COMC, INC.
SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
----
1. Purchase and Sale of Stock.................................................1
1.1 Sale and Issuance of Series A Preferred Stock.....................1
1.2 Term..............................................................1
1.3 Interest Rate.....................................................1
1.4 Liquidation and Sale Preferences..................................1
1.5 Redemption Conversion and Sinking Fund............................1
1.6 Voting Rights.....................................................2
1.7 Legend............................................................2
1.8 Closing..........................................................3
1.9 Subsequent Sale of Series A Preferred Stock.......................3
2. Representations and Warranties of the Company..............................3
2.1 Organization; Good Standing; Qualification........................3
2.2 Authorization.....................................................3
2.3 Valid Issuance of Preferred and Common Stock......................3
2.4 Governmental Consents.............................................4
2.5 Capitalization and Voting Rights..................................4
2.6 Subsidiaries......................................................5
2.7 Contracts and Other Commitments...................................5
2.8 Material Contracts and Commitments................................5
2.9 Registration Rights...............................................5
2.10 Permits...........................................................6
2.11 Compliance With Other Instruments.................................6
2.12 Litigation........................................................6
2.13 Title to Property and Assets; Leases..............................6
2.14 Patents, Trademarks, etc..........................................7
2.15 Proprietary Agreements............................................7
2.16 Taxes.............................................................7
2.17 No Material Changes...............................................7
2.18 Conflicts of Interest.............................................7
2.19 Employees; Absence of Restrictive Agreements......................8
3. Representations and Warranties of the Investors............................8
3.1 Authorization.....................................................8
3.2 Purchase Entirely for Own Account.................................8
3.3 Receipt of Information............................................8
3.4 Investment Experience.............................................8
3.5 Accredited Investor...............................................9
3.6 Sale of Preferred Stock...........................................9
3.7 Restricted Securities.............................................9
4. Conditions of Investors' Obligations at Closing............................9
-i-
4.1 Representations and Warranties....................................9
4.2 Performance.......................................................9
4.3 Qualifications....................................................9
4.4 Forms.............................................................9
4.5 Proceedings and Documents.........................................9
4.6 Registration Rights Series A Peferred Stock......................10
5. Conditions of the Company's Obligations at Closing........................10
5.1 Representations and Warranties...................................10
5.2 Performance......................................................10
5.3 Qualifications...................................................10
5.4 Forms............................................................10
6. Miscellaneous.............................................................10
6.1 Entire Agreement.................................................10
6.2 Survival of Warranties...........................................10
6.3 Successors and Assigns...........................................10
6.4 Governing Law....................................................11
6.5 Counterparts.....................................................11
6.6 Titles and Subtitles.............................................11
6.7 Notices..........................................................11
6.8 Finders' Fees....................................................11
6.9 Attorneys' Fees..................................................11
6.10 Amendments and Waivers...........................................11
6.11 Severability.....................................................11
6.12 Rights of Investors..............................................12
6.13 Exculpation Among Investors......................................12
6.14 Delays or Omissions..............................................12
Schedule A - ......List of Investors
Exhibit A - ......Schedule of Exceptions
-ii-
COMC, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of March 21, 2003, by and between COMC, INC., a Delaware corporation
(the "Company"), and each of the persons listed on Schedule A hereto, each of
which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Series A Preferred Stock.
(a) The Company shall file with the Secretary of State of Delaware any
appropriate forms if required in connection with this Agreement.
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor, severally and not jointly, at
the Closing that number of shares of the Company's Series A Preferred Stock set
forth opposite each Investor's name on Schedule A hereto at a price of twenty
eight and 6/10th cents ($0.286) per share, up to an aggregate of one million
(1,092,657.34) shares of Series A Preferred Stock for a total price of three
hundred and twelve thousand five hundred dollars ($312,500) ("Series A Preferred
Stock"), with an option to increase this amount by fifteen percent (15%) or an
aggregate of an additional one hundred and sixty three thousand eight hundred
and ninety eight and 6/10th (163,898.60) shares for an additional total price of
forty six thousand eight hundred and seventy five dollars ($46,875) for a
sixty-day period.
1.2 Term. All the Series A Preferred Stock will have a term of five
years from date of issuance of the original 1,092,657.34 shares.
1.3 Interest Rate. The Interest Rate on this Series A Preferred Stock
will be a 5% Pay-In-Kind (PIK) dividend. A minimum of two-year interest is
accrued even if Investors are forced to convert or voluntarily convert.
1.4 Liquidation and Sale Preference. In the event that the Company is
liquidated or sold, the Series A Preferred shareholders will receive the par
value of their shares plus any accumulated PIK interest before the common
shareholders receive any proceeds whatsoever. Then the common shareholders will
receive 1/10th of the amount each preferred share received excluding accumulated
PIK interest for each share. In the event any proceeds distributed in excess
thereof, the preferred stock will be treated as if it is the equivalent to 10
shares of common stock, plus shares attributable to any PIK interest.
1.5 Redemption, Conversion and Sinking Fund.
1
(a) The Series A Preferred Stock is redeemable five (5) years after the
date of issuance and if not repaid, the holders of the Series A Preferred Stock
have the right to force the Company into liquidation.
(b) The Series A Preferred stockholders have the right at any time to
convert their shares into common stock.
(c) The Company, at any time, after a two-year period, has the right to
prepay the Series A Preferred Stock, without a penalty. If the Company exercises
their right and shows they have the funds available to prepay, this Series A
Preferred Stock, the Series A Preferred stockholders will have 10 business days
to make a decision to either convert their Series A Preferred shares into common
shares or have their shares redeemed.
( c) In the event the Company raises in excess of $2,000,000 of new
equity with rights junior to the Series A Preferred Stock , excluding the Series
A Preferred Stock Issuance, the Company has a right to demand that the Series A
Preferred Stock is converted into common stock. In the event such new equity is
Senior to the Series A Preferred Stock, however, there is no conversion of the
Series A into common stock.
(d) The Company will not have to establish a sinking fund for the
redemption of this Series A Preferred Stock.
1.6 Voting Rights. Each share of Series A Preferred Stock will have the
equivalent voting rights of 20 shares of common stock as long as this preferred
stock is outstanding. The Series A Preferred Shareholders can vote their shares
on all matters that the common shareholders have a right to vote on.
1.7 Legend. To the extent applicable, each certificate or other
document evidencing any of the Series A Preferred Stock or any Common Stock
issued upon conversion thereof shall be endorsed with the legend set forth
below, and each Investor covenants that, except to the extent such restrictions
are waived by the Company, such Investor shall not transfer the shares
represented by any such certificate without complying with the restrictions on
transfer described in the legend endorsed on such certificate:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED 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 OR
ANOTHER APPLICABLE EXEMPTION."
The foregoing legend shall be removed, and the Company shall issue a
certificate without such legend to the holder of such security if such holder
provides the Company with an opinion of counsel reasonably satisfactory to the
Company to the effect that a sale, transfer, assignment, offer, pledge or
distribution of such security may be made without registration and that such
legend is not required to satisfy the applicable exemption from registration.
2
1.8 Closing. The purchase and sale of the Series A Preferred Stock
shall take place at the offices of the Company, 0000 Xxxx Xxxx, Xxxxxxx,
Xxxxxxxxxx, no later than March 26, 2003, or at such other time and place as the
Company and Investors acquiring in the aggregate more than half the shares of
Series A Preferred Stock sold pursuant hereto shall mutually agree, either
orally or in writing (which time and place are designated as the "Closing"). At
the Closing or as soon as possible thereafter, the Company shall deliver to each
Investor a certificate representing the shares of Series A Preferred Stock that
such Investor is purchasing against payment of the purchase price therefor by
check, wire transfer or such other form of payment as shall be mutually agreed
upon by such Investor and the Company.
1.9 Subsequent Sale of Series A Preferred Stock.
(a) Each shareholder of Series A Preferred Stock shall have the right
for 90 days to purchase additional shares of Series A Preferred Stock for a
price of $0.286 per share of Series A Preferred Stock equal to 25% of their
original purchase.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that, except as set forth on the
Schedule of Exceptions attached hereto as Exhibit A, specifically identifying
the relevant subparagraph(s) hereof, which exceptions shall be deemed to be
representations and warranties as if made hereunder:
2.1 Organization; Good Standing; Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, has all requisite corporate power and authority to own
and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute and deliver this
Agreement, the Investors' Rights Agreement (collectively, the "Agreements"), to
issue and sell the Series A Preferred Stock and the Common Stock issuable upon
conversion thereof, and to carry out the provisions of the Agreements.
2.2 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of the Agreements, the performance of all obligations of the
Company hereunder and thereunder and the authorization, issuance (or reservation
for issuance), sale and delivery of the Series A Preferred Stock being sold
hereunder and the Common Stock issuable upon conversion thereof has been taken
or will be taken prior to the Closing or as soon as possible thereafter, and the
Agreements constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally, (b) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies, and (c) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.
2.3 Valid Issuance of Series A Preferred Stock. The Series A Preferred
Stock that is being purchased by the Investors hereunder, when issued, sold and
delivered in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly and validly issued, fully paid and nonassessable,
and will be free of all pledges, liens, encumbrances or restrictions on transfer
other than restrictions on transfer under this Agreement under applicable state
and federal
3
securities laws. The Common Stock issuable upon conversion of the
Series A Preferred Stock purchased under this Agreement has been duly and
validly reserved for issuance and will be duly and validly issued, fully paid
and nonassessable except as mentioned in 2.5, and will be free of all pledges,
liens, encumbrances or restrictions on transfer other than restrictions on
transfer under this Agreement, the Investors' Rights Agreement and under
applicable state and federal securities laws.
2.4 Governmental Consents. To the best of the Company's knowledge, no
consent, approval, qualification, order or authorization of, or filing with, any
local, state or federal governmental authority is required on the part of the
Company in connection with the Company's valid execution, delivery or
performance of this Agreement, the offer, sale or issuance of the Series A
Preferred Stock by the Company or the issuance of Common Stock upon conversion
of the Series A Preferred Stock, except (a) the filing of any forms with the
Secretary of State of the State of Delaware, and (b) such filings as have been
made prior to the Closing, except that any notices of sale required to be filed
with the Securities and Exchange Commission under Regulation D of the Securities
Act of 1933, as amended (the "Securities Act"), or such post-closing filings as
may be required under applicable state securities laws, which will be timely
filed within the applicable periods therefor. Any required consents not filed
prior to closing will be filed as soon as possible thereafter.
2.5 Capitalization and Voting Rights. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(a) Preferred Stock. Ten million (10,000,000) shares of Preferred Stock
(the "Preferred Stock"), two million (2,000,000) shares of which have been
designated Series A Preferred Stock. Prior to this Agreement, no shares of
Preferred Stock have been issued or are outstanding. The rights, privileges and
preferences of the Series A Preferred Stock will be as stated herein and in any
related filings with the Sate of Delaware.
(b) Common Stock. Authorized: forty million (40,000,000) shares of
common stock ("Common Stock") of which twenty five million five hundred and
twenty three thousand nine hundred and fifty eight (25,523,958) shares are
issued and outstanding with three million eight hundred and one thousand two
hundred and thirty seven (3,801,237) are currently held as treasury stock.
Shareholders will have the right on the next proxy statement to vote to increase
the authorized common shares from 40,000,000 to 80,000,000. If increase in
authorized shares is not approved, to the extent shares are not available upon
conversion, each shareholder of Series A preferred stock will only be able to
convert his proportionate amount of preferred stock according to the common
shares available.
The outstanding shares of Common Stock are owned by the stockholders in
the numbers specified in the Company's stock register. The outstanding shares of
Common Stock have been issued in accordance with the registration or
qualification provisions of the Securities Act and any relevant state securities
laws or pursuant to valid exemptions therefrom. Except for (i) as provided in
the Schedule of Exceptions (other than valid options and warrants outstanding,
etc.), and (ii) the conversion privileges of the Series A Preferred Stock, there
are not outstanding any subscriptions, options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), or agreements for
the purchase or acquisition from the Company of any shares of its capital stock
or other securities of any kind representing an ownership interest or contingent
ownership interest in the
4
Company. Neither the offer nor the issuance or sale of the Series A Preferred
Stock or the Common Stock issuable, except when noted above, upon conversion of
the Series A Preferred Stock constitutes an event, under any anti-dilution
provisions of any securities issued or issuable, by the Company or any
agreements with respect to the issuance of securities by the Company, which will
either increase the number of shares issuable, except when noted above, pursuant
to such provisions or decrease the consideration per share to be received by the
Company pursuant to such provisions. Except as set otherwise stated, the Company
is not a party or subject to any agreement or understanding, and, to the best of
the Company's knowledge, there is no agreement or understanding between any
persons that affects or relates to the voting or giving of written consents with
respect to any security or the voting by a director of the Company.
2.6 Subsidiaries. The Company wholly owns one operating subsidiary, ICF
Communication Solutions, Inc. and does not own or control, directly or
indirectly, any interest in any other corporation, association or other business
entity. The Company is not a participant in any joint venture, partnership or
similar arrangement.
2.7 Contracts and Other Commitments. To the best of its knowledge, the
Company does not have any contract, agreement, lease, license, purchase order,
instrument, commitment or proposed transaction, written or oral, absolute or
contingent, other than (a) contracts for the purchase of supplies and services
that were entered into in the ordinary course of business and that do not
involve more than two hundred thousand dollars ($200,000), and do not extend for
more than one (1) year beyond the date hereof except for the Company's Burbank,
CA office lease, (b) sales contracts entered into in the ordinary course of
business, and (c) contracts terminable at will by the Company on no more than
thirty (30) days' notice without cost or liability to the Company (collectively,
"Contracts").
2.8 Material Contracts and Commitments. To the best of its knowledge,
all of the Contracts are valid, binding and in full force and effect in all
material respects and enforceable by the Company in accordance with their
respective terms in all material respects, subject to the effect of applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, usury
or other laws of general application relating to or affecting enforcement of
creditors' rights and rules or laws concerning equitable remedies. The Company
is not currently engaged in any discussion (a) with any representative of any
corporation or corporations regarding the consolidation or merger of the Company
with or into any such corporation or corporations, (b) with any corporation,
partnership, association or other business entity or any individual regarding
the sale, conveyance or disposition of all or substantially all of the assets of
the Company of a transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Company is disposed of, or
(c) regarding any other form of acquisition, liquidation, dissolution or winding
up of the Company.
2.9 Registration Rights. To the best of its knowledge, the Company is
not obligated (either on a "demand," "request," "piggyback" or other basis) to
register under the Securities Act any of its presently outstanding securities or
any of its securities that may subsequently be issued unless 75% of the holders
of this Series of Preferred A shares convert into shares of common stock of the
Company and request that such common stock be registered under the Securities
Act in which case, the Company will within sixty (60) days will file a
Registration Statement for these shares under the Securities Act.
5
2.10 Permits. To the best of its knowledge, the Company has all
franchises, permits, licenses, approvals and any similar authority necessary for
the conduct of its business as now being conducted by it, the lack of which
could materially and adversely affect the business, properties, prospects or
financial condition of the Company and believes it can obtain, without undue
burden or expense, any similar authority for the conduct of its business as
planned to be conducted. The Company is not in default in any material respect
under any of such franchises, permits, licenses or other similar authority.
2.11 Compliance With Other Instruments. To the best of its knowledge,
the Company is not in violation or default in any material respect of any
provision of its Certificate or Bylaws or in any material respect of any
provision of any lease, license, purchase order, agreement, instrument or
contract to which it is a party or by which it is bound or, to the best of its
knowledge, of any federal, state or local law, judgment, order, writ, decree,
statute, rule or regulation applicable to the Company. To the best of the
Company's knowledge, all parties having material contractual arrangements with
the Company are in substantial compliance therewith and none are in material
default in any respect thereunder. The execution, delivery and performance by
the Company of this Agreement and the other Agreements, and the consummation of
the transactions contemplated hereby and thereby will not result in any such
violation or be in material conflict with or constitute, with or without the
passage of time or giving of notice, either a material default under any such
provision or an event that results in the creation of any material lien, charge
or encumbrance upon any assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license,
authorization or approval applicable to the Company, its business or operations,
or any of its assets or properties. There is no agreement, obligation,
instrument or transaction to which the Company is a party which materially
adversely affects the business, conditions, affairs or operations of the Company
or any of its properties or assets.
2.12 Litigation. To the best of its knowledge, except as set forth in the
Company's most recent 10Q filed with the Securities and Exchange Commission
("SEC"), there is no action, suit, arbitration, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the
Company, its properties, assets or business, nor is the Company aware that there
is any basis for the foregoing.
2.13 Title to Property and Assets; Leases. To the best of its
knowledge, except (a) for liens for current taxes not yet delinquent, (b) for
liens imposed by law and incurred in the ordinary course of business for
obligations not past due to carriers, warehousemen, laborers, materialmen and
the like, (c) for liens in respect of pledges or deposits under workers'
compensation laws or similar legislation, or (d) for minor defects in title,
none of which, individually or in the aggregate, materially interferes with the
use of such property, the Company owns its property and assets free and clear of
all mortgages, liens, claims and encumbrances. With respect to the property and
assets it leases, the Company is in compliance with such leases and, to the best
of its knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances, subject to clauses (a)-(d) above. The Company owns no real
property.
2.14 Patents, Trademarks, etc. To the best of the Company's knowledge,
the Company owns and possesses or is licensed under all patents, patent
applications, licenses, trademarks, trade names, brand names, inventions and
copyrights employed in the operation of its business as now conducted with no
infringement of or conflict with the rights of others respecting any of the
same.
6
To the Company's knowledge, the operation of the Company's business as now
conducted does not infringe any patent or other proprietary rights of others
respecting any of the same. The Company has not received any communications
alleging that it has violated any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other person or entity, nor is the Company aware of any basis for the foregoing.
There are no agreements, understandings, instruments, contracts, judgments,
orders or writs of decrees to which the Company is a party or by which it is
bound which involve indemnification by the Company with respect to infringements
of proprietary rights.
2.15 Proprietary Agreements. To the best of its knowledge, each
officer, director, consultant and employee of the Company has executed or will
be asked to execute an agreement regarding confidentiality and proprietary
information.
2.16 Taxes. To the best of its knowledge, the Company has filed all tax
returns, or appropriate legal extensions, that are required to have been filed
with appropriate governmental agencies or instrumentalities, except where the
failure to do so would not have a material adverse effect upon the Company,
taken as a whole. The Company has paid or established reserves for all income,
franchise and other taxes, assessments, governmental charges, penalties,
interest and fines due and payable by it as set forth on all tax returns on or
before the Closing. The Company is not delinquent in the payment of any such tax
or in the payment of any assessment or governmental charge. There is no pending
dispute with any taxing authority relating to any of such returns, and the
Company has no knowledge of any proposed liability for any tax to be imposed
upon the properties or assets of the Company.
2.17 No Material Changes. Since January 1, 2003, the Company has
conducted its business in its normal way and the following events have
transpired since the draft of the December 31, 2002 statements: (a) COMC has a
new Chairman of the Board; (b) Xxxxxxxxxxx Xxxxx on February 28, 2003 resigned
all his positions at ICF Communication Solutions, Inc. ("ICF") and he also
resigned on February 28, 2003 as CEO and CFO of COMC, Inc. These COMC
resignations are to take effect upon the new Chairman's request; (c) Bank
Agreements were switched from Comerica Bank to Greater Bay Banks; (d) Xxxxxxx
Xxxxx has taken over as Executive Vice President and COO of ICF and has resigned
as Chairman of COMC; (e) Xxxxxx X. Xxxxxxxxx was elected the Chairman of the
Board of COMC and elected Chairman, CEO, and President of ICF; (f) The Company
during the first quarter of 2003 has been in the process of re-negotiating its
liabilities with all of its creditors; (g) this Offering is being made without
the Company having provided audited financial statements for the year ended
December 31, 2002, which are in the process of being prepared by BDO Xxxxxxx;
(h) Revenues for the months of January and February 2003 were below projections
supplied at the begin of the year; and (i) ALL DOCUMENTS IN CONNECTION WITH THIS
TRANSACTION ARE AVAILABLE AT THE COMPANY'S CORPORATE OFFICE.
2.18 Conflicts of Interest. To the best of the Company's knowledge, no
officer, director or stockholder of the Company or any affiliate (as such term
is defined in Rule 405 under the Securities Act) of any such person has any
direct or indirect interest (a) in any entity which does business with the
Company, or (b) in any property, asset or right which is used by the Company in
the conduct of its business, or (c) in any contractual relationship with the
Company other than as an employee or consultant. For the purpose of this Section
2.19, there shall be disregarded any interest
7
which arises solely from the ownership of less than a one percent (1%) equity
interest in a corporation whose stock is regularly traded on any national
securities exchange or in the over-the-counter market.
2.19 Employees; Absence of Restrictive Agreements. To the best of the
Company's knowledge, subject to the terminations and changes mentioned in 2.17
above, (i) no officer or employee of the Company has any plans to terminate his
or her employment with the Company, (ii) no officer or employee of the Company
is subject to any secrecy or non-competition agreement or any agreement or
restriction of any kind that would impede in any way the ability of such person
to carry out fully all activities of such person in furtherance of the business
of the Company, and (iii) Xxxxxxx Xxxxx has a non-compete clause in his
employment contract.
3. Representations and Warranties of the Investors. Each Investor
hereby represents and warrants, severally and not jointly, that:
3.1 Authorization. Each Investor has full power and authority to enter
into this Agreement and that this Agreement constitutes a valid and legally
binding obligation of such Investor.
3.2 Purchase Entirely for Own Account. This Agreement is made with each
Investor in reliance upon such Investor's representation to the Company, which
by such Investor's execution of this Agreement such Investor hereby confirms,
that the Series A Preferred Stock to be purchased by such Investor and the
Common Stock issuable upon conversion thereof (collectively, the "Securities")
will be acquired for investment for such Investor's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and that such Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this
Agreement, each Investor further represents that such Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities.
3.3 Receipt of Information. Based in part on the Company's
representations and warranties contained herein, each Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Series A Preferred Stock. Each Investor further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Series A Preferred Stock and the business, properties, prospects and financial
condition of the Company and to obtain additional information (to the extent the
Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify the accuracy of any information furnished
to it or to which it had access. The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 2 hereof or
the right of the Investors to rely thereon.
3.4 Investment Experience. Each Investor is experienced in evaluating
and investing in securities of companies that are not cash flow positive and
experiencing financial difficulties and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of the investment in the Series A Preferred Stock.
8
3.5 Accredited Investor. Each Investor is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
3.6 Sale of Preferred Stock.
(a) Private sales of are Series A Preferred Stock are allowed pursuant
to compliance with applicable rules and regulations under the Securities Act. At
the Company's next registration of stock, all Preferred Shareholders who convert
their shares to Common Stock will have their shares included in a Registration
Statement.
3.7 Restricted Stock. Each Investor understands that any Common Stock
may not be sold, transferred or otherwise disposed of without registration under
the Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Common Stock or an available
exemption from registration under the Securities Act, the Common Stock must be
held. In particular, each Investor is aware that the Common Stock may not be
sold pursuant to Rule 144 promulgated under the Securities Act unless all of the
conditions of that Rule are met.
4. Conditions of Investors' Obligations at Closing. The obligations of
each Investor under Section 1.1(b) are subject to the fulfillment on or before
the Closing of each of the following conditions, the waiver of which shall not
be effective against any Investor who does not consent in writing thereto:
4.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of the Closing.
4.2 Performance. To the best of its knowledge, the Company shall have
performed and complied with all agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by it on or
before the Closing.
4.3 Qualifications. To the best of its knowledge, all authorizations,
approvals or permits, if any, of any governmental authority or regulatory body
of the United States or of any state that are required in connection with the
lawful issuance and sale of the Series A Preferred Stock pursuant to this
Agreement shall be duly obtained and effective as of the Closing.
4.4 Forms. Any appropriate filings if necessary will be made in a
timely manner with the Delaware Secretary of State.
4.5 Proceedings and Documents. To the best of its knowledge, all
corporate and other proceedings in connection with the transactions contemplated
at the Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Investors, who shall have received all
such counterpart original and certified or other copies of such documents as it
may reasonably request.
4.6 Registration Rights Series A Preferred Stock. The Series A
Preferred Stockholders shall have no Registration Rights until they convert
their Series A Preferred Stock into common stock of the Company. In the event
that more than 75% of the Series A Preferred Stockholders
9
convert their Series A Preferred Stock into Common Stock, they can request a
Registration Statement for their shares of Common Stock. The Company must file
the Registration Statement within 90 days of that request (i.e., if 900,000
shares of Series A Preferred Stock are converted into 9,000,000 shares of Common
Stock, if 8,196,000 of those converted shares request a Registration Statement,
then the Company must honor that request within 90 days).
5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
5.1 Representations and Warranties. The representations and warranties
of each Investor contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the Closing.
5.2 Performance. The Investor shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by the Investor on or before the
Closing.
5.3 Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Series A Preferred Stock pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
5.4 Forms. Any appropriate filings if necessary will be made in a
timely manner with the Delaware Secretary of State.
6. Miscellaneous.
6.1 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties with respect to the
subject matter hereof and no party shall be liable or bound to any other party
in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein.
6.2 Survival of Warranties. The warranties, representations and
covenants of the Company and the Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
6.3 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any shares of the Series A Preferred Stock sold
hereunder or any Common Stock issued upon conversion thereof). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
6.4 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York.
10
6.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.7 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by United States first-class
mail, postage prepaid, or delivered personally by hand or nationally recognized
courier or sent via facsimile addressed (1) if to an Investor, as indicated on
the list of Investors attached hereto as Schedule A, or at such other address as
such holder or permitted assignee shall have furnished to the Company in
writing, or (2) if to the Company, at the address indicated on the signature
page hereto, or at such other address as the Company shall have furnished to
each Holder in writing. All such notices and other written communications shall
be effective (a) if mailed, five (5) days after mailing, (b) if delivered, upon
delivery and (c) if sent via facsimile, upon confirmation of receipt.
6.8 Finders' Fees. Each party represents that it neither is nor will be
obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, employees or
representatives is responsible. The Company agrees to indemnify and hold
harmless each Investor from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
6.9 Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the other Agreements or the
Restated Certificate, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and disbursements in addition to any other relief to
which such party may be entitled.
6.10 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of at least seventy
percent (75%) of the Series A Preferred Stock. Any amendment or waiver effected
in accordance with this paragraph shall be binding upon each holder of any
securities purchased under this Agreement at the time outstanding (including
securities into which such securities have been converted), each future holder
of all such securities and the Company.
6.11 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
6.12 Rights of Investors. Each holder of the Series A Preferred Stock
(and Common Stock issued upon conversion thereof) shall have the absolute right
to exercise or refrain from
11
exercising any right or rights that such holder may have by reason of this
Agreement or any Series A Preferred Stock, 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 holder shall not incur any liability to any other holder or holders of the
Series A Preferred Stock (or Common Stock issued upon exercise thereof) with
respect to exercising or refraining from exercising any such right or rights.
6.13 Exculpation Among Investors. Each Investor acknowledges that it is
not relying upon any person, firm or corporation, other than the Company and its
officers and directors, in making its investment or decision to invest in the
Company. Each Investor agrees that no Investor nor the respective controlling
persons, officers, directors, partners, agents or employees of any Investor
shall be liable for any action heretofore or hereafter taken or omitted to be
taken by any of them in connection with the Series A Preferred Stock (and Common
Stock issued upon conversion thereof).
6.14 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, or the
Investors' Rights Agreement shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on any Investor's
part of any breach, default or noncompliance under this Agreement, or the
Investors' Rights Agreement or any waiver on such party's part of any provisions
or conditions of the Agreement, or the Investors' Rights Agreement must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or the Investors' Rights
Agreement by law, or otherwise afforded to any party, shall be cumulative and
not alternative.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
COMC, Inc.
a Delaware corporation
12
By
------------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx, Chairman of the Board
13
INVESTOR LIST FOLLOWS ON NEXT PAGES
SCHEDULE A: LIST OF INVESTORS:
---------------------------------
Signature & Printed Name
---------------------------------
Signature & Printed Name
---------------------------------
Signature & Printed Name
---------------------------------
Signature & Printed Name
---------------------------------
Signature & Printed Name
---------------------------------
Signature & Printed Name
INVESTOR LIST CONTINUED ON NEXT PAGE
14
EXHIBIT A
NONE.
15
