POINTE COMMUNICATIONS CORPORATION
SECURITIES PURCHASE AGREEMENT
SEPTEMBER ___, 1999
EXHIBITS
--------
Exhibit A Form of Convertible Promissory Note
Exhibit B Form of Certificate of Designations
Exhibit C Form of Warrant Agreement
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Legal Opinion of Gardere & Xxxxx L.L.P.
Schedule 1 Schedule of Investors and Amount of Investment
Schedule 2.2 Capitalization: Rights to Purchase Capital Stock of the Company
Schedule 2.3 Subsidiaries
Schedule 2.7 Litigation
Schedule 2.8 Material Intellectual Property
Schedule 2.10 Material Agreements
Schedule 2.13 Conflicts of Interest
Schedule 2.14 Registration Rights and Voting Rights
Schedule 2.16 Title to Property and Assets
Schedule 2.17 Employee Benefit Plans
Schedule 2.18 Tax Returns and Audits
Schedule 2.20 Permits
Schedule 2.23 Financial Statements
Schedule 2.24 Changes
Schedule 2.27 Finder's Fee
Schedule 2.28 Insurance
SECURITIES PURCHASE AGREEMENT
-----------------------------
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
---------
September ___, 1999, is made by and among POINTE COMMUNICATIONS CORPORATION, a
Nevada corporation (the "Company"), TSG CAPITAL FUND III, L.P., a Delaware
-------
limited partnership, and its Affiliates ("TSG"), Opportunity Capital Partners
---
II, L.P., a Delaware limited partnership and its Affiliates ("OCP II"), and
------
Opportunity Capital Partners III, L.P., a Delaware limited partnership and its
Affiliates ("OCP III") (hereinafter, TSG, OCP II and OCP III shall each be
--------
referred to as a "Purchaser" and shall collectively be referred to as
---------
"Purchasers").
------------
WITNESSETH:
----------
WHEREAS, the Company is interested in having investors provide additional
capital to the Company through debt or equity investments; and
WHEREAS, subject to the terms and conditions set forth herein, the Company
desires to borrow from Purchasers, and Purchasers desire to loan to the Company
an aggregate of $21,000,000, as set forth on Schedule 1 attached hereto (the
----------
"Loan") in exchange for the issuance by the Company of a convertible promissory
------
note to each of TSG, OCP II and OCP III in the form of Exhibit "A" attached
-----------
hereto (the "Note" or collectively, the "Notes"), which shall be convertible
---- -----
into, upon the occurrence of certain events set forth in the Notes, an aggregate
of 7,000 shares (plus additional shares for accrued interest) of the Company's
Class B Convertible Senior Preferred Stock (the "Class B Preferred Stock"), par
-----------------------
value $0.01 per share, and warrants to purchase shares of the Company's common
stock, par value $0.00001 per share (the "Common Stock"); and
-------------
WHEREAS, the Company desires to issue the Notes on the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. LOAN TO THE COMPANY.
----------------------
1.1 Loan Amount. Subject to the terms and conditions of this Agreement
-----------
and as consideration for the issuance of the Notes to Purchasers, Purchasers
shall pay and deliver to the Company cash equal to the Loan Amount
($21,000,000), which shall be payable at the Closing by cashier's check or wire
transfer of funds to such account as may be specified by the Company in writing.
"Loan Amount" shall mean the aggregate amount loaned to the Company by the
Purchasers in exchange for the Notes as set forth on Schedule 1 attached hereto.
----------
1.2 Issuance of the Notes. At the Closing, the Company shall issue:
------------------------
(i) to TSG a Note in the principal amount of $20,000,000 convertible into shares
of the Class B Preferred Stock ; (ii) to OCP II, a Note in the principal amount
of $900,000 convertible into shares of Class B Preferred Stock; and (iii) to OCP
III, a Note in the principal amount of $100,000 convertible into shares of Class
B Preferred Stock .
1.3 The Closing.
------------
a) Subject to the satisfaction or, to the extent permissible by
law, waiver by the parties hereto on the Closing Date of the conditions
described in Sections 3 and 4 of this Agreement, the funding of the Loan Amount
and issuance of the Notes (the "Closing") shall occur on such date as the
-------
Company and Purchasers may mutually agree, on or prior to September 10, 1999
(such date on which the Closing takes place being the "Closing Date"). The
------------
Closing shall take place at the offices of the Company, 0000 Xxxxxxxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, or at such other place as the
Company and Purchasers may mutually agree upon in writing.
b) At or before the Closing, each party shall cause to be
prepared, and at the Closing the parties shall execute, deliver, and file each
document, agreement, and instrument required or contemplated by this Agreement
to be so executed, delivered, and filed in connection with the transactions
contemplated hereby which have not been theretofore accomplished.
c) The parties shall, from time to time after the Closing Date at
the request of any other party and without further consideration, execute and
deliver or cause to be executed and delivered to such other party such further
instruments of transfer, assignment, conveyance, and assumption, and shall take
or cause to be taken such other action as reasonably requested, as may be
necessary to carry into effect the transactions contemplated hereby.
1.4 Conversion of Note into Class B Preferred Stock and Warrants.
------------------------------------------------------------------
(a) Subject to the terms and conditions set forth in the Notes,
the Company agrees to issue to Purchasers upon conversion of the Notes (i)
shares of the Company's Class B Convertible Senior Preferred Stock, par value
$0.01 per share (the "Class B Preferred Shares"), having the rights, privileges
------------------------
and preferences set forth in the Certificate of Designations attached hereto as
Exhibit B (the "Certificate"), and (ii) warrants to TSG to purchase an aggregate
--------- -----------
of 8,571,429 shares, warrants to OCP II to purchase an aggregate of 385,714
shares, and warrants to OCP III to purchase an aggregate of 42,857 shares (as
such numbers may be adjusted as provided herein) of the Company's Common Stock
at an exercise price determined in accordance with Section 5.3 (b) of the
Warrant Agreement in the form attached hereto as Exhibit C (the "Warrant
--------- -------
Agreement") (as such price per share may be adjusted as provided herein) (the
---------
"Warrants"), which Warrants shall be subject to the terms and conditions set
---------
forth in the Warrant Agreement.
b) The parties agree to execute the Registration Rights Agreement
in substantially the form attached hereto as Exhibit D upon conversion of the
---------
Notes.
(c) The parties agree that the number of Class B Preferred Shares and
Warrants (together, the "Securities") to be issued by the Company to Purchasers
----------
upon conversion, and the exercise price of the Warrants, shall be equitably
adjusted, subject to the agreement of each party, to reflect any spin-off,
split-up, reclassification, combination of shares, recapitalization or similar
corporate reorganization, or any consolidation or merger under which the
surviving entity is or becomes the "Company" as defined in this Agreement, in
any such case which occurs between the effective date of this Agreement and the
Closing Date.
(d) The parties further agree that if the Pensat Transaction
(hereinafter defined) is consummated on or before December 31, 1999, the
exercise price of the Warrants shall automatically be adjusted pursuant to
Section 5.3 (b) of the Warrant Agreement. "Pensat Transaction" shall mean the
------------------
transactions contemplated by that certain letter of intent and term sheet
between the Company and Pensat International Communications, Inc. ("Pensat"),
------
dated July 26, 1999, including, but not limited to, the purchase by Pensat or
affiliates thereof, or other parties, of Class C Preferred Stock for an
aggregate purchase price of at least $20,000,000.
(e) The parties further agree that the number of Warrants to be
issued by the Company to Purchasers upon conversion of the Notes shall be
adjusted to maintain the ratio of 0.75 Warrants for each Common Share issuable
upon conversion of the Class B Preferred Shares issued pursuant to the principal
amount of the Notes without regard to interest earned on the Notes.
1.5 Use of Proceeds. The Company hereby agrees that it shall apply the
---------------
net proceeds received hereunder from the Loan (after deduction of all costs and
expenses of such Loan) to build out and interconnect its competitive local
exchange, long distance and Internet networks, to repay debt and to fund working
capital and capital expenditures of the Company.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
--------------------------------------------------------------
Company hereby represents and warrants to and covenants with the Purchasers as
follows (except as set forth on the Schedules hereto, which exceptions shall be
deemed to be representations and warranties as if made hereunder):
2.1 Organization, Qualifications and Corporate Power. The Company is a
------------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada and has all requisite corporate power and authority to
own and hold its properties and to carry on its business as now conducted and as
proposed to be conducted. The Company has all requisite corporate power and
authority to execute, deliver and perform this Agreement and to sell, issue and
deliver the Notes, Securities upon conversion of the Notes, and the shares of
Common Stock issuable upon conversion of the Class B Preferred Shares or upon
exercise of the Warrants (collectively, the "Underlying Shares") to Purchasers.
-----------------
The Company is duly qualified to conduct business and is in good standing in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on the business (as now conducted or as proposed to be
conducted), financial condition, operating results, assets, properties or
prospects of the Company or its subsidiaries, taken as a whole (each such
effect, a "Material Adverse Effect"). The Company has delivered to Purchasers
-----------------------
complete and correct copies of the Company's Articles of Incorporation
(including all amendments thereto) and Bylaws, in each case in effect as of the
date hereof (the "Existing Articles" and "Existing Bylaws," respectively).
------------------ ---------------
2.2 Capitalization.
--------------
(a) The authorized capital stock of the Company will consist,
immediately prior to the Closing, of: (1) 100,000,000 shares of Common Stock, of
which 46,449,125 shares are issued and outstanding, and (2) 100,000 shares of
preferred stock, par value $0.01 per share (the "Preferred Stock"), of which
---------------
10,229 shares of Class A Convertible Senior Preferred Stock (convertible into
21,919,562 shares of Common Stock) are issued and outstanding.
(b) The Company has reserved: (1) 3,000,000 shares of Common Stock
under its Incentive Stock Option Plan (the "Employee Plan"); (2) 1,000,000
-------------
shares of Common Stock under its Executive Long-Term Plan (the "Executive
---------
Plan"); and (3) 1,000,000 shares of Common Stock under its Non-Employee Director
Stock Option Plan (the "Director Plan"); (4) 5,000,000 shares of Common Stock
-------------
under its Executive Market Value Appreciation Stock Option Plan (the "Market
------
Appreciation Plan"); (5) 2,000,000 shares of Common Stock under its Pay for
------------------
Performance Stock Option Plan (the "Pay for Performance Plan") (such shares
------------------------
collectively, the "Reserved Option Shares"), in each case, for issuance upon
------------------------
exercise of incentive or non-qualified stock options granted or expected to be
granted to certain executive officers, non-employee directors and employees of
the Company or of any subsidiary of the Company pursuant to the terms and
conditions of the Employee Plan, the Executive Plan, the Director Plan, the
Market Value Appreciation Plan and the Pay for Performance Plan (collectively,
the "Plans"). The Company has reserved 464,241 shares of Common Stock for
-----
issuance upon exercise of non-qualified stock options expected to be given to
certain consultants and former employees of the Company outside of the Plans
(the "Other Reserved Option Shares"). Each Plan has been duly adopted by the
------------------------------
Company's Board of Directors and the Employee Plan, Executive Plan and Director
Plan have been approved by the Company's shareholders to the extent necessary to
be qualified under the Internal Revenue Code of 1986, as amended. The Market
Value Appreciation Plan and the Pay for Performance Plan will be presented as an
item for the shareholders to consider and vote upon at the next shareholder
meeting. As of the date hereof: 1,267,500 options to purchase Reserved Option
Shares are outstanding under the Employee Plan; 600,000 options to purchase
Reserved Option Shares are outstanding under the Director Plan; 690,000 options
to purchase Reserved Option Shares are outstanding under the Executive Plan;
3,600,000 options to purchase Reserved Option Shares are outstanding under the
Market Value Appreciation Plan; 1,110,000 options to purchase Reserved Option
Shares are outstanding under the Pay for Performance Plan; and 464,241 options
to purchase shares of Common Stock are outstanding outside of the Plans (the
"Other Options"). 1,732,500 Reserved Option Shares remain available for issuance
--------------
under the Employee Plan; 310,000 Reserved Option Shares remain available for
issuance under the Executive Plan; 400,000 Reserved Option Shares remain
available for issuance under the Director Plan; 1,400,000 Reserved Option Shares
remain available for issuance under the Market Value Appreciation Plan; and
890,000 Reserved Option Shares remain available for issuance under the Pay for
Performance Plan.
(c) The Company has additional convertible securities, warrants or
rights outstanding, which are convertible into or give holders the right to
purchase shares of Common Stock, as follows: (1) $1,080,000 par value
convertible debentures, which are convertible into 900,000 shares of Common
Stock; (2) rights issued in conjunction with the acquisition of Rent-A-Line
Telephone Company LLC, the terms of which provide holders with the right to
purchase up to 625,000 shares of Common Stock; (3) warrants issued in return for
services or in various financing activities, the terms of which provide holders
the right to purchaser 13,225,121 shares of Common Stock; (4) 2,000 shares of
Series A Preferred Stock issued by Telecommute Solutions, Inc. ("TCS"), which
provide holders with the right to purchase 2,643 shares of TCS common stock or
666,667 shares of Common Stock; (5) contingent obligations issued in conjunction
with the acquisition of Galatel, Inc., which provide for the grant to the former
owners of Galatel of up to 93,750 shares of Common Stock; (6) contingent
obligations issued in conjunction with the acquisition by the Company of a
customer list to provide the former owner of such list with warrants to purchase
up to 180,000 shares of Common Stock; (7) 10,229 shares of Class A Convertible
Senior Preferred Stock which is convertible into 21,919,562 shares of Common
Stock; and (8) warrants issued to the owners of the Company's Class A
Convertible Senior Preferred Stock which provide the holders the right to
purchase 10,800,000 shares of Common Stock.
(d) Except as set forth in Schedule 2.2 or provided in this
-------------
Agreement: (i) no subscription, warrant, option, convertible security or other
right (contingent or otherwise) to purchase or acquire any securities of the
Company or any of its subsidiaries is authorized or outstanding as of the date
hereof; (ii) none of the Company or any of its subsidiaries has any obligation
(contingent or otherwise) (y) to issue any subscription, warrant, option,
convertible security or other such right or (z) to issue or distribute to
holders of any securities of the Company or any of its subsidiaries any
evidences of indebtedness or assets of the Company or any of its subsidiaries;
and (iii) none of the Company or any of its subsidiaries has any obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
securities or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
(e) All of the outstanding shares of the Company's capital stock
have been duly authorized and validly issued, are fully-paid and nonassessable
and were issued in compliance with all applicable federal and state securities
laws and regulations. Except as set forth in Schedule 2.2, there are no
-------------
statutory or contractual shareholders preemptive rights, rights of first refusal
or any similar rights relating to the issuance and sale of securities of the
Company or any of its subsidiaries.
2.3 Subsidiaries. Except as set forth in Schedule 2.3, the Company
------------ ------------
does not own, directly or indirectly, any shares of capital stock, partnership
interests or other participation rights or other interests in the nature of an
equity interest in any corporation, association, partnership, joint venture
company, trust, estate, limited liability company, limited liability
partnership, joint stock company, unincorporated organization or other entity,
or any option, warrant or other security convertible into or exchangeable for
any of the foregoing. Each of the Company's subsidiaries is a corporation or a
limited liability company, as the case may be, duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each of the Company's subsidiaries has the requisite corporate
or limited liability company, as the case may be, power and authority to own and
hold its properties and to carry on its business as conducted and as proposed to
be conducted. Each of the Company's subsidiaries is duly qualified to conduct
business and is in good standing under the laws of each jurisdiction in which
the failure to so qualify would have a Material Adverse Effect.
2.4 Authorization and Validity of Investment Agreements.
--------------------------------------------------------
(a) All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization, execution and
delivery of this Agreement, the Warrant Agreement, and the Registration Rights
Agreement in the form attached hereto as Exhibit D (the "Registration Rights
--------- -------------------
Agreement" and with the Certificate, this Agreement and the Warrant Agreement,
---------
and all other documents and instruments to be executed in connection therewith
collectively, the "Investment Agreements") has been taken. All corporate action
---------------------
on the part of the Company, its officers, directors and, upon the occurrence of
the Shareholders Meeting referenced in Section 6.6, shareholders necessary for:
(i) the performance of all obligations of the Company hereunder and under the
other Investment Agreements, and (ii) the authorization, issuance, sale and
delivery of the Securities and the Underlying Shares to Purchasers pursuant to
the terms of the Investment Agreements has been taken.
(b) (1) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, and (2) the other
Investment Agreements, when executed and delivered by the Company, shall
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms; except in each case of
subclause (1) and (2) (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other laws of general
application affecting enforcement of creditors, rights generally; (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies; or (iii) to the extent the indemnification
provisions contained in the Investment Agreements may be limited by applicable
federal or state securities laws.
2.5 Compliance with Securities Laws; Valid Issuance of Securities. The
-------------------------------------------------- ----------
Securities to be issued to Purchasers upon conversion of the Notes, when issued,
sold and delivered in accordance with the terms hereof for the consideration
expressed herein, will be duly and validly issued, fully-paid and nonassessable
with the rights, powers and privileges as set forth herein, in the Company's
Articles of Incorporation, as amended by the Articles of Amendment and in the
Warrant Agreement, and will be free and clear of all liens, charges, claims,
encumbrances and restrictions other than restrictions on transfer under the
Investment Agreements and applicable federal and state securities laws, and will
be issued pursuant to an exemption from the registration requirements of all
applicable federal and state securities laws. After the Shareholders Meeting
referenced in Section 6.6 of this Agreement, the Underlying Shares issuable upon
conversion of the Class B Preferred Shares and the exercise of the Warrants
purchased hereunder shall be duly and validly reserved for issuance, and upon
issuance in accordance with the terms of the Company's Articles of
Incorporation, as amended, and the Warrant Agreements, shall be duly and validly
issued, fully-paid and nonassessable and free of restrictions on transfer other
than restrictions on transfer under the Investment Agreements and applicable
federal and state securities laws, and will be issued pursuant to an exemption
from the registration requirements of all applicable federal and state
securities laws. The issuance, sale and delivery of the Securities and the
Underlying Shares are not subject to any preemptive right of any shareholder of
the Company or to any right of first refusal or other right in favor of any
person.
2.6 Governmental Consents. No consent, approval, order or
----------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, foreign, state or local governmental authority is
required on the part of the Company or any of its subsidiaries in connection
with the consummation of the transactions contemplated by the Investment
Agreements, except for filings pursuant to applicable state securities laws and
Regulation D of the Securities Act of 1933, as amended (the "Securities Act").
--------------
2.7 Litigation. Except as set forth in Schedule 2.7, there is no
---------- -------------
action, suit, proceeding or investigation pending or, to the Company's
knowledge, currently threatened against the Company or any of its subsidiaries,
nor, to the Company's knowledge, is there any reasonable basis for the
foregoing. None of the Company or any of its subsidiaries is a party or
expressly subject to the provisions of any order, writ, injunction, judgment or
decree of any court, administrative agency, government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company or any of its subsidiaries currently pending or which the Company or any
of its subsidiaries intends to initiate.
2.8 Intellectual Property. Set forth on Schedule 2.8 attached hereto
---------------------- ------------
is a list of all material patents, pending patent applications, trademarks,
service marks, trade names, copyrights, licenses, computer codes or computer
software, proprietary rights, proprietary processes and other intellectual
property rights (collectively "Intellectual Property") owned by, or licensed to,
---------------------
the Company or any of its subsidiaries, with an indication as to which of such
items are owned by the Company or any of its subsidiaries and which are licensed
to the Company or its subsidiaries. The Company's and its subsidiaries, legal
rights to use the Intellectual Property owned by or licensed to the Company and
its subsidiaries is sufficient for the use thereof in their respective
businesses as now conducted and as proposed to be conducted, except where the
failure would not have a Material Adverse Effect. None of the Company or any of
its subsidiaries has received any communications alleging that the Company or
any of its subsidiaries has violated or, by conducting its business as now
conducted or as proposed to be conducted, would violate any of the rights in the
Intellectual Property of any other individual, corporation, association,
partnership, joint venture, trust, estate, limited liability company, limited
liability partnership, joint stock company, unincorporated organization or
government or any agency or political subdivision thereof, or other entity or
organization (each, a "Person"). To the Company's knowledge, none of the
------
Company or any of its subsidiaries is infringing upon the right or claimed right
of any Person with respect to any of the Intellectual Property. None of the
Company or any of its subsidiaries has licensed any of the Intellectual Property
to any other Person, nor does any other Person have an option or any other right
to acquire any of the Intellectual Property other than in the ordinary course of
business (except for the Intellectual Property that is in the public domain).
To the Company's knowledge, none of the employees of the Company or any of its
subsidiaries is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any order, writ,
injunction, judgment, instrument or decree of any court, administrative agency,
government agency or instrumentality that would interfere with the use of such
employee's best efforts to promote the interests of the Company or any of its
subsidiaries or that would conflict with the business of the Company or such
subsidiary (as currently conducted or proposed to be conducted). None of the
execution or delivery of the Investment Agreements, nor the carrying on of the
business of the Company or any of its subsidiaries (as currently conducted or
proposed to be conducted) by their respective employees, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions, or
provisions of, or constitute a default under, any contract or respective other
agreement, covenant or instrument under which any such employee is obligated.
It is not, nor will it be necessary, to use any inventions of any of the current
employees of the Company or its subsidiaries (or Persons the Company currently
intends to hire) made prior to their employment with the Company or its
subsidiaries and to which the Company or its subsidiaries do not otherwise have
rights.
2.9 Compliance.
----------
(a) None of the Company or any of its subsidiaries is in violation
or in default of any provisions of its respective Articles of Incorporation,
bylaws or of any order, writ, injunction, judgment, instrument, decree or
contract to which it is a party or by which it is bound or, to its knowledge, of
any provision of federal or state statute, rule or regulation applicable to the
Company or any of its subsidiaries which violations or defaults would, either
individually or in the aggregate, have a Material Adverse Effect. The
execution, delivery and performance of the Investment Agreements and the
consummation of the transactions contemplated hereby or thereby do not and will
not, with or without the passage of time and/or the giving of notice: (i) result
in any such violation or be in conflict with or constitute a default under any
such provision, order, writ, injunction, judgment, instrument, decree or
contract; (ii) result in the creation of any lien, security interest, charge or
encumbrance upon the capital stock or any assets of the Company or any of its
subsidiaries; or (iii) give any third party the right to modify, terminate or
accelerate any obligation under any such provision, order, writ, injunction,
judgment, instrument, decree or contract.
2.10 Material Contracts. Schedule 2.10 lists each contract relating to
------------------ -------------
the Company or any of its subsidiaries that: (a) represents a contract upon
which the Company or such subsidiary is substantially dependent or which is
otherwise material to the Company or such subsidiary; (b) provides for
borrowings or similar extensions of credit; (c) limits or restricts the ability
of the Company or such subsidiary to compete or otherwise to operate in any
manner or place; (d) provides for a guaranty or indemnity (other than customary
indemnities for infringement of Intellectual Property rights); (e) grants a
power of attorney, agency or similar authority to another Person; (f) contains a
right of first refusal with respect to the sale or acquisition of the capital
stock or assets of the Company or any of its subsidiaries; (g) contains a right
or obligation (other than in the ordinary course of business) of any officer or
director of the Company or any of its subsidiaries, or any of their respective
affiliates or associates; (h) is an employment or consulting agreement to which
the Company or any of its subsidiaries is a party; or (i) was not made in the
ordinary course of business (collectively, "Material Contracts"). True copies
------------------
of each Material Contract, including all amendments and supplements thereto,
have been made available to Purchasers. Except as set forth in Schedule 2.10,
-------------
each Material Contract is valid and subsisting and no breach or default, alleged
breach or default, or event which would (with the passage of time, notice or
both) constitute a breach or default thereunder on the part of the Company or
any of its subsidiaries, or, to the knowledge of the Company, on the part of any
other party thereto, has occurred.
2.11 Absence of Undisclosed Liabilities. Since June 30, 1999 none of
------------------------------------
the Company or any of its subsidiaries has: (i) declared or paid any dividends,
or authorized or made any distribution upon or with respect to any class or
series of its capital stock; (ii) made any loans or advances to any Person,
other than ordinary advances for expenses incurred in the ordinary course of
business consistent with past practices; or (iii) sold, exchanged or otherwise
disposed of any of its assets or rights, other than in the ordinary course of
business consistent with past practices. Except as set forth in the Financial
Statements (as defined) and the schedules hereto, the Company has no material
liabilities or obligations, contingent or otherwise, other than (i) liabilities
paid or incurred in the ordinary course of business subsequent to the Statement
Date (as defined), and (ii) obligations under contracts and commitments incurred
in the ordinary course of business, which, in both cases, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company.
2.12 Disclosure.
----------
(a) As of its filing date, each document filed with the Securities
and Exchange Commission (the "Commission") by the Company, as amended or
----------
supplemented prior to the Closing Date, if applicable, pursuant to the
Securities Act and/or the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (i) complied in all material respects with the applicable
--------------
requirements of the Securities Act and/or Exchange Act and (ii) did not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. As of the date
hereof, the Company has filed all documents with the Commission as required by
the Exchange Act and the policies, rules and regulations of the Commission.
(b) None of the representations or warranties of the Company
contained in this Agreement, the schedules and exhibits attached hereto, the
other Investment Agreements or any certificate furnished or to be furnished to
Purchasers at Closing (when read together) contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. There is no fact which has not been disclosed to
Purchasers in writing of which the Company has knowledge, and which has had or
would reasonably be anticipated to have a Material Adverse Effect, and the
Company is not aware of any impending or contemplated event or occurrence that
would cause any of the representations or warranties contained herein not to be
true and complete on the date of such event or occurrence as if made on that
date.
2.13 Conflicts of Interest. Except as set forth in Schedule 2.13, none
--------------------- -------------
of the Company or any of its subsidiaries is indebted, directly or indirectly,
to any of its respective officers or directors or to their respective spouses or
immediate family members, for any amount whatsoever other than in connection
with expenses or advances of expenses incurred in the ordinary course of
business consistent with past practices or relocation expenses of employees.
Except as set forth in Schedule 2.13, no director, officer or any affiliates
-------------
thereof, (as such term is defined in Rule 405 under the Securities Act), or any
members of their immediate families (x) are, directly or indirectly, indebted to
the Company or any of its subsidiaries or, (y) have any direct or indirect
ownership interest in any Person (A) with which the Company or any of its
subsidiaries is affiliated or (B) with which the Company or any of its
subsidiaries has a material business relationship, or (C) which competes with
the Company or any of its subsidiaries; except that for purposes of this clause
(y), officers, directors or affiliates thereof or any members of their immediate
families may own stock in (but not exceeding one percent (1%) of the outstanding
capital stock of) any publicly traded companies that may compete with the
Company. To the Company's knowledge, none of the officers or directors of the
Company or any members of their immediate families are, directly or indirectly,
interested in any material contract of the Company or any of its subsidiaries.
None of the Company or any of its subsidiaries is a guarantor or indemnitor of
any indebtedness of any other Person.
2.14 Registration Rights and Voting Rights. Except as set forth in
-----------------------------------------
Schedule 2.14 and contemplated in the Registration Rights Agreement, there are
--------------
no agreements, written or oral, between the Company and any Person relating to
the registration of its capital stock under federal or state securities laws,
including piggyback registration rights. Except as set forth in Schedule 2.14,
-------------
to the Company's knowledge, no stockholders of the Company have entered into any
agreements with respect to the voting of shares of the capital stock of the
Company.
2.15 Private Placement. Subject to and in reliance in part on the
------------------
truth and accuracy of the representations of each Purchaser set forth in this
Agreement, the offer, sale and issuance of the Securities as contemplated by
this Agreement is exempt from the registration requirements of the Securities
Act and any applicable state securities laws and none of the Company or any of
its subsidiaries nor any authorized agent acting on its behalf will take any
action hereafter that would cause the loss of such exemption.
2.16 Title to Property and Assets. Except as set forth in Schedule
-------------------------------- --------
2.16, the Company and each of its subsidiaries owns its property and assets free
----
and clear of all mortgages, liens, loans and encumbrances, except such
encumbrances and liens which arise in the ordinary course of business or liens
for taxes that are not delinquent or being contested in good faith and do not
materially impair the ownership or use of such property or assets by the Company
or such subsidiary. Except as set forth in Schedule 2.16 with respect to the
-------------
property and assets it leases, each of the Company and its subsidiaries is in
compliance with such leases and holds a valid leasehold interest free of any
liens, claims or encumbrances.
2.17 Employee Matters. Except as described in Schedule 2.17 attached
----------------- -------------
hereto, neither the Company nor any of its subsidiaries is a party to or bound
by, or has any liability under, any material employment contract or any deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation or benefit agreement, plan
or arrangement, of any kind including without limitation any multiemployer plan.
2.18 Tax Returns and Audits. Except as set forth in Schedule 2.18, the
---------------------- -------------
Company and its subsidiaries have accurately prepared and timely filed all
federal, state, foreign, local and other tax returns required by law to be
filed, except where failure to do so would not reasonably be expected to have a
Material Adverse Effect, have paid or made provision for the payment of all
taxes shown on such returns to be due and all additional assessments. Adequate
provisions have been made and are reflected in the Financial Statements to the
extent required by generally accepted accounting principles applied on a
consistent basis and as in effect in the United States ("GAAP") for all current
taxes and other charges to which the Company or any of its subsidiaries is
subject and which are not currently due and payable. There are no additional
assessments or adjustments pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries for any period.
2.19 Labor Agreements and Actions. None of the Company or any of its
------------------------------
subsidiaries is bound by or subject to (and none of their assets or properties
are bound by or subject to) any written or oral contract, commitment, agreement
or arrangement with any labor union, and no labor union has requested or, to the
knowledge of the Company, has sought to represent any of the employees,
representatives or agents of the Company or any of its subsidiaries. There is
no strike or other labor dispute involving the Company or any of its
subsidiaries pending, or to the knowledge of the Company, threatened, which
could have a Material Adverse Effect, nor is the Company aware of any labor
organization activity involving the employees, representatives or agents of the
Company or any of its subsidiaries. The Company and its subsidiaries have
complied with all applicable federal and state equal employment opportunity laws
and regulations and with all other laws and regulations related to employment
and labor issues except where the failure to comply would not have a Material
Adverse Effect.
2.20 Permits. Except as set forth in Schedule 2.20, the Company and
------- -------------
its subsidiaries have all franchises, permits, licenses and any other
governmental authority necessary for the conduct of their businesses as now
being conducted, the lack of which could have a Material Adverse Effect. None
of the Company or any of its subsidiaries is in default in any material respect
under any of such franchises, permits, licenses or other authority.
2.21 Corporate Documents. The Existing Articles and Existing Bylaws
--------------------
are in the form provided to counsel for Purchasers. The copy of the minute
books of the Company provided to counsel for Purchasers contains minutes of all
meetings of directors and shareholders of the Company and all actions by written
consent without a meeting by the directors and stockholders of the Company since
the date of the Company's incorporation and reflects all actions by the
directors (and any committee of directors) and shareholders of the Company with
respect to all transactions referred to in such minutes accurately in all
material respects.
2.22 Real Property Holding Corporation. The Company is not a United
------------------------------------
States real property holding corporation within the meaning of Internal Revenue
Code Section 897(c)(2) and Section 1.897-2(c) of the Treasury Regulations
promulgated thereunder.
2.23 Financial Statements. Attached hereto as Schedule 2.23 are
--------------------- --------------
complete and correct copies of (i) the unaudited balance sheet of the Company
for the quarterly period ended June 30, 1999; (ii) audited consolidated
financial statements of the Company containing audited balance sheets and
statements of income at and for the Company's fiscal years ended December 31,
1996, 1997 and 1998 and (iii) an unaudited balance sheet and statement of income
of the Company at and for the six-month period ended March 31, 1999 (the
"Statement Date") (the items referred to in clauses (i) through (iii),
-----------------
collectively, the "Financial Statements"). The Financial Statements have been
--------------------
prepared from the books and records of the Company and have been prepared in
accordance with GAAP (except as indicated in the notes thereto) and fairly
present the consolidated financial condition and operating results of the
Company and its subsidiaries as of the dates and for each period presented in
accordance with GAAP.
2.24 Changes. Since the Statement Date and except as set forth in
-------
Schedule 2.24, there has not been:
--------------
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except for changes in the ordinary course of business or that have
not resulted in a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, resulting in a Material Adverse Effect;
(c) any waiver, release or compromise by the Company or any of its
subsidiaries of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or any of its
subsidiaries except in the ordinary course of business or that has not resulted
in a Material Adverse Effect;
(e) any material change to a material contract or agreement by
which the Company, or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee, representative, agent, officer, director or
stockholder of the Company or any of its subsidiaries;
(g) any sale, assignment or transfer of any patents, pending
patent applications, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, software source code and object code and
proprietary rights and processes or other material intangible assets of the
Company or any of its subsidiaries;
(h) any resignation or termination of employment of any officer,
director, key employee, key representative or key agent of the Company or any of
its subsidiaries and to the Company's knowledge, the Company does not know of
any impending resignation or termination of employment of any such officer,
director, key employee, key representative or key agent;
(i) receipt of notice that there has been a loss of, or order
cancellation by, any major advertiser or major customer of the Company or any of
its subsidiaries;
(j) any mortgage, pledge, transfer of a security interest in, lien
or encumbrance, created by the Company or any of its subsidiaries, with respect
to any of its capital stock, properties or assets, except liens for taxes not
yet due or payable;
(k) any loans or guarantees made by the Company or any of its
subsidiaries to or for the benefit of its employees, representatives, agents,
officers or directors, or any members of their immediate families, other than
ordinary advances for expenses incurred in the ordinary course of business;
(1) any declaration, setting aside or payment or other
distribution with respect to any of the capital stock of the Company or any of
its subsidiaries, or any direct or indirect redemption, purchase, or other
acquisition of any of such capital stock by the Company or any of its
subsidiaries; or
(m) any arrangement or commitment by the Company or any of its
subsidiaries to do anything described in this Section 2.24, subject to
materiality and other qualifiers as may be set forth in this Section 2.24.
2.25 Environmental and Safety Laws. The Company, its subsidiaries, the
-----------------------------
operation of their respective businesses and any real property that they own,
lease or otherwise occupy or use are in compliance with all applicable
Environmental Laws and orders or directives of any governmental authorities
having jurisdiction under such Environmental Laws except where the failure to
comply would not result in a Material Adverse Effect. Neither the Company nor
any of its subsidiaries has received any citation, directive or notice of any
proceedings, claims or other actions from any governmental authority arising out
of the ownership or occupation of its properties or premises or the conduct of
its respective operations, nor is it aware of any basis therefor. To the
Company's knowledge, no material expenditure on behalf of the Company or any of
its subsidiaries will be required in order to comply with any Environmental Law.
As used herein, "Environmental Laws" means any federal, state, municipal, local
------------------
or foreign law, statute, ordinance, code, rule or regulation pertaining to land
use, air, soil, surface water, groundwater (including protection, cleanup,
removal, remediation or damage thereof), public or employee health or safety or
any other environmental matter, including, without limitation, the following
laws as the same may be amended from time to time: (i) Clean Air Act (42 U.S.C.
7401, et seq.), (ii) Clean Water Act (33 U.S.C. 1251, et seq.), (iii) Resource
-- --- -- ---
Conservation and Recovery Act (42 U.S.C. 6901, et seq.), (iv) Comprehensive
-- ---
Environmental Response Compensation Liability Act, as amended (42 U.S.C. 9601,
et seq.) ("CERCLA"), (v) Safe Drinking Water Act (42 U.S.C. 300f, et seq.),
-- --- -- ---
(vi) Toxic Substance Control Act (15 U.S.C. 2601, et seq.), (vii) Rivers and
---- -- ---
Harbors Act (33 U.S.C. 401, et seq.), (viii) Endangered Species Act (16 U.S.C.
-- ---
1531, et seq.), and (ix) Occupational Safety and Health Act (29 U.S.C. 651, et
-- --- --
seq.), together with any other applicable federal, state or local laws relating
---
to emissions, discharges, releases or threatened releases of any Hazardous
Substance (as defined herein) into ambient air, land, surface water, ground
water, personal property or structures, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, discharge or handling of any Hazardous Substance. As used herein,
"Hazardous Substances" means any pollutant, contaminant, hazardous or toxic
----------------------
substance, material, constituent or waste or any pollutant that is labeled or
regulated as such terms are defined in any Environmental Law or that is labeled
or regulated as such by (i) the United States of America, (ii) any state,
commonwealth, territory or possession of the United States of America and (iii)
any political subdivision thereof (including counties, municipalities and the
like) or any agency, authority or instrumentality of any of the foregoing,
including any court, tribunal, department, bureau, commission or board,
including, without limitation, asbestos and asbestos-containing materials and
any material or substance that is: (i) designated as a "hazardous substance"
pursuant to Section 307 of the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251, et seq. (33 U.S.C. 1317), (ii) defined as a "hazardous waste,,
-- ---
pursuant to Section 1004 of the Federal Solid Waste Disposal Act, 42 U.S.C.
Section 6901, et seq. (42 U.S.C. 6903), (iii) defined as a "hazardous
-- ---
substance" pursuant to Section 101 of CERCLA or (iv) is so designated or defined
under any other applicable Environmental Law.
2.26 FCPA. The Company and its subsidiaries have complied in all
----
material respects with the United States Foreign Corrupt Practices Act of 1977,
as amended (the "FCPA"), and have obtained all consents, licenses, approvals,
----
authorizations, rights, and privileges in connection with the conduct of its
business required by the FCPA and have otherwise conducted their business in
compliance with all material respects with the FCPA. Each of the Company's and
its subsidiaries internal management and accounting practices and controls are
adequate to ensure compliance in all material respects with the FCPA.
2.27 Finder's Fee. Except as set forth in Schedule 2.27, the Company
------------- -------------
represents that it neither is nor will be obligated for any finder's fee or
commission in connection with the transactions contemplated by the Investment
Agreements, the documents referred to herein and the transactions contemplated
hereby and thereby.
2.28 Insurance. Schedule 2.28 sets forth all insurance policies and
--------- --------------
bonds that are material to the Company and its subsidiaries, and such policies
and bonds are in full force and effect and, to the knowledge of the Company, no
defaults exist under any of them. In the past three years neither the Company
nor any of its subsidiaries has been refused insurance for which it applied or
had any policy of insurance terminated (except at its request).
2.29 Year 2000.
----------
(a) To the Company's knowledge, none of the computer software,
computer firmware, computer hardware (whether general or special purpose) or
other similar or related items of automated, computerized or software systems
that are used or relied on by the Company or by any of its subsidiaries in the
conduct of their respective businesses will malfunction, will cease to function,
will generate incorrect data or will produce incorrect results when processing,
providing or receiving (i) date-related data from, into and between the
twentieth and twenty-first centuries or (ii) date-related data in connection
with any valid date in the twentieth and twenty-first centuries.
(b) To the Company's knowledge, none of the products and services
sold, licensed, rendered, or otherwise provided by the Company or by any of its
subsidiaries in the conduct of their respective businesses will malfunction,
will cease to function, will generate incorrect data or will produce incorrect
results when processing, providing or receiving (i) date-related data from, into
and between the twentieth and twenty-first centuries or (ii) date-related data
in connection with any valid date in the twentieth and twenty-first centuries.
(c) Neither the Company nor any of its subsidiaries has made any
other representations or warranties regarding the ability of any product or
service sold, licensed, rendered, or otherwise provided by the Company or by any
of its Subsidiaries in the conduct of their respective businesses to operate
without malfunction, to operate without ceasing to function, to generate correct
data or to produce correct results when processing, providing or receiving (i)
date-related data from, into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
2.30 Other. The Company is not governed by the provisions of Sections
-----
78.411 through 78.444, inclusive of the Nevada Revised Statutes.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser hereby
--------------------------------------------
represents and warrants to the Company, on such Purchaser's own behalf, that:
3.1 Accredited Investor: Authorization. Purchaser is an "accredited
------------------------------------
investor" within the meaning of Rule 501 promulgated under the Securities Act
and has the corporate, partnership or individual, as the case may be, power and
authority to enter into and perform this Agreement and the other Investment
Agreements and to consummate the transactions contemplated hereby and thereby.
This Agreement has been duly authorized, executed and delivered by Purchaser and
constitutes the legal, valid and binding obligation of Purchaser, enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of creditors, rights
generally and except as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
3.2 No Conflict with Other Agreements. The execution, delivery and
-------------------------------------
performance of the Investment Agreements and the consummation of the
transactions contemplated hereby or thereby will not, with or without the
passage of time and/or the giving of notice, result in a violation or default of
any provisions of Purchaser's charter, bylaws or other organizational document
or of any order, writ, injunction, judgment, instrument, decree or material
contract to which it is a party or by which it is bound or, to its knowledge, of
any material provision of federal or state statute, rule or regulation
applicable to Purchaser.
3.3 Investment Knowledge. Purchaser has sufficient knowledge and
---------------------
experience in financial and business matters so as to be capable of evaluating
the risks and merits of its investment in the Company and is capable of bearing
the economic risks of such investment, including a complete loss of its
investment.
3.4 Distribution. The Securities (including Class B Preferred Shares
------------
issuable as dividends and the Underlying Shares) are being acquired for
Purchaser's own account with the present intention of holding such securities
for purposes of investment and not with a view to or for resale in connection
with any distribution thereof in violation of any securities laws. Purchaser
further represents that it understands and agrees that, until registered under
the Securities Act or transferred pursuant to the provisions of Rule 144 as
promulgated by the Securities and Exchange Commission (such securities,
"Unrestricted Securities"), all certificates evidencing any of the Securities
-----------------
(including Class B Preferred Shares issuable as dividends and the Underlying
Shares), whether upon initial issuance or upon any transfer thereof, shall bear
a legend, prominently stamped or printed thereon, reading substantially as
follows:
"The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Act"), or the securities laws of
any state. These securities have been acquired for investment and not with a
view to distribution or resale in violation of any securities laws. Such shares
may not be offered for sale, sold, delivered after sale, transferred, pledged or
hypothecated in the absence of an effective registration statement covering such
shares under the Act and any applicable state securities laws or an exemption
therefrom."
4. CONDITIONS OF PURCHASERS' OBLIGATIONS AT THE CLOSING. The
----------------------------------------------------------
obligations of Purchasers to the Company under this Agreement are subject to the
fulfillment, on or before the Closing of each of the following conditions,
unless otherwise waived in writing by Purchasers.
4.1 Performance. The Company shall have performed and complied with
-----------
all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by the Company on
or before the Closing. Each of the representations and warranties of the
Company contained in this Agreement shall be deemed made as of the date of this
Agreement. All such representations and warranties shall be true and correct on
and as of the Closing date with the same force and effect as if made at that
time, and there shall be no material adverse change in the circumstances
surrounding such representations and warranties between the date of this
Agreement and the date of Closing.
4.2 Qualifications. All authorizations, approvals or permits, if any,
--------------
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be obtained and effective as of the
Closing.
4.3 Opinion of Company Counsel. Purchasers shall have received from
-----------------------------
Gardere & Xxxxx L.L.P., counsel for the Company, an opinion, dated as of the
Closing, in substantially the form of Exhibit E.
----------
4.4 Supporting Documents. Purchasers shall have received the
---------------------
following:
(a) A copy of resolutions of the Board of Directors of the Company
authorizing and approving the transactions contemplated hereby and a copy of
resolutions of the Board of Directors of the Company authorizing and approving
the adoption of the Certificate, all such resolutions to be certified by the
Secretary of the Company;
(b) A Certificate of Incumbency executed by the Secretary of the
Company certifying the names, titles and signatures of the officers authorized
to execute the Note and the Investment Agreements and further certifying that
the Articles of Incorporation, as amended, and Bylaws of the Company delivered
to legal counsel for each Purchaser at the time of the execution of this
Agreement have been validly adopted and have not been amended or modified; and
(c) Such additional supporting documentation and other information
with respect to the transactions contemplated hereby as legal counsel for each
Purchaser may reasonably request.
4.5 Pensat Documents. Purchasers shall have received copies of all
-----------------
then existing documentation relating to the Pensat Transaction.
4.6 Agreement of Shareholders. Prior to the Closing Date, the Company
--------------------------
shall have obtained the written consent of a majority of its shareholders
entitled to vote on such matters to vote in favor of the following: (i) to amend
the Articles of Incorporation of the Company increasing the number of authorized
shares of Common Stock of the Company at the Shareholders Meeting to be held
pursuant to Section 6.6 of this Agreement, and (ii) to vote in favor of the
election of the director designated by TSG to the Board of Directors, at the
Shareholders Meeting to be held pursuant to Section 6.6 of this Agreement.
-----------
4.7 Certificate of Designations. The Company shall have filed the
-----------------------------
Certificate with the Secretary of State of Nevada, which Certificate shall
continue to be in full force and effect as of the Closing.
4.8 Payment of Expenses. The Company shall have paid in accordance
---------------------
with Section 10.9 the expenses and disbursements of TSG.
4.9 SBA Forms. The Company shall have executed any Small Business
----------
Administration forms requested by OCP II or OCP III in connection with the
transactions contemplated herein.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT THE CLOSING. The
-------------------------------------------------------------
obligations of the Company to Purchasers under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived by the Company in writing.
5.1 Performance. All covenants, agreements, obligations and conditions
-----------
contained in this Agreement to be performed by each Purchaser on or prior to the
Closing shall have been performed or complied with in all material respects.
The representations and warranties of each Purchaser contained in this Agreement
shall be deemed made as of the date of this Agreement. All such representations
and warranties shall be true and correct on and as of the Closing date with the
same force and effect as if made at that time, and there shall be no material
adverse change in the circumstances surrounding such representations and
warranties between the date of this Agreement and the date of Closing.
5.2 Minimum Investment. In addition to the other conditions specified
-------------------
in this Section 5, it shall be a further condition to the obligations of the
Company, that it shall have received an aggregate of at least: (i) $20,000,000
from TSG; (ii) $900,000 from OCP II; and (iii) $100,000 from OCP III, in
connection with the issuance of the Notes hereunder.
6. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company covenants and
----------------------------------------
agrees as follows:
6.1 Corporate Existence. The Company will maintain its corporate
--------------------
existence in good standing in the State of Nevada and comply with all applicable
laws and regulations of the United States or of any state or political
subdivision thereof and of any foreign jurisdiction, and of any government
authority of any of the foregoing, where failure to so comply would have a
Material Adverse Effect.
6.2 Books of Account and Reserves. The Company will keep books of
---------------------------------
record and account in order to prepare its Financial Statements. The Company
will employ a certified public accounting firm of established national
reputation selected by the Board of Directors of the Company who are
"independent" within the meaning of the accounting regulations of the Securities
and Exchange Commission (the "Accountants"). The Company will have annual
-----------
audits made by such Accountants in the course of which such Accountants shall
make such examinations, in accordance with generally accepted auditing
standards, as will enable them to give such reports or opinions with respect to
the financial statements of the Company as will satisfy the requirements of the
Securities and Exchange Commission in effect at such time with respect to
reports or opinions of accountants.
6.3 Furnishing of Financial Statements and Information. The Company
-----------------------------------------------------
will deliver to each Purchaser and each of their respective transferees,
successors and assigns (together with their respective Affiliates (as defined))
that holds a Note or, after conversion, to OCP II and OCP III and to any holder
of at least 10% of the Class B Preferred Shares (or the Common Stock issuable
upon conversion thereof) while any Class B Preferred Shares are outstanding (and
each recipient that receives such information agrees to keep confidential such
information as the Company designates as confidential in writing):
(a) annually, as soon as available, but in any event by the end of
each fiscal year, an operating plan and budget for the following year;
(b) as soon as available, but in any event within 30 days after
the end of each monthly accounting period in each fiscal year, unaudited
statements of income, operations and cash flows of the Company for such monthly
period and for the period from the beginning of the fiscal year to the end of
such month, and unaudited balance sheets of the Company as of the end of such
monthly period, setting forth in each case comparisons to the annual operating
plan and budget and to the corresponding period in the preceding fiscal year,
and all such statements shall be prepared in accordance with GAAP (provided,
however, that such statements need not comply with the footnote disclosure
requirements of GAAP);
(c) as soon as available, but in any event within 45 days after
the end of each quarterly accounting period in each fiscal year, unaudited
statements of income, operations and cash flows of the Company for such
quarterly period and for the period from the beginning of the fiscal year to the
end of such quarter, and unaudited balance sheets of the Company as of the end
of such quarterly period, setting forth in each case comparisons to the annual
operating plan and budget and to the corresponding period in the preceding
fiscal year, and all such statements shall be prepared in accordance with GAAP
(provided, however, that such statements need not comply with the footnote
disclosure requirements of GAAP);
(d) as soon as available, but in any event within 90 days after
the end of each fiscal year, audited statements of income, operations, retained
earnings and cash flows of the Company for such fiscal year and balance sheets
of the Company as of the end of such fiscal year, all prepared in accordance
with GAAP, all in reasonable detail and duly certified by the Accountants, who
shall have given the Company an opinion, unqualified as to the scope of the
audit, regarding such statements setting forth in each case comparisons to the
annual operating plan and budget of the preceding fiscal year;
(e) promptly after the Company learns of the commencement or
written threats of the commencement of any material lawsuit, legal or equitable,
or of any material administrative, arbitration or other proceeding against the
Company or its business, assets or properties, written notice of the nature and
extent of such suit or proceeding;
(f) promptly upon transmission thereof, copies of all reports,
proxy statements, registration statements and notifications filed by it with the
Securities and Exchange Commission pursuant to any act administered by the
Securities and Exchange Commission or furnished to stockholders of the Company
or to any national securities exchange;
(g) with reasonable promptness, notice of any default in any
agreement of the Company or any of its subsidiaries which is reasonably expected
to result in a Material Adverse Effect;
(h) with reasonable promptness, such other financial data relating
to the business, affairs and financial condition of the Company and as is
available to the Company and as from time to time the Purchasers may reasonably
request; and
(i) provide copies of definitive documents relating to the Pensat
Transaction at least seven (7) days prior to the closing of the Pensat
Transaction in substantially the form to be executed at such closing.
"Affiliate" means, with respect to any Person, any Person that, directly or
indirectly, controls, is controlled by or is under common control with such
first-named Person. For the purposes of this definition, "control," (including
with correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise. In
addition, in the case of Purchasers, an "Affiliate," of any Purchaser shall
include the partners thereof and the Company shall not be deemed to be an
"Affiliate," of any Purchaser.
6.4 Key Person Insurance. Within 90 days after the Closing, the
----------------------
Company shall obtain and thereafter at all times maintain one or more key person
life insurance policies on the life of Xxxxxxx Xxxxxxx in an aggregate amount of
not less than $10,000,000, with the proceeds of such insurance policies payable
to the Company. Copies of such keyman insurance policies shall be delivered to
each Purchaser upon request.
6.5 Subsidiaries. The Company shall (i) cause each such subsidiary to
------------
comply with the covenants set forth in Sections 6.1, 6.2, and 6.3 and (ii) all
references in Section 6.3 to financial statements shall be deemed to refer to
consolidated financial statements.
6.6 Shareholder Meeting. At the next meeting of its shareholders, such
-------------------
meeting to be held prior to December 31, 1999 (the "Shareholder Meeting"), the
-------------------
Board of Directors of the Company shall submit and recommend an appropriate
amendment to the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock of the Company to at least 200,000,000.
6.7 Board of Directors. Pursuant to Section 3.02 of the Bylaws of the
-------------------
Company, the Board of Directors of the Company (the "Board") shall pass a
-----
resolution to increase the number of directors on the Board from eight (8) to
nine (9) to accommodate TSG's designee to the Board. Upon funding of the Loan
Amount, TSG shall have the right to appoint one member to the Board.
6.8 Access and Visitation. The Company will permit each Purchaser to
-----------------------
visit and inspect the Company's properties, and to examine the Company's books
and records with the Company management at such reasonable times as shall be
requested by such Purchaser.
7. NEGATIVE COVENANTS OF THE COMPANY. The Company will be limited and
----------------------------------
restricted as follows:
7.1 Restrictive Agreements Prohibited. Neither the Company nor any of
----------------------------------
its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of the Investment Agreements or its
obligations under the Certificate.
7.2 No Amendment of Certificate. The Company shall not amend, alter or
---------------------------
repeal or otherwise change any of the terms or provisions of the Certificate
prior to conversion of the Notes into shares of Class B Preferred Stock.
7.3 No Issuance of Senior Securities. Prior to conversion of the Notes
--------------------------------
into shares of the Class B Preferred Stock, the Company shall not create,
authorize, issue or increase the authorized amount of, any preferred stock or
any other class or series of any equity securities, or any warrants, options or
other rights convertible or exchangeable into any class or series of any equity
securities of the Company, having a preference or priority over the Class B
Preferred Stock as to the right to received dividends or amounts distributable
upon liquidation of the Company.
7.4 Affiliate Transactions. The Company will not enter into any
-----------------------
transactions with any Affiliate unless conducted on an arm's-length basis, at
fair market value. For purposes of this Section 7.2, (i) "Affiliate" shall mean
any entity directly or indirectly controlling, controlled by or under direct or
indirect common control with the Company (or any of its subsidiaries) and
includes (a) any person who is a director or beneficial owner of at least 5% of
such person's equity securities, (b) any person (other than wholly-owned
Subsidiaries) of which the Company or any Affiliate owns at least 10% of such
person's equity securities or (c) immediate family members of any such person
specified in clauses (a) or (b) and (ii) "Subsidiary" shall mean any entity of
which the Company owns, directly or indirectly, at least a majority of the
outstanding capital stock or a partnership in which the Company (or a subsidiary
of the Company) serves as general partner.
8. CONVERSION OF CLASS B PREFERRED SHARES AND EXERCISE OF WARRANTS.
---------------------------------------------------------- ---------
8.1 Conversion of Preferred Shares. Each Purchaser may, at its option,
------------------------------
at any time and from time to time, after conversion of the Note and amendment of
the Articles of Incorporation as contemplated by Section 6.6 above, convert all
or any portion of the Class B Preferred Shares into Common Stock at the rate and
upon the terms and conditions and subject to the adjustments set forth in the
Certificate.
8.2 Exercise of Warrants. Each Purchaser may, at its option, exercise
---------------------
any Warrant, or any portion thereof, after conversion of the Note and issuance
of the Warrants, and after amendment of the Articles of Incorporation as
contemplated by Section 6.6 above, in exchange for Common Stock at the rate and
upon the terms and conditions set forth in the applicable Warrant Agreement.
8.3 Underlying Shares Fully Paid; Reservation of Common Stock. The
-------------------------------------------------------------
Company covenants and agrees that all Underlying Shares shall be issued upon the
exercise of the conversion privilege referred to in Section 8.1 and the right of
exercise referred to in Section 8.2 and shall, upon issuance in accordance with
the terms of the Company's Articles of Incorporation, as amended, and the
Warrant Agreements, respectively, be fully paid and non-assessable, and that the
issuance thereof shall not give rise to any preemptive rights on the part of any
Person. The Company further covenants and agrees that the Company will at all
times from and after the Shareholder Meeting have authorized and reserved a
sufficient number of shares of its Common Stock for the purpose of issuing the
Underlying Shares.
8.4 Adjustment of Number of Shares. The number of shares of Common
----------------------------------
Stock issuable upon conversion of Class B Preferred Shares as well as the number
of shares of Common Stock issuable upon exercise of any Warrant (and the
exercise price payable in connection with such exercise) shall be subject to
adjustment from time to time as set forth in the Certificate and in the Warrant
Agreements.
9. PREEMPTIVE RIGHTS.
------------------
9.1 After conversion of the Notes, each Purchaser and its transferees,
successors and assigns (each, a "Holder") shall be entitled to a preemptive
------
right to purchase its pro rata share of all or any part of any New Securities
--------
(as defined) which the Company may, from time to time, sell and issue. Such
Holder's pro rata share, for purposes of this preemptive right, is the ratio
---------
that the number of whole shares of Common Stock into which the shares of Class B
Preferred Shares held by such Holder (including any additional shares of Class B
Preferred Shares issued to such holder) are convertible plus the number of
shares of Common Stock then held by the Holder as a result of the conversion of
Class B Preferred Shares together with the number of shares such Holder is
entitled to purchase pursuant to Warrants bears to the total number of shares of
Common Stock of the Company on a fully-diluted basis.
9.2 Except as set forth in the next sentence, "New Securities" shall
--------------
mean any shares of capital stock of the Company, including Common Stock, whether
now authorized or not, and rights, options or warrants to purchase said shares
of capital stock, and securities of any type whatsoever that are, or may become,
convertible into said shares of capital stock. Notwithstanding the foregoing,
"New Securities" does not include (i) securities offered to the public generally
pursuant to a registration statement filed with the Commission and declared
effective under the Securities Act,(ii) securities issued in connection with the
acquisition of another entity by the Company by merger, purchase of
substantially all of the assets or other reorganization or in a transaction
governed by Rule 145 under the Securities Act, (iii) options exercisable for
Common Stock issued to employees, officers, directors or consultants of the
Company outstanding as of the first date on which Class B Preferred Shares were
first issued (the "First Issue Date") or options issued to employees, officers,
----------------
directors or consultants of the Company pursuant to the Employee Plan, the
Executive Plan, the Director Plan, the Market Value Appreciation Plan, or the
Pay for Performance Plan or a stock option plan adopted by the Board of
Directors of the Company and approved by a majority of the holders of Class B
Preferred Shares after the First Issue Date, (iv) shares of Common Stock issued
on conversion of outstanding Class B Preferred Shares; (v) shares of Common
Stock issued upon exercise of rights, convertible securities or warrants (A)
outstanding as of the First Issue Date or (B) issued in connection with the sale
of Class B Preferred Shares hereunder, (vi) stock issued pursuant to any rights
or agreements, including without limitation convertible securities, options and
warrants, provided, that, the preemptive rights established by this Section 9
-------- ----
shall apply with respect to the initial sale or grant by the Company of
interests in its capital stock pursuant to such rights or agreements, or (vii)
stock issued in connection with any stock split, stock dividend or
recapitalization by the Company.
9.3 In the event the Company proposes to undertake an issuance of New
Securities, it shall give the Holders of the Notes or Class B Preferred Shares
written notice of its intention, describing the type of New Securities, and the
price and terms upon which the Company proposes to issue the same. Each Holder
of Class B Preferred Shares shall have thirty (30) days from the date of receipt
of any such notice to agree to purchase up to its respective pro rata share of
--- ----
such New Securities for the price and upon the terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
9.4 In the event a Holder fails to exercise such preemptive right
within said thirty-day period (each such Holder a "Non-Electing Holder"), the
-------------------
Company shall give the Holders that have elected to exercise such preemptive
right within said thirty-day period (each such Holder an "Electing Holder")
---------------
written notice of each Non-Electing Holder's failure to exercise its preemptive
right to purchase its pro rata share of the New Securities (such securities, the
--- ----
"Additional New Securities"). Each Electing Holder shall have ten (10) days
---------------------------
from the date of receipt of any such notice to elect to purchase up to its pro
---
rata share of the Additional New Securities by giving written notice to the
----
Company and stating therein the quantity of such New Securities to be purchased.
9.5 In the event any Electing Holder fails to exercise its preemptive
right pursuant to Section 9.4 within said forty-day period, the Company shall
have ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of Additional New Securities covered thereby shall be closed, if
at all, within sixty (60) days from the date of said agreement) to sell the
Additional New Securities not elected to be purchased by Electing Holders at the
price and upon the terms no more favorable to the purchasers of such securities
than specified in the Company's notice. In the event the Company has not sold
the Additional New Securities or entered into an agreement to sell the
Additional New Securities within said ninety-day period (or sold and issued
Additional New Securities in accordance with the foregoing within sixty (60)
days from the date of said agreement), the Company shall not thereafter issue or
sell any of such Additional New Securities, without first offering such
securities in the manner provided above.
9.6 In the event no Holders exercise their respective preemptive right
pursuant to Section 9.3 within said thirty-day period, the Company shall have
ninety (90) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by Holders of the Class B Preferred
Shares at the price and upon the terms no more favorable to the purchasers of
such securities than specified in the Company's notice. In the event the
Company has not sold the New Securities or entered into an agreement to sell the
New Securities within said ninety-day period (or sold and issued New Securities
in accordance with the foregoing within sixty (60) days from the date of said
agreement), the Company shall not thereafter issue or sell any of such New
Securities, without first offering such securities in the manner provided above.
10. MISCELLANEOUS.
-------------
10.1 Survival of Warranties. The warranties, representations and
------------------------
covenants of the Company and Purchasers contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
10.2 Transfer; Successors and Assigns. The terms and conditions of
-----------------------------------
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
10.3 No Third Party Beneficiaries. Nothing express or implied in this
-----------------------------
Agreement is intended to confer, nor shall anything herein confer, upon any
other than the parties hereto and the respective successors or assigns of such
parties, any rights, remedies, obligations or liabilities whatsoever.
10.4 GOVERNING LAW. THIS AGREEMENT AND ALL ACTS AND TRANSACTIONS
--------------
PURSUANT HERETO AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE
GOVERNED, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
10.5 WAIVER OF JURY TRIAL. THE COMPANY AND EACH PURCHASER DO HEREBY
-----------------------
KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVE SUCH RIGHT ANY PARTY
OR THEIR SUCCESSORS OR ASSIGNS MAY HAVE TO A JURY TRIAL IN EVERY JURISDICTION IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES HERETO OR
THEIR SUCCESSORS OR ASSIGNS AGAINST ANY OTHER PARTY HERETO OR THEIR RESPECTIVE
AFFILIATES, SUCCESSORS OR ASSIGNS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER DOCUMENT EXECUTED AND DELIVERED BY
ANY PARTY IN CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ANY ACTION TO
RESCIND OR CANCEL THIS AGREEMENT, AND ANY CLAIMS OR DEFENSES ASSERTING THAT THIS
AGREEMENT WAS FRAUDULENTLY INDUCED OR OTHERWISE VOID OR VOIDABLE).
10.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
10.7 Titles and Subtitles. The titles and subtitles used in this
----------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
10.8 Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed effectively given and received upon delivery
in person, or two business days after delivery by overnight courier service or
by telecopier transmission with acknowledgment of transmission receipt, or five
business days after deposit via certified or registered mail, return receipt
requested, addressed to the party to be notified at such party's address as set
forth below or on Schedule 1 hereto, or as subsequently modified by written
-----------
notice, and (a) if to the Company:
Pointe Communications Corporation
0000 Xxxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Gardere & Xxxxx, LLP
3000 Thanksgiving Tower
0000 Xxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: W. Xxxxxx Xxxx Jr.
Facsimile: (000) 000-0000
(b) if to TSG:
TSG Capital Fund III, L.P.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxx, Xxxxx & Xxxxx
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
(c) if to OCP II:
Opportunity Capital Partners II, L.P.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxxx & Xxxx, L.L.P.
Embarcadero Center West
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
(d) if to OCP III:
Opportunity Capital Partners III, L.P.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxxx & Xxxx, L.L.P.
Embarcadero Center West
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
10.9 Expenses. Each party shall bear its own costs and expenses;
--------
provided, however, that the Company shall pay and be responsible for the
reasonable legal fees and out-of-pocket expenses incurred by TSG and TSG's
counsel, not to exceed in the aggregate $100,000, incurred with respect to this
Agreement, the documents referred to herein and the transactions contemplated
hereby and thereby.
10.10 Amendments and Waivers. Any term of this Agreement may be
------------------------
amended or waived, and this Agreement may be terminated, with the written
consent of the parties hereto.
10.11 Severabilitv. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
10.12 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any holder of the Notes or of any of the Class B
Preferred Shares (or the Common Stock issuable upon conversion thereof) or to
the Company, upon any breach or default of the Company or by any Purchaser under
this Agreement, shall impair any such right, power or remedy of such holder or
the Company, as the case may be, nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder or the Company, as the case may be, of any
breach or default under this Agreement, or any waiver on the part of any holder
or the Company, as the case may be, of any provisions or conditions of this
Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any holder, shall be cumulative and
not alternative.
10.13 Further Assurances. The Company and each Purchaser shall take
-------------------
such additional actions and execute and deliver such additional agreements and
other instruments and documents as necessary or appropriate to effect the
transactions contemplated by this Agreement in accordance with its terms.
10.14 Entire Agreement. This Agreement, and the documents referred to
-----------------
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
existing between the parties hereto are expressly canceled. Other than the
Investment Agreements there are no other agreements existing between the Company
and Purchasers.
10.15 Notice to OCP II and OCP III. The Company may send a single copy
----------------------------
of any notice or delivery required to be made by Company to the Purchasers
hereunder for both OCP II and OCP III at their common address, as set forth in
Section 10.8 of this Agreement, in full satisfaction of such requirement.
10.16 Voting Agreement. Each of TSG, OCP II and OCP III hereby agree
-----------------
that, with respect to the rights of the holders of the Class B Preferred Stock
to designate, elect and remove a director as set forth in Section 3 (c) of the
Certificate, so long as TSG owns at least 35% in the aggregate of the Class B
Preferred Stock originally issued to it, (i) TSG shall have the right to
designate the director to be elected by the holders of the Class B Preferred
Stock (the "Class B Director") and each of OCP II and OCP III agree to vote in
favor of the Class B Director so designated by TSG, and (ii) the Class B
Director shall be subject to removal only at the request of TSG and each of OCP
II and OCP III agree to vote in favor of such removal if so requested by TSG.
[Signature Pages Follow]
The parties have executed this Agreement as of the date first written
above.
COMPANY:
POINTE COMMUNICATIONS CORPORATION,
a Nevada corporation
By:
Xxxxxxx X. Xxxxxxx
Chief Financial Officer
PURCHASERS:
TSG CAPITAL FUND III, L.P.,
a Delaware limited partnership
By: TSG Associates III, L.L.C.,
Its General Partner
By:
---------------------------------
Name:
Title:
OPPORTUNITY CAPITAL PARTNERS II, L.P.,
a Delaware limited partnership
By: Xxxxxxxx Capital Management, L.P.
Its General Partner
By: /S/ Xxxxx X. Xxxx
---------------------------------
Xxxxx X. Xxxx
Partner
OPPORTUNITY CAPITAL PARTNERS III, L.P.,
a Delaware limited partnership
By: JM Capital Management, L.P.
Its General Partner
By: /S/ Xxxxx X. Xxxx
---------------------------------
Xxxxx X. Xxxx
General Partner
EXHIBIT A
---------
FORM OF CONVERTIBLE PROMISSORY NOTE
[ATTACHED]
EXHIBIT B
---------
FORM OF CERTIFICATE OF DESIGNATIONS
[ATTACHED]
EXHIBIT C
---------
FORM OF WARRANT AGREEMENT
[ATTACHED]
EXHIBIT D
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
[ATTACHED]
EXHIBIT E
---------
FORM OF LEGAL OPINION OF GARDERE & XXXXX, L.L.P.
[ATTACHED]
SCHEDULE 1
----------
Purchaser Name Loan Amount
-------------------------------------- ------------
TSG Capital Fund III, L.P. $ 20,000,000
Opportunity Capital Partners II, L.P. $ 900,000
Opportunity Capital Partners III, L.P. $ 100,000
------------
Total $ 21,000,000
