Exhibit 10.1
CONVERTIBLE LOAN AGREEMENT
between
TEAMVEST, INC.
and
ELECTRONIC MARKET CENTER, INC.
dated as of
August 9, 2000
TABLE OF CONTENTS
Page
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Background Statement ........................................................................... 1
Statement of Agreement ......................................................................... 1
ARTICLE I
THE LOAN
Section 1.1 The Loan........................................................................ 1
Section 1.2 Note............................................................................ 1
Section 1.3 Interest........................................................................ 1
Section 1.4 Prepayment...................................................................... 2
Section 1.5 Maturity........................................................................ 2
Section 1.6 Conversion...................................................................... 2
Section 1.7 Payments........................................................................ 5
ARTICLE II
EFFECTIVENESS
Section 2.1 Effectiveness................................................................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization, Existence......................................................... 6
Section 3.2 Authorization, Enforceability, Consents......................................... 6
Section 3.3 Subsidiaries.................................................................... 7
Section 3.4 Capitalization.................................................................. 7
Section 3.5 Financial Statements............................................................ 7
Section 3.6 No Conflict..................................................................... 7
Section 3.7 Litigation...................................................................... 8
Section 3.8 Offering Exempt................................................................. 8
Section 3.9 Title to Properties and Assets, etc............................................. 8
Section 3.10 Compliance with Laws............................................................ 9
Section 3.11 Disclosure...................................................................... 9
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
Section 4.1 Authorization, Enforceability................................................... 8
Section 4.2 Investment Intent............................................................... 9
Section 4.3 Experience...................................................................... 9
Section 4.4 Accredited Investor............................................................. 9
Section 4.5 No Public Market................................................................ 9
Section 4.6 No Transfer..................................................................... 9
Section 4.7 Business Location............................................................... 10
ARTICLE V
COVENANTS
Section 5.1 Financial and Business Reporting................................................ 10
Section 5.2 Inspection...................................................................... 10
Section 5.3 Confidentiality................................................................. 11
Section 5.4 Registration Rights............................................................. 11
ARTICLE VI
RESTRICTIONS ON TRANSFER; LEGEND
Section 6.1 Restrictions on Transfer........................................................ 11
Section 6.2 Legend.......................................................................... 11
ARTICLE VII
MISCELLANEOUS
Section 7.1 Survival of Representations, Warranties, Agreements, etc........................ 12
Section 7.2 Expenses; Brokers............................................................... 12
Section 7.3 Further Assurances.............................................................. 12
Section 7.4 Successors and Assigns.......................................................... 12
Section 7.5 Entire Agreement................................................................ 12
Section 7.6 Notices......................................................................... 13
Section 7.7 Amendments, Waivers............................................................. 14
Section 7.8 Interpretation.................................................................. 14
Section 7.9 Headings........................................................................ 14
Section 7.10 Governing Law................................................................... 14
Section 7.11 Severability.................................................................... 14
Section 7.12 Counterparts.................................................................... 14
Section 7.13 Public Announcements............................................................ 14
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Exhibits
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Exhibit A Form of Convertible Promissory Note
Schedules
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Schedule A Schedule of Exceptions
iii
CONVERTIBLE LOAN AGREEMENT
THIS CONVERTIBLE LOAN AGREEMENT (this "Agreement"), dated as of the
9th day of August, 2000, is made between TEAMVEST, INC., a Delaware corporation
with its principal offices in Charlotte, North Carolina (the "Company"), and
ELECTRONIC MARKET CENTER, INC., a Delaware corporation with its principal
offices in Hartford, Connecticut (the "Investor").
Background Statement
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WHEREAS, the Company and the Investor are parties to an Operating
Agreement, dated as of the date hereof (the "Operating Agreement"), pursuant to
which the Company and the Investor have agreed to certain terms and conditions
with respect to a strategic alliance between the Company and the Investor.
Statement of Agreement
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NOW, THEREFORE, in consideration of the execution of the Operating
Agreement and the premises and the mutual covenants and obligations hereinafter
set forth, the parties hereto hereby agree as follows:
ARTICLE I
THE LOAN
Section 1.1 The Loan. On the terms and subject to the conditions set forth
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herein, the Investor shall make a loan to the Company in the principal amount of
$2,000,000 (the "Loan"). An initial amount of $800,000 will be made available by
the Investor to the Company on August 9, 2000 and the remaining $1,200,000 will
be made available by the Investor to the Company in one or more installments as
requested by the Company. The Company agrees to draw down the entire principal
amount of the Loan by December 31, 2000.
Section 1.2 Note. The Loan shall be evidenced by a convertible promissory
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note made by the Company to the Investor in the principal amount of $2,000,000,
to be dated the Effective Date (as hereinafter defined) and to be issued in
substantially the form of Exhibit A attached hereto (as amended, modified or
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supplemented from time to time, the "Note").
Section 1.3 Interest. Subject to the terms and conditions hereof, the
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Company promises to pay interest on the outstanding principal balance of the
Note at a rate per annum equal to Six-Month LIBOR (as hereinafter defined) as in
effect from time to time. Interest shall accrue from August 9, 2000 or the date
on which advances are made by the Investor to the Company until repayment or
conversion of the outstanding principal balance of the Note in full and shall be
computed on the basis of a 360-day year consisting of twelve 30-day months and
the actual number of days (including the first day, but excluding the last day)
elapsed. Accrued interest shall be due and payable in full on the Maturity Date
or, if earlier, upon prepayment pursuant to Section 1.4 hereof or upon
conversion of the outstanding principal balance of the
Note pursuant to Section 1.6 hereof. As used herein, "Six-Month LIBOR" shall
mean the British Banker's Association average of interbank offered rates for
six-month contracts covering U.S. dollar deposits in the London market, as
published in The Wall Street Journal (Charlotte, North Carolina edition) on
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August 9, 2000 and as so published on each six-month anniversary of such date
until all outstanding principal of and all accrued and unpaid interest on the
Note shall have been paid in full, as adjusted on each such six-month
anniversary to conform to changes in such published average rate. If such
average rate shall not be so published on any such six-month anniversary, then
the applicable rate under the Note shall be such average rate as so published on
the next preceding date of publication (but shall not be adjusted to conform to
any change in such published average rate until such six-month anniversary).
Section 1.4 Prepayment. The Company may at any time, with the written
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consent of the Investor, prepay all or a portion of the outstanding principal
balance of the Note without premium or penalty, provided that interest on the
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principal amount prepaid accrued to the date of prepayment shall be paid on such
date.
Section 1.5 Maturity. Unless sooner converted, or unless and to the extent
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sooner prepaid, in each case as set forth herein, all outstanding principal of
and all accrued and unpaid interest on the Note shall be due and payable on
December 31, 2000 (the "Maturity Date").
Section 1.6 Conversion.
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1.6.1 Automatic Conversion.
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(a) Unless and to the extent sooner paid, the Conversion
Amount (as hereinafter defined) shall, on the thirtieth day after all proceeds
of the Loan have been drawn down and expended by the Company, automatically be
converted into common stock of the Company ("Common Stock"). The Company will in
good faith notify the Investor when the Loan has been expended. As used herein,
"Conversion Amount" shall mean, to the extent not sooner paid or converted, the
Loan together with (subject to the proviso below) all accrued and unpaid
interest thereon; provided that the Company may, at its option, pay all accrued
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and unpaid interest in cash at the time of conversion.
(b) Unless and to the extent not sooner paid, the Conversion
Amount shall, on the Maturity Date, automatically be converted into Common
Stock.
1.6.2 Optional Conversion.
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(a) Unless and to the extent not sooner paid, the Investor
may, with the consent of the Company (which may, in the sole discretion of the
Company, be withheld), elect to convert all (but not less than all) of the
Conversion Amount into shares of Common Stock at any time.
(b) To exercise its right of conversion under this Section
1.6.2, the Investor shall deliver to the Company written notice of its election
to effect such conversion. The Company shall have ten (10) days to accept or
reject such notice, and if such notice is accepted by
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the Company (which shall be deemed to have occurred if the Company has not
rejected the notice within ten (10) days of receipt), the Investor shall deliver
to the Company the Note, duly endorsed for transfer, along with any amount of
the Loan not yet drawn down by the Company.
1.6.3 Conversion Price.
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(a) The number of shares of Common Stock into which the
Conversion Amount may be converted shall be equal to the number obtained by
dividing (i) the Conversion Amount at the time of conversion by (ii) $2.553 (the
amount in this clause (ii), the "Conversion Price" per share of Common Stock),
subject to adjustment as provided herein.
(b) The Conversion Price, and the number of shares of Common
Stock into which the Note may be converted pursuant to Sections 1.6.1 or 1.6.2,
shall be subject to adjustment from time to time as follows:
(i) If the Company shall, at any time and from time to
time after the date hereof and prior to the date of conversion under
Sections 1.6.1 or 1.6.2, take a record of the holders of its Common
Stock for the purpose of entitling them to receive, or otherwise
declare or distribute, a dividend payable in or other distribution of
additional shares of Common Stock, or split or subdivide its
outstanding shares of Common Stock into a greater number of shares of
Common Stock, then in each such case the Conversion Price in effect
immediately prior to such action shall thereby be proportionately
reduced and the number of shares of Common Stock receivable upon
conversion pursuant to Sections 1.6.1 or 1.6.2 shall thereby be
proportionately increased; and conversely, if the Company shall, at
any time and from time to time on or after the date hereof and prior
to the date of conversion under Sections 1.6.1 or 1.6.2, combine its
outstanding shares of Common Stock into a smaller number of shares of
Common Stock, the Conversion Price in effect immediately prior to such
action shall thereby be proportionately increased and the number of
shares of Common Stock receivable upon conversion pursuant to Sections
1.6.1 or 1.6.2 shall thereby be proportionately decreased.
(ii) In the event that, at any time and from time to time
on or after the date hereof and prior to the date of conversion under
Sections 1.6.1 or 1.6.2, the holders of Common Stock (or any shares of
stock or other securities at the time receivable upon conversion
hereof pursuant to Sections 1.6.1 or 1.6.2) shall have received, or,
on or after the record date fixed for the determination of eligible
stockholders, shall have become entitled to receive, without payment
therefor, securities or other property of the Company (other than cash
and other than Common Stock) by way of dividend or distribution, then
and in each case, the Investor shall, upon conversion hereof pursuant
to Sections 1.6.1 or 1.6.2, be entitled to receive, in addition to the
number of shares of Common Stock receivable thereupon, and without
payment of any additional consideration therefor, the amount of such
securities or other property of the Company (other than cash and other
than Common Stock) that the Investor would hold on the date of such
conversion had it been the holder of record of such shares of Common
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Stock on the date hereof and had thereafter, during the period from
the date hereof to and including the date of such conversion, retained
such shares and/or all such other securities or other property
receivable by it as aforesaid during such period, giving effect to all
adjustments called for during such period by Sections 1.6.1 or 1.6.2.
(iii) In the event that, at any time and from time to time
after the date hereof and prior to the date of conversion under
Sections 1.6.1 or 1.6.2, the Company issues any Common Stock for a per
share consideration less than the Conversion Price in effect at such
time, then the Conversion Price shall be reduced to a price determined
by multiplying the Conversion Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding (including for this
purpose the number of shares of Common Stock into which this Note is
then convertible pursuant to Sections 1.6.1 or 1.6.2) immediately
prior to such issuance plus the number of shares of Common Stock that
the aggregate consideration received for such issuance would purchase
at the Conversion Price, and the denominator of which shall be the
total number of shares of outstanding Common Stock (calculated as
described hereinabove) immediately after such issuance, and the number
of shares of Common Stock receivable upon conversion pursuant to
Sections 1.6.1 or 1.6.2 shall be adjusted to be equal to the number of
shares obtained by multiplying the Conversion Price in effect
immediately prior to such issuance by the number of shares issuable
upon such conversion immediately prior to such issuance, and dividing
the product by the Conversion Price resulting from the adjustment
described in this clause (iii). The provisions of this clause (iii)
shall not apply, however, to (A) any issuance of Common Stock for
which an adjustment is provided under clause (i) above, (B) any
issuance or sale of Common Stock pursuant to the exercise of stock
options, warrants, rights or convertible securities issued and
outstanding as of the date hereof or (C) any issuance or sale of
Common Stock to employees and directors of the Company pursuant to
employee benefit plans up to an amount not exceeding, at any time, 20%
of the sum of (y) all shares of Common Stock outstanding at such time
plus (z) the shares of Common Stock so issued to employees and
directors or issuable to employees and directors upon exercise of
options, rights or warrants issued pursuant to such plans.
1.6.4 Effect of Conversion; Certain Obligations.
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(a) The automatic conversion of the Note pursuant to Section
1.6.1 hereof shall be effective on the Maturity Date without any further action
on the part of the Investor or the Company and whether or not the Note is
surrendered to the Company. The optional conversion of the Note pursuant to
Section 1.6.2 hereof shall be effective on the date of acceptance by the Company
of the notice required by Section 1.6.2(b) hereof and shall not require any
further action on the part of the Company or the Investor. The Company shall not
be obligated to issue certificates evidencing the equity securities issuable
upon any conversion unless (i) the Investor notifies the Company that the Note
has been lost, stolen or destroyed and delivers to the Company an indemnity
agreement or security reasonably satisfactory in form and amount to
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the Company and reimburses the Company for all reasonable expenses incidental
thereto, or (ii) the Note is delivered to the Company. The Company shall, as
soon as practicable after such delivery, or after such security or agreement and
indemnification is provided, issue and deliver to the Investor a certificate or
certificates for the equity securities to which the Investor shall be entitled
as the result of conversion. The person or persons entitled to receive equity
securities issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such securities on such date. The Company may,
at its option in lieu of any fractional shares that would otherwise be issuable,
make a cash payment to the Investor equal to the product of such fraction
multiplied by the applicable purchase price (or Conversion Price) of one share
of Common Stock
(b) If, prior to conversion of the Note pursuant to Sections
1.6.1 or 1.6.2 hereof, there shall be any merger, consolidation, exchange of
securities, conversion, recapitalization, reorganization, or other similar
event, as a result of which equity securities of the Company shall be changed or
converted into or exchanged for the same or a different number or amount of
shares or other equity securities of the same or another class or type of equity
or other securities of the Company or another entity, then the Investor shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified in this Agreement and in lieu of the equity securities
immediately theretofore receivable upon conversion of the Note pursuant to such
Section, such equity securities and/or other securities as may be issued or
payable with respect to or in exchange for the amount of equity securities
immediately theretofore receivable upon conversion of the Note pursuant to such
Section had such merger, consolidation, exchange of securities, conversion,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Investor to the end that the provisions hereof shall thereafter be
applicable, as nearly as may be practicable, in relation to any equity
securities or shares of stock or other securities thereafter deliverable upon
conversion of the Note pursuant to such Section.
(c) Whenever the Conversion Price or number or type of
securities issuable upon conversion of the Note pursuant to Sections 1.6.1 or
1.6.2 is adjusted as herein provided, the Company shall promptly deliver to the
Investor a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
Section 1.7 Payments. All payments of principal of and interest on the
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Note shall be made in lawful money of the United States of America to the
Investor at its address for notices as provided in Section 7.6 hereof or, in the
event of any assignment or other transfer of the Note, to the assignee or
transferee at its address as provided in writing to the Company.
ARTICLE II
EFFECTIVENESS
Section 2.1 Effectiveness. This Agreement shall become effective on the
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date upon which the following conditions have been satisfied (the "Effective
Date"):
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(a) The Company shall execute and deliver the Note to the
Investor; and
(b) The Company shall deliver to the Investor (i) a copy,
certified as of a recent date by the Secretary of State of Delaware, of the
Certificate of Incorporation of the Company, (ii) copies, certified by the
Secretary or an Assistant Secretary of the Company, of the Bylaws of the Company
and resolutions adopted by the Company's Board of Directors authorizing the
execution and delivery of this Agreement and the Note and the performance by the
Company of its obligations hereunder and thereunder, and (iii) a good standing
certificate for the Company, issued as of a recent date by the Secretary of
State of Delaware.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor as follows:
Section 3.1 Organization, Existence. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware, has all corporate power and authority necessary to conduct its
business as now conducted and as proposed to be conducted, to own or lease the
properties and assets it now owns or holds under lease, and to enter into and
perform its obligations under this Agreement and the Note, and is duly qualified
to conduct business as a foreign corporation in each jurisdiction except where
the failure so to qualify would not have a material adverse effect upon the
condition (financial or otherwise), results of operations, business, prospects
or assets of the Company and its subsidiaries, taken as a whole (a "Material
Adverse Effect").
Section 3.2 Authorization, Enforceability, Consents. The execution,
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delivery and performance by the Company of this Agreement and the Note have been
duly authorized by all necessary corporate action on the part of the Company.
Each of this Agreement and the Note constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the
enforcement of creditors' rights generally and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Subject to the accuracy of the representations set forth in
Article IV hereof, no consent, approval, authorization or order of, or filing or
registration with, any federal or state court or governmental or regulatory
agency or board is or will be required in connection with the execution and
delivery of this Agreement and the Note and the consummation of the transactions
contemplated hereby, except (a) the filing of a Notice of Sale of Securities
Pursuant to Regulation D or Section 4(6) with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
and (b) the filing of a copy of such notice with the North Carolina Securities
Administrator and/or such other filings as may be required under other
applicable state securities or blue sky laws, which filings, if required, will
be accomplished in a timely manner promptly after the Effective Date.
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Section 3.3 Subsidiaries. The Company has no subsidiaries and does not
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own, directly or indirectly, any capital stock or other proprietary interest in
any corporation, association, trust, partnership, joint venture, limited
liability company or other entity.
Section 3.4 Capitalization. Schedule 3.4 of the Schedule of Exceptions
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attached hereto as Exhibit A (the "Schedule of Exceptions") lists the names of
each stockholder of the Company and the type and number of shares of capital
stock owned by such stockholder. Except as set forth in Schedule 3.4, there are
no outstanding options, warrants, conversion privileges, preemptive rights or
other rights or agreements for the purchase or acquisition from the Company of
any equity interest in or other securities of the Company,
Section 3.5 Financial Statements. The Company is the successor by merger
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to TeamVest, LLC, a North Carolina limited liability company ("Old TeamVest").
The Company has delivered to the Investor (i) the audited consolidated balance
sheet of Old TeamVest as of December 31, 1999 and the audited consolidated
statement of operations for the fiscal year then ended and (ii) the unaudited
consolidated balance sheet for the Company as of May 31, 2000 and the unaudited
consolidated statement of operations for the five-month period then ended
(collectively, the "Financial Statements"). Except as set forth in Schedule 3.5
of the Schedule of Exceptions, the Financial Statements are complete and correct
in all material respects, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated, and present fairly the consolidated financial condition and
position of Old TeamVest as of the date thereof (subject, in the case of interim
financial statements, to normal year-end adjustments and to the absence of
footnotes required under generally accepted accounting principles). Except as
set forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business subsequent to the date of the most recent Financial Statements.
Section 3.6 No Conflict. The execution, delivery and performance by the
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Company of this Agreement and the Note and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) violate its Certificate
of Incorporation or Bylaws, (ii) conflict with or constitute a material breach
of or default under any agreement, indenture, mortgage or other instrument to
which the Company is a party or by which it or its properties are bound, (iii)
violate any material law, regulation, judgment, order or decree applicable to
the Company or (iv) result in the creation or imposition of any lien or
encumbrance upon any property of the Company.
Section 3.7 Litigation. There is no civil, criminal or administrative
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action, suit, claim, notice, hearing, inquiry, proceeding or investigation at
law or in equity by or before any court, arbitrator or similar panel,
governmental instrumentality or other agency now pending or, to the knowledge of
the Company, threatened against the Company or its assets or seeking to enjoin
or questioning the validity of this Agreement or the transactions contemplated
hereby.
Section 3.8 Offering Exempt. Subject to the accuracy of the
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representations set forth in Article IV hereof, the offer and issuance of the
Note pursuant to this Agreement will not result in a violation of the
requirements of Section 5 of the Securities Act or the registration and
qualification requirements of applicable state securities or blue sky laws.
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Section 3.9 Title to Properties and Assets, etc. The Company has good and
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marketable title to, or holds under valid lease, all of its properties and
assets used in and material to its business, subject to no mortgage, lien or
other encumbrance other than (i) those resulting from taxes which have not yet
become delinquent and (ii) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company. To the Company's knowledge (but without having
conducted any special investigation or patent search), the Company has
sufficient legal rights to all patents, copyrights, trade secrets, information,
proprietary rights and processes necessary for and material to its business as
now conducted without any conflict with or infringement of the rights of others,
and the Company has not received any written communication alleging that the
Company has violated or infringed any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other person or entity.
Section 3.10 Compliance with Laws. The Company is in compliance with all
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statutes, laws, regulations, decrees and orders of any governmental or
regulatory authority or body applicable to it or to the conduct of its business
and has all governmental permits, approvals and licenses necessary to conduct
its business as now conducted except where the failure so to be in compliance or
to obtain such permits, licenses and approvals would not have a Material Adverse
Effect.
Section 3.11 Disclosure. This Agreement and all other written documentation
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provided by the Company to the Investor in connection with the transactions
contemplated hereby, taken as a whole, does not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements included in such documentation, in light of the circumstances under
which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants to the Company as follows:
Section 4.1 Authorization, Enforceability. The Investor has all corporate
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power and authority necessary to enter into and perform its obligations under
this Agreement and the Operating Agreement. The execution, delivery and
performance by the Investor of this Agreement and the Operating Agreement have
been duly authorized by all necessary corporate action on the part of the
Investor. This Agreement and the Operating Agreement constitute legal, valid and
binding obligations of the Investor, enforceable against the Investor in
accordance with their terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
the enforcement of creditors' rights generally and to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
Section 4.2 Investment Intent. This Agreement is made with the Investor in
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reliance upon the Investor's representations to the Company set forth in this
Article IV, evidenced by the Investor's execution of this Agreement, that the
Investor has made the Loan and is acquiring the
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Note and the equity securities of the Company issuable upon conversion of the
Note (the Note and such equity securities, collectively, the "Securities") for
investment for its own account, not as nominee or agent, and not with a view to,
or for resale in connection with, any distribution thereof. The Investor
understands that the Securities have not and will not be registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the Investor's investment intent as expressed herein.
Section 4.3 Experience. The Investor (i) has such knowledge and experience
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in financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Securities, (ii) is able to bear the economic
risks of such investment and (iii) has been furnished with and has had access to
such information as it has considered necessary to make a determination as to
the purchase of the Securities, together with such additional information as it
has considered necessary to verify the accuracy of the information supplied.
Section 4.4 Accredited Investor. The Investor is an "accredited investor"
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within the meaning of such term under Regulation D promulgated under the
Securities Act.
Section 4.5 No Public Market. The Investor understands that the Securities
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may not be sold, transferred or otherwise disposed of without registration under
the Securities Act and registration or qualification under applicable state
securities or blue sky laws unless an exemption from such registration and
qualification is available, and that in the absence of such registration and
qualification or such exemption, the Securities must be held indefinitely. In
particular, the Investor is aware that the Securities may not be sold pursuant
to Rule 144 promulgated under the Securities Act ("Rule 144") except in limited
amounts and in accordance with all of the terms and conditions of such Rule,
including a requirement as to the availability to the public of current
information about the Company. The Investor understands (i) that such
information is not now available to the public and the Company has no present
plans to make such information available to the public and (ii) that no public
market now exists for any of the Securities and that it is possible that a
public market will never exist for any of the Securities.
Section 4.6 No Transfer. The investor acknowledges that the sale, transfer
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or other disposition of the Securities is subject to the restrictions set forth
in Section 6.1 hereof and agrees that in no event will it sell, transfer or
otherwise dispose of any of the Securities except in compliance with such
restrictions and in a manner consistent with its representations herein.
Section 4.7 Business Location. The office or offices of the Investor in
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which its investment decision was made is located in the Commonwealth of
Pennsylvania.
ARTICLE V
COVENANTS
Section 5.1 Financial and Business Reporting. The Company will furnish the
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Investor:
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(a) as soon as practicable after the end of each fiscal year,
and in any event within 90 days thereafter, an audited consolidated balance
sheet of the Company and its subsidiaries as of the end of such fiscal year and
audited consolidated statements of income, changes in stockholders' equity and
cash flows of the Company and its subsidiaries for such year, all prepared in
accordance with generally accepted accounting principles consistently applied
and in reasonable detail, and accompanied by a report and opinion thereon by
independent public accountants of national standing selected by the Company;
(b) as soon as practicable after the end of each fiscal
quarter, and in any event within 45 days thereafter, a consolidated balance
sheet of the Company and its subsidiaries as of the end of such fiscal quarter
and consolidated statements of income, changes in stockholders' equity and cash
flows of the Company and its subsidiaries for such fiscal quarter and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied (subject to normal year-end
adjustments and to the absence of footnotes required under generally accepted
accounting principles) and in reasonable detail;
(c) as soon as available and in any event at least thirty (30)
days prior to the beginning of each fiscal year, an annual budget and business
and operating plan for such fiscal year for the Company and its subsidiaries;
and
(d) promptly upon request, such other information about the
business, condition (financial or otherwise) or operations of the Company as the
Investor may from time to time reasonably request.
Section 5.2 Inspection. For so long as at least $2,000,000 in principal is
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outstanding under the Note or the Investor shall hold at least 300,000 shares of
Common Stock (adjusted to give effect to stock dividends, stock splits,
recapitalizations and the like), the Investor shall have the right to visit and
inspect any of the properties of the Company or any of its subsidiaries, to
discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such books, records, contracts and
other information as it may reasonably request, all at such reasonable times and
as often as may be reasonably requested.
Section 5.3 Confidentiality. The Investor covenants and agrees that any
---------------
information provided to the Investor pursuant to or in connection with this
Agreement regarding the operations or prospective operations of the Company or
any of its subsidiaries shall be deemed confidential information and the
Investor agrees to use its commercially reasonable best efforts to prevent the
disclosure to any person (excluding its officers, employees, agents or counsel,
but only to the extent it advises such employees, agents or counsel of the
confidential nature of such information and takes reasonable actions to prevent
the subsequent disclosure of such information by such employees, agents and
counsel) of any such confidential information disclosed to it, provided that
--------
such information may be disclosed (i) to the extent required by law or by a
governmental agency, regulatory or supervisory authority or court having
jurisdiction over it (in which case the Investor shall provide the Company
notice of such intended disclosure as far in advance of such disclosure as is
reasonably possible), (ii) to persons in connection with potential business
transactions between such persons and the Investor believed by the Investor in
good faith to be in the interests of the Company and upon appropriate
arrangements obligating such persons
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to keep such information confidential, and (iii) in connection with the
enforcement of its rights hereunder. The obligation of confidentiality set forth
in this Section shall not apply to information that (i) now or hereafter comes
into the public domain without breach of this Agreement, (ii) is demonstrated by
the Investor to be previously known to or developed by it prior to the
disclosure of said confidential information or (iii) is demonstrated by the
Investor to have been received from a third party without similar restrictions
and without breach of this Agreement.
Section 5.4 Registration Rights. In the event of a conversion of the Note
-------------------
by the Company pursuant to Sections 1.6.1 or 1.6.2 hereof, the Company agrees
that it will enter into a registration rights agreement with the Investor
pursuant to which it will grant to the Investor piggyback registration rights
with respect to the Securities on customary terms and conditions.
ARTICLE VI
RESTRICTIONS ON TRANSFER; LEGEND
Section 6.1 Restrictions on Transfer. The Investor agrees that the
------------------------
Securities may not be sold, transferred or otherwise disposed of unless (i) a
registration statement with respect thereto has become effective under the
Securities Act and such registration or qualification as may be necessary under
any applicable state securities laws has become effective, or (ii) the Company
has been furnished with an opinion of counsel satisfactory to the Company that
such registration is not required.
Section 6.2 Legend. The Note and any notes issued in exchange or
------
substitution therefor, in whole or in part, shall bear the following legend (and
any certificates issued to evidence any equity securities issued upon conversion
thereof shall bear such legend, appropriately modified):
THE NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES
LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION HEREOF OR THEREOF
MAY BE MADE UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT
HERETO OR THERETO HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT
AND SUCH REGISTRATION OR QUALIFICATION AS MAY BE NECESSARY UNDER
ANY APPLICABLE STATE SECURITIES LAWS HAS BECOME EFFECTIVE, OR (2)
THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
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ARTICLE VII
MISCELLANEOUS
Section 7.1 Survival of Representations, Warranties, Agreements, etc. All
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representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution and delivery hereof and the consummation
of the transactions contemplated hereby; provided, however, that the covenants
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and agreements set forth in Article V hereof (other than in Section 5.4 hereof)
shall terminate upon the consummation by the Company of its first underwritten
public offering of its equity securities registered under the Securities Act.
Section 7.2 Expenses; Brokers. Each of the Company and the Investor shall
-----------------
pay all costs and expenses incurred by it or on its behalf in connection with
this Agreement and the consummation of the transactions contemplated hereby.
Each party to this Agreement (i) represents and warrants that it has not
retained any finder or broker in connection with the transactions contemplated
by this Agreement and (ii) agrees to indemnify and to hold the other party
harmless from and against any liability for commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which the indemnifying party is responsible.
Section 7.3 Further Assurances. At any time or from time to time after the
------------------
date hereof, the Company, on the one hand, and the Investor, on the other hand,
agree to cooperate with each other, and at the request of the other party, to
execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence or
effectuate the consummation of the transactions contemplated hereby.
Section 7.4 Successors and Assigns. This Agreement shall be binding upon
----------------------
and shall inure to the benefit of the respective successors and assigns of the
parties hereto.
Section 7.5 Entire Agreement. This Agreement and the other documents
----------------
referred to herein or delivered pursuant hereto contain the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior and contemporaneous arrangements or understandings between the parties
with respect thereto.
Section 7.6 Notices. All notices and other communications required or
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permitted hereunder or under the Note to any party shall be in writing and shall
be delivered in person, by telecopy, by nationally recognized overnight courier
or by first class mail, postage prepaid, addressed to such party at its address
set forth below or such other address as may hereafter be designated in writing
by such party to the other:
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(a) if to the Company, to:
TeamVest, Inc.
00000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxxx Xxxxxxx, Chief Financial Officer
with a copy to:
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
(b) if to the Investor, to:
Electronic Market Center, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Chief Executive Officer
with a copy to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
All such notices and other communications shall be deemed to have been
given (i) if delivered personally or sent by telecopy, upon receipt, (ii) if
delivered by overnight courier, on the business day following delivery to such
courier or (iii) if mailed, on the fifth (5th) business day after deposit in the
mails.
Section 7.7 Amendments, Waivers. The terms and provisions of this
-------------------
Agreement or the Note may be modified or amended, or any of the provisions
hereof waived, temporarily or permanently, only by the written agreement of the
Company and the Investor.
Section 7.8 Interpretation. For purposes of this Agreement, (i) except as
--------------
otherwise expressly provided herein, or unless the context otherwise requires,
references to "Sections" or "Schedules" without reference to a document are to
the designated Sections of or Schedules to this Agreement, (ii) the words
"herein," "hereof," "herewith," "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular provision and (iii)
any
13
disclosure made on any Schedule to this Agreement with respect to any
representation and warranty contained herein and that discloses any matter that
is the subject of any other representation and warranty contained herein shall
be deemed to have been disclosed in the appropriate Schedule modifying such
other representation and warranty if it is clear from the face of the disclosure
without any further investigation (including reviewing any document referenced
by such disclosure) that such disclosure relates to such other representation
and warranty.
Section 7.9 Headings. The headings of the various sections and subsections
--------
of this Agreement have been inserted for convenience only and shall not in any
way affect the meaning or construction of any of the provisions hereof.
Section 7.10 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the Commonwealth of Pennsylvania,
without giving effect to the conflict of laws provisions thereof.
Section 7.11 Severability. To the extent any provision of this Agreement is
------------
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in any such jurisdiction, without prohibiting or
invalidating such provision in any other jurisdiction or the remaining
provisions of this Agreement in any jurisdiction.
Section 7.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
Section 7.13 Public Announcements. Any public announcement regarding this
--------------------
Agreement or the relationship between the Company and the Investor shall be
reviewed and approved by both parties hereto prior to its release.
(signatures on following page)
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
TEAMVEST, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
------------------------------
Title: CFO
---------------------------
ELECTRONIC MARKET CENTER, INC.
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Title: CEO
---------------------------
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