EXHIBIT 10.7
COMMON STOCK PURCHASE AGREEMENT
by and among
XXXXX SYSTEMS, INC., a Texas corporation
and
XXXXXXX & XXXXX, a Texas general partnership
Dated as of June __, 2002
Table of Contents
Page
1. PURCHASE AND SALE OF STOCK......................................1
1.1 Sale and Issuance of Common Stock......................1
1.2 Closing................................................1
1.3 Use of Proceeds........................................1
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................1
2.1 Organization, Good Standing and Qualification..........2
2.2 Capitalization and Voting Rights.......................2
2.3 Subsidiaries...........................................2
2.4 Authorization..........................................2
2.5 Governmental Consents..................................3
2.6 Litigation.............................................3
2.7 Title to Property and Assets...........................3
2.8 Financial Statements...................................4
2.9 Books and Records; Bylaws..............................4
2.10 Material Contracts.....................................4
2.11 Rights of Registration.................................5
2.12 Proprietary Rights.....................................5
2.13 No Conflict of Interest................................5
2.14 Tax Returns............................................6
2.15 Permits; Compliance with Laws..........................6
2.16 Compliance with Other Instruments......................7
2.17 Certain Action; Indebtedness...........................7
2.18 Changes................................................7
2.19 Employees; Employee Compensation.......................8
2.20 Employee Benefit Plans.................................9
2.21 Insurance.............................................10
2.22 Environmental and Safety Laws.........................10
2.23 Real Property.........................................10
2.24 Development and Marketing Rights......................11
2.25 Representations Regarding the Restructuring...........11
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TABLE OF CONTENTS
(continued)
2.26 Disclosure............................................12
3. REPRESENTATIONS AND WARRANTIES AND COVENANTS OF PURCHASERS TO
THE COMPANY....................................................12
3.1 Authorization.........................................13
3.2 Purchase Entirely for Own Account.....................13
3.3 Disclosure of Information.............................13
3.4 Investment Experience.................................13
3.5 Restricted Securities.................................13
3.6 Further Limitations on Disposition....................13
3.7 Legends...............................................14
4. INDEMNIFICATION................................................14
4.1 Indemnification of Purchaser Indemnitees..............14
4.2 Indemnification of Company Indemnitee.................14
5. CONDITIONS OF PURCHASERS OBLIGATIONS AT CLOSING................14
5.1 Representations and Warranties........................14
5.2 Performance...........................................14
5.3 Compliance Certificate................................15
5.4 Qualifications........................................15
5.5 Proceedings and Documents.............................15
5.6 Business Activities...................................15
5.7 Management Agreement..................................15
5.8 Board of Directors....................................15
5.9 Indemnification Agreements............................15
5.10 Good Standing.........................................15
5.11 The Restructuring.....................................15
5.12 Xxxxx Option Package..................................15
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.............15
6.1 Representations and Warranties........................16
6.2 Qualifications........................................16
7. MISCELLANEOUS..................................................16
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TABLE OF CONTENTS
(continued)
7.1 Successors and Assigns................................16
7.2 Governing Law.........................................16
7.3 Counterparts..........................................16
7.4 Titles and Subtitles..................................16
7.5 Notices...............................................16
7.6 Finder's Fee..........................................16
7.7 Costs and Expenses....................................17
7.8 Amendment and Waivers.................................17
7.9 Severability..........................................17
7.10 Entire Agreement......................................17
7.11 Survival of Warranties................................17
7.12 Attorneys' Fees.......................................17
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XXXXX SYSTEM, INC.
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made as of June
__, 2002, by and among Xxxxx Systems, Inc., a Texas corporation (the "Company"),
and Xxxxxxx & Xxxxx, a Texas general partnership (the "Purchaser").
RECITALS
WHEREAS, the Purchaser desires to purchase from the Company an aggregate of
3,085,000 shares (the "Shares") of the Company's Common Stock, par value $0.01
per share ("Common Stock"), and the Company desires to issue and sell to the
Purchaser the Shares, on the terms and subject to the conditions specified
herein.
WHEREAS, this transaction is part of a series of transactions involving the
restructuring of debt of the Company and changes in management of the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Common Stock. On and subject to the terms and
conditions of this Agreement, at the Closing (defined below) Purchaser agrees to
purchase, and the Company agrees to sell to Purchaser, the Shares, at a purchase
price of $0.05 per share (representing an aggregate investment of $150,000
which, upon issuance, will represent approximately 46% of the issued and
outstanding capital stock of the Company, without giving effect to the issuance
of the Shares.
1.2 Closing. The closing of the transactions set forth in Section 1.1 above
shall take place at the offices of Squire, Xxxxxxx & Xxxxxxx L.L.P., Xxx
Xxxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000-0000, concurrently with
the execution and delivery of this Agreement or at such other time and place as
the Company and the Purchaser mutually agree upon, either orally or in writing
(which time and place are designated as the "Closing"). At the Closing, (i) the
Company will deliver to the Purchaser the various documents referred to in
Section 4 below; (ii) the Purchaser will deliver to the Company the various
certificates, instruments and documents referred to in Section 5 below; and
(iii) the Company shall deliver to the Purchaser a stock certificate registered
in the Purchaser's name representing the Shares against payment of the purchase
price therefore by check, wire transfer of immediately available funds to an
account designated by the Company or other means acceptable to the Company.
1.3 Use of Proceeds. The Company shall use the proceeds of the sale of the
Shares for its working capital and general corporate purposes.
2. Representations and Warranties of the Company. Except as set forth on
the Schedule of Exceptions attached as Exhibit A hereto (the "Schedule of
Exceptions") or in the Company's Form 10-K for the fiscal year ended September
30, 2001 or Form 10-Q for the quarterly period ended March 31, 2002 (the
"Company's SEC Filings"), the Company makes the following representations and
warranties to the Purchaser as of the date hereof and as of the date of the
Closing, each and all of which shall survive the execution and delivery of this
Agreement and the Closing hereunder as set forth in Section 7.11 hereof.
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and has the corporate power to own its property and to
carry on its business as now being conducted and as proposed to be conducted. On
or before the Closing, the Company will have the power to execute and deliver
this Agreement and any other agreement to which the Company is a party, the
execution and delivery of which is contemplated hereby (the "Ancillary
Agreements"); to issue and sell the Shares; and to carry out the provisions of
this Agreement and any Ancillary Agreements. The Company is duly qualified and
authorized as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to so
qualify would not have a material adverse effect on the business, properties,
prospects or financial condition of the Company.
2.2 Capitalization and Voting Rights. The authorized capital stock of the
Company consists, or will consist, on or before the Closing, of:
(a) Preferred Stock. One million five hundred thousand (1,500,000)
shares of Preferred Stock (the "Preferred Stock"), none of which is
outstanding prior to the Closing.
(b) Common Stock. Fifteen million (15,000,000) shares of Common Stock
(the "Common Stock"), of which six million, seven hundred fifty nine
thousand, eight hundred thirty one (6,759,831) shares will be issued and
outstanding upon the Closing. The outstanding shares of Common Stock are
all duly and validly authorized and issued, fully paid and nonassessable
and were issued in accordance with the registration or qualification
provisions of the Securities Act of 1933, as amended (the "Securities
Act"), and any relevant state securities laws, or pursuant to valid
exemptions therefrom. The Company has reserved Thirteen Thousand Six
Hundred (13,600) shares of Common Stock for issuance to advisors,
employees, directors and consultants of the Company under compensatory
arrangements that have been approved by the Board of Directors of the
Company (the "Option Agreements"). There are options for an aggregate of
Nine Hundred Seventy Thousand Six Hundred (970,600) shares of Common Stock
outstanding, and options Zero (0) shares of Common Stock remain available
for future grant.
(c) Except as set forth on Schedule 2.2(c) or in the Company's SEC
Filings and for currently outstanding options to purchase Nine Hundred
Seventy Thousand Six Hundred (970,600) shares of Common Stock pursuant to
the Option Agreements, there are no outstanding options, warrants, rights
(including conversion, preemptive rights, rights of first refusal or other
similar rights) or proxy or stockholder agreements of any kind for the
purchase or acquisition from the Company of any shares of its capital stock
or other securities convertible into shares of equity securities of the
Company. The Company is not a party or subject to any agreement or
understanding, and, to the Company's knowledge, no stockholder or
optionholder of the Company is a party to any agreement or understanding
with respect to the voting or transfer of any security of the Company, the
voting of a director or with respect to any other aspect of the Company's
affairs.
2.3 Subsidiaries. Except as set forth on Schedule 2.3 or in Exhibit 21 to
the Company's SEC Filings, the Company does not currently own or control,
directly or indirectly, any interest in any other corporation, partnership,
limited liability company, association or other business entity. The Company is
not a participant in any joint venture, partnership or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company and its
respective officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Management Agreement, which is
substantially in the from attached hereto as Exhibit B (the "Management
Agreement") and any Ancillary Agreements; the performance of all obligations of
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the Company hereunder and thereunder; and the authorization, issuance (or
reservation for issuance), sale and delivery of the Shares being sold hereunder
has been taken or will be taken prior to the Closing, and this Agreement, the
Management Agreement and any Ancillary Agreements constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except (i) as limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors,
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity) and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies. The Shares being purchased by the Purchaser hereunder, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, and will be subject to the truth and accuracy of
the Purchaser's representations set forth in Section 3 of this Agreement, the
offer, sale and issuance of the Shares as contemplated by this Agreement are
exempt from the registration requirements of any applicable state and federal
securities laws. To the Company's knowledge, no person acting on its behalf has
taken any action (including, without limitation, any offering of any securities
of the Company under circumstances which require the integration of such
offering with the offering of the Shares under the Securities Act and the rules
and regulations of the SEC thereunder) that might subject the offering, issuance
or sale of the Shares to the registration requirements of Section 5 of the
Securities Act.
2.5 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement or the Management Agreement or in connection with the performance
by the Company of any of its obligations hereunder or thereunder including but
not limited to, the valid offer, issue, sale or delivery of the Shares, except
for the filings pursuant to applicable federal securities laws and the
respective rules thereunder.
2.6 Litigation. Except as set forth on Schedule 2.6 or in the Company's SEC
Filings, there is no action, suit, proceeding or investigation pending or, to
the Company's knowledge, currently threatened against the Company or any of its
properties or assets that questions the validity of this Agreement, Management
Agreement or any of the Ancillary Agreements or the right of the Company to
enter into such agreements or to consummate the transactions contemplated hereby
or thereby or that is reasonably likely to result, either individually or in the
aggregate, in any material adverse change in the assets, business, properties,
prospects or financial condition of the Company or in any material change in the
current equity ownership of the Company. The foregoing includes, without
limitation, any action, suit, proceeding or investigation pending or currently
threatened involving the prior employment of any of the Company's employees,
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers, their
obligations under any agreements with prior employers or negotiations by the
Company with potential backers of, or investors in, the Company or its proposed
business. The Company is not a party to or, to the Company's knowledge, named in
or subject to any order, writ, injunction, judgment or decree of any court,
government agency or instrumentality. There is no material action, suit,
proceeding or investigation by the Company currently pending, or to the
Company's knowledge, threatened or that the Company intends to initiate.
2.7 Title to Property and Assets. Except as set forth on Schedule 2.7 or in
the Company's SEC Filings, the Company has good and valid title to its
properties and assets, free and clear of all mortgages, liens, loans and
encumbrances. With respect to the property and assets leased by the Company, the
Company is in compliance with such leases and the Company holds a valid
leasehold interest free of any liens, claims or encumbrances.
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2.8 Financial Statements. The Company has delivered to the Purchaser its
audited condensed consolidated balance sheets as of September 30, 2001, and the
related condensed consolidated statements of operations, stockholders' equity
and cash flow for the period then ended, and its unaudited condensed
consolidated balance sheets as of March 31, 2002, and the related condensed
consolidated statements of operations, stockholders' equity and cash flow for
the six-month period then ended (these financial statements being collectively
referred to as the "Financial Statements"), as filed with the Securities and
Exchange Commission. The Financial Statements have been prepared in accordance
with generally accepted accounting principles ("GAAP"), applied on a consistent
basis throughout the periods indicated, are consistent with each other and
accurately set out and describe in all material respects the financial condition
and operating results of the Company for such periods, except, in the case of
the Financial Statements that are unaudited, which do not contain footnotes and
are subject to nonrecurring year-end adjustments resulting upon audit of the
Company, which adjustments in the aggregate will not be material to the
financial condition of the Company. Except as set forth in the Financial
Statements or Schedule 2.8, the Company has no material liabilities, contingent
or otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to March 31, 2002 and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in the Financial Statements, which, in both cases,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company. Except as set forth on Schedule 2.8 or in the
Company's SEC Filings, the Company is not a guarantor or indemnitor of any
indebtedness of any person, firm or corporation.
2.9 Books and Records; Bylaws. The copies of the minute books of the
Company provided to the Purchaser contain minutes of all meetings of the members
of the Company and directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders of the Company since the
date of the formation and incorporation of the Company and accurately reflects
all actions by the directors (and any committee of such) and stockholders with
respect to all transactions referred to in such minutes in all material
respects. The Company's stock ledger, as provided to the Purchaser, is complete
and reflects all issuances, transfers, repurchases and cancellations of shares
of capital stock of the Company. The Bylaws of the Company are in the form
provided to the Purchaser.
2.10 Material Contracts. Schedule 2.10 contains a true, correct and
complete list and description of all of the contractual obligations to which the
Company is a party or by which it is bound that involve (i) obligations
(contingent or otherwise) of, or payments to, the Company in an amount exceeding
$[35,000]; (ii) the license of any patent, copyright, trade secret or any other
proprietary right material to the Company's business, to or from the Company;
(iii) provisions restricting the development, manufacture or distribution of the
Company's products or services; or (iv) any other obligation which could
reasonably be considered material to the business, operating results or
financial condition of the Company (collectively, the "Material Contracts").
Each Material Contract is a valid and binding agreement of Company, enforceable
against the Company in accordance with its terms (subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors, rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)). Except for any
nonperformance that in the aggregate has or results in no material adverse
effect to the business, properties, assets, operating results or financial
condition of the Company, to the knowledge of the Company, it has fulfilled all
obligations required pursuant to each Material Contract to have been performed
by it as of the Closing. The Company is not in default or breach, nor to its
knowledge is any third party in default or breach, under or with respect to any
Material Contract, except for such default or breach that would not have a
material adverse effect on the business, properties, assets, operating results,
prospects or financial condition of the Company.
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2.11 Rights of Registration. Except as set forth on Schedule 2.11, the
Company is not under any contractual obligation and has not granted any rights
to register any of its currently outstanding securities under the Securities
Act.
2.12 Proprietary Rights.
(a) To its knowledge, the Company owns, has licensed or otherwise possesses
all patents, copyrights, trademarks, trade names, domain names, trade secrets,
including computer software programs and other proprietary data and other
intellectual property rights necessary to conduct its business as currently
conducted (the "Proprietary Information") without any conflict with or
infringement of any intellectual property or other rights of others. Schedule
2.12(a) contains a complete list of all the Proprietary Information (including
all patents, provisional patents and patents pending) necessary to the conduct
of the Company's business as currently conducted or as proposed to be conducted.
(b) To its knowledge, the Company has taken all appropriate security
measures to protect the secrecy, confidentiality and value of all trade secrets,
know-how, inventions, designs, processes and technical data required to conduct
its business. Except as set forth on Schedule 2.12(b) and for agreements with
its own employees or consultants, there are no outstanding options, licenses or
other similar agreements relating to the Proprietary Information, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity. Except as set forth on Schedule 2.12(b), the Company has
not received any communications alleging that it has violated any of the
patents, trademarks, service marks, trade names, domain names, copyrights or
trade secrets or other proprietary rights of any other person or entity. The
Company is not aware of any violation by a third party of any of its patents,
licenses, trademarks, trade names, domain names, service marks, copyrights,
trade secrets or other proprietary rights. The Company has the right to use the
Proprietary Information, except that the possibility exists that other persons
may have independently developed trade secrets or technical information similar
or identical to those of or acquired by the Company (although the Company has no
such knowledge).
(c) The Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement or is subject to any judgment, decree or order of any court or
administrative agency that would interfere with the use of such employee's
reasonable efforts to promote the interests of the Company or that would
conflict with the Company's business as proposed to be conducted. To the
Company's knowledge, neither the execution nor delivery of this Agreement nor
the carrying on of the Company's business by the employees of the Company, nor
the conduct of the Company's business as proposed, will conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any material contract, covenant or instrument under which any of such
employees is now obligated. The Company does not believe it is or will be
necessary to use any inventions of any of its employees (or persons it currently
intends to hire) made prior to their employment by the Company. To the Company's
knowledge, none of the Company's officers or employees has improperly used or is
making improper use of any confidential information or trade secrets of others,
including those of any former employer of such officer or employee.
2.13 No Conflict of Interest.
(a) Except as set forth on Schedule 2.13(a), there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors or affiliates.
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(b) Except as set forth on Schedule 2.13(b), the Company is not indebted,
directly or indirectly, to any of its officers or directors or to such officers'
or directors' respective spouses or children, in any amount whatsoever other
than in connection with expenses or advances of expenses incurred in the
ordinary course of business. None of the Company's employees, officers or
directors, nor any members of their immediate families, is, directly or
indirectly, indebted to the Company. No member of the immediately family of any
officer or director of the Company is directly or indirectly interested in any
material contract with the Company.
(c) Except as set forth on Schedule 2.13(c), neither the Company nor any of
its officers or directors has any interest (other than as holders of less than
1% of the voting securities of a publicly traded company), either directly or
indirectly, in any entity that currently (i) provides any services or designs,
produces or sells any products or product lines that are the same or competitive
with the business of the Company; (ii) is a supplier, customer or creditor of
the Company; or (iii) has any direct or indirect interest in any asset or
property, real or personal, tangible or intangible, of the Company or any
property, real or personal, tangible or intangible, that is necessary for the
Company's business as is currently conducted or proposed to be conducted.
2.14 Tax Returns. All tax returns, declarations, statements, reports,
schedules, forms and information returns ("Returns") required by all U.S.
federal, state and local and foreign jurisdictions (in each case, including all
political subdivisions thereof) relating to all U.S. federal, state, local and
foreign taxes and other assessments of a similar nature (whether imposed
directly or through withholding), including any interest, additions to tax or
penalties applicable thereto ("Taxes"), if any, required to be filed by the
Company prior to the Closing have been (or will be) timely filed, except Form
1120 for the fiscal year ended September 30, 2001 and the Franchise Tax Return
for 2002, and such Returns are (or will be) true, complete and correct in all
material respects. All Taxes shown on any such Returns to be due from the
Company that are due and payable have been paid, other than those being
contested in good faith and for which an adequate reserve or accrual has been
established in accordance with GAAP. The Company has not elected to be treated
as a collapsible corporation pursuant to Section 1362(a) or Section 341(f) of
the Internal Revenue Code of 1986, as amended (the "Code"), nor has it 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
effect on the Company, its financial condition, its business as presently
conducted or any of its properties or material assets. The Company has never had
any tax deficiency proposed or assessed against it, nor has it executed any
waiver of any statute of limitations on the assessment or collection of any tax
or governmental charge. None of the Company's federal income tax returns and
none of its respective state income or franchise tax or sales or use tax returns
has ever been audited by governmental authorities within the past four years.
The Company has withheld or collected from each payment made to each of its
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 or authorized depositaries. The Company is not
a party to any agreement, contract, arrangement or plan that has resulted in or
would result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code (without
regard to the exception in Sections 280G(b)(4) and 280G(b)(5) of the Code).
Since the date of the Financial Statements, the Company has not incurred any
taxes, assessments or governmental charges other than in the ordinary course of
business.
2.15 Permits; Compliance with Laws. The Company has obtained and maintained
in good standing all of its licenses, permits, consents, authorizations and any
similar authority required to be obtained by it under federal, state and local
laws and regulations (collectively, "Laws"), the lack of which would not have a
material adverse effect on the assets, condition or affairs of the Company,
financially or otherwise. The Company is in compliance with such Laws (except
for such noncompliance which,
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individually or in the aggregate, will not have a material adverse effect on the
Company's business, prospects, financial condition or results or operations),
and there is no pending or, to the Company's knowledge, threatened, action or
proceeding against the Company under any of such Laws, other than any such
actions or proceedings that, individually or in the aggregate, if adversely
determined, would not have a material adverse effect on the business of the
Company.
2.16 Compliance with Other Instruments. Except as set forth on Schedule
2.16, the Company is not in breach or violation of any term of its Certificate
of Incorporation or Bylaws; of any term or provision of any material
indebtedness, indenture, mortgage, deed of trust, contract, agreement,
instrument, judgment or decree to which the Company is a party or by which it or
any of its properties or assets is bound; or any order, statute, rule, or
regulation applicable to the Company, in each case where such breach or
violation would have a material adverse effect on the Company. The execution,
delivery and performance of and compliance with this Agreement, the Management
Agreement and any Ancillary Agreements and the consummation of the transactions
contemplated hereby or thereby including, but not limited to, the issuance, sale
and delivery of the Shares, do not conflict with and shall not result in a
breach or violation of the terms, conditions or provisions of or constitute a
default (or an event that, with the giving of notice or passage of time, or
both, could result in a default) under, or result in the creation or imposition
of any lien, charge or encumbrance upon any of the assets of the Company
pursuant to the terms of the Company's Certificate of Incorporation or Bylaws,
or, to the Company's knowledge, any statute, law, rule or regulation; any state
or federal order, judgment or decree; or any material indenture, mortgage, deed
of trust, lease or other agreement or instrument to which the Company or any of
its properties or assets is subject, in each case where such breach or violation
would have a material adverse effect on the Company.
2.17 Certain Action; Indebtedness. Except as set forth on Schedule 2.17 or
in the Company's SEC Filings, the Company has not (i) declared or paid any
dividends, authorized or made any distribution or incurred any liability to make
a payment or distribution upon or with respect to any class or series of its
capital stock (each, a "Restricted Payment"); (ii) incurred any indebtedness in
excess of $35,000 individually or $70,000 in the aggregate; (iii) made any loans
or advances to any person, other than advances to officers of the Company for
travel expenses or other business-related advances in the ordinary course of
business; or (iv) sold, exchanged or otherwise disposed of any of its assets or
rights, other than the sale of its inventory in the ordinary course of business.
For the purposes of this Section 2.17 and Section 2.10, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
sections.
2.18 Changes. Except as set forth on Schedule 2.18 or in the Company's SEC
Filings, since March 31, 2002, there has not been:
(a) any change in the assets, liabilities, financial condition or operating
results of the Company from that reflected in the Financial Statements, except
changes in the ordinary course of business that have not been, individually or
in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the business, properties, assets, operating
results or financial condition of the Company (as such business is presently or
currently proposed to be conducted);
(c) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and that is not
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material to the business, properties, assets, operating results or financial
condition of the Company (as such business is presently or currently proposed to
be conducted);
(d) any material adverse change to a Material Contract by which the Company
or any of its assets is bound or subject;
(e) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets, trade names, domain names or other intangible assets;
(f) any declaration, setting aside or payment of any dividend or other
distribution of the Company's capital stock or any direct or indirect
redemption, purchase or other acquisition of any of such stock by the Company;
(g) any resignation or termination or to the Company's knowledge, any
threatened or impending resignation or termination, of employment of any key
officer of the Company;
(h) any mortgage, pledge, granting 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;
(i) any material change in any compensation arrangement or agreement with
any employee, officer, director or stockholder;
(j) receipt of notice that a customer or supplier of the Company has
terminated, materially reduced or threatened to terminate or materially reduce
its purchases from or provisions of products or services to the Company, as the
case may be;
(k) any loans or guarantees made by the Company to or for the benefit of
its employees, stockholders, 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; or
(l) any agreement or commitment by the Company to do any of the things
described in this Section 2.18.
2.19 Employees; Employee Compensation.
(a) There is no strike, labor dispute or union organization activities
pending with respect to or, to the Company's knowledge, threatened against the
Company. The Company is not a party to any collective bargaining agreements
covering any of its employees. None of the Company's employees belong to any
union or collective bargaining unit.
(b) To the Company's knowledge, no employee of the Company is obligated
under any judgment, decree or order or any term of any employment contract,
patent disclosure agreement or other contract or agreement that would conflict
with such employee's obligation to use his or her best efforts to promote the
interests of the Company or that would conflict with the Company's execution or
delivery of this Agreement, the Management Agreement or any Ancillary Agreement,
or the Company's businesses as currently conducted or proposed to be conducted.
The Company is not actually aware that any of its employees are in violation of
any term of any employment agreement, proprietary information agreement,
non-competition agreement or any other agreement relating to such employee's
relationship with any previous employer.
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(c) Except as set forth on Schedule 2.19(c), the Company is not party to or
bound by any currently effective employment contract, deferred compensation
agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement
or other employee compensation agreement, except the Company's Stock Option
Plan, restricted stock purchase agreements and offer letters in the ordinary
course of business. The Company is not aware that any officer or key employee,
or that any group of key employees, intends to terminate his, her or their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. The Company does not believe
it is or will be necessary to use any inventions of any of its employees (or
people it currently intends to hire) made before their employment by the
Company.
2.20 Employee Benefit Plans.
(a) Schedule 2.20 contains a current, correct and complete list of all
Plans. "Plan" means each employee benefit plan or other similar arrangement
(whether written or oral) to which the Company or any ERISA Affiliate (as
defined below) is a party, by which any of them is bound, legally or otherwise;
to which any of them contributes; or which any of them sponsors including,
without limitation (i) any profit-sharing, deferred compensation, bonus,
pension, retainer, consulting, retirement, severance, welfare or incentive plan,
agreement or arrangement; (ii) any plan, agreement or arrangement providing for
"fringe benefits" or perquisites to employees, officers or agents, including but
not limited to benefits relating to the Company's or ERISA Affiliates'
automobiles, clubs, vacation, child care, parenting, sabbatical, sick leave,
medical, dental, hospitalization, life insurance or other benefits, whether
provided through the purchase of insurance or otherwise; (iii) any employment
agreement not terminable on 30 (thirty) days' (or less) written notice; or (iv)
any other "employee benefit plan" (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")). "ERISA
Affiliate" means any entity required to be aggregated with the Company under
Section 414(b), (c) or (m) of the Code. The Company has delivered to the
Purchaser current, correct and complete copies of all material documents with
respect to such Plans.
(b) Each Plan complies in all material respects with all applicable
requirements of ERISA, the Code, other applicable laws and regulations, any
requirements imposed by applicable governmental authorities and the agreements,
instruments or other documents which govern the Plans. The Company and each
ERISA Affiliate has performed all of its material obligations under all Plans,
including but not limited to making all required contributions to each Plan on a
timely basis. To the knowledge of the Company and the ERISA Affiliates, no event
has occurred that will or could give rise to disqualification of any such Plan.
With respect to each Plan that constitutes an "employee benefit plan" under
ERISA Section 3(3) or a "plan" within the meaning of Code Section 4975(e)(1), no
"prohibited transaction" (as defined in Code Section 4975(c)(1) or ERISA Section
406) has occurred. The execution and delivery of this Agreement and the issuance
and sale of the Shares will not involve any such prohibited transaction.
(c) There are no investigations, claims, lawsuits or actions (other than
routine claims for benefits) pending or, to the Company's knowledge, threatened
by any third party or any governmental authority against any Plans or their
assets or arising out of such Plans or against any fiduciary of the Plans, and
neither the Company nor the ERISA Affiliates are aware of facts which could give
rise to any such actions.
(d) The Company's and the ERISA Affiliates' group health plans have been
operated in material compliance with the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") rules of Code Section 4980B and all other
applicable laws. Except to the extent required under Code Section 4980B, neither
the Company nor any ERISA Affiliate has any written health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employees of
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the Company or such ERISA Affiliate. Neither the Company nor any ERISA Affiliate
has made any written agreements, covenants or commitments to provide retiree
medical benefits that cannot be terminated at the discretion of the Company or
such ERISA Affiliate, as applicable.
(e) Neither the Company nor any ERISA Affiliate is or ever has been a party
to any Plan that is (i) a Multiemployer Plan or (ii) a Pension Plan subject to
ERISA Title IV, ERISA Section 302, or Code Section 412. A "Multiemployer Plan"
means a multiemployer plan within the meaning of ERISA Section 4001(a)(3) to
which the Company or any ERISA Affiliate makes, is making or is obligated to
make contributions or, during the preceding three (3) calendar years, has made
or has been obligated to make contributions. A "Pension Plan" means an employee
pension benefit plan as defined in ERISA Section 3(2) that the Company or any
ERISA Affiliate sponsors or maintains or to which any of them makes, is making
or is obligated to make contributions.
2.21 Insurance. The Company has in full force and effect fire and casualty
insurance policies, with extended coverage, in amounts (subject to reasonable
deductibles) customary in the industry in which the Company competes.
2.22 Environmental and Safety Laws. The Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety (collectively, the "Environmental Laws"), and no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation. Except as set forth on Schedule 2.22 or in
the Company's SEC Filings, no Hazardous Materials (as defined below) are used or
have been used, stored, or disposed of by the Company or, to its knowledge, by
any other person or entity on any property owned, leased or used by the Company.
For the purposes of the preceding sentence, "Hazardous Materials" shall mean (a)
materials that are listed or otherwise defined as "hazardous" or "toxic" under
any applicable local, state, federal and/or foreign laws and regulations that
govern the existence and/or remedy of contamination on property, the protection
of the environment from contamination, the control of hazardous wastes or other
activities involving hazardous substances, including building materials or (b)
any petroleum products or nuclear materials.
2.23 Real Property.
(a) Schedule 2.23 hereto contains a true, correct and complete list of all
real properties now owned, leased, subleased, operated or otherwise occupied by
the Company (collectively, the "Real Properties"). No other Person has any oral
or written right, agreement or option to acquire, lease, sublease or otherwise
occupy all or any portion of such Real Properties. The Company has not received
any written or oral notice for assessment for public improvements against any of
the Real Properties which remains unpaid and, to the best knowledge of the
Company, no such assessment has been proposed. There is no pending condemnation,
expropriation, eminent domain or similar proceeding affecting all or any portion
of any of the Real Properties and, to the best knowledge of and the Company, no
such proceeding is contemplated.
(b) Accurate and current copies of all real property leases, subleases,
licenses or other occupancy agreements (and all amendments thereto) listed on
Schedule 2.23 hereto have previously been delivered to Buyer (collectively, the
"Leases"). The Company has not assigned its rights under any Leases. The Leases
are in full force and effect and constitute binding obligations of the Company
and the other parties thereto and (i) there are no defaults thereunder by the
Company or to the best knowledge of the Company, by any other party thereto, and
(ii) no event has occurred which with notice, lapse of time, or both would
constitute a default by the Company or, to the best knowledge of the Company, by
any other party thereto.
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(c) (i) The Company has good, marketable and insurable legal and equitable
(A) fee simple title to the real property owned by such entity (the "Owned Real
Property"), and (B) leasehold title to the property leased pursuant to the
Leases (the "Leased Real Property"), in all cases, free and clear of any and all
Liens, exceptions, items, encumbrances, easements, restrictions and other
matters either of record or, to the best knowledge of the Company, not of record
which, in the case of such matters not of record, either individually or in the
aggregate, could prohibit or adversely interfere with Buyer's use of such
property. No material default or breach exists under any of the covenants,
conditions, restrictions, rights-of-way or easements, if any, affecting all or
any portion of the Real Properties.
(ii) The zoning for the Real Properties are as set forth on Schedule 2.23
hereto and, to the best knowledge of the Company, the current zoning of each of
the Real Properties permits the operator of such property for the current
respective use thereof. The Company has not made any application for a rezoning
of any of the Real Properties, does not have any knowledge of any proposed or
pending change to any zoning affecting any of the Real Properties, and has no
knowledge of any expropriation or condemnation or similar proceeding pending or
threatened against any of the Real Properties or any part of the Real
Properties.
(iii) All utilities, including, without limitation, potable water, sewer,
gas, electric, telephone, and other public utilities and all storm water
drainage required by law or necessary for the operation of the Real Properties
(A) are installed, connected and operating, in good condition, and in compliance
with all applicable laws, with all installation and connection charges paid in
full, including, without limitation, connection and the permanent right to
discharge sanitary waste into the collector system of the appropriate sewer
authority, and (B) are adequate (in both quality and quantity) to service the
Real Properties for their respective use in the business as presently conducted
thereon.
(iv) The Company has not conveyed or leased any rights in the oil, gas or
other mineral rights with respect to the Real Properties (collectively, the
"Minerals"). No person or entity has asserted to the Company, or to the best
knowledge of the Company, to any other party, any rights in or to any Minerals
and no person or entity has attempted to access, physically investigate, extract
or remove any of the Minerals. To the best knowledge the Company, there is no
person or entity which has any claim or other right to the Minerals.
(v) Except as set forth on Schedule 2.23 hereto, there are no deeds of
trust or mortgages which are a Lien upon the Real Properties that are owned by
the Company.
2.24 Development and Marketing Rights. The Company has not granted rights
to develop, produce, assemble, license, distribute, market or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, produce, assemble, license, distribute, market or
sell its products.
2.25 Representations Regarding the Restructuring.
(a) Company Corporation Actions. The Board of Directors of the Company,
together with the stockholders of the Company, to the extent required by
applicable law, have taken all actions necessary to effect the restructuring of
the Company's indebtedness owed to XX Xxxxxx Xxxxx Bank, which restructuring was
effectuated pursuant to that certain form of Amendment to Loan Agreement and
related Loan Purchase Agreement attached hereto as Exhibit C (the "Restructuring
Agreements").
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(b) Authority and Validity of the Restructuring Agreements. The Company has
all requisite corporate power and authority to enter into the Restructuring
Agreements and to perform the obligations thereunder and to consummate the
transaction contemplated thereby. The execution and delivery of the
Restructuring Agreements and all related documents and instruments and the
consummation of the Reorganization contemplated thereby have been duly
authorized by all necessary action on the part of the Company and, except as
specifically set forth therein, no other approval is required for the
performance by the Company or the holders of Common Stock of the Company of
their respective obligations thereunder. The Restructuring Agreements and all
related documents and instruments have been, and at Closing will be, duly
executed and delivered by the Company and the other parties thereto. The
Restructuring Agreements and all related documents and instruments, constitute,
and at Closing will constitute, a valid and binding obligation of the Company,
enforceable in accordance with their respective terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting creditors' rights, and with respect to the
remedy of specific performance, equitable doctrines applicable thereto).
(c) No Violations. Neither the execution and delivery of the Restructuring
Agreements and all related documents and instruments by the Company nor the
consummation of the Reorganization contemplated thereby will (i) violate any
provisions of the charter or bylaws of the Company or (ii) violate, or be in
conflict with, or constitute a default (or an event which, with or without due
notice or lapse of time, or both, would constitute a default) under, or cause or
permit the acceleration of the maturity of, or give rise to any material note,
debt instrument, indenture, security agreement, option to purchase, lease, deed
of trust, material license or Material Contract to which the Company is a party
or by which any of its assets is or may be bound, or (iii) result in the
creation or imposition of any encumbrance of any kind based upon any assets of
the Company under any indebtedness, liens, obligation, material contract or
commitment to which the Company is a party or by which any of it or its assets
is or may be bound, or (iv) violate any laws to which the Company may be
subject.
(d) Consents and Approvals of Governmental Authorities. Except as
contemplated by the Restructuring Agreements, no consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required with respect to the Company in connection with the execution,
delivery and performance of the Restructuring Agreements or all related
documents and instruments or the consummation by the Company of the
Reorganization.
(e) Other Consents. No consent or waiver or approval of, or notice to, any
third party is required or necessary to be obtained by the Company in connection
with the execution and delivery of the Restructuring Agreements and the
performance of the Company's obligations thereunder, except as may be required
under contracts, agreements or instruments not material to the Company.
(f) Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or, to the Company's knowledge, threatened
that question the validity of the Restructuring Agreements or any action taken
or to be taken by the Company in connection therewith.
2.26 Disclosure. The Company has provided the Purchaser with all the
information that such Purchaser has requested for deciding whether to purchase
the Shares and all information that the Company believes is necessary to enable
the Purchaser to make such decision (it being understood and acknowledged that
the Company has provided its due diligence materials only to the single counsel
to the Purchaser and such counsel has made such materials generally available to
the Purchaser for review). Neither this Agreement, the Management Agreement, the
Ancillary Agreements, nor any other statements or certificates made or delivered
in connection herewith or therewith or in the Company's SEC Filings contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the
A-12
statement herein or therein, when read together, not misleading in light of the
circumstances under which they were made.
3. Representations and Warranties and Covenants of Purchasers to the
Company. The Purchaser hereby represents and warrants and covenants to the
Company that as of the date such Purchaser executes this Agreement:
3.1 Authorization. Such Purchaser has full power and authority to enter
into this Agreement and the Management Agreement. All corporate action on the
part of the Purchaser, its officers, directors and stockholders necessary for
the authorization, execution and delivery of this Agreement and the Management
Agreement has been taken or will be taken prior to Closing. Each such agreement
constitutes a valid and legally binding obligation of Purchaser, enforceable in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium 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; and (iii) to the extent the indemnification provision
contained in the Management Agreement may be limited by applicable federal and
state securities laws.
3.2 Purchase Entirely for Own Account. Such Purchaser is purchasing the
Shares for its own account, for investment purposes and not with a view to the
resale or distribution of any part thereof. Purchaser will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any of the Shares, except in compliance with the Securities Act. By
executing this Agreement, Purchaser further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell or
transfer to such person or to any third person, with respect to any of the
Shares.
3.3 Disclosure of Information. Purchaser further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Shares and the business,
properties, prospects and financial condition of the Company and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to the Purchaser. The foregoing, however,
does not limit or modify the representations and warranties of the Company in
Section 2 of this Agreement or the right of the Purchaser to rely thereon.
3.4 Investment Experience. Purchaser represents that it is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act.
Purchaser is an investor in securities of thinly traded companies and turn
around situations and acknowledges that it is able to fend for itself, can bear
the economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Shares. Purchaser also represents it has not been
organized solely for the purpose of acquiring the Shares.
3.5 Restricted Securities. Purchaser understands that the Shares it is
purchasing 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 addition,
Purchaser represents that it is familiar with SEC Rule 144, as currently in
effect and understands the resale limitations imposed thereby and by the
Securities Act.
3.6 Further Limitations on Disposition. Without in any way limiting the
above, Purchaser further agrees not to make any disposition of all or any
portion of the Securities, unless and
A-13
until (i) such disposition will not require registration of such shares under
the Securities Act and (ii) the transferee has agreed in writing for the benefit
of the Company to be bound by this Section 3.6 and Section 8 of this Agreement;
provided, however, that this Section 3.6 shall be inapplicable if:
(a) there is then in effect a Registration Statement under the Securities
Act covering the proposed disposition of Shares and such disposition is made in
accordance with such Registration Statement; or
(b) the Shares are sold by Purchaser pursuant to, and in accordance with
all of the requirements then applicable under, Rule 144.
3.7 Legends. It is understood that the certificate(s) evidencing the Shares
shall bear the legends substantially in the form set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE CORPORATION RECEIVES AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE
OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 OF THE
ACT. COPIES OF THE AGREEMENTS COVERING THE PURCHASE OF THESE SHARES
AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
4. Indemnification.
4.1 Indemnification of Purchaser Indemnitees. The Company agrees to
indemnify and hold Purchaser and each of its directors, officers and affiliates
(collectively, the "Purchaser Indemnitees") harmless against and in respect of
any and all damages, losses, liabilities, obligations, costs, and expenses
(including reasonable attorneys' fees) that the Purchaser Indemnitees may suffer
or incur as a result of a breach by the Company of any of the representations,
warranties or covenants set forth herein (notwithstanding any investigations
made by or on behalf of the Purchaser Indemnitees).
4.2 Indemnification of Company Indemnitee. The Purchaser Indemnitees agree
to indemnify and hold the Company (and its directors, officers and affiliates)
(collectively, the "Company Indemnitee") harmless against and in respect of any
and all damages, losses, liabilities, obligations, costs, and expenses
(including reasonable attorneys' fees) that the Company Indemnitee may suffer or
incur as a result of a breach of any of the representations or warranties by the
Purchaser Indemnitees set forth herein.
5. Conditions of Purchasers Obligations at Closing. The obligations of the
Purchaser to purchase the Shares at the Closing are subject to the fulfillment
on or before the applicable closing of each of the following conditions.
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5.1 Representations and Warranties. The representations and warranties of
the Company in Section 2 shall be true on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
the date of the Closing.
5.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Compliance Certificate. The President of the Company shall deliver to
each Purchaser at the Closing a certificate certifying that the conditions
specified in Sections 5.1, 5.2, 5.4 and 5.6 have been fulfilled and that there
shall have been no material adverse change in the business of the Company or any
subsidiary of the Company since March 31, 2002.
5.4 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
Shares pursuant to this Agreement shall have been duly obtained by the Company
and be effective as of the Closing.
5.5 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Purchaser.
5.6 Business Activities. The Company's business, assets, financial
condition, operations, results of operations and prospects shall be
substantially as represented to the Purchaser and no change to such business,
assets, financial condition, operations, results of operations or prospects
shall have occurred that, in the Purchaser's reasonable judgment, is or may be
materially adverse to the Company.
5.7 Management Agreement. The Company and the Purchaser shall have entered
into the Management Agreement.
5.8 Board of Directors. All but two of the directors of the Company shall
have resigned effective as of the Closing and shall have acted to fill the
vacancies created by such resignations with two designees of the Purchaser.
5.9 Indemnification Agreements. The Company shall have entered into an
Indemnification Agreement with each member of its Board of Directors, in form
and substance substantially in the form attached hereto as Exhibit E.
5.10 Good Standing. The Company shall deliver to the Purchaser at the
Closing a certificate dated the date hereof certifying as to the Company's good
standing in each of the States of Texas and those States in which the Company's
business or operations require it to qualify as a foreign corporation.
5.11 The Restructuring. The Company shall have entered into the
Restructuring Agreements and the same shall be in full force and effect as of
the Closing and the Restructuring Agreements shall not have been amended or
modified. The transactions contemplated by the Restructuring Agreements shall
have been duly consummated in accordance with the terms of such Restructuring
Agreements.
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5.12 Xxxxx Option Package. The Company shall have entered into the Xxxxx
Systems, Inc/X.X Xxxxx, Xx. Agreement of June 22, 2002, that provides for the
cancellation, conversion or assignment of all options and similar rights to
purchase Common Stock beneficially owned by X.X. Xxxxx, Xx. ("Xxxxx") and the
release of all claims that either party may have against the other.
6. Conditions of the Company's Obligations at Closing. The obligations of
the Company to sell and issue the Shares at the Closing are subject to the
fulfillment of each of the following conditions:
6.1 Representations and Warranties. The representations and warranties
of Purchaser in Section 3 shall be true on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
the date of the Closing.
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
Securities pursuant to this Agreement shall be duly obtained and effective as of
the Closing.
7. Miscellaneous.
7.1 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 Securities). 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.
7.2 Governing Law. This Agreement and the transactions contemplated
hereunder shall be governed by and construed under the laws of the State of
Texas as applied to agreements among Texas residents entered into and to be
performed entirely within Texas. The parties hereto agree to waive all rights
they may otherwise have to trial by jury in connection with any action, suit or
proceeding brought to enforce or defend any rights or remedies arising under or
relating to this Agreement and the agreements and transactions contemplated
hereby, whether grounded in tort, contract or otherwise.
7.3 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.5 Notices. All notices, reports to be provided under Section 4.1, and
other communications required or permitted hereunder shall be in writing, shall
be effective when given, and shall in any event be deemed to be given upon
receipt or, if earlier, (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid; (b) upon delivery, if delivered by hand; (c) one (1) business
day after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid; or (d) one (1) business day after the business day of
facsimile transmission (with confirmation), if delivered by facsimile
transmission and provided that a copy is sent by first class mail, postage
prepaid, and shall be addressed (i) if to a Purchaser, at such Purchaser's
address or facsimile number as set forth on the signature page to this
Agreement, with a copy to ______________________________, attn:
_______________________________, and (ii) if to the Company, at the address or
facsimile number of the Company's principal corporate offices, or at such other
address as a party may designate by ten (10) days' advance written notice to the
other party pursuant
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to the provisions above, with a copy to
____________________________________; attn: _______________________.
7.6 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finder's or broker's fee or commission in connection with the
transactions contemplated by this Agreement, and each party agrees to indemnify
and hold harmless any other party hereto from any liability for any commission
or compensation in the nature of a finder's or broker's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
such party or any of its officers, partners, employees, or representative is
responsible.
7.7 Costs and Expenses. The Company shall pay in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
transactions contemplated hereby the fees and out-of-pocket expenses of Squire,
Xxxxxxx & Xxxxxxx L.L.P.
7.8 Amendment and Waivers. 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 Purchaser. 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.
7.9 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.
7.10 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement among the parties and no party shall be liable
or bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein.
7.11 Survival of Warranties. The warranties, representations and covenants
of the Company and Purchaser contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing for a
period of one year and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of the Purchaser or the Company.
Notwithstanding anything to the contrary in this Section 7.11, no limitation or
condition of liability provided in herein shall apply to the breach of any of
the representations and warranties contained herein if such representation or
warranty was made fraudulently or with intent to deceive.
7.12 Attorneys' Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the Management Agreement or
Ancillary Agreements, the prevailing party shall be entitled to reasonable
attorneys' fees, costs, and disbursements in addition to any other relief to
which such party may be entitled.
7.13 Third Party Beneficiaries. The Company hereby acknowledges that Xxxx,
Xxxxx & Strong II, L.P. ("CSS"), Focus Capital Group, LLC ("FCG") and Xxxxxx
Xxxx ("Xxxx") are relying on the truthfulness and accuracy of the Company's
representations and warranties set forth in this Agreement for purposes of
entering into separate transactions with the Company at or about the same time
the Company is entering into the transactions contemplated by this Agreement. As
such, CSS, FCG and Xxxx are third party beneficiaries of this Agreement and are
entitled to take legal action against the Company for any breach of the
Company's representations and warranties made herein as if such representations
and warranties had been made directly to CSS, FCG or Xxxx in connection with the
transactions such parties are entering into with the
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Company. The Company hereby agrees to waive as a defense to any legal action
brought by CSS, FCG and Xxxx any claim that such entities or persons are not
third party beneficiaries of this Agreement.
7.14 Legal Counsel. Each of the Company and Purchaser hereby acknowledge
that Squire, Xxxxxxx & Xxxxxxx L.L.P. ("SSD") is legal counsel to FCG only and
that FCG has participated in facilitating the transactions contemplated by this
Agreement and the transactions being entered into concurrently herewith by CSS
and Xxxx. Each of the Company and Purchaser has had an opportunity to consult
with its own legal counsel and to seek advice regarding this Agreement and the
transactions contemplated hereby.
[Intentionally Left Blank]
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The parties have executed this Common Stock Purchase Agreement as of the
date first above written.
COMPANY: XXXXX SYSTEMS, INC.
By:
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Name:
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Title:
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PURCHASER: XXXXXXX & XXXXX
By:
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Name:
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Title:
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Address:
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EXHIBITS
Omitted
