Ex-10.19
$2,000,000 NOTE PURCHASE AGREEMENT
dated as of February 9, 1999
among
XXXXXXXX.XXX, INC.
and
THE PURCHASERS LISTED ON SCHEDULE 1.01
TABLE OF CONTENTS
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1. PURCHASE, SALE AND TERMS OF NOTES........................................................................1
1.01. Authorization of Notes and Warrants..........................................................1
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1.02. The Shares...................................................................................1
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1.03. Purchase Price and Closing...................................................................1
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1.04. Use of Proceeds..............................................................................2
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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................................2
2.01. Organization, Standing and Power.............................................................2
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2.02. Authority; Enforceability; No Conflict.......................................................2
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2.03. Capitalization...............................................................................3
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2.04. Subsidiaries.................................................................................5
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2.05. Status of Notes, Warrants and Shares.........................................................6
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2.06. Financial Statements.........................................................................6
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2.07. Actions Pending..............................................................................7
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2.08. Compliance with Law..........................................................................7
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2.09. No Material Adverse Change...................................................................7
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2.10. Certain Fees.................................................................................7
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2.11. Disclosure...................................................................................7
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2.12. Securities Act of 1933.......................................................................8
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2.13. Governmental Approvals.......................................................................8
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2.14. United States Real Property Holding Corporation..............................................8
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3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.........................................................8
3.01. Organization and Standing of the Purchasers..................................................8
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3.02. Authority; Enforceability; No Conflict.......................................................9
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3.03. Acquisition for Investment...................................................................9
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3.04. Financing...................................................................................10
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4. CONDITIONS TO PURCHASERS' OBLIGATIONS FOR CLOSING.......................................................10
4.01. Representations and Warranties..............................................................10
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4.02. Secretary's Certificate.....................................................................10
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4.03. Officer's Certificate.......................................................................10
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4.04. [Intentionally Omitted].....................................................................10
4.05. Consents, Licenses, Approvals, etc..........................................................10
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4.06. Good Standing Certificates..................................................................11
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4.07. No Proceedings or Litigation................................................................11
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4.09. Legal Opinions..............................................................................11
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4.10. Consents and Waivers of Equity Holders......................................................11
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4.12. Expenses....................................................................................11
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4.13. Compliance with this Agreement..............................................................11
4.14. Proceedings Satisfactory....................................................................11
5. COVENANTS OF THE COMPANY................................................................................12
5.01. Covenants of the Company Under the Series B
Purchase Agreement..........................................................................12
5.02. Registration Rights.........................................................................12
6. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTES........................................................12
6.01. Note Register; Ownership of Notes...........................................................12
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6.02. Transfer and Exchange of Notes..............................................................12
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6.03. Replacement of Notes........................................................................12
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7. PAYMENTS ON NOTES; REDEMPTION; CONVERSION...............................................................13
7.01. Place of Payment............................................................................13
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7.02. Additional Interest.........................................................................13
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7.03. Mandatory Redemption........................................................................13
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7.04. Optional Redemption.........................................................................13
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7.05. Allocation of Partial Redemptions...........................................................13
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7.06. Maturity; Surrender; etc....................................................................14
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8. SUBORDINATION OF SENIOR SUBORDINATED OBLIGATIONS........................................................14
8.01. Generally...................................................................................14
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8.02. Restrictions................................................................................14
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8.03. Permitted Payments..........................................................................14
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8.04. Turnover of Payments........................................................................15
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8.05. Insolvency, etc.............................................................................15
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8.06. Obligations Not Impaired....................................................................15
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8.07. Payment of Senior Debt; Subrogation.........................................................15
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9. EVENTS OF DEFAULT AND ACCELERATION......................................................................16
10. REMEDIES ON DEFAULT, ETC................................................................................17
10.01. Remedies....................................................................................17
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10.02. Annulment of Defaults.......................................................................18
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10.03. Waivers.....................................................................................18
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11. DEFINITIONS AND ACCOUNTING TERMS........................................................................18
11.01. Certain Defined Terms.......................................................................18
11.02. Accounting Terms............................................................................22
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12. INDEMNIFICATION.........................................................................................23
12.01. General Indemnity...........................................................................23
12.02. Indemnification Procedure...................................................................23
13. MISCELLANEOUS...........................................................................................24
13.01. No Waiver; Cumulative Remedies..............................................................24
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13.02. Amendments, Waivers and Consents............................................................24
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13.03. Addresses for Notices.......................................................................25
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13.04. Costs, Expenses and Taxes...................................................................25
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13.05. Binding Effect; Assignment..................................................................26
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13.06. Survival of Representations and Warranties..................................................26
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13.07. Prior Agreements............................................................................26
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13.08. Severability................................................................................26
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13.09. Confidentiality.............................................................................26
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13.10. Governing Law...............................................................................27
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13.11. Headings....................................................................................27
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13.12. Counterparts................................................................................27
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13.13. Further Assurances..........................................................................27
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13.14. Waiver......................................................................................27
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13.15. Specific Enforcement........................................................................28
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$2,000,000 NOTE PURCHASE AGREEMENT
Dated as of February 9, 1999
Each of the Purchasers Listed
on Schedule 1.01
Ladies and Gentlemen:
XXXXXXXX.XXX, INC., a Florida corporation (the "Company"), hereby
agrees with each of you as follows:
1. PURCHASE, SALE AND TERMS OF NOTES
1.01. Authorization of Notes and Warrants. The Company has authorized
the issuance and sale of $2,000,000 in aggregate principal amount of its 12%
Senior Subordinated Notes (the "Notes") due February 9, 2000 (the "Final
Maturity Date"), to be substantially in the form of Exhibit A. The Company has
authorized the issuance of Warrants to purchase up to an aggregate of 6,668
shares of Common Stock in the form of the Common Stock Purchase Warrant attached
hereto as Exhibit B (the "Warrants") to be issued to the Purchasers hereunder as
Additional Interest on the Notes pursuant to Section 7.02. The Company agrees
that the value of all Warrants to be issued through the Closing Date is $1,000
and the Company agrees to use the foregoing for all federal, state, and local
income tax purposes with respect to the transactions contemplated by this
Agreement.
1.02. The Shares. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of authorized but
unissued shares of Common Stock (the "Common Shares") to satisfy the rights of
exercise of the Warrants. The Common Shares are sometimes referred to herein as
the "Shares."
1.03. Purchase Price and Closing. The Company agrees to issue and sell
to the Persons (individually a "Purchaser" and collectively the "Purchasers")
listed on Schedule 1.01 hereto and, in consideration of and in express reliance
upon the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchasers, severally but not jointly, agree to purchase, that
principal amount of Notes set forth opposite their respective names in Schedule
1.01, for an amount equal to one hundred percent (100%) of the principal amount
thereof. The closing of the purchase
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and sale of the Notes hereunder (the "Closing") shall take place at the offices
of Messrs. LeBoeuf, Lamb, Xxxxxx and XxxXxx, L.L.P., 000 Xxxxxx Xxxxxx,
Xxxxxxxx, XX 00000 at 10:00 a.m. on February 9, 1999, or at such time and date
thereafter as the Purchasers and the Company may agree (the "Closing Date"). At
the Closing, the Company will deliver to each Purchaser (i) Notes in the
principal amount to be purchased by such Purchaser as set forth on Schedule 1.01
registered in the Purchaser's name (or its nominee) and (ii) Warrants in the
amount required to be issued to such Purchaser in accordance with Section 7.02
as Additional Interest, against delivery of a check or checks payable to the
order of the Company, or a transfer of funds to the account of the Company by
wire transfer, representing the net cash consideration for the Notes to be
purchased at such Closing set forth opposite each such Purchaser's name on
Schedule 1.01.
1.04. Use of Proceeds. The Company shall use the cash proceeds from the
sale of the Notes for general working capital purposes.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers as
follows:
2.01. Organization, Standing and Power. Each of the Company and the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of the
Company and the Subsidiaries has all requisite power and authority to own, lease
and operate its properties and assets and to conduct its business as now being
conducted and is duly qualified to do business in good standing in those foreign
jurisdictions in which such qualification is required.
2.02. Authority; Enforceability; No Conflict. The Company has all
requisite corporate power and authority to enter into this Agreement, to issue
and sell the Notes, to issue the Warrants, and to carry out its obligations
hereunder. The execution, delivery and performance of this Agreement by the
Company, the issuance and sale of the Notes and the issuance of the Warrants by
the Company have been duly and validly authorized by all requisite corporate
proceedings on the part of the Company. This Agreement when executed and
delivered by the Company is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, rehabilitation, liquidation, conservatorship, receivership or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. Except as set
forth on Schedule 2.02, the execution and delivery of this Agreement by the
Company does not, and the consummation by the Company of the transactions
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contemplated hereby and thereby will not result in or constitute: (a) a default,
breach or violation of or under the Articles of Incorporation or the By-laws,
(b) a default, breach or violation of or under any mortgage, deed of trust,
indenture, note, bond, license, lease agreement or other instrument or
obligation to which the Company or any Subsidiary is a party or by which any of
their respective properties or assets are bound, (c) a violation of any statute,
rule, regulation, order, judgment or decree of any court, public body or
authority by which the Company, any Subsidiary or any of their respective
properties or assets are bound, (d) an event which (with notice or lapse of time
or both) would permit any Person to terminate, accelerate the performance
required by, or accelerate the maturity of any indebtedness or obligation of the
Company or any Subsidiary under any agreement or commitment to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary is bound
or by which any of their respective properties or assets are bound, (e) the
creation or imposition of any lien, charge or encumbrance on any property of the
Company or any Subsidiary under any agreement or commitment to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary is bound
or by which any of their respective properties or assets are bound, or (f) an
event which would require any consent under any agreement to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary is bound
or by which any of their respective properties or assets are bound.
2.03. Capitalization. The authorized capital stock of the Company
consists of:
(a) 30,000,000 shares of Common Stock, of which (i) 1,362,730
shares are outstanding, (ii) 225,225 are reserved for issuance upon conversion
of the Series A Preferred Stock, (iii) 1,171,191 are reserved for issuance upon
conversion of the Series B Preferred Stock, (iv) 1,007,000 are reserved for
issuance upon conversion of the Series C Preferred Stock, (v) 1,350,000 are
reserved for issuance upon conversion of the Series D Preferred Stock, (vi)
100,000 are reserved for issuance upon conversion of the Special Preferred Stock
(Northern California Division), (vii) 1,250,000 are reserved for issuance under
the Company's Stock Option Plan; (viii) 247,500 are reserved for issuance upon
the exercise of the warrants held by former 14% Subordinated Debenture Holders,
(ix) 500,000 are reserved for issuance upon the exercise of the warrants held by
Superior Bank, F.S.B., pursuant to a Sale and Marketing Agreement dated as of
April 28, 1995, between the Company and Superior Bank, F.S.B., as amended (the
"Sale and Marketing Agreement"), (x) 13,333 are reserved for issuance upon the
conversion of the 12% Subordinated Debentures, (xi) 25,000 are reserved for
issuance upon the exercise of options held by Xxxx Xxxxxxx and Xxxx Xxxxxxx (the
"Buscema Options"), (xii) 100,000 are reserved for issuance upon conversion of
rights in the Realeads Group held by Xxxx Xxxxx, Xxxxx Xxxxxx and Xxxxxx
Xxxxxxxx under a Second Amendment for the Agreement of Operation of First Realty
Network, Inc. dated on or about December 23, 1996 (the "FRN Agreement"), (xiii)
132,455 are reserved for issuance upon the exercise of the warrants held or
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which may be obtained by Xxxxxx X. Xxxxxxx (other than as a former 14%
Subordinated Debenture Holder), (xiv) 92,436 are reserved for issuance upon the
exercise of warrants held by Xxxxxxx Xxxxx & Associates, (xv) 50,000 are
reserved for issuance upon the exercise of warrants held by former holders of
12% Senior Subordinated Convertible Notes dated August 31, 1997, (xvi) 66,667
are reserved for issuance upon the exercise of warrants held by former holders
of 12% Senior Subordinated Convertible Notes dated January 30, 1998, (xvii)
100,000 are reserved for issuance pursuant to the Option Agreement dated January
28, 1998, between the Company, RM Holdings, Inc., Xxxx X. Xxxxxxx, Xxxxxx X.
Xxxxxx and Xxxx Xxxxx, (xviii) 36,000 are reserved for issuance upon the
exercise of warrants held by FMN Associates, Ltd., (xix) 100,000 are reserved
for issuance upon conversion of rights held by Xxxxxx.xxx, LLC under the Domain
Name Assignment Agreement dated as of January 1, 1999, between the Company and
Xxxxxx.xxx, LLC (the "Domain Name Assignment Agreement") and (xx) 6,668 are
reserved for issuance upon exercise of the Warrants; and
(b) 15,000,000 shares of Preferred Stock, of which (i) 225,225
have been designated Series A Preferred Stock (all of which are outstanding),
(ii) 1,000 have been designated Special Preferred Stock (Northern California
Division) (all of which are outstanding), (iii) 1,171,191 have been designated
Series B Preferred Stock (959,614 of which are outstanding), (iv) 1,007,000 have
been designated Series C Preferred Stock (739,336 of which are outstanding) and
(v) 1,350,000 have been designated Series D Preferred Stock (1,273,898 of which
are outstanding and 18,650 of which have been reserved for issuance upon
exercise of warrants held by Dominion Fund III). All of the outstanding shares
of Common Stock, Series A Preferred Stock, Special Preferred Stock (Northern
California Division), Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock have been duly authorized and validly issued, and are
fully-paid and non-assessable.
Except (i) the Preferred Stock referred to herein, (ii) options and
warrants referred to herein, (iii) as required by the Sale and Marketing
Agreement, (iv) as required by the Series B Preferred Stock Purchase Agreement
dated as of March 29, 1996 among the Company, Purchasers of the Series B
Preferred Stock, purchasers of the Series C Preferred Stock, purchasers of the
Series D Preferred Stock, Xxxx X. Xxxxxxx, Xxxxxx X. Xxxxxx and Xxxx Xxxxx, as
amended ("Series B Purchase Agreement"), (v) as required by the Operating
Agreement for the Northern California Division dated July 1, 1997 among the
Company, Xxxxx-XxXxxxxx Real Estate, Inc. and Xxxx Xxxxx ("Operating
Agreement"), as amended, (vi) as required by the Agreement Relating to Purchase
of Xxxx Xxxxx'x Rights in the Northern California Division dated as of January
1, 1998, between the Company and Xxxx Xxxxx, (vii) as required by the Employment
Agreement dated July 18, 1997 between the Company and Xxxxx Xxxxxx, (viii) as
required by the Note Purchase Agreement dated January 28, 1998, (ix) as required
by the Employment Agreements dated on or about January 28, 1998, between the
Company and Xxxx Xxxxx, Xxxx X. Xxxxxxx, Xxxxx Xxxxxx and
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Xxxxxxx Xxxxxx, (x) as required by the Domain Name Assignment Agreement, (xi) as
required by the Technology Member Correspondent Agreement dated on or about
November 1, 1998, between the Company and Mortgage Loan Specialists, Inc. and
(xii) as required by the Technology Member Correspondent Agreement dated on or
about November 1, 1998, between the Company and First Capital, Inc., there are
no outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon the Company for the purchase or
acquisition of any shares of capital stock of the Company or any other
securities convertible into, exchangeable for or evidencing the right to
subscribe to any shares of such capital stock.
All outstanding shares of capital stock, convertible securities,
rights, options and warrants of the Company are owned by the stockholders and in
the numbers specified on Schedule 2.03. Except as required by the terms of the
Buscema Options, the Special Preferred Stock (Northern California Division), the
contingent repurchase rights of Superior Bank, F.S.B. under the Sale and
Marketing Agreement, the Agreement dated as of April 1, 1998, between the
Company and Superior Bank, F.S.B., the FRN Agreement, the Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, the Operating
Agreement, the Note Purchase Agreement and the Domain Name Assignment Agreement,
the Company is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
convertible securities, rights or options of the type described in the preceding
sentence.
Except as required by the terms of the Registration Rights Agreement
dated May 1, 1996, between the Company and Xxxxxxx Xxxxx & Associates, Inc., the
Registration Rights Agreement dated March 15, 1996, between the Company and
Xxxxx-XxXxxxxx Real Estate, Inc., the Operating Agreement, the Series B Purchase
Agreement, as amended, registration rights held by Dominion Fund III under the
Warrant to Purchase Shares of Series D Preferred Stock dated April 1, 1998 and
the Registration Rights Agreement dated as of January 1, 1999, between the
Company and Xxxxxx.xxx, LLC, the Company is not a party to any agreement
granting registration rights to any person with respect to any of its equity or
debt securities.
Except as set forth in the Related Agreements and the Xxxxx-XxXxxxxx
Merger Agreement (which restricts the transfer of the Special Preferred Stock
(Northern California Division)), the Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of the Company other than agreements enforcing restrictions
under state and federal securities laws. The offer and sale of all capital
stock, convertible securities, rights or options of the Company issued prior to
the Closing Date complied with or was exempt from all applicable federal and
state securities laws and no stockholder has a right of rescission or damages
with respect thereto.
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2.04. Subsidiaries. Schedule 2.04 sets forth each Subsidiary and each
Independent Division, showing the jurisdiction of the incorporation or
organization of each Subsidiary and showing the percentage of each Person's
ownership of the outstanding stock or other interests of each such Subsidiary or
Independent Division. All of the outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, and are fully paid and
non-assessable. Except as set forth on Schedule 2.04 (i) there are no
outstanding preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any Subsidiary or the Company
with respect to any Subsidiary or Independent Division for the purchase or
acquisition of any shares of capital stock of any Subsidiary or any other
securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of such capital stock or any other similar ownership
interests of any Independent Division and (ii) neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of capital stock or any convertible
securities, rights, options or warrants of any Subsidiary or similar ownership
interests of any Independent Division. Except as set forth herein, neither the
Company nor any Subsidiary is a party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of any Subsidiary or similar ownership interests of any Independent Division.
2.05. Status of Notes, Warrants and Shares. The Notes and Warrants to
be issued at the Closing have been duly authorized by all necessary corporate
action on the part of the Company. The Shares have been duly authorized by all
necessary corporate action on the part of the Company and have been duly
reserved for issuance. When the Shares are issued such shares will be validly
issued and outstanding, fully paid and nonassessable and the issuance of such
shares will not be subject to preemptive or other similar contractual rights of
any other stockholder of the Company.
2.06. Financial Statements. As set forth on Schedule 2.06 hereto, the
audited consolidated balance sheets of the Company and the Subsidiaries as at
December 31, 1997, and the related consolidated income statements and statements
of cash flows and changes in stockholders' equity of the Company and the
Subsidiaries for the fiscal periods then ended, together with the opinion
thereon of KPMG Peat Marwick LLP, independent certified public accountants, and
the interim consolidated balance sheet of the Company and the Subsidiaries as at
December 31, 1998, and the related consolidated income statement and statement
of cash flows and changes in stockholders' equity of the Company and the
Subsidiaries for the twelve month period then ended, are complete and correct in
all material respects and fairly present the financial condition of the Company
and the Subsidiaries at such dates and the results of the operations of the
Company and the Subsidiaries for the periods covered by such statements, all in
accordance with GAAP consistently applied.
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2.07. Actions Pending. There is no action, suit, claim, investigation
or proceeding pending or, to the knowledge of the Company, threatened against
the Company or any Subsidiary which questions the validity of this Agreement or
any of the Related Agreements or any action taken or to be taken pursuant hereto
or thereto. Except as set forth on Schedule 2.07, there is no action, suit,
claim, investigation or proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any Subsidiary or any of their
respective properties or assets. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any Subsidiary.
2.08. Compliance with Law. The business of the Company and the
Subsidiaries has been and is presently being conducted so as to comply with all
applicable federal, state, and local governmental laws, rules, regulations and
ordinances (including, without limitation, all rules and regulations pertaining
to the producing, processing, underwriting, selling and servicing of residential
mortgage loans, loan brokerage operations and the sale of "business
opportunities"). Each of the Company and the Subsidiaries has all franchises,
permits, licenses, consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now being conducted
by it.
2.09. No Material Adverse Change. Except as set forth on Schedule 2.09,
since December 31, 1998, (a) there has been no material adverse change in the
business, assets, operations, affairs, prospects or financial condition of the
Company or any Subsidiary; and (b) neither the business, financial condition,
operation, prospects or affairs of the Company, any Subsidiary nor any of their
respective properties or assets have been adversely affected in any material
respect as the result of any legislative or regulatory change, any revocation or
change in any franchise, permit, license or right to do business, or any other
event or occurrence, whether or not insured against.
2.10. Certain Fees. No broker's, finder's or financial advisory fees or
commissions will be payable by the Company or any Subsidiary with respect to the
transactions contemplated by this Agreement and the Related Agreements.
2.11. Disclosure. Neither this Agreement or the Schedules hereto, nor
any other document, certificate or instrument furnished to the Purchasers by or
on behalf of the Company in connection with the transactions contemplated by
this Agreement, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading. The parties further agree that any agreement, event,
condition or other item which is disclosed on a particular Schedule hereto shall
be deemed to be disclosed for the purposes of all other Schedules to which it is
relevant, provided that all of the terms
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or effects of any such item which are relevant to any Schedule hereto are
adequately disclosed.
2.12. Securities Act of 1933. The Company has complied and will comply
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Notes and the issuance of the Warrants
hereunder. Neither the Company nor anyone acting on its behalf has or will sell,
offer to sell or solicit offers to buy the Notes or similar securities to, or
solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any Person, so as to bring
the issuance and sale of the Notes or the issuance of the Warrants under the
registration provisions of the Securities Act and applicable state securities
laws.
2.13. Governmental Approvals. Except as set forth on Schedule 2.13 and
except for the filing of any notice prior or subsequent to the Closing that may
be required under applicable state and/or federal securities laws (which, if
required, shall be filed on a timely basis), no authorization, consent,
approval, license, exemption of or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with, the
execution and delivery by the Company of this Agreement, for the offer, issue,
sale, execution or delivery of the Notes or the Warrants, or for the performance
by the Company of its obligations under this Agreement.
2.14. United States Real Property Holding Corporation. Neither the
Company nor any Subsidiary is now nor has ever been a "United States Real
Property Holding Corporation" as defined in Section 897(c)(2) of the Code and
Section 1.897-2(b) of the Regulations promulgated by the Internal Revenue
Service.
2.15. Representations Under Series B Purchase Agreement. Except as set
forth on Schedule 2.15, the representations and warranties of the Company set
forth in Article 2 of the Series B Purchase Agreement are true and correct and
with the same effect as though made at and as of the date hereof, except for
those representations and warranties which speak of a specific date which remain
true and correct as of such date.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each of the Purchasers severally but not jointly hereby represents and
warrants to the Company as follows:
3.01. Organization and Standing of the Purchasers. Each of the
Purchasers is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization.
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3.02. Authority; Enforceability; No Conflict. Each of the Purchasers
has all requisite power and authority to enter into this Agreement and to carry
out its obligations hereunder. The execution, delivery and performance of this
Agreement by each of the Purchasers has been duly and validly authorized by all
requisite proceedings on the part of such Purchaser. This Agreement when
executed and delivered by each of the Purchasers is a valid and binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, rehabilitation, liquidation,
conservatorship, receivership or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery of this Agreement
by each of the Purchasers does not, and consummation by such Purchaser of the
transactions contemplated hereby will not, result in or constitute (a) a
default, breach or violation of or under the organizational documents of such
Purchaser, (b) a default, breach or violation of or under any mortgage, deed of
trust, indenture, note, bond, license, lease agreement or other instrument or
obligation to which such Purchaser is a party or by which any of its properties
or assets are bound, except for any defaults, breaches or violations which would
not, individually or in the aggregate, have a Material Adverse Effect on such
Purchaser or prevent or materially delay the consummation by such Purchaser of
the transactions contemplated hereby, or (c) a violation of any statute, rule,
regulation, order, judgment or decree of any court, public body or authority,
except for any violations which would not, individually or in the aggregate,
have a Material Adverse Effect on such Purchaser or prevent or materially delay
the consummation by such Purchaser of the transactions contemplated hereby.
3.03. Acquisition for Investment. Each of the Purchasers is an
"accredited investor" as defined in Regulation D under the Securities Act, and
is acquiring the Notes and the Warrants solely for its own account for the
purpose of investment and not with a view to or for sale in connection with any
distribution thereof, and it has no present intention or plan to effect any
distribution of the Notes or the Warrants. Each of the Purchasers acknowledges
that it is able to bear the financial risks associated with an investment in the
Notes and that it has been given full access to such records of the Company and
the Subsidiaries and to the officers of the Company and the Subsidiaries as it
has deemed necessary and appropriate to conducting its due diligence
investigation. The Notes and the Warrants may bear a legend to the following
effect:
"This security has not been registered under the Securities Act of
1933, as amended, or the laws of any state and may not be sold or
transferred except in compliance with that Act and such laws."
9
3.04. Financing. Each of the Purchasers has sufficient funds and will
have sufficient funds at all times through the Closing Date to consummate the
transactions contemplated hereby. None of the Purchasers will be rendered
insolvent by reason of its investments in the Company nor will it be left with
unreasonably small capital for purposes of operating its businesses.
4. CONDITIONS TO PURCHASERS' OBLIGATIONS FOR CLOSING
The obligation of each of the Purchasers to purchase and pay for the
Notes to be purchased by it at the Closing is subject to the following
conditions:
4.01. Representations and Warranties. Each of the representations and
warranties set forth in Section 2 hereof shall be true, accurate and correct at
the Closing Date with the same effect as though made at and as of such time.
4.02. Secretary's Certificate. The Purchasers shall have received a
certificate of the Secretary or an Assistant Secretary of the Company, dated the
Closing Date, (a) attesting to corporate action taken by the Company, including
resolutions of the Board of Directors authorizing (i) the execution, delivery
and performance by the Company of this Agreement, (ii) the issuance of the Notes
and the Warrants to be issued to the Purchasers and (iii) the execution,
delivery and performance by the Company of all other agreements or matters
contemplated hereby or executed in connection herewith, (b) certifying the names
and true signatures of the officers of the Company authorized to sign this
Agreement, the Notes, the Warrants, and the other documents, instruments or
certificates to be delivered pursuant hereto and thereto, together with the true
signatures of such officers and (c) verifying that the Articles of Incorporation
and the By-Laws (as attached thereto) are true, correct and complete as of the
Closing Date.
4.03. Officer's Certificate. The Purchasers shall have received a
certificate of the President and Treasurer of the Company (an "Officer's
Certificate"), dated the Closing Date, which shall certify that the
representations and warranties contained in Section 2 hereof are true and
correct as of the Closing Date and that all conditions required to be performed
prior to or at the Closing have been performed as of the Closing Date.
4.04. [Intentionally Omitted]
4.05. Consents, Licenses, Approvals, etc. The Purchasers shall have
received certified true copies of all consents, licenses and approvals required
or advisable in connection with the execution, delivery, performance, validity
and enforceability of this Agreement, and such consents, licenses and approvals
shall be in full force and effect and be reasonably satisfactory in form and
substance to the Purchasers.
10
4.06. Good Standing Certificates. The Purchasers shall have received a
certificate of the appropriate public official in the jurisdiction of
incorporation of the Company and each Subsidiary as to the due incorporation and
good standing of the Company and such Subsidiary together with, in the case of
the Company, a certified copy of the Articles of Incorporation of the Company.
4.07. No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Company or any Subsidiary, or any of the officers or directors of
the Company or any Subsidiary seeking to restrain, prevent or change the
transactions contemplated by this Agreement, or seeking damages in connection
with such transactions.
4.08. Warrants. The Company shall have issued to the Purchasers the
number of Warrants required to be issued as Additional Interest on the Closing
Date pursuant to Section 7.02
4.09. Legal Opinions. The Purchasers shall have received a legal
opinion from Xxxxx & Xxxxxxx, counsel to the Company, dated the Closing Date and
substantially in the form of opinion attached as Exhibit C.
4.10. Consents and Waivers of Equity Holders. The Company shall have
obtained written agreements from a majority of the holders of each of the Series
B, Series C and Series D Preferred Stock consenting to the issuance of the
Notes, the Warrants and the Shares upon the exercise of the Warrants and waiving
any rights of first offer such holders may otherwise have with respect to the
issuance of the Notes, Warrants or the Shares.
4.11. Consents of Lenders. The Company shall have obtained consent to
the transactions contemplated hereby from Residential Funding Corporation
pursuant to the terms of the Residential Funding Agreement.
4.12. Expenses. All fees and disbursements required to be paid pursuant
to Section 13.04 hereof shall have been paid in full.
4.13. Compliance with this Agreement. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
4.14. Proceedings Satisfactory. All proceedings taken in connection
with the issuance and sale of the Notes and the issuance of the Warrants and all
documents and papers relating thereto shall be satisfactory in form and
substance to the
11
Purchasers. The Purchasers shall have received copies of such documents and
papers as they may reasonably request in connection with this Agreement.
5. COVENANTS OF THE COMPANY
5.01. Covenants of the Company Under the Series B Purchase Agreement.
The Company covenants and agrees that on and after the Closing Date and until
the earlier of (i) the date on which the Notes shall be paid in full and all
Warrants and Shares shall no longer be held of record by the Purchasers or (ii)
the consummation of a Qualified Public Offering (as defined in the Series B
Purchase Agreement) it will comply, for the benefit of the Purchasers, in all
respects with the covenants of the Company set forth in Articles 6 and 7 of the
Series B Purchase Agreement.
5.02. Registration Rights. The Company shall amend the Series B
Purchase Agreement to ensure that the Purchasers shall have the right to
register Common Shares obtained by them upon exercise of the Warrants or any
other Registrable Securities (as defined in the Series B Purchase Agreement)
otherwise obtained by them pursuant to the registration rights provided by the
Company in the Series B Purchase Agreement to the same extent as if they were
original parties to such Agreement.
6. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTES
6.01. Note Register; Ownership of Notes. The Company will keep at its
principal office a register in which the Company will provide for the
registration of Notes and the registration of transfers of Notes. The Company
may treat the Person in whose name any Note is registered on such register as
the owner thereof for the purpose of receiving payment of the principal of and
the premium, if any, and interest on such Note and for all other purposes,
whether or not such Note shall be overdue, and the Company shall not be affected
by any notice to the contrary.
6.02. Transfer and Exchange of Notes. Upon surrender of any Note for
registration of transfer or for exchange to the Company at its principal office,
the Company at its expense will execute and deliver in exchange therefor a new
Note or Notes of the same class as such surrendered Note in denominations, as
requested by the holder or transferee, which aggregate the unpaid principal
amount of such surrendered Note. Each such new Note shall be registered in the
name of such Person as such holder or transferee may request, shall be dated so
that there will be no loss of interest on such surrendered Note and shall be
otherwise of like tenor.
6.03. Replacement of Notes. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Note and, in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond in such reasonable amount as the Company may determine (or, in
the case of any Note held by a Purchaser or any institutional investor, of any
indemnity agreement from such
12
Purchaser or such other holder reasonably satisfactory to the Company), or in
the case of any such mutilation, upon the surrender of such Note for
cancellation to the Company at its principal office, the Company at its expense
will execute and deliver, in lieu thereof, a new Note of the same class and of
like tenor, dated so that there will be no loss of interest on such lost,
stolen, destroyed or mutilated Note. Any Note in lieu of which any such new Note
has been executed and delivered by the Company shall not be deemed to be an
outstanding Note for any purpose hereof.
7. PAYMENTS ON NOTES; REDEMPTION; CONVERSION
7.01. Place of Payment. Payments of principal and interest becoming due
and payable on the Notes shall be made at the address of each holder set forth
on Schedule 1.01 hereto, unless the Company, by written notice from each holder
of any Note, shall be notified to make payment at a different address.
7.02. Additional Interest. At the Closing, the Company shall issue to
each Purchaser, as additional interest on the Notes ("Additional Interest"), (a)
Warrants to purchase that number of shares of Common Stock equal to the amount
obtained by dividing (i) 10% of the principal amount of the Notes held by such
Purchaser, by (ii) the exercise price of the Warrants (as set forth therein),
and (b) in cash, 1% of the principal amount of the Notes held by such Purchaser.
7.03. Mandatory Redemption. The Company shall redeem all of the then
outstanding Notes at 100% of the principal amount thereof without premium on the
earlier of (a) the Final Maturity Date, (b) the Initial Public Offering, or (c)
a merger of the Company with or into any other corporations, the conveyance
transfer or lease of substantially all of its accounts in a single transaction
or series of transactions, or a sale in one or more transactions of more than
50% of the Common Stock of the Company on a fully diluted basis.
7.04. Optional Redemption. (a) At any time or from time to time the
Company may, at its option, upon notice to each holder of Notes not less than 30
days and not more than 60 days prior to the date fixed for such redemption,
redeem all or any part (in integral multiples of $100,000) of the Notes, each
such redemption to be made at 100% of the principal amount of the Notes so
redeemed.
(b) Any redemption of Notes pursuant to this Section 7.04 shall
be accompanied by an Officer's Certificate (a) stating the principal amount of
each Note to be redeemed, (b) stating the proposed date of redemption (c)
stating the accrued interest on each such Note to the proposed date of
redemption to be paid in accordance with Section 7.06 and (d) stating that the
proposed redemption does not violate Article 8 of this Agreement or the terms or
any subordination agreement to which the Notes may be subject.
13
7.05. Allocation of Partial Redemptions. In the case of each partial
redemption, the principal amount of the Notes to be redeemed shall be allocated
among all of the Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof not theretofore
called for redemption, with adjustments, to the extent practicable, to
compensate for any prior redemptions not made exactly in such proportion.
7.06. Maturity; Surrender; etc. In the case of each redemption of the
Notes, the principal amount of each Note to be redeemed shall mature and become
due and payable on the date fixed for such redemption, together with interest on
such principal amount accrued to such date. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest, interest on such principal amount shall cease to
accrue. Any Note redeemed in full shall be surrendered to the Company upon the
Company's written request and cancelled and shall not be reissued, and no Note
shall be issued in lieu of any repaid principal amount of any Note.
8. SUBORDINATION OF SENIOR SUBORDINATED OBLIGATIONS
8.01. Generally. All Senior Subordinated Obligations are subordinate
and junior in right of payment to all Senior Debt, but only to the extent
provided in this Article 8.
8.02. Restrictions. Except to the extent expressly permitted in this
Article, or as otherwise consented to in writing by the holders of Senior Debt,
the Purchasers shall not (a) receive payment of or collect in whole or in part,
or xxx upon, the Senior Subordinated Obligations; (b) sell, assign, transfer,
pledge, hypothecate or encumber the Senior Subordinated Obligations unless the
proposed purchaser, assignee, transferee or pledgee acknowledges in writing that
it is bound by this Article; (c) enforce any lien they may now or in the future
have on the Senior Subordinated Obligations; (d) join in any petition in
bankruptcy, assignment for the benefit of creditors or creditors' agreement,
other than the filing of a claim or proof of debt or except as directed by the
holder of Senior Debt, so long as the Senior Debt of Company, or commitment to
extend credit to the Company in respect thereof, is in existence; or (e) accept
any pledge or transfer of property (other than shares of stock of the Company)
as security for or in payment of the Senior Subordinated Obligations, or
otherwise defease the Senior Subordinated Obligations.
8.03. Permitted Payments. So long as no default shall have occurred in
payment or performance of any obligation of the Company with respect to the
Senior Debt, payments of interest and principal on the Senior Subordinated
Obligations may be made at payment dates as specified under the Notes (it being
understood that no prepayment shall be made of the Senior Subordinated
Obligations and no modification, for default or otherwise, of such payment dates
as specified in the Notes shall be
14
permitted without the prior written consent of the holder of the Senior Debt).
Upon prior written notice to the holder of the Senior Debt, the Purchasers shall
be permitted to accelerate the Senior Subordinated Obligations upon any Event of
Default (as defined herein). In the event the Company or any holder of Senior
Debt provides notice to the Purchasers of default with respect to the Senior
Debt of the Company, no interest and no principal payments on the Senior
Subordinated Obligations shall be made without the prior written consent of the
holder of such Senior Debt. The subordination of claims of the Purchasers
hereunder shall remain in effect so long as there shall be outstanding any
Senior Debt of the Company.
8.04. Turnover of Payments. In the event that any Purchaser receives a
payment from the Company in violation of the terms of this Article 8, such
Purchaser (a) shall hold such money in trust for the benefit of the holders of
Senior Debt, and (b) shall, upon request of the holders of Senior Debt,
forthwith remit an amount equal to such payment to such holders, or the payment
in the exact form received (but with any necessary endorsement to such holders
without recourse). After any Purchaser has received notice that a payment has
been made to such Purchaser in violation of the terms of this Article 8, such
Purchaser shall segregate such payment from (and shall not commingle such
payment with any of) the other funds of such Purchaser.
8.05. Insolvency, etc. In case of any assignment of the Company for the
benefit of creditors, or in case of any bankruptcy proceedings instituted by or
against the Company, or in case of the appointment of any receiver for the
Company's business or assets, or in case of any dissolution or winding up of the
affairs of the Company, the Company and any assignee, trustee in bankruptcy,
receiver, or other person or persons in charge, are hereby directed to pay to
the holders of Senior Debt the full amount of the Senior Debt of the Company
before making any payment of principal or interest to the Purchasers. Upon
payment in full of the amount of the Senior Debt, the Purchasers shall be
entitled to receive any excess proceeds.
8.06. Obligations Not Impaired. Nothing contained in this Article 8
shall impair, as between the Company and any holder of Senior Subordinated
Obligations, the obligation of the Company to pay to such holder the principal
thereof and premium, if any, and interest thereon as and when the same shall
become due and payable in accordance with the terms thereof, or prevent any
holder of Senior Subordinated Obligations from exercising all rights, powers and
remedies otherwise permitted by applicable law or under any agreement under
which such Senior Subordinated Obligations were incurred, all subject to the
rights of the holders of Senior Debt to receive cash, securities or other
property otherwise payable or deliverable to the holders of Senior Subordinated
Obligations.
8.07. Payment of Senior Debt; Subrogation. Upon the payment in full in
cash of all Senior Debt, the holders of Senior Subordinated Obligations shall be
subrogated to all rights of any holder of Senior Debt to receive any further
payments or
15
distributions applicable to Senior Debt until all Senior Subordinated
Obligations shall have been paid in full, and such payments or distributions
received by the holders of Senior Subordinated Obligations by reason of such
subrogation, of cash, securities or other property that otherwise would be paid
or distributed to the holders of Senior Debt, shall, as between the Company and
its creditors other than the holders of Senior Debt, on the one hand, and the
holders of Senior Subordinated Obligations, on the other hand, be deemed to be a
payment by the Company on account of Senior Debt and not on account of Senior
Subordinated Obligations.
9. EVENTS OF DEFAULT AND ACCELERATION
The following conditions or events shall constitute events of default
("Events of Default"):
(a) if the Company shall default in the payment of any
principal on any Note when the same becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise; or
(b) if the Company shall default in the payment of any
interest on any Note for more than five days after the same becomes due and
payable; or
(c) if the Company shall default in the performance of or
compliance with any term contained in Article 5 hereof; or
(d) if the Company shall default in the performance of or
compliance with any other term contained herein or in the Related Agreements and
such default shall not have been remedied within 30 days after the earlier of
(x) an officer of the Company obtaining knowledge of such default and (y)
receipt by the Company of written notice of such default from any holder of any
Note; or
(e) if any representation or warranty made in writing by or
on behalf of the Company herein or in any instrument furnished in compliance
with or in reference hereto or otherwise in connection with the transactions
contemplated hereby shall prove to have been false or incorrect in any material
respect on the date as of which made; or
(f) if the Company or any Subsidiary shall be in default (as
principal or as guarantor or other surety) in the payment of any principal of or
premium or interest on any Indebtedness with a principal amount in excess of
$50,000 (other than the Notes) or in the performance of or compliance with any
term of any evidence of any such Indebtedness or of any mortgage, indenture or
other agreement relating thereto the effect of which is to cause such
Indebtedness to become due and payable before its stated maturity or before its
regularly scheduled dates of payment, and such
16
default, event or condition shall continue for more than the period of grace, if
any, specified therein and shall not have been waived pursuant thereto; or
(g) if the Company or any Subsidiary shall (i) be generally
not paying its debts as they become due, (ii) file, or consent by answer or
otherwise to the filing against it of, a petition for relief or reorganization
or arrangement or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, (iii) make an
assignment for the benefit of its creditors, (iv) consent to the appointment of
a custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, (v) be
adjudicated an insolvent or be liquidated, or (vi) take corporate action for the
purpose of any of the foregoing; or
(h) if a court or governmental authority of competent
jurisdiction shall enter an order appointing, without consent by the Company or
any Subsidiary, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Company or any
Subsidiary, or if any such petition shall be filed against the Company or any
Subsidiary and such petition shall not be dismissed within 30 days; or
(i) if a final judgment which, with other outstanding final
judgments against the Company and the Subsidiaries, exceeds $100,000 shall be
entered against the Company or any Subsidiary and if, within 60 days after entry
thereof, such judgment shall not have been discharged or execution thereof
stayed pending appeal, or if, within 60 days after the expiration of any such
stay, such judgment shall not have been discharged.
10. REMEDIES ON DEFAULT, ETC.
10.01. Remedies. Upon the occurrence of any Event of Default the
holders of the majority of outstanding principal amount of the Notes (the
"Required Holders"), may proceed to protect and enforce its or their rights by
suit in equity, action at law and/or other appropriate proceeding either for
specific performance of any covenant, provision or condition contained in this
Agreement or any Related Agreement, or in aid of the exercise of any power
granted in this Agreement or any Related Agreement, and (unless there shall have
occurred an Event of Default under Section 9(g) or 9(h), in which case the
unpaid balance of the Notes shall automatically become due and payable) may at
its or their option by notice to the Company declare all or any part of the
unpaid principal amount of the Notes then outstanding to be forthwith due and
payable, and thereupon such unpaid principal amount or part thereof, together
with interest accrued thereon and all other sums, if any, payable under this
Agreement, the
17
Notes or the other Related Agreements, shall become so due and payable without
presentation, presentment, protest or further demand or notice of any kind, all
of which are hereby expressly waived, and such holder or holders may proceed to
enforce payment of such amount or part thereof in such manner as it or they may
elect.
10.02. Annulment of Defaults. An Event of Default shall not be deemed
to be in existence or to have occurred for any purpose of this Agreement until
the expiration of all grace periods under this Agreement or if the Required
Holders shall have waived such event in writing or stated in writing that the
same has been cured to their reasonable satisfaction. No waiver or statement of
satisfactory cure pursuant to this Section 10.02 shall extend to or affect any
subsequent or other Event of Default not specifically identified in such waiver
or statement of satisfactory cure or impair any of rights of the holder of any
Notes or Shares upon the occurrence thereof.
10.03. Waivers. The Company hereby waives to the extent not prohibited
by applicable law which cannot be waived (a) all presentments, demands for
performance, notice of nonperformance (except to the extent specifically
required by the provisions hereof), (b) any requirement of diligence or
promptness on the part of any holder of the Notes or the Shares in the
enforcement of its rights under this Agreement or the Notes, (c) except to the
extent required by other provisions of this Agreement, any and all notices of
every kind and description which may be required to be given by any statute or
rule of law, and (d) any defense of any kind (other than indefeasible payment)
which it may now or hereafter have with respect to its liability under this
Agreement.
11. DEFINITIONS AND ACCOUNTING TERMS
11.01. Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"12% Subordinated Debentures" shall mean the 12% Convertible
Subordinated Debentures issued by the Company, maturing on May 1, 1999.
"14% Subordinated Debenture Holders" shall mean any holder of the 14%
Subordinated Debentures.
"14% Subordinated Debentures" shall mean the 14% Subordinated
Debentures, issued by the Company maturing on September 30, 1997.
"Additional Interest" shall have the meaning assigned to such term in
Section 7.02.
18
"Agreement" shall mean this $2,000,000 Note Purchase Agreement,
including all amendments, modifications or supplements thereto.
"Articles of Incorporation" shall mean the Articles of Incorporation of
the Company, including all amendments, modifications or supplements thereto.
"Board of Directors" shall mean the board of directors of the Company
as constituted from time to time.
"Buscema Options" shall have the meaning assigned to such term in
Section 2.03.
"By-Laws" shall mean the By-Laws of the Company, including all
amendments, modifications or supplements thereto.
"Closing" shall have the meaning assigned to such term in Section 1.03.
"Closing Date" shall have the meaning assigned to such term in Section
1.03.
"Common Shares" shall have the meaning assigned to such term in
Section 1.02.
"Common Stock" shall mean (a) the Company's Common Stock, $0.01 par
value, as authorized on the date of this Agreement, (b) any other capital stock
of any class or classes (however designated) of the Company, authorized on or
after the date hereof, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies or in the absence of any
provision to the contrary in the Certificate of Incorporation or the By-laws, be
entitled to vote for the election of a majority of directors of the Company
(even though the right so to vote has been suspended by the happening of such a
contingency or provision), and (c) any other securities into which or for which
any of the securities described in (a) or (b) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
"Company" shall have the meaning assigned to such term in the
introductory sentence hereof.
"Domain Name Assignment Agreement" shall have the meaning assigned to
such term in Section 2.03.
"Event of Default" shall have the meaning assigned to such term in
Article 9.
19
"Final Maturity Date" shall have the meaning assigned to such term in
Section 1.01.
"FRN Agreement" shall mean that certain Second Amendment to Agreement
for the Operation of First Realty Network, Inc., dated on or about December 23,
1996, among the Company, Realeads U.S.A., Inc., First Realty Network, Inc.,
Consumer Real Estate Research, Inc., and Xxxx Xxxxx, Xxxxx Xxxxxx and Xxxxxx
Xxxxxxxx.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time, applied on a basis
consistent with those used in the preparation of the financial statements
referred to in Section 2.06 (except for changes concurred in by the independent
public accountants to the Company and the Subsidiaries).
"Indebtedness" shall mean (a) any liability for borrowed money or
evidenced by a note or similar obligation given in connection with the
acquisition of any property or other assets (other than trade accounts payable
incurred in the ordinary course of business); (b) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of others, whether
or not the same are or should be reflected in the Company's balance sheet (or
the notes thereto), except guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business, and (c) the present value of any lease payments due under leases
required to be capitalized in accordance with GAAP.
"Independent Division" shall mean any division of the Company or any
Subsidiary which is organized or operated pursuant to an agreement with any
other Person or Persons which grants such Person or Persons an ownership
interest in or other claim to the assets, revenue or value of such Division.
"Initial Public Offering" shall mean an initial public offering of the
Company's Common Stock pursuant to a registration statement filed under the
Securities Act of 1933, as amended.
"Xxxxx-XxXxxxxx Merger Agreement" shall mean the Agreement and Plan of
Merger dated as of March 15, 1996 among the Company, Western American Mortgage
Company and Xxxxx-XxXxxxxx Real Estate, Inc. and the Amended and Restated
Operating Agreement as of July 1, 1998 among the Company, Xxxxx- XxXxxxxx Real
Estate, Inc. and Xxxx Xxxxx.
"Material Adverse Effect" means any material adverse effect on (a) the
business, profits, properties or condition of the Company and the Subsidiaries,
taken as a whole, (b) the ability of the Company to perform its obligations
under the Agreement or any Related Agreement and (c) the binding nature,
validity or
20
enforceability of this Agreement or any Related Agreement, which, in each case,
arises from, or reasonably could be expected to arise from, any action or
omission of action on the part of the Company or any Subsidiary or the
occurrence of any event or the existence of any fact or condition in respect of
the Company or any Subsidiary or any of their respective properties.
"Notes" shall have the meaning assigned to such term in Section 1.01.
"Operating Agreement" shall mean the Operating Agreement for the
Northern California Division, dated on or about July 1, 1997, among the Company,
Xxxxx- XxXxxxxx Real Estate, Inc., and Xxxx Xxxxx.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, university, or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Purchaser" shall have the meaning assigned to such term in Section
1.03.
"Residential Funding Agreement" shall mean that certain First Amended
and Restated Warehousing Credit and Security Agreement dated as of June 8, 1998
between the Company and Residential Funding Corporation, as amended.
"Related Agreements" shall mean the Notes, the Warrants and the
"Related Documents" defined therein, including all amendments, modifications or
supplements thereto.
"Required Holders" shall have the meaning assigned to such term in
Section 10.01.
"Sale and Marketing Agreement" shall have the meaning assigned to such
term in Section 2.03.
"Xxxxxxxxx Options" shall have the meaning assigned to such term in
Section 2.03.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time or any other federal act, rule or regulation requiring registration
with any federal agency in connection with a public offering of registrable
securities.
"Senior Debt" shall mean the unpaid principal of, premium (if any) and
interest of the Warehouse Lines of Credit.
"Senior Subordinated Obligations" shall mean the unpaid principal of,
premium (if any) and interest on the Notes and all other obligations of the
Company and the
21
Subsidiaries of any kind whatsoever under or in respect of this Agreement and
the Related Agreements.
"Series A Preferred Stock" shall mean the shares of Preferred Stock
designated Series A Preferred Stock.
"Series B Preferred Stock" shall mean the shares of Preferred Stock
designated Series B Preferred Stock.
"Series B Purchase Agreement" shall mean that certain Series B
Preferred Stock Purchase Agreement, dated as of March 29, 1996, by and among the
Company and the Purchasers listed on Schedule 1.01 thereto.
"Series C Preferred Stock" shall mean the shares of Preferred Stock
designated Series C Preferred Stock.
"Series D Preferred Stock" shall mean the shares of Preferred Stock
designated Series D Preferred Stock.
"Shares shall have the meaning assigned to such term in Section 1.02.
"Special Preferred Stock (Northern California Division)" shall mean the
shares of Preferred Stock designated Special Preferred Stock (Northern
California Division).
"Stock Option Plan" shall mean any qualified or non-qualified incentive
stock option plan of the Company which is adopted by the Board of Directors,
including all amendments, supplements or modifications thereto.
"Subsidiary" shall mean any corporation or other entity of which at
least a majority of the securities or other ownership interest having ordinary
voting power (absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other Subsidiaries.
"Warehouse Lines of Credit" shall mean collectively (i) the line of
credit of the Company with Residential Funding Corporation pursuant to the
Residential Funding Agreement, as the same may be amended or increased or
otherwise modified from time to time and any refinancings or replacements
thereof and (ii) any other similar line of credit approved by the Required
Holders, the terms of which require the Senior Subordinated Obligations to be
subordinated to the borrowings by the Company thereunder.
"Warrants" shall have the meaning assigned to such term in Section
1.01.
11.02. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistently applied, and all
financial data
22
submitted pursuant to this Agreement, unless otherwise specified, shall be
prepared in accordance with GAAP.
12. INDEMNIFICATION
12.01. General Indemnity. The Company agrees to indemnify and save
harmless the Purchasers and their respective directors, officers, affiliates,
successors and assigns from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys' fees, charges and disbursements) incurred by the
Purchasers as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein or in any of the Related
Agreements. Each Purchaser agrees severally but not jointly to indemnify and
save harmless the Company and its directors, officers, affiliates, successors
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred by any such Person as a
result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Purchaser herein.
12.02. Indemnification Procedure. Any party entitled to indemnification
under this Section 12 (an "indemnified party") will give written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
promptly after the discovery by such party of any matters giving rise to a claim
for indemnification; provided that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Section 12 except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist in respect of such action, proceeding or
claim, to assume the defense thereof, with counsel reasonably satisfactory to
the indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or
23
proceeding shall be losses subject to indemnification hereunder. The indemnified
party shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its written consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. Anything in this Section
12 to the contrary notwithstanding, the indemnifying party shall not, without
the indemnified party's prior written consent, settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party, a release from all liability in respect of such claim. The
indemnification required by this Section 12 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred. The
indemnity agreements contained herein shall be in addition to (a) any cause of
action or similar right of the indemnified party against the indemnifying party
or others, and (b) any liabilities the indemnifying party may be subject to
pursuant to the law.
13. MISCELLANEOUS
13.01. No Waiver; Cumulative Remedies. No failure or delay on the part
of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
13.02. Amendments, Waivers and Consents. Any provision in the Agreement
to the contrary notwithstanding, and except as hereinafter provided, changes in,
termination or amendments of or additions to this Agreement or any Related
Agreement may be made, and compliance with any covenant or provision set forth
herein may be omitted or waived, if the Company (a) shall obtain consent thereto
in writing from the holders of at least a majority of the then outstanding
principal amount of the Notes and (b) shall deliver copies of such consent in
writing to any holders who did not execute such consent; provided that (a) no
consents shall be effective to reduce the percentage in interest of the Notes or
Shares the consent of the holders of which is required under this Section 13.02
and (b) no amendment of
24
Article 8 of this Agreement shall be made without the written consent of the
holders of Senior Debt. Any waiver or consent may be given subject to
satisfaction of conditions stated therein and any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
13.03. Addresses for Notices. Any notice, demand, request, waiver or
other communication under this Agreement or any Related Agreement shall be in
writing and shall be deemed to have been duly given on the date of service if
personally served or on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid and addressed as follows:
To the Company: Xxxxxxxx.xxx, Inc.
0000 Xxxxxxx Xxxx., 0xx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxx
With a copy to: Xxxxx & Lardner
000 Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
To any Purchaser: At its address or addresses specified
on Schedule 1.01 hereto
With a copy to: LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
Xxxxxxx Square
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx., Esq.
13.04. Costs, Expenses and Taxes. As a condition precedent to the
Closing, the Company agrees to pay at the Closing in connection with the
preparation, execution and delivery of this Agreement and the issuance of the
Notes and Warrants to be issued at the Closing, the reasonable fees and other
out-of-pocket expenses of Messrs. LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P. In
addition, the Company shall pay the reasonable fees and out of pocket expenses
of legal counsel, independent public accountants, consultants and other outside
experts retained by the Purchasers in connection with any amendment or waiver to
this Agreement or any Related Agreement or the successful enforcement of this
Agreement or any Related Agreement by the Purchasers. In addition, the Company
shall pay any and all stamp, or other similar taxes payable or determined to be
payable in connection with the execution and delivery of this Agreement, the
issuance of the Notes and the other instruments and documents to be delivered
hereunder or thereunder, and agrees to
25
save the Purchasers harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes.
13.05. Binding Effect; Assignment. This Agreement and each Related
Agreement to which it is a party shall be binding upon and inure to the benefit
of each of the Company and the Purchasers and their respective heirs, successors
and assigns, except that the Company shall not have the right to delegate its
obligations hereunder or to assign its rights hereunder or any interest herein
without the prior written consent of the holders of at least a majority of the
then outstanding principal amount of the Notes. In addition, the Company
acknowledges and agrees that any Purchaser hereunder may assign all or any
portion of its rights under the Notes or Warrants held by it to any other Person
not currently a Purchaser hereunder. Upon any such assignment (i) the assigning
Purchaser shall deliver the Notes and Warrants held by it to the Company for
cancellation and reissuance in the names and amounts as directed by such
Purchaser, (ii) the Company, the Purchasers and the assignee shall enter into an
amendment to this Agreement in order to make the assignee a Purchaser hereunder
and entitled to all the rights evidenced hereby and to amend Schedule 1.01
hereto to reflect such assignment and (iii) the Company shall cause to be issued
to such assignee either a legal opinion in the form issued to the assigning
Purchaser pursuant to Section 4.09 of this Agreement or a letter from the issuer
of such opinion stating that the assignee may rely on such opinion as if it were
issued to assignee hereunder.
13.06. Survival of Representations and Warranties. All representations
and warranties made in this Agreement, each Related Agreement, the Notes, or any
other instrument or document delivered in connection herewith or therewith,
shall survive the execution and delivery hereof or thereof for a period of two
years.
13.07. Prior Agreements. This Agreement, each Related Agreement, and
the other agreements executed and delivered herewith constitute the entire
agreement between the parties and supersedes any prior understandings or
agreements concerning the subject matter hereof.
13.08. Severability. The provisions of this Agreement and each Related
Agreement are severable and, in the event that any court of competent
jurisdiction shall determine that any one or more of the provisions or part of a
provision contained in this Agreement or any Related Agreement shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision of this Agreement or any Related Agreement; but this
Agreement and each Related Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of a provision, had never
been contained herein, and such provisions or part reformed so that it would be
valid, legal and enforceable to the maximum extent possible.
26
13.09. Confidentiality. Each Purchaser agrees that it will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information which such Purchaser may obtain from the Company pursuant to
financial statements, reports and other materials submitted by the Company to
such Purchaser pursuant to this Agreement, or pursuant to visitation or
inspection rights granted hereunder or under any Related Agreement, unless such
information is known, or until such information becomes known, to the public;
provided, however, that the Purchasers may disclose such information (a) on a
confidential basis to their attorneys, accountants, consultants and other
professionals to the extent necessary to obtain their services in connection
with their investment in the Company, (b) to any prospective purchaser of any
Notes or Shares from such Purchaser as long as such prospective purchaser agrees
in writing to be bound by the provisions of this Section 13.09, (c) to any
entity controlling, controlled by or under common control with the Purchaser, or
to any partner of such Purchaser, or (d) as required by applicable law.
13.10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF FLORIDA, AND
WITHOUT GIVING EFFECT TO CHOICE OF LAW PROVISIONS.
13.11. Headings. Article, section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
13.12. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
13.13. Further Assurances. From and after the date of this Agreement,
upon the request of any Purchaser or the Company, each of the Company and the
Purchasers shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement, each Related
Agreement and the Shares.
13.14. Waiver. At any time prior to the Closing Date, any party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party granting such waiver but such waiver or failure to
insist upon strict compliance with such obligation,
27
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or future failure.
13.15. Specific Enforcement. Each of the Purchasers and the Company
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement and each Related Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement, each
Related Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state thereof having jurisdiction, this
being in addition to any other remedy to which they may be entitled at law or
equity.
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
XXXXXXXX.XXX, INC.
By:____________________________________
Name:
Title:
PURCHASERS:
CANAAN EQUITY, L.P.
By: Canaan Equity Partners L.L.C.
By: ___________________________________
Member/Manager
DOMINION FUND IV, L.P.
By: Dominion Management IV, L.L.C.,
its General Partner
By: ___________________________________
Xxxxxxx X. Xxx
Managing Member
INTUIT INC.
By:____________________________________
Name:
Title:
[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]
29
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: Investment General Partner
By:_____________________________________
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: General Partner
By:____________________________________
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: General Partner
By:_____________________________________
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]
30
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: General Partner
By:______________________________________
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
Technology Crossover Ventures II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: Investment General Partner
By:______________________________________
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]
31
SCHEDULE 1.01
PURCHASER PRINCIPAL AMOUNT OF NOTES
--------------------------------------------------------------------------------
Canaan Equity, L.P. $500,000
c/o Canaan Partners
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Dominion Fund IV, L.P. $500,000
c/o Dominion Ventures
00 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Intuit Inc. $500,000
0000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
--------------------------------------------------------------------------------
TCV II, V.O.F.* $7,770
c/o Technology Crossover Ventures
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Technology Crossover Ventures II, L.P.* $239,187
c/o Technology Crossover Ventures
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
TCV II (Q), L.P.* $183,890
c/o Technology Crossover Ventures
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
TCV II Strategic Partners, L.P.* $32,634
c/o Technology Crossover Ventures
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
Technology Crossover Ventures II, C.V.* $36,519
c/o Technology Crossover Ventures
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
--------------------------------------------------------------------------------
TOTAL $2,000,000
---------------------------
* Each with a copy to:
Technology Crossover
Ventures
000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
32
