EXHIBIT 10.13
EXECUTION COPY
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of April 1, 2003 by and between FIND/SVP, Inc., a New York corporation
(the "Company"), and Petra Mezzanine Fund, L.P. (the "Investor"). Capitalized
terms used but not otherwise defined herein shall have the meaning set forth in
the Glossary of Defined Terms attached as EXHIBIT A.
WHEREAS, the Company wishes to issue and sell to the Investor 333,333
shares (the "Preferred Shares") of the authorized but unissued Series A
Preferred Stock; and
WHEREAS, the Investor wishes to purchase the Preferred Shares on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants contained in this Agreement, the receipt and sufficiency of which
are hereby acknowledged, the parties mutually agree as follows:
ARTICLE I.
THE PREFERRED SHARES
SECTION 1.1 AUTHORIZATION. The Company has, or before the Closing (as
defined in Section 1.3) will have, duly authorized (i) the sale and issuance to
the Investor of the Preferred Shares, (ii) the issuance of shares of Series A
Preferred Stock to be issued pursuant to the dividend requirements set forth in
the Company's Amended Certificate (as defined below) (the "Dividend Shares") and
(iii) the issuance of shares of Common Stock to be issued upon conversion of the
Preferred Shares (the "Conversion Shares"). The Preferred Shares shall have the
rights, restrictions, privileges and preferences set forth in the Company's
Amended Certificate of Incorporation, a copy of which is attached as EXHIBIT B
(the "Amended Certificate"). The Company has, or before the Closing will have,
adopted and filed the Amended Certificate with the Secretary of State of the
State of New York.
SECTION 1.2 SALE OF PREFERRED SHARES. Subject to the terms and conditions
of this Agreement, at the Closing the Company will sell and issue to the
Investor, and the Investor will purchase, for the purchase price of $1.50 per
share of Series A Preferred Stock, 333,333 shares of Series A Preferred Stock.
SECTION 1.3 CLOSING. The closing of the purchase and sale of the Preferred
Shares to the Investor shall take place at the offices of Xxxx Xxxxxxx, P.C.,
0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m., New York
time, on April 1, 2003, or at such other location, date, and time as may be
agreed upon between the Company and the Investor (such closing being called the
"Closing" and such date and time being called the
"Closing Date"). At the Closing, the Company will deliver to the Investor a
certificate for 333,333 shares of Series A Preferred Stock, registered in the
name of such Investor, against payment to the Company of $500,000, by wire
transfer, cashier's check, or other method mutually acceptable to the Company
and such Investor. If at the Closing any of the conditions specified in Article
IV shall not have been fulfilled, the Investor shall, at its election, be
relieved of all of its obligations under this Agreement without thereby waiving
any other rights such Investor may have by reason of such failure or
non-fulfillment.
SECTION 1.4 USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Preferred Shares as set forth on EXHIBIT E.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor that, except as
set forth on the Disclosure Schedules attached hereto (the "Disclosure
Schedules"), specifically identifying the relevant Section hereof, which
exceptions shall be deemed to be representations and warranties as if made
hereunder:
SECTION 2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company (i)
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of New York and (ii) is duly licensed or qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of the business transacted by it or the character of the
properties owned or leased by it requires such licensing or qualification,
except where the failure to so qualify would not have a Material Adverse Effect.
The Disclosure Schedules contain an accurate and complete list of the
jurisdictions in which the Company has qualified to do business as a foreign
corporation.
SECTION 2.2 CORPORATE POWER. The Company has the corporate power and
authority (i) to own and use its properties, (ii) to carry on its business as
now conducted and as proposed to be conducted; (iii) to execute, deliver, and
perform this Agreement and the Investor's Rights Agreement with the Investor, in
the form attached as EXHIBIT C (the "Investor's Rights Agreement"), (iv) to
issue, sell, and deliver the Series A Preferred Stock, and (v) to issue and
deliver the Conversion Shares and the Dividend Shares.
SECTION 2.3 AUTHORIZATION. The execution and delivery by the Company of
this Agreement and the Investor's Rights Agreement; the performance by the
Company of its obligations hereunder and thereunder; the issuance (or
reservation for issuance), sale, and delivery of the Series A Preferred Stock;
and the issuance (or reservation for issuance) and delivery of the Conversion
Shares and the Dividend Shares have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the Certificate of Incorporation or the
bylaws of the Company, as amended, or any provision of any indenture, agreement,
or other instrument to which the Company or any Subsidiary, or any of their
properties or assets, is bound, or conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement, or other instrument, or result in the creation or
imposition of any lien,
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charge, restriction, claim, or encumbrance of any nature whatsoever upon any of
the properties or assets of the Company or any Subsidiary.
SECTION 2.4 VALIDITY. This Agreement and the Investor's Rights Agreement,
when executed and delivered, will constitute legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except (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 Investor's Rights Agreement may be limited by
applicable federal or state securities laws.
SECTION 2.5 VALID ISSUANCE. The shares of Series A Preferred Stock and the
Dividend Shares have been duly authorized and, when issued, sold and delivered
(or paid as applicable with respect to the Dividend Shares) in accordance with
this Agreement, will be validly issued, fully paid, and nonassessable shares of
Series A Preferred Stock, and will be free and clear of all liens, charges,
restrictions, claims, and encumbrances, except as set forth in this Agreement,
the Amended Certificate, the Investor's Rights Agreement and applicable federal
and state securities laws. The Conversion Shares have been duly and validly
reserved for issuance upon conversion of the Series A Preferred Stock and, when
so issued, will be duly authorized, validly issued, fully paid, and
nonassessable shares of Common Stock and will be free and clear of all liens,
charges, restrictions, claims, and encumbrances except as set forth in this
Agreement, the Amended Certificate, the Investor's Rights Agreement and
applicable federal and state securities laws. Neither the issuance, sale, or
delivery of the Series A Preferred Stock nor the issuance or delivery of the
Conversion Shares is subject to any preemptive right of stockholders of the
Company or to any right of first refusal or other right in favor of any Person
which has not been waived or which has not elapsed.
SECTION 2.6 NO INTEGRATION. The Company has not, directly or through any
agent, during the six-month period ending on the date of this Agreement, sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) in a manner that would cause the
offer and sale of the Preferred Shares to fail to be entitled to the exemption
afforded by Rule 506 of Regulation D or under Section 4(2) of the Securities
Act.
SECTION 2.7 OFFERING. Subject in part to the truth and accuracy of the
representations and warranties of the Investor set forth in Article III, the
offer, sale and issuance of the Series A Preferred Stock as contemplated by this
Agreement will be issued in compliance with all applicable federal and state
securities laws. Neither the Company nor any agent on its behalf has conducted
any general solicitation (as such term is used in Regulation D under the
Securities Act) in connection with the offer and sale of the Series A Preferred
Stock. The Company has not made any general advertising (as such term is used in
Regulation D under the Securities Act) relating to the sale of the Series A
Preferred Stock.
SECTION 2.8 GOVERNMENTAL APPROVALS. No registration or filing with, or
consent or approval of or other action by, any federal, state, or other
governmental agency or instrumentality is or will be necessary for (i) the valid
execution, delivery, and performance by
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the Company of this Agreement or the Investor's Right Agreement, (ii) the offer,
issuance, sale and delivery of the Series A Preferred Stock, (iii) upon
conversion thereof, the offer, issuance, and delivery of the Conversion Shares,
or (iv) upon payment in accordance with the provisions of the Amended
Certificate, the issuance and delivery of the Dividend Shares, other than (a)
filings pursuant to federal or state securities laws (all of which filings have
been made by the Company, other than those that are required to be made after
the Closing and that will be duly made on a timely basis) in connection with the
sale of the Series A Preferred Stock and (b) with respect to the Investor's
Rights Agreement, the registration of the shares covered thereby with the SEC
and filings pursuant to state securities laws.
SECTION 2.9 SUBSIDIARIES. Except as set forth in Part 2.9 of the
Disclosure Schedule, the Company does not own, directly or indirectly, any
securities of any Person that does not qualify as a Subsidiary. Each Subsidiary
has been duly incorporated or formed and is validly existing as a corporation or
professional corporation, limited liability company, partnership, or limited
partnership under the laws of the jurisdiction of its organization, has the
power and authority to own or lease and operate the properties now owned or
leased thereby, and is duly licensed or qualified to do business as a foreign
entity and is in good standing in each jurisdiction in which the nature of the
business transacted by it or the character of the properties owned or leased by
it requires such licensing or qualification, except where the failure to so
qualify would not have a Material Adverse Effect. All of the issued and
outstanding shares, membership interests, or partnership interests of each
Subsidiary has been duly and validly issued, are fully paid and nonassessable,
and were issued in accordance with all applicable federal and state securities
laws and regulations. All of such shares, membership interests, or partnership
interests of each Subsidiary are owned by the Company, free and clear of any
mortgage, pledge, lien, encumbrance, claim, or equity. The Company has furnished
(or will furnish at or prior to the Closing) counsel to the Investor with a true
and complete copy of each of the Subsidiaries' organizational documents as
amended and in effect on the date hereof, certified by the Secretary of State of
each jurisdiction in which such Subsidiaries are organized, and each of the
Subsidiaries' bylaws or operating agreements, as amended and in effect on the
date hereof. The Disclosure Schedules contain a complete list of the
Subsidiaries, containing the state of incorporation and all foreign
qualifications and setting forth any minority ownership interest therein.
SECTION 2.10 CAPITALIZATION.
(a) The authorized capital of the Company will consist immediately
prior to the Closing of:
(i) PREFERRED STOCK. 2,000,000 shares of preferred stock,
$.0001 par value per share, of which 500,000 shares have been designated as
Series A Preferred Stock, none of which are outstanding. The rights,
restrictions, privileges and preferences of the Series A Preferred Stock are as
stated in the Amended Certificate.
(ii) COMMON STOCK. 100,000,000 shares of Common Stock, $.0001
par value per share, of which 10,219,407 shares are issued outstanding.
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(iii) OPTIONS. The Company has outstanding options to purchase
2,790,399 shares of Common Stock, all of which were granted pursuant to its 1996
Stock Option Plan (the "Option Plan"). 709,601 shares of Common Stock are
authorized under the Option Plan for issuance upon the exercise of equity
incentives that have not yet been granted.
(iv) WARRANTS. The Company has issued warrants to purchase
572,222 shares of Common Stock.
(b) The outstanding shares of Common Stock and Series A Preferred
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and were issued in accordance with the registration or
qualification provisions of the Securities Act and any relevant state securities
laws or pursuant to valid exemptions therefrom.
(c) Except for (i) the conversion privileges of the Series A
Preferred Stock, (ii) the rights provided in the Investor's Rights Agreement,
and (iii) the Investor Warrant (as defined in Section 4.9) and currently
outstanding options, warrants and other convertible securities discussed in
Section 2.10(a) above and as otherwise set forth on Part 2.10(c) of the
Disclosure Schedule, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal) or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock or any securities convertible into or exchangeable for, or
exercisable into, the Company's capital stock. The Company is not a party or
subject to any agreement or understanding, and, to the Company's Knowledge,
there is no agreement or understanding between any Persons that (i) affects or
relates to the voting or giving of written consents with respect to any security
or by a director of the Company or (ii) except as otherwise set forth in this
Section 2.10, involves an instrument whose value is based on the Company's
capital stock, including, but not limited to, any derivative instrument, phantom
stock plan or stock appreciation right.
SECTION 2.11 FINANCIAL STATEMENTS AND REPORTS.
(a) The financial statements of the Company and its Subsidiaries
included in the Company's filings with the SEC for the last three (3) fiscal
years, the audited financial statements as of December 31, 2002 and for the year
ended December 31, 2002 and the unaudited financial statements of February 28,
2003 and for the two months then ended (including the related notes) complied as
to form, as of their respective dates of filing with the SEC, if applicable, in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto (including, without
limitation, Regulation S-X), have been prepared in accordance with generally
accepted accounting principles in the United States ("GAAP") (except, in the
case of unaudited statements, as permitted by Quarterly Report Form 10-Q of the
SEC) applied on a consistent basis during the periods and at the dates involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial condition of the Company and its Subsidiaries at the
dates thereof and the consolidated results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to notes and
normal year-end audit adjustments that were not material in amount or effect).
Except (A) as reflected in the Company's audited financial statements at
December 31, 2002 (the "Most Recent Financial Statements") or
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liabilities described in any notes thereto (or liabilities for which neither
accrual nor footnote disclosure is required pursuant to GAAP) or (B) for
liabilities incurred in the ordinary course of business since December 31, 2002
consistent with past practice or in connection with this Agreement or the
transactions contemplated hereby, neither the Company nor any of its
Subsidiaries has any material liabilities or obligations of any nature. Deloitte
& Touche LLP, who have expressed their opinion with respect to the audited
financial statements of the Company and its Subsidiaries included in the
Company's filings with the SEC (including the related notes), are independent
public or certified public accountants as required by the Securities Act and the
Exchange Act.
(b) The Company heretofore has provided to counsel to the Investor
complete and correct copies of all certifications filed with the SEC pursuant to
Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002 ("SOX") and hereby
reaffirms, represents and warrants to the Company the matters and statements
made in such certificates.
SECTION 2.12 CONTROLS. Each of the Company and its Subsidiaries maintains
accurate books and records reflecting its assets and liabilities and maintains
proper and adequate internal accounting controls which are effective for
gathering, analyzing and disclosing the information the Company is required to
timely disclose in the reports it files under the Exchange Act.
SECTION 2.13 SEC REPORTS. Except as set forth on Schedule 2.13, the
Company has on a timely basis filed all forms, reports and documents required to
be filed by it with the SEC since January 1, 1998. Except to the extent
available in full without redaction on the SEC's web site through the Electronic
Data Gathering, Analysis and Retrieval System ("XXXXX") two days prior to the
date of this Agreement, the Company has made available to counsel to the
Investor copies in the form filed with the SEC of (i) the Company's Annual
Reports on Form 10-K for each fiscal year of the Company beginning since January
1, 2000, (ii) its Quarterly Reports on Form 10-Q for each of the first three
fiscal quarters in each of the fiscal years of the Company referred to in clause
(ii) above, (iii) all proxy statements relating to the Company's meetings of
stockholders (whether annual or special) held, and all information statements
relating to stockholder consents since the beginning of the first fiscal year
referred to in clause (i) above, (iv) all certifications and statements required
by (x) the SEC's Order dated June 27, 2002 pursuant to Section 21(a)(1) of the
Exchange Act (File No. 4-460), (y) Rule 13a-14 or 15d-14 under the Exchange Act,
or (z) 18 U.S.C. ss.1350 (Section 906 of SOX) with respect to any report
referred to in clause (i) or (ii) above, (y) all other forms, reports,
registration statements and other documents (other than preliminary materials if
the corresponding definitive materials have been provided to Investor pursuant
to this Section 2.13 filed by the Company with the SEC since the beginning of
the first fiscal year referred to in clause (i) above (the forms, reports,
registration statements and other documents referred to in clauses (i), (ii),
(iii), (iv) and (v) above are, collectively, the "Company SEC Reports" and, to
the extent available in full without redaction on the SEC's web site through
XXXXX two days prior to the date of this Agreement, are, collectively, the
"Filed Company SEC Reports"), and (vi) all comment letters received by the
Company from the staff of the SEC since January 1, 2000 and all responses to
such comment letters by or on behalf of the Company. The Company SEC Reports and
the draft Annual Report on Form 10-K for the year ended December 31, 2002
attached hereto on Schedule 2.13 (the "2002 10-K")(x) complied as to form in all
material respects with the requirements of the
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Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder and (y) did not at the time they were filed with the SEC
(or delivered herewith with respect to the 2002 10-K), contain any untrue
statement of a material fact or omit to state a material fact or required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. No
Subsidiary of the Company is or has been required to file any form, report,
registration statement or other document with the SEC. The Company maintains the
disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the
Exchange Act. Except as set forth on PART 2.13 of the Disclosure Schedule, to
the Company's knowledge, each director and executive officer of the Company has
filed with the SEC on a timely basis all statements required by Section 16(a) of
the Exchange Act and the rules and regulations thereunder since January 1, 2000.
As used in this Section 2.13, the term "file" shall be broadly construed to
include any manner in which a document or information is furnished, supplied
otherwise made available to the SEC.
SECTION 2.14 CHANGES. Except as set forth on PART 2.14 of the Disclosure
Schedule, since December 31, 2002 there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company or any Subsidiary except changes in the
ordinary course of business consistent with past practice that have not been, in
the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company or any
Subsidiary (as such business is presently conducted and as it is proposed to be
conducted);
(c) any waiver by the Company or any Subsidiary of a material 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 Subsidiary, except in the
ordinary course of business and that is not material to the assets, properties,
financial condition, operating results or business of the Company or any
Subsidiary (as such business is presently conducted and as it is proposed to be
conducted);
(e) any material change or amendment to a material contract or
arrangement by which the Company, any Subsidiary or any of their respective
assets or properties is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
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(h) any resignation or termination of employment of any officer of
the Company or any Subsidiary; and the Company does not know of the impending
resignation or termination of employment of any such officer;
(i) receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company or any Subsidiary,
except for losses of retainer customers in the ordinary course of business which
did not have a Material Adverse Effect;
(j) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by the Company or any Subsidiary to
or for the benefit of its employees, officers or directors, or any members of
their immediate families, other than travel advances and other advances made in
the ordinary course of its business;
(l) any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the Company;
(m) to the Company's Knowledge, any other event or condition of any
character that might have a Material Adverse Effect; or
(n) any agreement or commitment by the Company or any Subsidiary to
do any of the things described in this Section.
SECTION 2.15 LITIGATION. Except as set forth in Part 2.15 of the
Disclosure Schedule, there is no (i) action, suit, claim, proceeding, or
investigation pending or, to the Company's Knowledge, threatened against the
Company or any Subsidiary, or, to the Company's Knowledge, against any officer,
key employee or stockholder who holds not less than 5% of the Company's
outstanding capital stock (a "Major Stockholder") of the Company or any
Subsidiary in his or her capacity as such, at law or in equity, or before or by
any federal, state, municipal, or other governmental department, commission,
board, bureau, agency, or instrumentality, domestic or foreign; (ii) arbitration
proceeding relating to the Company or any Subsidiary pending under collective
bargaining agreements or otherwise; or (iii) governmental inquiry pending or, to
the Company's Knowledge, threatened against the Company or any Subsidiary
(including without limitation any inquiry as to the qualification of the Company
or any Subsidiary to hold or receive any license or permit), or, to the
Company's Knowledge, against any officer, key employee or Major Stockholder of
the Company or any Subsidiary in his or her capacity as such, and to the
Company's Knowledge, there is no basis for any of the foregoing which
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect. The Company has not received any written opinion or memorandum
from legal counsel to the effect that the Company or any Subsidiary is exposed,
from a legal standpoint, to any liability or disadvantage that could result in a
Material Adverse Effect. Neither the Company nor any Subsidiary is in default
with respect to any order, writ, injunction, or decree known to or served upon
it of any
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court or of any federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign which
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect. There is no action or suit by the Company or any Subsidiary
currently pending or that the Company or any Subsidiary intends to initiate.
SECTION 2.16 INTELLECTUAL PROPERTY. PART 2.16 of the Disclosure Schedules
contains a complete list of patents, registered trademarks, registered service
marks, and material unregistered trademarks and service marks, copyrights,
Internet domain names and pending patent, trademark, service xxxx and copyright
applications of the Company and the Subsidiaries. The Company and the
Subsidiaries have sufficient title and ownership of all patents, trademarks,
service marks, trade names, copyrights, Internet domain names, trade secrets,
information, proprietary rights, computer software, object code, source code,
archives, data, databases, data history and processes (collectively, the
"Intellectual Property") materially necessary for their respective businesses as
now conducted and as proposed to be conducted without any known conflict with or
infringement of the rights of others. Except as set forth in PART 2.16 of the
Disclosure Schedules, there are no outstanding options, licenses or agreements
of any kind relating to the foregoing, nor is the Company or any Subsidiary
bound by or a party to any options, licenses, or agreements of any kind with
respect to the Intellectual Property of any other Person. Neither the Company
nor any Subsidiary has received any communications alleging that the Company or
any Subsidiary has violated or, by conducting their respective businesses as
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
Person. Neither the Company nor any Subsidiary is aware that any of its
employees are obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of his or her best efforts to promote the interests of the Company or
any Subsidiary or that would materially conflict with the Company's or any
Subsidiary's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement or the Investor's Rights Agreement, nor the carrying
on of the Company's or any Subsidiary's business by the employees of the Company
or any Subsidiary, nor the conduct of the Company's or any Subsidiary's business
as proposed, will, to the Company's Knowledge, materially conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees is now obligated. Neither the Company nor any Subsidiary believes it
is or will be necessary to utilize any inventions of any of its employees (or
people it currently intends to hire) made prior to their employment by the
Company or any Subsidiary, except for inventions that have been assigned to the
Company.
SECTION 2.17 PROPRIETARY INFORMATION. Each of the employees, officers and
consultants of the Company has a validly existing agreement providing for
confidentiality and protection of intellectual property (a "Proprietary
Information Agreement") with the Company (except for an immaterial number of
non-key employees), such agreements are in full force and effect, and copies of
such agreements have been made available to counsel to the Investor. No third
party has claimed or, to the Company's Knowledge, has reason to claim that any
person employed by or affiliated with the Company or any Subsidiary has (i)
violated or may be violating any of the terms or conditions of his employment,
non-competition, or non-disclosure
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agreement with such third party; (ii) disclosed or may be disclosing or utilized
or may be utilizing any trade secret or proprietary information or documentation
of such third party; or (iii) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. To the Company's Knowledge, no person employed by or affiliated with
the Company or any Subsidiary has violated any confidential relationship that
such person may have had with any third party, in connection with the
development or sale of any service or proposed service of the Company or any
Subsidiary.
SECTION 2.18 INSURANCE. The Company and the Subsidiaries have in full
force and effect fire and casualty insurance policies, products liability, and
errors and omissions insurance in reasonable amounts customary for companies
similarly situated. PART 2.18 of the Disclosure Schedules contains a complete
list of all insurance policies for the Company and the Subsidiaries in effect as
of the date hereof and a list of any claims filed thereunder.
SECTION 2.19 TAXES. The Company and each Subsidiary have filed all tax
returns and reports as required by law (subject to permitted extensions) except
where the failure to file any such return(s) would not involve the payment of an
aggregate of more than $10,000 in taxes, penalties and interest. These returns
and reports are true and correct in all material respects. The Company and each
Subsidiary have paid all taxes and other assessments due (whether or not shown
on any return) except for those taxes being contested in good faith. The
provision for taxes of the Company as shown in the Most Recent Financial
Statements is adequate for taxes due or accrued as of the date thereof. Neither
the Company nor any Subsidiary has elected pursuant to the Code to be treated as
a Subchapter S corporation or a collapsible corporation pursuant to Section
1362(a) or Section 341(f) of the Code, nor has the Company or any Subsidiary
made any other elections pursuant to the Code (other than elections that relate
solely to methods of accounting, depreciation or amortization) that would have a
Material Adverse Effect. Neither the Company nor any Subsidiary has ever had any
tax deficiency proposed or assessed against it and has not executed any waiver
of any statute of limitations on the assessment or collection of any tax or
governmental charge except such which individually or in the aggregate could not
reasonably be expected to involve the payment of an aggregate of $10,000 in
taxes, penalties and interest. None of the Company's or any Subsidiary's federal
income tax returns and none of its state income or franchise tax or sales or use
tax returns has ever been audited by governmental authorities. Since the date of
the Most Recent Financial Statements, the Company and each Subsidiary have made
adequate provisions on their books of account for all taxes, assessments and
governmental charges with respect to their businesses, properties and operations
for such period. The Company and each Subsidiary have withheld or collected from
each payment made to each of their employees, the amount of all taxes
(including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be
withheld or collected therefrom, and has paid the same to the proper tax
receiving officers, agencies or authorized depositaries.
SECTION 2.20 OTHER AGREEMENTS. Except as set forth in PART 2.20 of the
Disclosure Schedules or as contemplated by this Agreement or the Investor's
Rights Agreement hereto, neither the Company nor any Subsidiary is a party to or
otherwise bound by any written or oral:
(a) agreement, involving more than $25,000, with any supplier
containing any
10
provision permitting any party other than the Company or a Subsidiary to
renegotiate the price or other terms, or containing any pay-back or other
similar provision, upon the occurrence of a failure by the Company or a
Subsidiary to meet its obligations under the agreement when due or the
occurrence of any other event;
(b) agreement for the future purchase of fixed assets or for the
future purchase of materials, supplies, or equipment which individually are in
excess of its normal operating requirements;
(c) agreement for the employment of any officer, employee, or other
person (whether of a legally binding nature or in the nature of informal
understandings) on a full-time or consulting basis;
(d) bonus, pension, profit-sharing, retirement, hospitalization,
insurance, stock purchase, stock option, or other plan, agreement, or
understanding pursuant to which benefits are provided to any employee of the
Company or the Subsidiaries (other than the Employee Plans applicable to
employees and disclosed under Section 2.24);
(e) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of the Company or the Subsidiaries;
(f) guaranty of any obligation for borrowed money or otherwise;
(g) voting trust or agreement, stockholders' agreement, pledge
agreement, buy-sell agreement, or right of first refusal or preemptive rights
agreement relating to any securities of the Company or the Subsidiaries;
(h) agreement, or group of related agreements with the same party or
any group of affiliated parties, under which the Company or any Subsidiary has
loaned or advanced or agreed to loan or advance money, except, in each case, for
advances to employees of such entity in respect of reimbursable business
expenses anticipated to be incurred by them in connection with their performance
of services for such entity;
(i) agreement or obligation (contingent or otherwise) to issue,
sell, or otherwise distribute or to repurchase or otherwise acquire or retire
any share of its capital stock or any of its other equity securities;
(j) agreement under which it has granted any Person any registration
rights, including piggyback rights;
(k) agreement under which it has limited or restricted its right to
compete with any Person in any respect;
(l) other agreement, or group of related agreements with the same
party or any group or affiliated parties, involving more than $50,000 or
continuing over a period of more
11
than six months from the date or dates thereof (including renewals or extensions
optional with another party), which agreement or group of agreements is not
terminable by the Company or a Subsidiary without penalty upon notice of thirty
(30) days or less; or
(m) other agreement, instrument, commitment, plan, or arrangement, a
copy of which would be required to be filed with the SEC as an exhibit to a
registration statement on Form S-l if the Company or the Subsidiaries were
registering securities under the Securities Act.
SECTION 2.21 LOANS TO EXECUTIVE OFFICERS AND DIRECTORS. The Company has
not, since July 30, 2002, extended or maintained credit, arranged for the
extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer (or equivalent
thereof) of the Company. PART 2.21 of the Disclosure Schedule identifies any
extension of credit maintained by the Company to which the second sentence of
Section 13(k)(1) of the Exchange Act applies.
SECTION 2.22 TRANSACTIONS WITH AFFILIATES. To the Company's Knowledge, no
employee, Major Stockholder, officer or director of the Company or any
Subsidiary or member of his or her immediate family has any direct or indirect
ownership interest in any Person with which the Company or any Subsidiary is
affiliated or with which the Company or any Subsidiary has a business
relationship, or any firm or corporation that competes with the Company or any
Subsidiary, except that employees, Major Stockholders, officers or directors of
the Company or any Subsidiary and members of their immediate families may hold
not more than 5% of the capital stock in another publicly traded company that
may compete with the Company or any Subsidiary. No member of the immediate
family of any stockholder, officer or director of the Company is directly or
indirectly interested in any material contract with the Company or any
Subsidiary.
SECTION 2.23 LABOR AGREEMENTS AND ACTIONS. Neither the Company nor any
Subsidiary is bound by or subject to (and none of their assets or properties is
bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the Company's Knowledge, has sought to represent any of the employees,
representatives or agents of the Company or any Subsidiary. There is no strike
or other labor dispute involving the Company or any Subsidiary pending, or to
the Company's Knowledge, threatened, nor is there any labor organization
activity involving the Company's or any Subsidiary's employees. To the Company's
Knowledge, no officer or key employee, or any group of key employees, intends to
terminate their employment with the Company or any Subsidiary, nor does the
Company or any Subsidiary have a present intention to terminate the employment
of any of the foregoing. To the Company's Knowledge, the Company and each
Subsidiary has complied in all material respects with all applicable state and
federal equal employment opportunity and other laws related to employment.
SECTION 2.24 EMPLOYEE BENEFIT PLANS.
(a) PART 2.24 of the Disclosure Schedules contains a list of each
Employee Plan that covers any employee of the Company or any Subsidiary. With
respect to each Employee Plan, the Company has provided to counsel to the
Investor the most recently filed
12
Form 5500 and a copy of such Employee Plan. The Company has filed all Form 5500s
required to be filed by the Company (subject to permitted extensions).
(b) No Employee Plan is a Multiemployer Plan and no Employee Plan is
subject to Title IV of ERISA. Neither the Company nor any Subsidiary, nor their
ERISA Affiliates, have incurred any liability under Title IV of ERISA arising in
connection with the termination of any plan covered or previously covered by
Title IV of ERISA. None of the Employee Plans or other arrangements listed in
the Disclosure Schedules covers any non-United States employee or former
employee of such entities. No "prohibited transaction," as defined in Section
406 of ERISA or Section 4975 of the Code, has occurred with respect to any
Employee Plan.
(c) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. The Company has
furnished to counsel to the Investor copies of the most recent Internal Revenue
Service determination letters with respect to each such plan.
(d) Each Employee Plan has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules, and regulations that are applicable to such Employee Plan. Other
than routine claims for benefits made in the ordinary course of business, there
are no pending claims, investigations, or causes of action pending or, to the
Knowledge of the Company, threatened against any Employee Plan or any fiduciary
thereof by any participant, beneficiary, or governmental agency.
(e) All contributions and payments accrued under each Employee Plan,
determined in accordance with prior funding and accrual practices, as adjusted
to include proportional accruals for the period ending on the Closing Date, will
be discharged and paid on or prior to the Closing Date except to the extent
reflected in the Most Recent Financial Statements. There has been no amendment
to, written interpretation of, or announcement (whether or not written) by the
Company or any Subsidiary, or any of their ERISA Affiliates relating to, or
change in employee participation or coverage under, any Employee Plan that would
increase materially the expense of maintaining such Employee Plan above the
level of the expense incurred in respect thereof for the fiscal year ended prior
to the date hereof.
(f) There is no contract, agreement, plan, or arrangement covering
any employee or former employee of the Company or any Subsidiary that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code. No
tax under Section 4980B of the Code has been incurred in respect of any Employee
Plan that is a group health plan, as defined in Section 5000(b)(1) of the Code.
With respect to the employees and former employees of the Company and the
Subsidiaries, there are no employee post-retirement medical or health plans in
effect, except as required by Section 4980B of the Code. No employee of the
Company or any Subsidiary will become entitled to any bonus, retirement,
severance, or similar benefit or enhanced benefit solely as a result of the
transactions contemplated hereby. Neither the Company nor any Subsidiary has,
nor is any such entity reasonably expected to have, any
13
liability under Title IV of ERISA.
(g) Except as set forth on PART 2.24(G) of the Disclosure Schedule,
neither the Company nor any Subsidiary has a 401(k) plan that requires a
matching contribution from the Company or any Subsidiary.
SECTION 2.25 SIGNIFICANT SUPPLIERS AND CUSTOMERS. PART 2.25 of the
Disclosure Schedule lists (i) the ten largest suppliers of the Company and its
Subsidiaries, on a consolidated basis, for each of the fiscal years ended
December 31, 2001 and 2002, and (ii) the ten largest customers or other sources
of revenue of the Company and its Subsidiaries, on a consolidated basis, for
each of the fiscal years ended December 31, 2001 and 2002. No such supplier or
customer has terminated, materially reduced or, to the Company's Knowledge,
threatened to terminate or materially reduce its services or other transactions
to or purchases from the Company or any of its Subsidiaries.
SECTION 2.26 ENVIRONMENTAL LAWS. The Company and the Subsidiaries, and the
operation of their respective businesses, and any real property that such
entities own, lease, or otherwise occupy or use (the "Premises") are in
compliance with all applicable Environmental Laws and orders or directives of
any governmental authorities having jurisdiction under such Environmental Laws,
including, without limitation, any Environmental Laws or orders or directives
with respect to any cleanup or remediation of any release or threat of release
of Hazardous Substances except for noncompliance that individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
Except as set forth on Part 2.26 of the Disclosure Schedule, neither the Company
nor any Subsidiary has received any citation, directive, letter, or other
written communication or any written notice of any proceeding, claim, or lawsuit
from any Person arising out of the ownership or occupation of the Premises, or
the conduct of the Company's and/or the Subsidiaries' operations, and the
Company is not aware of any basis therefor. Neither the Company nor any
Subsidiary has caused or allowed a release, or a threat of release, of any
Hazardous Substance onto, at, or near the Premises and, to the Company's
Knowledge, neither the Premises nor any property at or near the Premises has
been subject to a release of any Hazardous Substance.
SECTION 2.27 COMPLIANCE WITH LAWS. The operations of the Company and the
Subsidiaries have been conducted in compliance with all Applicable Laws and
regulations, including, without limitation, all rules, regulations and
requirements of SOX and the SEC as well as all applicable laws, regulations,
orders, and requirements promulgated by any governmental authority of competent
jurisdiction and relating to consumer protection, equal opportunity, health care
industry regulation, environmental protection, fire, and occupational safety
matters, except for noncompliance that individually or in the aggregate would
not reasonably be expected to have a Material Adverse Effect. Except as set
forth on Part 2.27 of the Disclosure Schedules, neither the Company nor any
Subsidiary has received written notice of any violation (or of any
investigation, inspection, audit, or other proceeding by any governmental
authority involving allegations of any violation) of any Applicable Law, and to
Knowledge of the Company, no investigation, inspection, audit, or other
proceeding by any governmental authority involving allegations of violation of
any Applicable Law has been threatened or contemplated. The Company has no
Knowledge of any pending legislation or regulation that would have a Material
14
Adverse Effect on (i) the business of the Company and the Subsidiaries, taken as
a whole, or (ii) the transactions contemplated by this Agreement or any of the
other agreements contemplated hereunder or executed herewith.
SECTION 2.28 PERMITS. The Company and each Subsidiary has all franchises,
permits, licenses, and any similar authority necessary for the conduct of their
respective businesses as now being conducted by them, the lack of which could
have a Material Adverse Effect, and the Company believes it and each Subsidiary
can obtain, without undue burden or expense, any similar authority for the
conduct of their respective businesses as planned to be conducted. Neither the
Company nor any Subsidiary is in default in any material respect under any of
such franchises, permits, licenses, or other similar authority.
SECTION 2.29 U.S. REAL PROPERTY HOLDING CORPORATION. The Company is not
now, nor has it ever been, a "United States real property holding corporation,"
as defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service, and the Company and
each Subsidiary has filed with the Internal Revenue Service all statements, if
any, with its United States income tax returns that are required under Section
1.897-2(h) of such Regulations.
SECTION 2.30 MINUTE BOOKS. The minute books of the Company and each
Subsidiary provided to counsel to the Investor contain a complete summary of all
meetings of directors and stockholders for the last three (3) fiscal years and
reflect all transactions referred to in such minutes accurately in all material
respects.
SECTION 2.31 QUALIFIED SMALL BUSINESS STOCK. The Preferred Stock, Dividend
Shares and Conversion Shares constitute "qualified small business stock" as
defined in section 1202(c) of the Internal Revenue Code.
SECTION 2.32 PROCEED RESTRICTIONS. The Company acknowledges that the
Investor herein represents that it is a federally licensed small business
investment company subject to the regulations promulgated by the U.S. Small
Business Administration (the "SBA") relating to the small business investment
company program (the "SBIC Regulations"). The SBIC Regulations prohibit certain
uses of proceeds of loans made by small business investment companies, as
follows: personal use of loan proceeds by stockholders, officers, and employees
of the company; any relending or reinvestment of loan proceeds, if the company's
primary business activity involves, directly or indirectly, providing funds to
others, purchasing debt obligations, factoring or the long-term leasing of
equipment with no provision for maintenance or repair; purchasing any stock in
or providing capital to any small business investment company; making any real
estate purchases if the company is classified under Major Group 65 of the
Standard Industrial Classification Manual, unless such transaction would
otherwise be exempt by virtue of Section 901(c) of the SBIC Regulations; any use
of proceeds that is contrary to the public interest including, but not limited
to, activities which are in violation of law or inconsistent with free
competitive enterprise; or foreign investments and use outside the United
States, except as permitted under Section 901(g) of the SBIC Regulations. The
Company represents, covenants and agrees that no portion of the proceeds will be
used for any of the foregoing prohibited purposes and that any prohibited use of
any portion of the proceeds will constitute a material
15
breach of this Agreement.
SECTION 2.33 SOLVENCY. Except as disclosed on Part 2.33 of the Disclosure
Schedule, the Company and each of its "significant subsidiaries" (as that term
is defined by Rule 1-02 of Regulation S-X promulgated under the Securities Act)
are, and immediately after the Closing will be, Solvent. As used herein, the
term "Solvent" means, with respect to a particular date, that on such date, (i)
the fair market value of the total assets of each of the Company and its
Subsidiaries exceeds their respective total liabilities (including, without
limitation, stated liabilities and contingent liabilities), and (ii) the Company
and each of its Subsidiaries is currently able to pay its debts as they come due
or mature. None of the Company nor any of its "significant subsidiaries" has
taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy, insolvency, debtor relief, reorganization
or similar law, nor does the Company have any Knowledge or reason to believe
that creditors of the Company and its Subsidiaries have initiated or intend to
initiate involuntary bankruptcy or similar proceedings.
SECTION 2.34 DISCLOSURE. Neither this Agreement, any Schedule or Exhibit
to this Agreement, nor any other statements or certificates made or delivered in
connection herewith or therewith 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.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company that:
SECTION 3.1 AUTHORIZATION. Such Investor has full power and authority to
enter into this Agreement and the Investor's Rights Agreement and that such
agreements have been duly executed and delivered by it and constitute the legal,
valid, and binding obligations of such Investor, enforceable in accordance with
their respective terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of
general application affecting enforcement of creditors' rights generally, as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, or (ii) to the extent the indemnification
provisions contained in the Investor's Rights Agreement may be limited by
applicable federal or state securities laws, and the Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of any securities laws. The Investor is not a registered
broker-dealer or an entity engaged in the business of being a broker-dealer.
SECTION 3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The shares of Series A
Preferred Stock being purchased by the Investor, the Divided Shares and the
Conversion Shares are being acquired for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof in violation of any securities laws.
SECTION 3.3 DISCLOSURE OF INFORMATION. Such Investor has had an
opportunity to discuss the Company's business, management, and financial affairs
with the Company's
16
management, the terms and conditions of the offering of the Series A Preferred
Stock and has received and reviewed the Company SEC Reports filed since April 1,
2002.
SECTION 3.4 INVESTMENT EXPERIENCE. Such Investor has sufficient knowledge
and experience in investing in companies similar to the Company in terms of the
Company's stage of development so as to be able to evaluate the risks and merits
of its investment in the Company and it is able financially to bear the risks
thereof including a complete loss of its investment.
SECTION 3.5 ACCREDITED INVESTOR. Such Investor is an "accredited investor"
within the meaning of Rule 501(a) of Regulation D under the Securities Act and
was not organized for the specific purpose of acquiring the Series A Preferred
Stock.
SECTION 3.6 RESTRICTED SECURITIES. Such Investor understands that the
Series A Preferred Stock it is purchasing, the Dividend Shares and the
Conversion Shares are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act, only in certain limited circumstances. In this connection,
such Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
SECTION 3.7 LEGENDS. It is understood that the certificates evidencing the
Series A Preferred Stock and Conversion Shares may bear the following legends:
(a) "The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended. Such shares have been
acquired for investment and may not be offered for sale, sold, transferred,
pledged or hypothecated in the absence of an effective registration statement
covering such shares under the Securities Act or an opinion of counsel
satisfactory to the Company that such registration is not required."
(b) Any legend imposed or required by applicable state securities
laws.
SECTION 3.8 GENERAL SOLICITATION. The Investor did not learn of the offer
and sale of the Series A Preferred Stock as a result of any general advertising
or any general solicitation.
ARTICLE IV.
CONDITIONS TO THE OBLIGATIONS OF THE INVESTOR
The obligations of the Investor under Section 1.2 of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions:
SECTION 4.1 QUALIFICATIONS. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Series A Preferred Stock pursuant to this Agreement shall be duly obtained
and effective as of the Closing.
17
SECTION 4.2 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
to be taken by the Company in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Investor and their counsel, and the Investor and their
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they reasonably may request.
SECTION 4.3 SUPPORTING DOCUMENTS. The Investor and its counsel shall have
received copies of the following documents:
(a) (i) the Amended Certificate, certified as of a recent date by
the Secretary of State of the State of New York; (ii) the organizational
documents of each Subsidiary in effect as of the Closing Date, certified by the
Secretary of State of the state of its organization; and (iii) certificates, as
of the most recent reasonably practicable dates, as to the corporate good
standing of the Company and each Subsidiary issued by the Secretary of State of
the jurisdictions in which the Company and each Subsidiary is organized,
conducting business, or otherwise required to be licensed or qualified.
(b) a certificate of the Secretary of the Company dated the Closing
Date and certifying: (i) that attached thereto is a true and complete copy of
the Bylaws of the Company and the bylaws or operating agreements of each
Subsidiary as in effect on the date of such certification; (ii) that attached
thereto is a true and complete copy of all resolutions adopted by the Board of
Directors of the Company authorizing the execution, delivery, and performance of
this Agreement and the Investor's Rights Agreement, the issuance, sale, and
delivery of the Series A Preferred Stock and the reservation, issuance, and
delivery of the Conversion Shares and Dividend Shares, and that all such
resolutions are in full force and effect and are all the resolutions adopted in
connection with the transactions contemplated by this Agreement and the
Investor's Rights Agreement; (iii) that the Certificate of Incorporation has not
been amended since the filing of the Amended Certificate; and (iv) to the
incumbency and specimen signature of each officer of the Company executing this
Agreement and the Investor's Rights Agreement, the stock certificates
representing the Series A Preferred Stock and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of the Company
as to the incumbency and signature of the officer signing the certificate
referred to in this Section; and
(c) such additional supporting documents and other information with
respect to the operations and affairs of the Company as the Investor or their
counsel reasonably may request in writing.
SECTION 4.4 KEY MAN INSURANCE. The Company shall have in full force and
effect $3,000,000 of a key man insurance policy insuring the life of Xxxxx
Xxxxx, with proceeds payable to the Company, with terms and conditions
reasonably satisfactory to the Investor.
SECTION 4.5 OPINION OF COMPANY'S COUNSEL. The Investor shall have received
from Xxxx Xxxxxxx, P.C., counsel for the Company, an opinion dated the Closing
Date, substantially in the form of EXHIBIT D hereto.
18
SECTION 4.6 INVESTOR'S RIGHTS AGREEMENT. The Company and the Investor
shall have executed and delivered the Investor's Rights Agreement.
SECTION 4.7 SIMULTANEOUS CLOSING OF GUIDELINE RESEARCH CORPORATION.
Simultaneously with the Closing of the transactions contemplated hereby, the
Company shall close the acquisition of Guideline Research Corporation. The
parties hereto acknowledge and agree that the representations and warranties set
forth herein, and the exceptions thereto as set forth in the Disclosure
Schedules, include Guideline Research Corporation as a wholly owned Subsidiary
of the Company.
SECTION 4.8 SIMULTANEOUS CLOSING OF LOAN. Simultaneously with the Closing
of the transactions contemplated hereby, the Company shall execute and deliver a
secured promissory note in favor of the Investor in the amount of $3,000,000,
together with the related loan and security agreements.
SECTION 4.9 WARRANT. Simultaneously with the Closing of the transactions
contemplated hereby, the Company shall issue the Investor a warrant to purchase
up to 675,000 shares of Common Stock at an exercise price of $0.01 per share,
substantially in the form of EXHIBIT F (the "Investor Warrant").
SECTION 4.10 CLOSING FEE. Simultaneous with the Closing, the Company shall
have paid to the Investor a closing fee in the amount of $12,500 (the "Closing
Fee"); provided, however, that the Investor acknowledges that the Company has
prepaid a portion of the Closing Fee in the form of an acceptance fee in the
amount of $10,000.
SECTION 4.11 EXPENSES OF INVESTOR. Simultaneous with the Closing, the
Company shall have paid in accordance with Section 7.2 the expenses of the
Investor invoiced at the Closing.
SECTION 4.12 SBA APPROVAL. Any approvals or waivers needed from the SBA
for the purchase of the Preferred Shares by the Investor will have been
obtained. The Company will have completed, executed and delivered to the
Investor a Size Status Declaration on SBA Form 480, a Non-Discrimination
Certificate on SBA Form 652, a Portfolio Financing Request on SBA Form 1031 and
such other documents as the Investor will have reasonably requested.
SECTION 4.13 NO INJUNCTION. No statute, rule, regulation, order, decree,
ruling or injunction shall have been enacted, entered, promulgated, endorsed or
threatened or is pending by or before any governmental authority of competent
jurisdiction which restricts, prohibits or threatens to restrict or prohibit the
consummation of any of the transactions contemplated by this Agreement.
SECTION 4.14 NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading in the
Common Stock shall not have been restricted or suspended by the SEC or any
market or exchange where such Common Stock is traded (except for any suspension
of trading of limited duration solely to permit dissemination of material
information regarding the Company).
19
ARTICLE V.
COVENANTS
SECTION 5.1 INTEGRATION. The Company will not offer, sell or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
the Securities Act) in a manner that would cause the offer and sale of the
Preferred Shares to the Investor to fail to be entitled to the exemption from
registration afforded by Rule 506 of Regulation D and Section 4(2) of the
Securities Act.
SECTION 5.2 DISCLOSURES. The Company, promptly following the Closing, will
(i) issue a press release, in a form reasonably acceptable to the Investor
announcing the sale of the Preferred Shares, (ii) file such press release and
other appropriate information with the SEC on Form 8-K and (iii) include in the
filing of its next Form 10-Q or Form 10-K, as applicable, appropriate
disclosures relating to the sale of the Preferred Shares, including, without
limitation, the disclosure required by Item 701 of Regulation S-K. The Company
shall, from and after the Closing, timely file all Company SEC Reports, comply
with all requirements under the Exchange Act, and otherwise comply with the
requirements of Sections 2.11 and 2.13 hereof.
SECTION 5.3 FILING OF 2002 10-K. The Company shall file its Annual Report
with the SEC on Form 10-K for the year ended December 31, 2002 no later than
April 15, 2003 in accordance with Rule 12b-25 of the Exchange Act.
ARTICLE VI.
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company to the Investor under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions by the Investor:
SECTION 6.1 PAYMENT OF PURCHASE PRICE. The Investor shall have delivered
$500,000.
SECTION 6.2 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 Series A Preferred Stock pursuant to this Agreement shall be duly obtained
and effective as of the Closing.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.1 INDEMNIFICATION. The Company hereby agrees to indemnify and
hold harmless the Investor, its officers, directors, employees, and Affiliates
(the "Indemnified Parties") from and against any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, attorneys'
fees, expenses and disbursements of any kind ("Losses") that may be imposed
upon, incurred by, or asserted against any Indemnified Party, relating to or
arising out of any claims by third parties relating to or arising out of the
transactions contemplated hereby except, in each case, to the extent resulting
from such
20
Investor's gross negligence, bad faith, or willful misconduct (including any
willful breach of fiduciary duties).
SECTION 7.2 EXPENSES. The Company will pay (i) all reasonable fees and
expenses incurred by the Investor in connection with entering into the
transactions contemplated in this Agreement including without limitation the
reasonable fees and expenses of counsel to the Investor incurred in connection
with entering into this Agreement, (ii) the reasonable fees and expenses
incurred with respect to any amendments or waivers requested by the Company
(whether or not the same become effective) under or in respect of this
Agreement, the agreements contemplated hereby, or the Amended Certificate and
(iii) the reasonable fees and expenses incurred with respect to the enforcement
of the rights granted under this Agreement, the agreements contemplated hereby
or the Amended Certificate; provided, however, that with respect to the fees and
expenses described in clause (i) above, the Company shall not be obligated to
pay such fees and expenses incurred in connection with the Closing to the extent
the amount of such fees and expenses exceeds $50,000.
SECTION 7.3 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and the Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing for a period of two years and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the Investor
or the Company. Notwithstanding anything in this Section 7.3 to the contrary,
the representations and warranties contained in Section 2.10 of this Agreement
shall survive indefinitely.
SECTION 7.4 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless the Investor from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.
SECTION 7.5 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Series A Preferred Stock or Conversion Shares). Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
SECTION 7.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given: (i) upon personal delivery to the party to be notified; (ii)
five days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iii) one day after deposit with a
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nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the address
noted below, or at such other address as such party may designate by ten (10)
days' advance written notice to the Company (who shall provide such other
address to the Investor upon request):
(a) if to the Company, at 000 Xxxxxx xx xxx Xxxxxxxx, 0xx xxxxx, Xxx
Xxxx, XX 00000, Attn: Xxxxx Xxxxx, with a copy to Xxxx Xxxxxxx, P.C., 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000, Attn: Xxxxxx X. Xxxxxxxx; and
(b) if to the Investor, at 000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxxx, XX 00000, Attn: Xxxxxx X. X'Xxxxx III, with a copy to Bass, Xxxxx &
Xxxx PLC, 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, XX 00000, Attn: Xxxxxx X.
Xxxxx III.
SECTION 7.7 GOVERNING LAW. This Agreement, and any dispute, controversy or
claim arising out of or relating to this Agreement or a breach thereof (a
"Claim"), shall be governed by, and construed in accordance with, the laws of
the State of New York.
SECTION 7.8 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits hereto, the Amended Certificate and the Investor's Rights Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supercedes any and all prior agreements of the parties with
respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 7.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery by facsimile or
by electronic transmission of an executed counterpart of any signature page to
this Agreement to be executed hereunder shall have the same effectiveness as the
delivery of a manually executed counterpart thereof.
SECTION 7.10 AMENDMENTS AND WAIVERS. Except as otherwise provided herein,
any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investor. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities, and the
Company.
SECTION 7.11 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
SECTION 7.12 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
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IN WITNESS WHEREOF, the Company and the Investor have executed this
Agreement as of the day and year first above written.
FIND/SVP, INC.
By: /s/ Xxxxx Xxxxx
-------------------------------
Name: Xxxxx Xxxxx
Title: Chief Executive Officer
INVESTOR:
PETRA MEZZANINE FUND, L.P.
By: Petra Partners, LLC
Its General Partner
By: /s/ Xxxxxx X. X'Xxxxx III
-------------------------------
Name: Xxxxxx X. X'Xxxxx III
Title: Managing Member
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Disclosure Schedules
Exhibit A Glossary of Defined Terms
Exhibit B Amended Certificate
Exhibit C Investor's Rights Agreement
Exhibit D Opinion of Company Counsel
Exhibit E Use of Proceeds
Exhibit F Investor Warrant
EXHIBIT A
GLOSSARY OF DEFINED TERMS
The following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
(a) "Affiliate" of any specified Person shall mean (i) any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) the direct or indirect
beneficial owner of thirty percent (30%) or more of the voting securities of
such Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by," and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
(b) "Applicable Law" means, with respect to any Person, any federal,
state, or local statute, law, ordinance, rule, administrative interpretation,
regulation, order, writ, injunction, directive, judgment, decree, or other
requirement of any governmental authority (including any Environmental Laws)
applicable to such Person or any of its Subsidiaries.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" means the Company's common stock, par value
$.0001 per share.
(e) "Employee Plan" means each "employee benefit plan," as such term
is defined in Section 3(3) of ERISA, that (A)(i) is subject to any provision of
ERISA and (ii) is currently maintained or contributed to by the Company, or
(B)(i) is subject to any provision of Title IV of ERISA and (ii) is currently
maintained or contributed to by any of the Company's ERISA Affiliates.
(f) "Environmental Laws" means any federal, state, or local law or
ordinance or regulation pertaining to the protection of human health or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq., the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901, et
seq., and the Occupational Safety and Health Act, 29 U.S.C. Sections 651, et
seq.
(g) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(h) "ERISA Affiliate" of any entity means any other entity that,
together with such entity, would be treated as a single employer under Section
414 of the Code.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
(j) "Hazardous Substances" includes oil and petroleum products,
asbestos, polychlorinated biphenyls, urea formaldehyde, and any other material
classified as hazardous or toxic under any Environmental Laws.
(k) "Knowledge", "known to", or other similar terms, when used in
this Agreement to qualify any representation or warranty made by the Company or
any Subsidiary, mean that (at the time the applicable representation or warranty
is made or deemed made or repeated) any of the officers or directors of the
Company and its Subsidiaries has actual (and not imputed or constructive)
knowledge of certain specific facts or circumstances affecting such
representation or warranty, or is actually (and not imputedly or constructively)
aware of facts or circumstances which should have led a reasonable person with
similar business responsibilities to conduct a reasonably-detailed investigation
into such facts or circumstances and the legal consequences thereof, and such an
investigation would have resulted in the investigating party having actual (and
not imputed or constructive) knowledge of specific facts or circumstances
affecting such representation or warranty.
(l) "Material Adverse Effect" means a material adverse effect upon
the business, operations, properties, assets, affairs, or condition (financial
or otherwise) of the Company and its Subsidiaries, taken as a whole. In
determining whether any individual event would result in a Material Adverse
Effect, notwithstanding that such event does not of itself have any such effect,
a Material Adverse Effect shall be deemed to have occurred if the cumulative
effect of such event and all other then existing events would result in a
Material Adverse Effect.
(m) "Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
(n) "Person" means an individual, corporation, trust, partnership,
joint venture, unincorporated organization, government agency, or any agency or
political subdivision thereof, or other entity.
(o) "Preferred Stock" means the Company's preferred stock, par value
$.0001 per share.
(p) "Series A Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $.01 per share.
(q) "SEC" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
(r) "Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
(s) "Subsidiary" shall mean any corporation, partnership, limited
liability company, association or other business entity of which (a) if a
corporation, a majority of the total equity interest or total voting power of
shares of stock entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by the Company or any
Subsidiary of the Company, or (b) if a partnership, limited liability company,
association or other business entity, a majority of the partnership, membership
or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by the Company or any Subsidiary of the Company. For
purposes hereof, the Company or any Subsidiary of the Company shall be deemed to
have a majority ownership interest in a partnership, limited liability company,
association or other business entity if the Company or such Subsidiary shall be
allocated a majority of partnership, limited liability company, association or
other business entity gains or losses or shall be or control the managing
general partner of such partnership, limited liability company, association or
other business entity. "Subsidiary" shall specifically include Guideline
Research Corporation.
