMPLIANCE WITH APPLICABLE LAW.................................................................16
7.3 MAINTENANCE OF PROPERTIES......................................................................16
7.4 ACCOUNTING METHODS AND FINANCIAL RECORDS.......................................................16
7.5 MAINTAIN INSURANCE.............................................................................16
7.6 PAY TAXES AND OTHER LIABILITIES................................................................16
7.7 REPORTS........................................................................................17
xxxiii
7.8 REPLACEMENT OF CERTIFICATES....................................................................17
7.9 COMPLIANCE WITH CERTIFICATE OF INCORPORATION AND BYLAWS........................................18
7.10 BOARD OBSERVATION RIGHTS.......................................................................18
7.11 USE OF PROCEEDS................................................................................18
8. ANTI-DILUTION ADJUSTMENT................................................................................18
9. ENFORCEMENT.............................................................................................20
9.1 REMEDIES AT LAW OR IN EQUITY...................................................................20
9.2 CUMULATIVE REMEDIES............................................................................20
9.3 NO IMPLIED WAIVER..............................................................................20
10. DEFINITIONS.............................................................................................21
11. MISCELLANEOUS...........................................................................................25
11.1 WAIVERS AND AMENDMENTS.........................................................................25
11.2 RIGHTS OF HOLDERS INTER SE.....................................................................26
11.3 NOTICES........................................................................................26
11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC................................................27
11.5 SEVERABILITY...................................................................................27
11.6 PARTIES IN INTEREST............................................................................27
11.7 HEADINGS.......................................................................................28
11.8 CHOICE OF LAW..................................................................................28
11.9 EXPENSES.......................................................................................28
11.10 COUNTERPARTS; FACSIMILE........................................................................28
xxxiv
ANNEX A
List of Investors
INVESTORS EQUIRED PAYMENT # OF SHARES OF COMMON WARRANTS
STOCK
--------- --------------- --------------------- --------
CFE, Inc. $2,500,000 833,333 833,333
Xxxxxxx Xxxxxx 500,000 166,667 166,667
Xxxx Xxxx 500,000 166,667 166,667
First Global Ventures, Inc. 1,000,000 333,333 333,333
ZeroDotNet, Inc. 1,000,000 333,333 333,333
Xxxxx X. Xxxxxxxxxx 100,000 333,333 333,333
Xxxxx X. Xxxxxxxxxx, 150,000 50,000 50,000
Individual Retirement Account
Xxxxxxxxx Xxxxxx 100,000 33,333 33.333
Xxxxx Xxxxx 100,000 33,333 33,333
Xxxxx X.Xxxxx, as custodian 100,000 33,333 33,333
for Xxxxxxx X. Xxxxx
Xxxxx X. Xxxxx, as 100,000 33,333 33,333
custodian for Xxxxxx
Xxxxxx Xxxxx
Xxxxx & Xxxxx Xxxxx, 100,000 33,333 33,333
co-trustees FBO DASCAS
Revocable UTAD 7/6/93
Xxxxxxx Merdik 200,000 66,667 66,667
Xxxxxxx Xxxxxxxx 200,000 66,667 66,667
Xxx Xxxxxx 1,000,000 333,333 333,333
Xxxx Xxxxxx 200,000 66,667 66,667
Xxxxxx Xxxx 150,000 50,000 50,000
Xxxxxxxxxx Xxxxxxxxx 100,000 33,333 33,333
TOTAL $8,100,000 2,699,999 2,699,999
