Investment Restructuring Agreement (the "Agreement") effective as of March
1, 1998 by and between VCS Technologies, Inc. (the "Company"), and Apex
Communications, Inc. ("Apex"). The Company and Apex may be referred to herein
collectively as the "Parties" or individually as a "Party."
WHEREAS the Parties have agreed to restructure Apex's investment in the
Company consisting of loans made by Apex to the Company during 1997 and warrants
issued by the Company to Apex in consideration therefor,
NOW, THEREFORE, in consideration of the promises and the mutual covenants
contained herein, the Parties hereby agree as follows:
1 Acknowledgments. The Parties acknowledge that Apex has made demand loans to
the Company during 1997 in the aggregate principal amount of $100,000, and that,
as a result of payments on principal made by the Company in the aggregate amount
of $7,026, such aggregate principal amount has been reduced to $92,974 (the
"Indebtedness"). The Parties further acknowledge that in consideration for the
aforesaid loans the Company has issued to Apex warrants to purchase 10,000
shares of the Company's common stock (the "Common Stock"), exercisable at an
exercise price of $3.00 per share (the "Existing Warrants").
2 Restructuring of Apex's Investment in the Company. Apex hereby agrees as
follows:
2.1 Conversion of the Indebtedness into Term Note. Effective as of the date
hereof, the Company's obligation to pay the Indebtedness to Apex is converted
into and made subject to the terms of a term note in the principal amount of
$92,974 (the "Term Note"). Simple interest shall accrue on the unpaid principal
amount of the Term Note at the rate of 14% per annum (computed on the basis of a
360-day year of twelve 30-day months). The entire principal amount and accrued
interest of the Term Note shall be paid to Apex on March 1, 2000.
2.2 Payment of Accrued Interest. All unpaid interest accrued on the
Indebtedness as of the date hereof shall be paid to Apex on March 1, 2000.
2.3 Cancellation of the Existing Warrants. The Existing Warrants are hereby
canceled, null and void, and of no further effect.
3 Consideration. In consideration for the restructuring of Apex's investment in
the Company as provided in Section 2 above, the Company hereby agrees to issue
to Apex warrants to purchase an aggregate of 50,000 shares of Common Stock (the
"New Warrants"), such warrants exercisable at an exercise price of $2.00 per
share during the period beginning on the date hereof and ending on the sooner to
occur of (i) March 1, 2001 or (ii) the date prior to the effective date of the
registration statement filed in connection with the Company's initial public
offering.
4 Representations and Warranties of the Company. The Company represents and
warrants to Apex as follows:
4.1 The Company is duly organized, validly existing and in good standing
under the laws of the state of Delaware with full power and authority to operate
its business as currently conducted.
4.2 The authorized capital stock of the Company consists of 9,990,000
shares of Common Stock and 10,000 shares of Preferred Stock. Each outstanding
share of Common Stock is duly authorized, validly issued, fully paid and
non-assessable, and has not been issued and is not owned or held in violation of
any preemptive rights of stockholders. No shares of Preferred Stock are
currently outstanding.
4.3 The Company has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement. This Agreement has been duly
authorized by the Company and, when executed and delivered by the Company will
constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
4.4 No consent, authorization, approval, order, license, certificate or
permit of or from, or declaration or filing with, any federal, state, local or
other governmental authority, or any court or any
other tribunal, is required by the Company for the execution, delivery or
performance by the Company under this Agreement (except for such filings as may
be required under federal and state securities laws).
5 Representations and Warranties of Apex. Apex hereby represents and warrants
to the Company as follows:
5.1 Apex has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement. This Agreement has been duly
authorized by Apex and, when executed and delivered by Apex will constitute the
legal, valid and binding obligation of Apex, enforceable against Apex in
accordance with its terms. No consent, authorization, approval, order, license,
certificate or permit of or from, or declaration or filing with, any federal,
state, local or other governmental authority, or any court or any other
tribunal, is required by Apex for the execution, delivery or performance by Apex
under this Agreement.
5.2 Apex has received, read carefully and is familiar with this Agreement.
Respecting the Company, Apex is familiar with the Company's business and
financial condition and any other matters relating to the transactions
contemplated hereby; Apex has received all materials which have been requested
by it, has had a reasonable opportunity to ask questions of the Company and its
representatives, and the Company has answered all inquiries that Apex has put to
it. Apex has taken all the steps necessary to evaluate the merits and risks of
the refinancing transactions contemplated hereby.
5.3 Apex has been advised by the Company to consider retaining legal
counsel in connection with the preparation and the execution of this Agreement.
5.4 Apex represents that it is an "accredited investor" as such term is
defined in Rule 501 of the Rules and Regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
5.5 Apex has such knowledge and experience in finance, securities,
investments and other business matters so as to be able to evaluate the merits
and risks of its investment in the Company.
5.6 Apex has adequate means of providing for its current and foreseeable
future needs and has no need for liquidity of its investment in the Company.
Apex recognizes and is fully cognizant of the fact that its investment in the
Company involves a high degree of risk, and Apex represents that it can afford
to bear such risk, including, without limitation, the risk of losing the entire
investment.
5.7 Apex has been advised by the Company that (i) none of the New Warrants,
the shares of Common Stock underlying the New Warrants (the "Underlying Shares")
or the Term Note has been registered under the Securities Act, and that the New
Warrants, the Underlying Shares and the Term Note will be issued on the basis of
the statutory exemption provided by Section 4(2) of the Securities Act or
Regulation D promulgated thereunder, or both, relating to transactions by an
issuer not involving any public offering, and under similar exemptions under
applicable state securities laws; (ii) none of the New Warrants, the Underlying
Shares or the Term Note has been registered or qualified with any federal or
state agency or self-regulatory organization, and (iii) the Company's reliance
on exemptions from federal and state registration or qualification requirements
is based in part upon the representations made by Apex contained in this
Agreement.
5.8 Apex has been advised by the Company of, and/or it is otherwise
familiar with, the nature of the limitations on the transfer of the New
Warrants, the Underlying Shares and the Term Note imposed by the Securities Act
and the rules and regulations promulgated thereunder. In particular, Apex agrees
that no sale, assignment or transfer of any of the New Warrants, the Underlying
Shares or the Term Note shall be valid or effective (and agrees to not so sell,
assign or transfer any of the New Warrants, the Underlying Shares or the Term
Note), and the Company shall not be required to give any effect to such a sale,
assignment or transfer, unless the sale, assignment or transfer is (i)
registered under the
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Securities Act, it being understood that none of the New Warrants, the
Underlying Shares or the Term Note are currently registered for sale; or (ii)
made in accordance with all the requirements and limitations of Rule 144 under
the Securities Act. Apex acknowledges that the New Warrants, the Underlying
Shares and the Term Note shall be subject to a stop transfer order and that the
certificate or certificates evidencing the New Warrants, the Underlying Shares
and the Term Note shall bear the following legend (and such other legends as may
be required by state blue sky laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (1) A REGISTRATION
STATEMENT UNDER THE ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH
RESPECT TO THESE SECURITIES, OR (2) PURSUANT TO A SPECIFIC EXEMPTION
FROM REGISTRATION UNDER THE ACT BUT ONLY UPON A HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE COMPANY, OR OTHER
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED
DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS
WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR STATE SECURITIES LAW.
5.9 Apex is acquiring the New Warrants, the Underlying Shares and the Term
Note for its own account for investment and not with a view to the sale or
distribution thereof or the granting of any participation therein. Apex has no
present intention of distributing or selling to others any of such interest or
granting any participation therein.
5.10 It never has been represented, guaranteed or warranted by any of the
Company, the Company's officers, directors, stockholders, employees or agents,
or any other person, whether expressly or by implication, that (i) the Company
or Apex will realize any given percentage of profits and/or amount or type of
consideration, profit or loss as a result of the Company's activities or Apex's
investment; or (ii) the past performance or experience of the management of the
Company, or of any other person, will in any way indicate the predictable
results of the Company's activities or the ownership of the New Warrants, the
Underlying Shares or the Term Note.
5.11 Apex is not acquiring the New Warrants, the Underlying Shares or the
Term Note as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or presented at any seminar or meeting, or
any solicitation of a share exchange by a person other than a representative of
the Company with whom Apex had a pre-existing relationship.
5.12 Apex is not relying on the Company with respect to the tax and other
economic considerations of an investment.
6 Indemnification.
6.1 Survival of Representations and Warranties. The representations and
warranties contained herein shall survive the execution and delivery of this
Agreement and shall continue forever thereafter.
6.2 Indemnification for the Benefit of the Company. Apex acknowledges that
it understands the meaning and legal consequences of the representations and
warranties contained in Section 5 hereof, and agrees to indemnify and hold
harmless the Company and each of the Company's officers, directors, employees
and agents from and against any and all loss, damage or liability due to or
arising out of a breach of any such representation or warranty.
6.3 Indemnification for the Benefit of Apex. The Company acknowledges that
it understands the meaning and legal consequences of the representations and
warranties contained in Section 4 hereof, and agrees to indemnify and hold
harmless Apex and each of the Apex's officers, directors, employees and agents
from and against any and all loss, damage or liability due to or arising out of
a breach of any such representation or warranty.
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7 Company's Right of First Purchase.
7.1 Company's Right of First Purchase. For such time until the date prior
to the effective date of the registration statement filed in connection with the
Company's initial public offering, any shares of Common Stock held by Apex will
be subject to the Company's right of first purchase. By virtue of that right,
such shares of Common Stock may not be transferred to any person or entity
unless such transfer occurs within the 30 days immediately following either (i)
the expiration of 30 days following written notice by Apex to the Company
identifying the prospective transferee and offering the Company the first
opportunity to purchase such stock at its Fair Market Value (as defined below)
in cash; or (ii) the Company's election to not purchase such shares of Common
Stock after receipt of such notice. This right of first purchase shall terminate
with respect to any shares of Common Stock with respect to which the Company was
offered but did not exercise its right of first purchase. The Company may assign
all or any portion of its right of first purchase to any one or more of its
stockholders, or to a pension or retirement plan or trust for employees of the
Company, who may then exercise the right so assigned. The Company's right of
first purchase shall terminate on the date prior to the effective date of the
registration statement filed in connection with the Company's initial public
offering.
7.2 Definition of Fair Market Value. The "Fair Market Value" of Common
Stock will mean the price at which one could reasonably expect such stock to be
sold in an arm's length transaction, for cash, other than on an installment
basis, to a person not employed by, controlled by, in control of or under common
control with the issuer of such stock. Such Fair Market Value will be that which
has currently or most recently been determined for this purpose by the Board of
Directors of the Company, or at the sole discretion of the Board by an
independent appraiser or appraisers selected by the Board, in either case giving
due consideration to recent transactions involving shares of such stock, if any,
the issuer's net worth, prospective earning power and dividend-paying capacity,
the goodwill of the issuer's business, the issuer's industry position and its
management, that industry's economic outlook, the values of securities of
issuers whose stock is publicly traded and which are engaged in similar
businesses, the effect of transfer restrictions to which such stock may be
subject under law and under the applicable terms of any contract governing such
stock, the absence of a public market for such stock and such other matters as
the Board or its appraiser or appraisers deem pertinent. The determination by
the Board or its appraiser or appraisers of the Fair Market Value will be
conclusive and binding notwithstanding the possibility that other persons might
make a different determination. If the Fair Market Value to be used was thus
fixed more than sixteen months prior to the day as of which Fair Market Value is
being determined, it will in any event be no less than the book value of the
stock being valued at the end of the most recent period for which financial
statements of the Company are available.
8 Miscellaneous.
8.1 Confidentiality. Apex hereby acknowledges and agrees that this
Agreement is confidential, and that its terms and contents shall not be
disclosed to any person other than through a press release of the Company.
8.2 Payment of Expenses. Except as expressly otherwise provided, each of
the Parties hereto shall pay all expenses and disbursements incurred by its
officers, employees, attorneys, accountants, financial advisers and other agents
and representatives in connection with this Agreement and the performance of its
obligations hereunder.
8.3 Notices. Any notices required or permitted to be given to, or served
upon, either Party hereto pursuant to this Agreement shall be sufficiently given
or served if sent to such Party by registered or certified mail, addressed to it
at its address, as set forth below, or to such other address as it shall
designate by written notice to the other parties addressed as follows:
VCS Technologies, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Att: Xxxxxxx Xxxxxxx III, President and CEO
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Apex Communications, Inc.
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8.4 Counterparts. This Agreement may be executed in any number of
counterparts and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute only one and the same
instrument.
8.5 Entire Agreement. This agreement constitutes the entire agreement
between the Parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the Parties hereto with respect to
the subject matter hereof.
8.6 Amendments and Waivers. This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by the Party against
whom enforcement of any such modification or agreement is sought. Either Party
hereto may, by an instrument in writing, waive compliance by the other Party
with any term or provision of this Agreement to be performed or complied with by
such other Party hereto. The waiver by any Party of a breach of any term or
provision of this Agreement shall not be construed as a waiver of any subsequent
breach.
8.7 Assignment. This Agreement is personal in nature and neither of the
Parties shall, without the written consent of the other, assign or transfer its
rights or obligations hereunder to another person or entity, except as herein
expressly provided or permitted and except that the Company may transfer all or
any portion of its rights or obligations hereunder to any of its affiliates
without such prior written consent. Subject to the foregoing provisions of this
Section 8.7, this Agreement shall be binding upon and inure to the benefit of
the Parties hereto and their respective successors and assigns.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of New York and all disputes arising hereunder shall be
adjudicated solely before the courts of New York to whose jurisdiction the
Parties hereto consent.
IN WITNESS WHEREOF, the Parties hereto have duly executed this Agreement and
caused the same to be delivered on their behalf as of the date first above
written.
Apex Communications, Inc. VCS Technologies, Inc.
By: /s/ Xxxxx Xxxxxxx By: /s/ Xxxxxxx Xxxxxxx
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Xxxxx Xxxxxxx, President Xxxxxxx Xxxxxxx, President and CEO
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