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EXHIBIT 4.6
[EXECUTION COPY]
PURCHASE AGREEMENT
BY AND AMONG
BANKVEST CAPITAL CORP.,
PRIMUS CAPITAL FUND III LIMITED PARTNERSHIP
AND
PNC VENTURE CORP
__________________________________
DATED AS OF MAY 28, 1998
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TABLE OF CONTENTS
Page
1. Authorization and Closing............................................................................ 1
1A. Authorization of the Preferred Stock........................................................ 1
1B. Purchase and Sale of the Preferred Stock.................................................... 1
1C. The Closing................................................................................. 1
2. Conditions of Each Purchaser's Obligation at the Closing.................................................. 1
2A. Representations and Warranties; Covenants................................................... 2
2B. Amendment and Restatement of Articles of Organization....................................... 2
2C. Amended Registration Rights Agreement....................................................... 2
2D. Amended and Restated Stockholders Agreement................................................. 2
2E. Amendment of Purchase Agreement............................................................. 2
2F. Sale of Preferred Stock to Each Purchaser................................................... 2
2G. Securities Law Compliance................................................................... 2
2H. Opinion of the Company's Counsel............................................................ 3
2I. Closing Documents........................................................................... 3
2J. Proceedings................................................................................. 3
2K. Expenses.................................................................................... 3
2L. Waiver...................................................................................... 4
3. Covenants................................................................................................. 4
3A. Financial Statements and Other Information.................................................. 4
3B. Inspection of Property...................................................................... 6
3C. Quarterly Investors Meetings................................................................ 7
3D. Class C Restrictions........................................................................ 7
3E. Affirmative Covenants...................................................................... 11
3F. Class D Restrictions....................................................................... 12
3G. Compliance with Agreements................................................................. 12
3H. Current Public Information................................................................. 13
3I. Amendment of Other Agreements.............................................................. 13
3J. Financing Agreements....................................................................... 13
3K. Right of First Refusal..................................................................... 14
3L. Regulatory Compliance Cooperation.......................................................... 15
3M. Public Disclosures......................................................................... 16
3N. Contingent Warrants........................................................................ 16
4. Transfer of Restricted Securities................................................................... 16
4A. General Provisions......................................................................... 16
4B. Opinion Delivery........................................................................... 16
4C. Rule 144A.................................................................................. 17
4D. Legend Removal............................................................................. 17
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5. Representations and Warranties of the Company....................................................... 17
5A. Organization, Corporate Power and Licenses................................................. 17
5B. Capital Stock and Related Matters.......................................................... 17
5C. Subsidiaries; Investments.................................................................. 18
5D. Authorization; No Breach................................................................... 19
5E. Financial Statements....................................................................... 19
5F. Absence of Undisclosed Liabilities......................................................... 20
5G. No Material Adverse Change................................................................. 20
5H. Absence of Certain Developments............................................................ 20
5I. Assets..................................................................................... 22
5J. Tax Matters................................................................................ 22
5K. Contracts and Commitments.................................................................. 23
5L. Intellectual Property Rights............................................................... 24
5M. Litigation, etc............................................................................ 25
5N. Brokerage.................................................................................. 26
5O. Governmental Consent, etc.................................................................. 26
5P. Insurance.................................................................................. 26
5Q. Employees.................................................................................. 26
5R. ERISA...................................................................................... 27
5S. Compliance with Laws....................................................................... 27
5T. Affiliated Transactions.................................................................... 28
5U. Real Property Holding Corporation Status................................................... 28
5V. Disclosure................................................................................. 28
6. Definitions.............................................................................................. 29
6A. Definitions................................................................................ 29
6B. Other Definitions.......................................................................... 34
7. Miscellaneous............................................................................................ 34
7A. Expenses................................................................................... 34
7B. Remedies................................................................................... 35
7C. Purchaser's Investment Representations..................................................... 35
7D. Treatment of the Preferred Stock........................................................... 36
7E. Consent to Amendments; Waivers............................................................. 37
7F. Survival of Representations and Warranties................................................. 37
7G. Successors and Assigns..................................................................... 37
7H. Capital and Surplus; Special Reserves...................................................... 37
7I. Generally Accepted Accounting Principles................................................... 38
7J. Severability............................................................................... 38
7K. Counterparts............................................................................... 38
7L. Descriptive Headings; Interpretation....................................................... 38
7M. Governing Law.............................................................................. 38
7N. Notices.................................................................................... 38
7O. Understanding Among the Purchasers......................................................... 39
7P. Delivery by Facsimile...................................................................... 39
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7Q. No Strict Construction..................................................................... 39
Schedules and Exhibits
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Schedule of Purchasers
List of Exhibits
List of Disclosure Schedules
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BANKVEST CAPITAL CORP.
PURCHASE AGREEMENT
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THIS AGREEMENT is made as of May 28, 1998, by and among BankVest
Capital Corp., a Massachusetts corporation (the "Company"), Primus Capital Fund
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III Limited Partnership, an Ohio limited partnership ("Primus"), and PNC Venture
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Corp, a Delaware corporation ("PNC"). Primus and PNC are collectively referred
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to herein as the "Purchasers" and individually as a "Purchaser." Except as
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otherwise provided herein, capitalized terms used herein are defined in Section
6 hereof.
Pursuant to this Agreement, (i) the Company desires to issue and sell
and Primus desires to purchase 37,500 shares of the Company's Class C
Convertible Preferred Stock, par value $1.00 per share (the "Class C
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Preferred"), and (ii) the Company desires to issue and sell and PNC desires to
purchase 37,500 shares of the Company's Class D Convertible Preferred Stock, par
value $1.00 per share (the "Class D Preferred" and, together with the Class C
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Preferred, the "Preferred Stock").
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The parties hereto hereby agree as follows:
Section 1. Authorization and Closing.
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1A. Authorization of the Preferred Stock. The Company shall (i)
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authorize the issuance and sale to Primus of 37,500 shares of Class C Preferred
and (ii) authorize the issuance and sale to PNC of 37,500 shares of Class D
Preferred.
1B. Purchase and Sale of the Preferred Stock. At the Closing, the
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Company shall (i) sell to Primus and, subject to the terms and conditions set
forth herein, Primus shall purchase from the Company, 37,500 shares of Class C
Preferred for $3,750,000 and (ii) sell to PNC and, subject to the terms and
conditions set forth herein, PNC shall purchase from the Company, 37,500 shares
of Class D Preferred for $3,750,000. The sale of the Preferred Stock to each
Purchaser shall constitute a separate sale hereunder.
1C. The Closing. The closing of the separate purchases and sales of
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the Preferred Stock (the "Closing") shall take place at the offices of Xxxxxxxxx
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& Manello, P.C., 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx at 10:00 a.m. on May
28, 1998, or at such other place or on such other date as may be mutually
agreeable to the Company and each Purchaser. At the Closing, the Company shall
deliver to each Purchaser stock certificates evidencing the Preferred Stock to
be purchased by such Purchaser, registered in such Purchaser's or its nominee's
name, upon payment of the purchase price therefor by a cashier's or certified
check, or by wire transfer of immediately available funds to the Company's
account in accordance with wire instructions delivered to each Purchaser prior
to the Closing.
Section 2. Conditions of Each Purchaser's Obligation at the Closing.
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The obligation of each Purchaser to purchase and pay for the Preferred Stock at
the Closing is subject to the satisfaction as of the Closing of the following
conditions:
2A. Representations and Warranties; Covenants. The representations
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and warranties contained in Section 5 hereof shall be true and correct at and as
of the Closing as though then made and the Company shall have performed in all
material respects all of the covenants required to be performed by it hereunder
prior to the Closing.
2B. Amendment and Restatement of Articles of Organization. The
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Company's Articles of Organization (the "Articles of Organization") shall have
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been amended and restated in the form of Exhibit A attached hereto, establishing
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the terms and the relative rights and preferences of the Preferred Stock and
amending and restating the terms and the relative rights and preferences of the
Company's Class A Convertible Preferred Stock, par value $1.00 per share (the
"Class A Preferred"), and the Company's Class B Convertible Preferred Stock, par
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value $1.00 per share (the "Class B Preferred"). The Company shall not have
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adopted or filed any other document designating terms, relative rights or
preferences of its preferred stock. The Articles of Organization shall be in
full force and effect under the Massachusetts General Laws as of the Closing as
so amended and restated and shall not have been further amended or modified.
2C. Amended Registration Rights Agreement. The Company and the
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Purchasers shall have entered into an amendment to that certain Amended and
Restated Registration Rights Agreement, dated as of February 28, 1997, by and
among the Company, Primus, PNC and WSDF, in the form of Exhibit B attached
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hereto (the "First Amendment to Amended and Restated Registration Rights
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Agreement"), and the First Amendment to Amended and Restated Registration Rights
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Agreement shall be in full force and effect as of the Closing.
2D. Amended and Restated Stockholders Agreement. The Company, the
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Purchasers and certain of the Company's other stockholders shall have entered
into an amended and restated stockholders agreement in the form of Exhibit C
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attached hereto (the "Amended and Restated Stockholders Agreement"), and the
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Amended and Restated Stockholders Agreement shall be in full force and effect as
of the Closing.
2E. Amendment of Purchase Agreement. The Company, Primus and PNC
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shall have entered into an amendment to that certain Purchase Agreement, dated
as of May 30, 1996, and as amended by the First Amendment to and Waiver of
Certain Provisions to Purchase Agreement, dated as of February 28, 1997, each by
and among the Company, Primus and PNC (the "1996 Purchase Agreement") in the
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form of Exhibit D attached hereto (the "Second Amendment to Purchase
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Agreement"), and the Second Amendment to Purchase Agreement shall be in full
force and effect as of the Closing.
2F. Sale of Preferred Stock to Each Purchaser. The Company shall
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have simultaneously sold to each Purchaser the Preferred Stock to be purchased
by such Purchaser hereunder at the Closing and shall have received payment
therefor in full.
2G. Securities Law Compliance. The Company shall have made all
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filings (other than those which are not required to be filed before the Closing)
under all applicable federal and state securities laws necessary to consummate
the issuance of the Preferred Stock pursuant to this Agreement in compliance
with such laws.
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2H. Opinion of the Company's Counsel. Each Purchaser shall have
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received from Xxxxxxxxx & Xxxxxxx, P.C., counsel for the Company, an opinion
with respect to the matters set forth in Exhibit E attached hereto, which shall
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be addressed to each Purchaser, dated the date of the Closing and in form and
substance reasonably satisfactory to each Xxxxxxxxx.
0X. Closing Documents. The Company shall have delivered to each
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Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing, stating
that the conditions specified in Section 1 and paragraphs 2A, 2B, 2F and 2G,
have been fully satisfied;
(ii) a Clerk's Certificate, dated the date of the Closing, certifying
that attached thereto are copies of (a) the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and performance
of this Agreement, the First Amendment to Amended and Restated Registration
Rights Agreement, the Amended and Restated Stockholders Agreement, the Second
Amendment to Purchase Agreement and each of the other agreements contemplated
hereby, the filing of the restated Articles of Organization referred to in
paragraph 2B, the issuance and sale of the Preferred Stock, the reservation for
issuance upon conversion of the Class C Preferred and/or conversion of the Class
B Common issuable upon conversion of the Class D Preferred of an aggregate of
349,000 shares of Class A Common, the reservation for issuance upon conversion
of the Class D Preferred of an aggregate of 174,500 shares of Class B Common and
the reservation for issuance upon conversion of the Class D Preferred of an
aggregate of 37,500 shares of Class C Preferred and the consummation of all
other transactions contemplated by this Agreement, and (b) the resolutions duly
adopted by the Company's stockholders adopting the Articles of Organization
referred to in paragraph 2B;
(iii) certified copies of the Articles of Organization, as filed with
the Secretary of State of The Commonwealth of Massachusetts and in effect at the
Closing, and a copy of the Bylaws as certified by the Clerk of the Company and
in effect at the Closing;
(iv) copies of all third party and governmental consents, approvals
and filings required in connection with the consummation of the transactions
hereunder (including, without limitation, all blue sky law filings and waivers
of all preemptive rights and rights of first refusal); and
(v) such other documents relating to the transactions contemplated
by this Agreement as any Purchaser or its special counsel may reasonably
request.
2J. Proceedings. All corporate and other proceedings taken or
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required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to each Purchaser and its special counsel.
2K. Expenses. At the Closing, the Company shall have reimbursed the
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Purchasers for their fees and expenses as provided in paragraph 7A hereof.
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2L. Waiver. Any condition specified in this Section 2 may be waived
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if consented to by each Purchaser at or prior to the Closing; provided that no
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such waiver shall be effective against any Purchaser unless it is set forth in a
writing executed by such Purchaser.
Section 3. Covenants.
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3A. Financial Statements and Other Information. The Company shall
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deliver to each Purchaser (so long as such Purchaser holds any Preferred Stock
or any Underlying Common Stock) and to each holder of at least 10% of the
outstanding Preferred Stock and each holder of at least 10% of the Underlying
Common Stock:
(i) as soon as available but in any event within 45 days after the
end of each monthly accounting period in each fiscal year, unaudited
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such monthly period and for the period from the
beginning of the fiscal year to the end of such month, and unaudited
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such monthly period, setting forth in each case
comparisons to the Company's annual budget and to the corresponding period in
the preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently applied,
subject to the absence of footnote disclosures and to normal year-end
adjustments for recurring accruals, and shall be certified by the Company's
chief financial officer;
(ii) accompanying the financial statements referred to in
subparagraph (i), an Officer's Certificate (a) stating that there is no Event of
Noncompliance in existence and that neither the Company nor any of its
Subsidiaries is in default under any of its other material agreements or, if any
Event of Noncompliance or any such default exists, specifying the nature and
period of existence thereof and what actions the Company and its Subsidiaries
have taken and propose to take with respect thereto and (b) setting forth the
amount of the Company's and its Subsidiaries' outstanding funded Indebtedness as
of the end of such monthly accounting period and the amount of available funds
under the Company's and its Subsidiaries' revolving credit lines and other
facilities as of the end of such period;
(iii) within 90 days after the end of each fiscal year, consolidating
and consolidated statements of income and cash flows of the Company and its
Subsidiaries for such fiscal year, and consolidating and consolidated balance
sheets of the Company and its Subsidiaries as of the end of such fiscal year,
setting forth in each case comparisons to the Company's annual budget and to the
preceding fiscal year, all prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by (a) with respect
to the consolidated portions of such statements, an opinion containing no
exceptions or qualifications (except for qualifications regarding specified
contingent liabilities) of an independent accounting firm of recognized national
standing acceptable to the holders of a majority of the outstanding Preferred
Stock and the holders of a majority of the Underlying Common Stock, (b) a
certificate from such accounting firm, addressed to the Company's board of
directors, stating that in the course of its examination nothing came to its
attention that caused it to believe that there was an Event of Noncompliance in
existence or that there was any other default by the Company or any Subsidiary
in the fulfillment of or compliance with
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any of the terms, covenants, provisions or conditions of any other material
agreement to which the Company or any Subsidiary is a party or, if such
accountants have reason to believe any Event of Noncompliance or other default
by the Company or any Subsidiary exists, a certificate specifying the nature and
period of existence thereof, and (c) a copy of such firm's annual management
letter to the board of directors;
(iv) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant aspects
of the Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials provided
hereunder);
(v) at least 15 days but not more than 90 days prior to the
beginning of each fiscal year, an annual budget prepared on a monthly basis for
the Company and its Subsidiaries for such fiscal year (displaying anticipated
statements of income and cash flows and balance sheets), and promptly upon
preparation thereof any other significant budgets prepared by the Company and
any revisions of such annual or other budgets, and within 30 days after any
monthly period in which there is a material adverse deviation from the annual
budget, an Officer's Certificate explaining the deviation and what actions the
Company has taken and proposes to take with respect thereto; provided that any
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monthly deviation which is contemplated in the annual budget and which does not
result in an adverse impact on the business or operations of the Company shall
not be deemed a material adverse deviation for purposes hereof;
(vi) promptly (but in any event within ten days) after the discovery
or receipt of notice of any Event of Noncompliance, any default under any
material agreement to which it or any of its Subsidiaries is a party, any
condition or event which is reasonably likely to result in any material
liability under any federal, state or local statute or regulation relating to
public health and safety, worker health and safety or pollution or protection of
the environment or any other material adverse change, event or circumstance
affecting the Company or any Subsidiary (including, without limitation, the
filing of any material litigation against the Company or any Subsidiary or the
existence of any dispute with any Person which involves a reasonable likelihood
of such litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company and its
Subsidiaries have taken and propose to take with respect thereto;
(vii) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general written
communications which the Company sends to its stockholders and copies of all
registration statements and all regular, special or periodic reports which it
files, or (to its knowledge) any of its officers or directors file with respect
to the Company, with the Securities and Exchange Commission or with any
securities exchange on which any of its securities are then listed, and copies
of all press releases and other statements made available generally by the
Company to the public concerning material developments in the Company's and its
Subsidiaries' businesses; and
(viii) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Person
entitled to receive information under this paragraph 3A may reasonably request.
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Each of the financial statements referred to in subparagraph (i) and (iii) shall
be consistent with the books and records of the Company (which, in turn, shall
be accurate and complete in all material respects) and shall present fairly in
all material respects the consolidated financial condition, results of
operations and cash flows of the Company and its Subsidiaries in accordance with
generally accepted accounting principles applied on a consistent basis as of the
dates and for the periods set forth therein, subject in the case of the
unaudited financial statements to changes resulting from normal year-end
adjustments for recurring accruals (none of which would, alone or in the
aggregate, be materially adverse to the financial condition, operating results,
assets, operations or business prospects of the Company and its Subsidiaries
taken as a whole). Notwithstanding the foregoing, the provisions of this
paragraph 3A and paragraphs 3B and 3C below shall cease to be effective so long
as the Company (a) is subject to the periodic reporting requirements of the
Securities Exchange Act and continues to comply with such requirements and (b)
promptly provides to each Person otherwise entitled to receive information
pursuant to this paragraph 3A all reports and other materials filed by the
Company with the Securities and Exchange Commission pursuant to the periodic
reporting requirements of the Securities Exchange Act. Except as otherwise
required by law or judicial order or decree or by any governmental agency or
authority, each Person entitled to receive information regarding the Company and
its Subsidiaries under this paragraph 3A or paragraph 3B below or under any
other provision of this Agreement or any other agreement contemplated hereby to
be executed by such Person with the Company shall use the same standards and
controls which such Person uses to maintain the confidentiality of its own
confidential information (but in no event less than reasonable care) to maintain
the confidentiality of all nonpublic information of the Company or any of its
Subsidiaries obtained by it pursuant to this paragraph 3A or paragraph 3B below
or under any other provision of this Agreement or any other agreement
contemplated hereby to be executed by such Person with the Company; provided
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that each such Person may disclose such information in connection with the sale
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or transfer of any Preferred Stock or Underlying Common Stock if such Person's
transferee agrees in writing to be bound by the provisions hereof. For purposes
of this Agreement and the Amended and Restated Registration Rights Agreement,
all holdings of Preferred Stock and Underlying Common Stock by Persons who are
Affiliates of each other (which, for this purpose, shall also include Persons
which have received distributions of securities from a partnership holding such
securities) shall be aggregated for purposes of meeting any threshold tests
under this Agreement and the Amended and Restated Registration Rights Agreement.
3B. Inspection of Property. The Company shall permit any
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representatives designated by any Purchaser (so long as such Purchaser holds any
Preferred Stock or Underlying Common Stock) or any holder of at least 10% of the
outstanding Preferred Stock or at least 10% of the Underlying Common Stock, upon
reasonable notice and during normal business hours, to (i) visit and inspect any
of the properties of the Company and its Subsidiaries, (ii) examine the
corporate and financial records of the Company and its Subsidiaries and make
copies thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of any such corporations with the directors, officers and independent
accountants of the Company and its Subsidiaries. The presentation of an
executed copy of this Agreement by any Purchaser or any such holder of Preferred
Stock or Underlying Common Stock to the Company's independent accountants shall
constitute the Company's permission to its independent accountants to
participate in discussions with such Persons. Any Person entitled to exercise
rights under this paragraph 3B shall be entitled to exercise such
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rights not more than one time per calendar quarter, unless at any time there
shall exist an Event of Noncompliance, in which case each such Person shall be
entitled to exercise such rights at any time and from time to time during the
period that such Event of Noncompliance shall be in existence.
3C. Quarterly Investors Meetings. Immediately prior to or
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immediately following each meeting of the Company's board of directors, the
Company shall hold an informational meeting for the holders of the Preferred
Stock and the Underlying Common Stock either by telephonic conference or at the
Company's principal executive office (or other location reasonably acceptable to
the holders of the Preferred Stock and the Underlying Common Stock and the
Company). At each such meeting, the executive officers of the Company and its
Subsidiaries and such other individuals as the executive officers deem necessary
and appropriate shall be available to discuss the affairs, finances and
operations of such corporations. Each holder electing to participate therein
shall be provided with an agenda of the matters to be discussed at each such
investors meeting. The Company shall reimburse each Purchaser for the
reasonable out-of-pocket expenses of not more than one representative designated
by such Purchaser incurred in connection with attending each such meeting.
3D. Class C Restrictions. So long as at least 331/5% of the Class C
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Preferred remains outstanding, the Company shall not, without the prior written
consent of the holders of a majority of the outstanding Class C Preferred (which
consent shall not be unreasonably withheld in the case of paragraph 3D(xxv)
below):
(i) directly or indirectly declare or pay any dividends or make any
distributions upon any of its capital stock or other equity securities other
than the Preferred Stock pursuant to the terms of the Articles of Organization,
except for dividends payable in shares of Common Stock issued upon the
outstanding shares of Common Stock;
(ii) directly or indirectly redeem, purchase or otherwise acquire, or
permit any Subsidiary to redeem, purchase or otherwise acquire, any of the
Company's or any Subsidiary's capital stock or other equity securities
(including, without limitation, warrants, options and other rights to acquire
such capital stock or other equity securities) other than (a) the Preferred
Stock or the Class B Preferred pursuant to the Articles of Organization, (b)
pursuant to the Put as defined in the Amended and Restated Stockholders
Agreement (as the same relates to the Preferred Stock and the Class A Preferred
and Class B Preferred and the Common Stock issued upon conversion thereof), (c)
WSDF's "Put" pursuant to that certain Put and Call Agreement dated as of
February 28, 1997, but only for an aggregate repurchase price of no more than $2
million, (d) repurchases of Common Stock from former employees of the Company
and its Subsidiaries upon termination of employment pursuant to arrangements
approved by the Company's board of directors for an aggregate purchase price of
no more than $250,000 in any twelve-month period so long as no Event of
Noncompliance is in existence immediately prior to or is otherwise caused by any
such repurchase, and (e) subject to approval by the Company's board of
directors, repurchases, at a price not to exceed $20.00 per share, of not more
than an aggregate of 12,500 shares of Common Stock from employees of the Company
and its Subsidiaries issued to such employees pursuant to the October 6, 1997
Private Placement Memorandum; or directly or indirectly redeem, purchase or make
any payments with respect to any stock appreciation rights, phantom stock plans
or similar rights or plans;
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(iii) authorize, issue or enter into any agreement providing for the
authorization, creation, or issuance (contingent or otherwise) of, (a) any notes
or debt securities containing equity features (including, without limitation,
any notes or debt securities convertible into or exchangeable for capital stock
or other equity securities, issued in connection with the issuance of capital
stock or other equity securities or containing profit participation features),
(b) any capital stock or other equity securities (or any securities convertible
into or exchangeable for any capital stock or other equity securities) which are
senior to or on a parity with the Class C Preferred or the Class D Preferred
with respect to the payment of dividends, redemptions or distributions upon
liquidation or otherwise or (c) any additional Preferred Stock (other than Class
C Preferred issued or issuable upon conversion of Class D Preferred pursuant to
Part E of the Articles of Organization); provided that nothing herein shall be
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interpreted as prohibiting the Company from authorizing, issuing or entering
into any agreement to issue capital stock or any other equity security which is
junior to the Preferred Stock in all respects (including, without limitation,
with respect to the payment of dividends, redemptions or distributions upon
liquidation or otherwise), subject to the rights of the holders of Preferred
Stock under this Agreement, the Articles of Organization and the other
agreements contemplated hereby;
(iv) make, or permit any Subsidiary to make, any loans or advances
to, guarantees for the benefit of, or Investments in, any Person (other than a
Wholly-Owned Subsidiary established under the laws of a jurisdiction of the
United States or any of its territorial possessions), except for (a) reasonable
advances to employees in the ordinary course of business, (b) acquisitions
permitted pursuant to subparagraph (viii) below, (c) Investments having a stated
maturity no greater than one year from the date the Company makes such
Investment in (1) obligations of the United States government or any agency
thereof or obligations guaranteed by the United States government, (2) fully-
insured certificates of deposit of commercial banks having combined capital and
surplus of at least $1 billion or (3) commercial paper with a rating of at least
"Prime-1" by Xxxxx'x Investors Service, Inc. and (d) loans made in the ordinary
course of business in connection with prefunding agreements with, and other
extensions of credit to, the Company's vendors;
(v) merge or consolidate with any Person or, except as permitted by
subparagraph (viii) below, permit any Subsidiary to merge or consolidate with
any Person (other than a Wholly-Owned Subsidiary);
(vi) sell, lease or otherwise dispose of, or permit any Subsidiary to
sell, lease or otherwise dispose of, any assets of the Company or its
Subsidiaries involving an aggregate consideration in excess of $1,000,000 in any
twelve-month period (other than any sale or lease of assets made in the ordinary
course of business in connection with any leases entered into by the Company or
any of its Subsidiaries as lessor in the ordinary course of business and other
than any Liens to lending institutions incurred or granted by the Company or any
of its Subsidiaries in the ordinary course of business in connection therewith);
(vii) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation, any
reorganization into a limited liability company, a partnership or any other non-
corporate entity which is treated as a partnership for federal income tax
purposes);
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(viii) acquire, or permit any Subsidiary to acquire, any interest in
any company or business (whether by a purchase of assets, purchase of stock,
merger or otherwise), or enter into any joint venture, involving an aggregate
consideration (including, without limitation, the assumption of liabilities
whether direct or indirect) exceeding $5,000,000 in any one transaction or
series of related transactions or exceeding $5,000,000 in any twelve-month
period;
(ix) enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any business other than the
businesses in which it is presently engaged (except that the Company shall be
permitted to operate a Wholly-Owned Subsidiary captive insurer and/or bankruptcy
proof Wholly-Owned Subsidiary for the purpose of securitizing lease receivables
in the ordinary course of business);
(x) except for any financing agreements or instruments (which are
subject to the provisions of paragraph 3J below and not this subparagraph (x)),
become subject to, or permit any of its Subsidiaries to become subject to,
(including, without limitation, by way of amendment to or modification of) any
agreement or instrument which by its terms would (under any circumstances)
restrict (a) the right of any Subsidiary to make loans or advances or pay
dividends to, transfer property to, or repay any Indebtedness owed to, the
Company or another Subsidiary (except that nothing in this clause (a) shall
prohibit the Company from operating a bankruptcy proof Wholly-Owned Subsidiary
for the purpose of securitizing lease receivables in the ordinary course of
business) or (b) the Company's right to perform the provisions of this
Agreement, the Amended and Restated Registration Rights Agreement, the Amended
and Restated Stockholders Agreement, the Articles of Organization or the Bylaws
(including, without limitation, provisions relating to the declaration and
payment of dividends on and the making of redemptions and conversions of the
Preferred Stock);
(xi) except as expressly contemplated by this Agreement, make any
amendment to the Articles of Organization or the Bylaws, or file any resolution
of the board of directors with the Massachusetts Secretary of State containing
any provisions, which would increase the number of authorized shares of the
Preferred Stock or adversely affect or otherwise impair the rights or the
relative preferences and priorities of the holders of the Preferred Stock or the
Underlying Common Stock under this Agreement, the Articles of Organization, the
Bylaws, the Amended and Restated Registration Rights Agreement or the Amended
and Restated Stockholders Agreement;
(xii) enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, employees, stockholders or Affiliates or with any
individual related by blood, marriage or adoption to any such individual or with
any entity in which any such Person or individual owns a beneficial interest,
except for customary employment arrangements and benefit programs on reasonable
terms and except as otherwise expressly contemplated by this Agreement;
(xiii) increase any compensation (including salary, bonuses and other
forms of current or deferred compensation) payable to Xxxx X. Xxxx or any other
officers or directors of the Company or any of its Subsidiaries, except for any
such increases approved by the Compensation
-9-
Committee established by the Company's board of directors in accordance with the
Amended and Restated Stockholders Agreement;
(xiv) establish or acquire (a) any Subsidiaries other than Wholly-
Owned Subsidiaries or (b) any Subsidiaries organized outside of the United
States and its territorial possessions (except that nothing in this clause (xiv)
shall prohibit the Company from establishing an offshore Wholly-Owned Subsidiary
captive insurer);
(xv) except as approved by the Company's board of directors (and,
in the case of lines of credit, loans or financing arrangements with lending
institutions, within the limits of such lines of credit, loans or financing
arrangements approved by the Company's board of directors), create, incur,
assume or suffer to exist, or permit any Subsidiary to create, incur, assume or
suffer to exist, any Indebtedness;
(xvi) except as approved by the Company's board of directors,
create, incur, assume or suffer to exist, or permit any Subsidiary to create,
incur, assume or suffer to exist, any Liens (other than Permitted Liens);
(xvii) make any capital expenditures for capital equipment for use in
the Company's operations such as computers, phones, office machines, office
furnishings and related fixtures (including, without limitation, payments with
respect to capitalized leases, as determined in accordance with generally
accepted accounting principles consistently applied) exceeding five percent (5%)
of the Company's Capital Base (as hereinafter defined) in the aggregate on a
consolidated basis during any fiscal year. The term "Capital Base" as used
------------
herein shall mean the net worth of the Company, plus all issued and outstanding
subordinated debt calculated in accordance with GAAP;
(xviii) enter into any leases or other rental agreements (excluding
capitalized leases, as determined in accordance with generally accepted
accounting principles consistently applied) under which the amount of the
aggregate lease payments to be made by the Company and its Subsidiaries for all
such agreements exceeds five percent (5%) of the Company's Capital Base (as
hereinbefore defined) on a consolidated basis during any fiscal year;
(xix) except as approved by the Company's board of directors, change
its fiscal year;
(xx) increase the authorized size of its board of directors above
seven members (except for any increase upon the occurrence of certain Events of
Noncompliance as provided in the Articles of Organization);
(xxi) amend or modify any stock option plan or employee stock
ownership plan as in existence as of the Closing (except for any such amendment
or modification which increases to not more than 300,000 the total number of
shares of Common Stock subject to authorized stock options (as such number of
shares is proportionately adjusted for subsequent stock splits, combinations and
dividends affecting the Common Stock and as such number includes all stock
-10-
options and purchase rights outstanding as of the Closing or exercised for
shares of Common Stock prior to the Closing)), adopt any new stock option plan
or employee stock ownership plan or issue any shares of Common Stock to its or
its Subsidiaries' employees or directors other than pursuant to the Company's
existing stock option plans (it being understood that all such options shall be
subject to vesting in equal annual installments over not less than five years);
(xxii) issue or sell any shares of the capital stock, or rights to
acquire shares of the capital stock, of any Subsidiary to any Person other than
the Company or a Wholly-Owned Subsidiary;
(xxiii) borrow against, pledge, assign, modify, cancel or surrender
the key-man life insurance policy required to be maintained under paragraph
3E(vii) hereof;
(xxiv) use the proceeds from the sale of the Preferred Stock other
than to finance its marketing efforts to banks and equipment vendors, to support
investment in equipment leases and for working capital purposes; or
(xxv) effect or consummate an initial Public Offering unless such
initial Public Offering constitutes a Qualified Public Offering.
3E. Affirmative Covenants. So long as at least 331/3% of the
---------------------
Preferred Stock remains outstanding, the Company shall, and shall cause each
Subsidiary to, unless it has received the prior written consent of the holders
of a majority of the outstanding Preferred Stock:
(i) at all times cause to be done all things necessary to
maintain, preserve and renew its corporate existence and all material licenses,
authorizations and permits necessary to the conduct of its businesses and where
the failure to do so would have a material adverse effect upon the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries taken as a whole;
(ii) maintain and keep its material properties in good repair,
working order and condition, and from time to time make all necessary or
desirable repairs, renewals and replacements, so that its businesses may be
properly and advantageously conducted in all material respects at all times;
(iii) pay and discharge when payable all material taxes, assessments
and governmental charges imposed upon its properties or upon the income or
profits therefrom (in each case before the same becomes delinquent and before
penalties accrue thereon) and all material claims for labor, materials or
supplies which if unpaid would by law become a Lien upon any of its property
unless and to the extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have been
established on its books with respect thereto;
(iv) comply with all other material obligations which it incurs
pursuant to any material contract or material agreement, whether oral or
written, express or implied, as such
-11-
obligations become due, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and adequate reserves (as
determined in accordance with generally accepted accounting principles,
consistently applied) have been established on its books with respect thereto;
(v) comply with all applicable laws, rules and regulations of all
governmental authorities, the violation of which would reasonably be expected to
have a material adverse effect upon the financial condition, operating results,
assets, operations or business prospects of the Company and its Subsidiaries
taken as a whole;
(vi) apply for and continue in force with good and responsible
insurance companies adequate insurance covering risks of such types and in such
amounts as are customary for corporations of similar size engaged in similar
lines of business;
(vii) maintain the key-man life insurance policy referred to in
paragraph 2H of the 1996 Purchase Agreement;
(viii) maintain proper books of record and account which present
fairly in all material respects its financial condition and results of
operations and make provisions on its financial statements for all such proper
reserves as in each case are required in accordance with generally accepted
accounting principles, consistently applied; and
(ix) enter into and maintain nondisclosure agreements with its key
employees.
3F. Class D Restrictions. So long as at least 331/3% of the
--------------------
Class D Preferred remains outstanding, the Company shall not, without the prior
written consent of the holders of a majority of the outstanding Class D
Preferred, take any of the actions specified in xxxxxxxxxx 0X(x), 0X(xx),
0X(xxx), 0X(x), 0X(xx) (but only if such transaction involves the sale, lease or
other disposition of more than 50% of the consolidated assets of the Company and
its Subsidiaries (computed on the basis of book value, determined in accordance
with generally accepted accounting principles consistently applied, or fair
market value, determined by the Company's board of directors in its good faith
judgment)), 3D(vii), 3D(ix), 3D(x), 3D(xi), 3D(xii), 3D(xv), 3D(xvi) or 3D(xxiv)
above; provided that, notwithstanding the foregoing, in lieu of obtaining the
-------- ----
prior written consent of the holders of the Class D Preferred as provided above
with respect to the actions specified in xxxxxxxxxx 0X(x), 0X(xx), 3D(v),
3D(vi), 3D(ix) and 3D(x) (but only with respect to clause (a) thereof) above,
the Company may offer in writing to redeem all of the outstanding Class D
Preferred in accordance with Section 4 of Part E of the Articles of
Organization. If the holders of a majority of the outstanding Class D Preferred
reject such offer of redemption or fail to accept such offer within ten business
days after such offer is delivered to each holder of Class D Preferred, such
holders shall be deemed to have consented to any such action which gave rise to
the offer of redemption, the offer shall be deemed to have been withdrawn and
the Company shall have no right to redeem any shares of Class D Preferred
pursuant to Section 4 of Part E of the Articles of Organization. If the holders
of a majority of the outstanding Class D Preferred accept such offer of
redemption, such holders shall have no right to object to the taking of any such
action which gave rise to the offer of redemption, and the Company shall be
obligated to redeem all of the outstanding
-12-
shares of Class D Preferred pursuant to the provisions of Section 4 of Part E of
the Articles of Organization on or prior to the date on which any such action
which gave rise to the offer of redemption is to be taken by the Company or any
of its Subsidiaries.
3G. Compliance with Agreements. The Company shall perform and
--------------------------
observe (i) all of its obligations to each holder of the Preferred Stock and all
of its obligations to each holder of the Underlying Common Stock set forth in
Part E of the Articles of Organization and the Bylaws, (ii) all of its
obligations to each holder of Registrable Securities set forth in the Amended
and Restated Registration Rights Agreement and (iii) all of its obligations to
each holder of Stockholder Shares set forth in the Amended and Restated
Stockholders Agreement.
3H. Current Public Information. At all times after the Company has
--------------------------
filed a registration statement with the Securities and Exchange Commission
pursuant to the requirements of either the Securities Act or the Securities
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Securities Exchange Act and the rules and
regulations adopted by the Securities and Exchange Commission thereunder and
shall take such further action as any holder or holders of Restricted Securities
may reasonably request, all to the extent required to enable such holders to
sell Restricted Securities pursuant to (i) Rule 144 adopted by the Securities
and Exchange Commission under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission or (ii) a registration statement on Form S-2
or S-3 or any similar registration form hereafter adopted by the Securities and
Exchange Commission. Upon request, the Company shall deliver to any holder of
Restricted Securities a written statement as to whether it has complied with
such requirements.
3I. Amendment of Other Agreements. The Company shall not amend,
-----------------------------
modify or waive any provision of its employment agreement with Xxxx X. Xxxx
without the prior written consent of the holders of a majority of the Underlying
Common Stock, and the Company shall enforce the provisions of such employment
agreement and shall exercise all of its rights and remedies thereunder unless it
is otherwise directed by the holders of a majority of the Underlying Common
Stock. The provisions of this paragraph 3I shall terminate upon the
consummation of a Qualified Public Offering.
3J. Financing Agreements. The Company shall not amend, modify or
--------------------
waive, or permit any Subsidiary to amend, modify or waive, any provision of the
Company's or any Subsidiary's existing financing agreements if as a result of
such amendment, modification or waiver the Company, any of its Subsidiaries or
the holders of the Preferred Stock would be subject to any provision of such
financing agreements more onerous or restrictive in any material respect than as
in effect immediately prior to any such amendment, modification or waiver,
without the prior written consent of the holders of a majority of the
outstanding Preferred Stock. The Company shall not become subject to, or permit
any Subsidiary to become subject to, any new financing agreement that contains
any provisions that are more onerous or restrictive in any material respect to
the Company, any of its Subsidiaries or the holders of the Preferred Stock than
the Company's existing financing agreements as of the date hereof, without the
prior written consent of the holders of a majority of the outstanding Preferred
Stock. Notwithstanding the foregoing, the holders of Preferred Stock shall
-13-
not unreasonably withhold such prior written consent, and such holders shall
have no right to object thereto if any such amendment, modification or waiver to
an existing financing agreement or if any such new financing agreement would not
have a material adverse effect on the business operations or financial condition
of the Company and its Subsidiaries taken as a whole. The provisions of this
paragraph 3J shall not apply if any such amendment, modification or waiver is
approved by a majority of the Company's board of directors (with at least one of
the Investor Directors (as defined in the Amended and Restated Stockholders
Agreement) voting in favor thereof or otherwise consenting thereto). The
provisions of this paragraph 3J shall terminate upon the consummation of a
Qualified Public Offering.
3K. Right of First Refusal.
----------------------
(i) Except for issuances of Common Stock (a) to the Company's
employees as contemplated by paragraph 3D(xxi) above, (b) to customers,
suppliers, financial institutions and other Persons having legitimate business
relationships with the Company or its Subsidiaries (in an aggregate amount not
to exceed 25,000 shares of Common Stock (as such number of shares is adjusted
for subsequent stock splits, stock combinations, stock dividends and
recapitalizations affecting the Common Stock)), (c) upon the conversion of the
Preferred Stock or the Class A Preferred or the Class B Preferred or the Class B
Common or upon exercise of the Warrants, the WSDF Warrants or the Contingent
Warrants (as defined in Section 3N(i) of this Agreement and Section 3N(i) of the
1996 Purchase Agreement), (d) in connection with the acquisition of another
company or business as contemplated by paragraph 3D(viii), (e) pursuant to a
public offering registered under the Securities Act, (f) upon the exercise of
certain common stock warrants issued prior to the Closing (as defined in the
1996 Purchase Agreement) pursuant to the Private Placement Memorandum in an
aggregate amount not to exceed 8,000 shares of Common Stock (at an exercise
price of not less than $13.75 per share) or (g) upon the exercise of common
stock warrants issued subsequent to the Closing (as defined in the 1996 Purchase
Agreement) and prior to July 1, 1996 pursuant to the Private Placement
Memorandum in an aggregate amount not to exceed 3,200 shares of Common Stock (at
an exercise price of not less than $13.75 per share), if the Company authorizes
the issuance or sale of any shares of Common Stock or any securities containing
options or rights to acquire any shares of Common Stock (other than as a
dividend on the outstanding Common Stock), the Company shall first offer to sell
to each holder of Underlying Common Stock a portion of such stock or securities
equal to the quotient determined by dividing (1) the number of shares of
Underlying Common Stock held by such holder by (2) the sum of the total number
of shares of Underlying Common Stock and the number of shares of Common Stock
outstanding which are not shares of Underlying Common Stock. Each holder of
Underlying Common Stock shall be entitled to purchase such stock or securities
at the most favorable price and on the most favorable terms as such stock or
securities are to be offered to any other Persons; provided that, at the request
-------- ----
of any holder of Underlying Common Stock, the Company shall offer to such holder
stock or securities which have no voting rights (other than required by
applicable law) and which are convertible into voting securities on the same
terms as the Class B Common is convertible into Class A Common but which are
otherwise identical to the stock or securities being offered. The purchase
price for all stock and securities offered to the holders of the Underlying
Common Stock shall be payable in cash or, to the extent otherwise required
hereunder, notes issued by such holders.
-14-
(ii) In order to exercise its purchase rights hereunder, a holder of
Underlying Common Stock must within 15 days after receipt of written notice from
the Company describing in reasonable detail the stock or securities being
offered, the purchase price thereof, the payment terms and such holder's
percentage allotment deliver a written notice to the Company describing its
election hereunder. If all of the stock and securities offered to the holders
of Underlying Common Stock is not fully subscribed by such holders, the
remaining stock and securities shall be reoffered by the Company to the holders
purchasing their full allotment upon the terms set forth in this paragraph,
except that such holders must exercise their purchase rights within five days
after receipt of such reoffer.
(iii) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the holders of
Underlying Common Stock have not elected to purchase during the 90 days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to such holders. Any stock or securities
offered or sold by the Company after such 90-day period must be reoffered to the
holders of Underlying Common Stock pursuant to the terms of this paragraph.
(iv) The rights of the holders of Underlying Common Stock under this
paragraph shall terminate upon the consummation of a Qualified Public Offering.
3L. Regulatory Compliance Cooperation.
---------------------------------
(i) Before the Company redeems, purchases or otherwise acquires,
directly or indirectly, or converts or takes any action with respect to the
voting rights of, any shares of any class of its capital stock or any securities
convertible into or exchangeable for any shares of any class of its capital
stock, the Company shall give written notice of such pending action to the
Purchasers. Upon the written request of any Purchaser made within 10 days after
its receipt of any such notice stating that after giving effect to such action
such Purchaser would have a Regulatory Problem, the Company shall defer taking
such action for such period (not to extend beyond 45 days after such Purchaser's
receipt of the Company's original notice) as such Purchaser requests to permit
it and its Affiliates to reduce the quantity of the Company's securities they
own in order to avoid the Regulatory Problem. In addition, the Company shall
not be a party to any merger, consolidation, recapitalization or other
transaction pursuant to which any Purchaser would be required to take any voting
securities, or any securities convertible into voting securities, which might
reasonably be expected to cause such Purchaser to have a Regulatory Problem.
For purposes of this paragraph, a Person shall be deemed to have a "Regulatory
----------
Problem" when such Person and such Person's Affiliates would own, control or
-------
have power over a greater quantity of securities of any kind issued by the
Company or any other entity than are permitted under any requirement of any
governmental authority.
(ii) At any Purchaser's request at any time (whether in connection
with any action by the Company referred to in subparagraph (i) above or
otherwise), the Company shall exchange with such Purchaser for such number of
shares of Class A Common or Class C Preferred, as the case may be, then held by
such Purchaser as it designates a like number of shares of Class B Common or
Class D Preferred, respectively, and the Company shall at all times reserve and
keep available out
-15-
of its authorized but unissued shares of Class B Common and Class D Preferred,
solely for issue upon such exchanges, the number of such shares deemed
sufficient by the Company for such purposes. In the event of any such exchange
of Class B Common for Class A Common or Class D Preferred for Class C Preferred,
(a) the holders of such Class B Common or Class D Preferred shall be entitled to
all the rights which such holders had pursuant to this Agreement and the Amended
and Restated Registration Rights Agreement as holders of Class A Common or Class
C Preferred, as the case may be (including, without limitation, the right to
have such shares treated as "Underlying Common Stock" and "Registrable
Securities" pursuant to this Agreement and the Amended and Restated Registration
Rights Agreement), and (b) if such shares of Class A Common or Class C Preferred
were "Restricted Securities" hereunder, such Class B Common or Class D Preferred
shall also be deemed to be "Restricted Securities" hereunder.
(iii) The Company shall grant to any subsequent holder of Restricted
Securities, upon such holder's request, the same rights granted to Purchasers
pursuant to this paragraph.
3M. Public Disclosures. The Company shall not, nor shall it permit
------------------
any Subsidiary to, disclose any Person's name or identity as an investor in any
of the Purchasers in any press release or other public announcement or in any
document or material filed with any governmental entity, without the prior
written consent of such Purchaser, unless such disclosure is required by
applicable law or governmental regulations or by order of a court of competent
jurisdiction, in which case prior to making such disclosure the Company shall
have given written notice to such Purchaser describing in reasonable detail the
proposed content of such disclosure and shall permit the Purchaser to review and
comment upon the form and substance of such disclosure. Nothing herein,
however, shall prohibit the Company from disclosing or marketing the Purchasers'
investment under this Agreement.
3N. Contingent Warrants.
-------------------
(i) Upon any redemption of shares of Class D Preferred pursuant to
the terms of paragraph 4A of Part E of the Articles of Organization, the Company
shall issue a warrant (collectively, the "Contingent Warrants") to each holder
-------------------
of Class D Preferred. The Contingent Warrants shall be in the form of Exhibit G
---------
attached to the 1996 Purchase Agreement, shall include the additional terms and
conditions described on Exhibit H attached to the 1996 Purchase Agreement
---------
(except that references therein to "$12.50" shall be deemed to be references to
"$21.49" for purposes of this paragraph 3N) and shall otherwise be satisfactory
in form and substance to the recipients thereof. The holders of the Contingent
Warrants shall have the right to acquire initially the same number of shares of
Class B Common into which each such holder's shares of Class D Preferred being
redeemed (the "Redeemed Shares") were convertible as of the Redemption Date
---------------
thereof. The initial exercise price for each share of Class B Common under the
Contingent Warrants shall be equal to the Conversion Price of the Redeemed
Shares as of the Redemption Date thereof, and the Contingent Warrants shall be
exercisable at any time after the Redemption Date of the Redeemed Shares and
shall expire (unless previously exercised) on the earlier of the tenth
anniversary of the Closing or immediately following the date on which the
outstanding Preferred Stock is converted into Conversion Stock pursuant to
paragraph 6F of Part E of the Articles of Organization.
-16-
(ii) The terms "Conversion Price," "Redemption Date" and "Conversion
Stock" have the meanings set forth in Part E of the Articles of Organization.
Section 4. Transfer of Restricted Securities.
---------------------------------
4A. General Provisions. Restricted Securities are transferable only
------------------
pursuant to (i) public offerings registered under the Securities Act, (ii) Rule
144 or Rule 144A of the Securities and Exchange Commission (or any similar rule
or rules then in force) if such rule is available and (iii) subject to the
conditions specified in paragraph 4B below, any other legally available means of
transfer.
4B. Opinion Delivery. In connection with the transfer of any
----------------
Restricted Securities (other than a transfer described in paragraph 4A(i) or
(ii) above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of Xxxxxxxx & Xxxxx or other counsel which (to the Company's
reasonable satisfaction) is knowledgeable in securities law matters to the
effect that such transfer of Restricted Securities may be effected without
registration of such Restricted Securities under the Securities Act. In
addition, if the holder of the Restricted Securities delivers to the Company an
opinion of Xxxxxxxx & Xxxxx or such other counsel that no subsequent transfer of
such Restricted Securities shall require registration under the Securities Act,
the Company shall promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the Securities Act
legend set forth in paragraph 7C. If the Company is not required to deliver new
certificates for such Restricted Securities not bearing such legend, the holder
thereof shall not transfer the same until the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the conditions
contained in this paragraph and paragraph 7C.
4C. Rule 144A. Upon the request of any Purchaser, the Company shall
---------
promptly supply to such Purchaser or its prospective transferees all information
regarding the Company required to be delivered in connection with a transfer
pursuant to Rule 144A of the Securities and Exchange Commission. The Company's
obligations under this paragraph 4C shall at all times be contingent upon the
relevant Purchaser's obtaining from the prospective transferees a written
agreement to take all reasonable precautions to safeguard the Rule 144A
information from disclosure to anyone other than a Person who will assist such
transferee in evaluating the transfer.
4D. Legend Removal. If any Restricted Securities become eligible for
--------------
sale pursuant to Rule 144(k), the Company shall, upon the request of the holder
of such Restricted Securities, remove the legend set forth in paragraph 7C from
the certificates for such Restricted Securities.
Section 5. Representations and Warranties of the Company. As a
---------------------------------------------
material inducement to the Purchasers to enter into this Agreement and purchase
the Preferred Stock hereunder, the Company hereby represents and warrants that:
5A. Organization, Corporate Power and Licenses. The Company is a
------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of Massachusetts and is
-17-
qualified to do business in every jurisdiction in which the failure to so
qualify has had or would have a material adverse effect on the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries taken as a whole. The Company possesses all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and as presently proposed to be conducted and to
carry out the transactions contemplated by this Agreement. The copies of the
Company's and each Subsidiary's charter documents and bylaws which have been
furnished to the Purchasers' special counsel reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and complete.
5B. Capital Stock and Related Matters.
---------------------------------
(i) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of (a) 500,000 shares of preferred
stock, of which (1) 60,000 shares shall be designated as Class A Preferred (of
which 30,000 shares shall be issued and outstanding and 30,000 shares shall be
reserved for issuance upon conversion of the Class B Preferred), (2) 30,000
shares shall be designated as Class B Preferred (all of which shall be issued
and outstanding), (3) 75,000 shares shall be designated as Class C Preferred (of
which 37,500 shares shall be issued and outstanding and 37,500 shares shall be
reserved for issuance upon conversion of the Class D Preferred) and (4) 37,500
shares shall be designated as Class D Preferred (all of which shall be issued
and outstanding) and (b) 6,000,000 shares of Common Stock, (x) of which
5,000,000 shares shall be designated as Class A Common (of which (1) 928,073
shares shall be issued and outstanding and held beneficially and of record by
the Persons (and in the amounts) set forth on the attached Capitalization
--------------
Schedule, (2) 480,000 shares shall be reserved for issuance upon conversion of
--------
the Class A Preferred, (3) 24,000 shares shall be reserved for issuance upon
exercise of the Class A Warrant, (4) 349,000 shares shall be reserved for
issuance upon conversion of the Class C Preferred, (5) 264,000 shares shall be
reserved for issuance upon conversion of the Class B Common issued upon
conversion of the Class B Preferred and exercise of the Class B Warrant, (6)
174,500 shares shall be reserved for issuance upon conversion of the Class B
Common issued upon conversion of the Class D Preferred), (y) 1,000,000 shares
shall be designated as Class B Common ((1) 10,670 shares of which shall be
issued and outstanding, (2) 240,000 shares of which shall be reserved for
issuance upon conversion of the Class B Preferred, (3) 24,000 shares of which
shall be reserved for issuance upon the exercise of the Class B Warrant, and (4)
174,500 shares of which shall be reserved for issuance upon conversion of the
Class D Preferred), and (z) 187,492 shares shall be reserved for issuance upon
the exercise of (1) certain common stock warrants issued pursuant to the Private
Placement Memorandum and (2) the WSDF Warrants. As of the Closing, neither the
Company nor any Subsidiary shall have outstanding any stock or securities
convertible or exchangeable for any shares of its capital stock or containing
any profit participation features, nor shall it have outstanding any rights or
options to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock or any stock
appreciation rights or phantom stock plans, except for the Preferred Stock, the
Class A Preferred Stock, the Class B Preferred Stock, the Class B Common, the
Warrants, the WSDF Warrants, the Contingent Warrants and except as set forth on
the attached Capitalization Schedule. The attached Capitalization Schedule
----------------------- -----------------------
accurately sets forth the following information with respect to all outstanding
options and rights to acquire the Company's capital stock: the holder, the
number of shares covered, the exercise price and the
-18-
expiration date. As of the Closing, neither the Company nor any Subsidiary shall
be subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any warrants,
options or other rights to acquire its capital stock, except as set forth on the
attached Capitalization Schedule and except pursuant to Articles of Organization
-----------------------
and the Amended and Restated Stockholders Agreement. As of the Closing, all of
the outstanding shares of the Company's capital stock shall be validly issued,
fully paid and nonassessable.
(ii) There are no statutory or, to the best of the Company's
knowledge, contractual stockholders preemptive rights or rights of refusal with
respect to the issuance of the Preferred Stock hereunder or the issuance of the
Common Stock upon conversion of the Preferred Stock. The Company has not
violated any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer, sale and
issuance of the Preferred Stock hereunder do not require registration under the
Securities Act or any applicable state securities laws. Except as disclosed on
the attached Capitalization Schedule, to the best of the Company's knowledge,
-----------------------
there are no agreements between the Company's stockholders with respect to the
voting or transfer of the Company's capital stock or with respect to any other
aspect of the Company's affairs, except for the Amended and Restated
Stockholders Agreement.
5C. Subsidiaries; Investments. The attached Subsidiary Schedule
------------------------- -------------------
correctly sets forth the name of each Subsidiary, the jurisdiction of its
incorporation and the Persons owning the outstanding capital stock of such
Subsidiary. Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, possesses all
requisite corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted and is qualified
to do business in every jurisdiction in which the failure to so qualify has had
or would have a material adverse effect on the financial condition, operating
results, assets, operations or business prospects of the Company and its
Subsidiaries taken as a whole. All of the outstanding shares of capital stock
of each Subsidiary are validly issued, fully paid and nonassessable, and all
such shares are owned by the Company or another Subsidiary free and clear of any
Lien and not subject to any option or right to purchase any such shares. Except
as set forth on the Subsidiary Schedule, neither the Company nor any Subsidiary
-------------------
owns or holds the right to acquire any shares of stock or any other security or
interest in any other Person.
5D. Authorization; No Breach. The execution, delivery and
------------------------
performance of this Agreement, the First Amendment to Amended and Restated
Registration Rights Agreement, the Amended and Restated Stockholders Agreement,
the Second Amendment to Purchase Agreement and all other agreements contemplated
hereby to which the Company is a party, the filing of the restatement of the
Articles of Organization have been duly authorized by the Company. This
Agreement, the First Amendment to Amended and Restated Registration Rights
Agreement, the Amended and Restated Stockholders Agreement, the Second Amendment
to Purchase Agreement, the Articles of Organization and all other agreements
contemplated hereby to which the Company is a party each constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms.
Except as set forth on the attached Restrictions Schedule, the execution and
---------------------
delivery by the Company of this Agreement, the First Amendment to Amended and
Restated Registration Rights Agreement, the Amended and Restated Stockholders
Agreement, the Second Amendment
-19-
to Purchase Agreement and all other agreements contemplated hereby to which the
Company is a party, the offering, sale and issuance of the Preferred Stock
hereunder, the issuance of Common Stock upon conversion of the Preferred Stock,
the issuance of Class C Preferred upon the conversion of Class D Preferred, the
filing of the Articles of Organization and the fulfillment of and compliance
with the respective terms hereof and thereof by the Company, do not and shall
not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in the creation of
any lien, security interest, charge or encumbrance upon the Company's or any
Subsidiary's capital stock or assets pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or notice or declaration to, or filing with, any court or
administrative or governmental body or agency pursuant to, the charter or bylaws
of the Company or any Subsidiary, or any law, statute, rule or regulation to
which the Company or any Subsidiary is subject, or any agreement, instrument,
order, judgment or decree to which the Company or any Subsidiary is subject.
Except as set forth on the attached Restrictions Schedule, none of the
---------------------
Subsidiaries are subject to any restrictions upon making loans or advances or
paying dividends to, transferring property to, or repaying any Indebtedness owed
to, the Company or another Subsidiary.
5E. Financial Statements. Attached hereto as the Financial
-------------------- ---------
Statements Schedule are the following financial statements:
-------------------
(i) the audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1996 and December 31, 1997 and the related
statements of income and cash flows (or the equivalent) for the respective
periods then ended; and
(ii) the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of March 31, 1998 (the "Latest Balance Sheet"), and the related
--------------------
statements of income and cash flows (or the equivalent) for the four-month
period then ended.
Each of the foregoing financial statements (including in all cases the notes
thereto, if any) is consistent with the books and records of the Company (which,
in turn, are accurate and complete in all material respects) and presents fairly
in all material respects the consolidated financial condition, results of
operations and cash flows of the Company and its Subsidiaries in accordance with
generally accepted accounting principles applied on a consistent basis as of the
dates and for the periods set forth therein, subject in the case of the
unaudited financial statements to changes resulting from normal year-end
adjustments for recurring accruals (none of which would, alone or in the
aggregate, be materially adverse to the financial condition, operating results,
assets, operations or business prospects of the Company and its Subsidiaries
taken as a whole). The attached Financial Statements Schedule sets forth the
-----------------------------
amount of the Company's and its Subsidiaries' outstanding funded Indebtedness as
of the end of the most recent monthly accounting period prior to the Closing and
the amount of available funds under the Company's and its Subsidiaries'
revolving credit lines and other facilities as of the end of such monthly
accounting period.
5F. Absence of Undisclosed Liabilities. Except as set forth on the
----------------------------------
attached Liabilities Schedule, the Company and its Subsidiaries do not have any
--------------------
material obligation or
-20-
liability (whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to the Company or any Subsidiary, whether due or to become
due and regardless of when asserted) arising out of transactions entered into at
or prior to the Closing, or any action or inaction at or prior to the Closing,
or any state of facts existing at or prior to the Closing other than: (i)
liabilities set forth on the Latest Balance Sheet (including any notes thereto),
(ii) liabilities and obligations which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business (none of which is a liability
resulting from breach of contract, breach of warranty, tort, infringement, claim
or lawsuit) and (iii) other liabilities and obligations expressly disclosed in
the other Schedules to this Agreement.
5G. No Material Adverse Change. Since the date of the Latest Balance
--------------------------
Sheet, there has been no material adverse change in the financial condition,
operating results, assets, operations, business prospects, employee relations or
customer or supplier relations of the Company and its Subsidiaries taken as a
whole.
5H. Absence of Certain Developments.
-------------------------------
(i) Except as expressly contemplated by this Agreement or as set forth
on the attached Developments Schedule, since the date of the Latest Balance
---------------------
Sheet, neither the Company nor any Subsidiary have:
(a) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity
securities;
(b) borrowed any amount or incurred or become subject to any
material liabilities, except current liabilities incurred in the ordinary
course of business and liabilities under contracts and financing agreements
with lending institutions entered into in the ordinary course of business;
(c) discharged or satisfied any material Lien or paid any
material obligation or liability, other than current liabilities paid in
the ordinary course of business;
(d) declared or made any payment or distribution of cash or
other property to its stockholders with respect to its capital stock or
other equity securities or purchased or redeemed any shares of its capital
stock or other equity securities (including, without limitation, any
warrants, options or other rights to acquire its capital stock or other
equity securities);
(e) mortgaged or pledged any of its properties or assets or
subjected them to any material Lien, other than such mortgages and pledges
made in the ordinary course and which constitute Permitted Liens, and
except Liens for current property taxes not yet due and payable;
-21-
(f) sold, assigned or transferred any of its tangible assets,
except in the ordinary course of business, or canceled any material debts
or claims;
(g) sold, assigned or transferred any patents or patent
applications, trademarks, service marks, trade names, corporate names,
copyrights or copyright registrations, trade secrets or other intangible
assets, or disclosed any material proprietary confidential information to
any Person (other than to the Purchasers and other than in the ordinary
course of business in circumstances in which the Company has imposed
confidentiality restrictions);
(h) suffered any extraordinary losses or waived any rights of
material value, whether or not in the ordinary course of business or
consistent with past practice;
(i) made capital expenditures for capital equipment for use in
the Company's operations (such as computers, phones, office machines,
office furnishings and related fixtures) or commitments therefor that
aggregate in excess of $100,000 ;
(j) made any loans or advances to, guarantees for the benefit
of, or any Investments in, any Persons in excess of $25,000 in the
aggregate, except for certain loans to existing employees in connection
with the issuance and sale of stock to such employees as described on the
attached Employee Stock Purchase Schedule;
--------------------------------
(k) made any charitable contributions or pledges;
(l) suffered any damage, destruction or casualty loss exceeding
in the aggregate $25,000, whether or not covered by insurance;
(m) made any Investment in or taken steps to incorporate any
Subsidiary, except for such steps taken in connection with the formation of
an offshore Wholly-Owned Subsidiary captive insurer and bankruptcy proof
Wholly-Owned Subsidiaries; or
(n) or entered into any other material transaction, whether or
not in the ordinary course of business.
(ii) Neither the Company nor any Subsidiary has at any time made any
payments for political contributions or made any bribes, kickback payments or
other illegal payments.
5I. Assets. Except as set forth on the attached Assets Schedule, the
------ ---------------
Company and each Subsidiary have good and marketable title to, or a valid
leasehold interest in, the material properties and assets used by them, located
on their premises or shown on the Latest Balance Sheet or acquired thereafter,
free and clear of all Liens, except for properties and assets disposed of in the
ordinary course of business since the date of the Latest Balance Sheet and
except for Liens disclosed on the Latest Balance Sheet (including any notes
thereto) and Liens for current property taxes not yet due and payable. Except
as described on the attached Assets Schedule, the Company's and each
---------------
Subsidiary's buildings, equipment and other tangible assets are in good
operating condition in all
-22-
material respects and are fit for use in the ordinary course of business. The
Company and each Subsidiary own, or have a valid leasehold interest in, all
material tangible assets necessary for the conduct of their respective
businesses as presently conducted and as presently proposed to be conducted.
5J. Tax Matters.
-----------
(i) Except as set forth on the attached Taxes Schedule: the Company
--------------
and each Subsidiary have filed all Tax Returns which they are required to file
under applicable laws and regulations; all such Tax Returns are complete and
correct in all material respects and have been prepared in compliance with all
applicable laws and regulations in all material respects; the Company and each
Subsidiary have paid all Taxes due and owing by them (whether or not such Taxes
are required to be shown on a Tax Return) and have withheld and paid over to the
appropriate taxing authority all Taxes which they are required to withhold from
amounts paid or owing to any employee, stockholder, creditor or other third
party; the Company believes that as of the date of this Agreement the accrual
for Taxes on the Latest Balance Sheet would be adequate to pay all Tax
Liabilities of the Company and its Subsidiaries if their current tax year were
treated as ending on the date of the Latest Balance Sheet (excluding any amount
recorded which is attributable solely to timing differences between book and Tax
income); since the date of the Latest Balance Sheet, the Company and its
Subsidiaries have not incurred any liability for Taxes other than in the
ordinary course of business; and no foreign, federal, state or local tax audits
or administrative or judicial proceedings are pending or being conducted with
respect to the Company or any Subsidiary, no information related to Tax matters
has been requested by any foreign, federal, state or local taxing authority and
no written notice indicating an intent to open an audit or other review has been
received by the Company or any Subsidiary from any foreign, federal, state or
local taxing authority.
(ii) Neither the Company nor any Subsidiary is liable for the Taxes
of another Person that is not a Subsidiary (a) under Treas. Reg. (S)1.1502-6 (or
comparable provisions of state, local or foreign law), (b) as transferee or
successor, (c) by contract or indemnity or (d) otherwise. Neither the Company
nor any Subsidiary is a party to any tax sharing agreement with a Person other
than the Company or a Subsidiary.
(iii) Neither the Company nor any Subsidiary has been a member of an
Affiliated Group other than one in which the Company was the common parent, or
filed or been included in a combined, consolidated or unitary income Tax Return,
other than one filed by the Company.
5K. Contracts and Commitments.
-------------------------
(i) Except as expressly contemplated by this Agreement or as set
forth on the attached Contracts Schedule or the attached Employee Benefits
------------------ -----------------
Schedule, neither the Company nor any Subsidiary is a party to or bound by any
--------
written or oral:
(a) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other
-23-
employee benefit plan or arrangement, or any collective bargaining
agreement or any other contract with any labor union, or severance
agreements, programs, policies or arrange ments;
(b) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or other
basis providing annual compensation in excess of $50,000 or contract
relating to loans to officers, directors or Affiliates;
(c) contract under which the Company or Subsidiary has advanced
or loaned any other Person amounts in the aggregate exceeding $50,000;
(d) agreement or indenture relating to borrowed money or other
Indebtedness or the mortgaging, pledging or otherwise placing a Lien on any
material asset or material group of assets of the Company or its
Subsidiaries;
(e) guarantee of any obligation in excess of $50,000 (other than
by the Company of a Wholly-Owned Subsidiary's debts or a guarantee by a
Subsidiary of the Company's debts or another Subsidiary's debts);
(f) lease or agreement under which the Company or any Subsidiary
is lessee of or holds or operates any property, real or personal, owned by
any other party, except for any lease of real or personal property under
which the aggregate annual rental payments do not exceed $50,000;
(g) contract or group of related contracts with the same party
or group of affiliated parties the performance of which involves
consideration in excess of $50,000 (other than lease arrangements entered
into as lessor in the ordinary course of business);
(h) assignment, license, indemnification or other agreement with
respect to any intangible property (including, without limitation, any
Intellectual Property Rights);
(i) warranty agreement with respect to its services rendered or
its products sold or leased;
(j) agreement under which it has granted any Person any
registration rights (including, without limitation, demand and piggyback
registration rights);
(k) sales, distribution or franchise agreement;
(l) agreement with a term of more than six months which is not
terminable by the Company or any Subsidiary upon less than 30 days notice
without penalty;
(m) contract or agreement prohibiting it from freely engaging in
any business or competing anywhere in the world; or
-24-
(n) any other agreement which is material to its operations and
business prospects or involves annual consideration in excess of $50,000.
(ii) All of the contracts, agreements and instruments set forth on
the attached Contracts Schedule are valid, binding and enforceable in accordance
with their respective terms. The Company and each Subsidiary have performed all
material obligations required to be performed by them under the contracts,
agreements and instruments listed or required to be listed on the attached
Contracts Schedule and are not in default under or in breach of nor in receipt
------------------
of any claim of default or breach under any material contract, agreement or
instrument listed or required to be listed on the attached Contracts Schedule;
------------------
no event has occurred which with the passage of time or the giving of notice or
both would result in a default, breach or event of noncompliance by the Company
or any Subsidiary under any material contract, agreement or instrument listed or
required to be listed on the attached Contracts Schedule; neither the Company
------------------
nor any Subsidiary has any present expectation or intention of not fully
performing all such obligations; neither the Company nor any Subsidiary has
knowledge of any breach or anticipated breach by the other parties to any
material contract, agreement, instrument or commitment listed or required to be
listed on the attached Contracts Schedule; and neither the Company nor any
------------------
Subsidiary is a party to any contract requiring it to purchase or sell goods or
services or lease property above or below (as the case may be) prevailing market
prices and rates.
(iii) A true and correct copy of each of the written instruments,
plans, contracts and agreements and an accurate description of each of the oral
arrangements, contracts and agreements which are referred to on the Contracts
---------
Schedule have been made available to the Purchaser's special counsel.
--------
5L. Intellectual Property Rights.
----------------------------
(i) The attached Intellectual Property Schedule contains a complete
------------------------------
and accurate list of all (a) patented or registered Intellectual Property Rights
owned or used by the Company or any Subsidiary, (b) pending patent applications
and applications for registrations of other Intellectual Property Rights filed
by the Company or any Subsidiary, (c) material unregistered trade names and
corporate names owned or used by the Company or any Subsidiary and (d) material
unregistered trademarks, service marks, copyrights, mask works and computer
software owned or used by the Company or any Subsidiary. The attached
Intellectual Property Schedule also contains a complete and accurate list of all
------------------------------
licenses and other rights granted by the Company or any Subsidiary to any third
party with respect to any Intellectual Property Rights and all licenses and
other rights granted by any third party to the Company or any Subsidiary with
respect to any material Intellectual Property Rights, in each case identifying
the subject Intellectual Property Rights. Except as set forth on the attached
Intellectual Property Schedule, the Company or one of its Subsidiaries owns all
------------------------------
right, title and interest to, or has the right to use pursuant to a valid
license, all Intellectual Property Rights necessary for the operation of the
businesses of the Company and its Subsidiaries as presently conducted and as
presently proposed to be conducted, free and clear of all Liens. Except as set
forth on the attached Intellectual Property Schedule, the loss or expiration of
------------------------------
any Intellectual Property Right or related group of Intellectual Property Rights
owned or used by the Company or any Subsidiary has not had and would not
reasonably be expected to have a material adverse effect on
-25-
the conduct of the Company's and its Subsidiaries' respective businesses, and no
such loss or expiration is, to the best of the Company's knowledge, threatened,
pending or reasonably foreseeable. The Company and its Subsidiaries have taken
all reasonably necessary and desirable actions to maintain and protect the
Intellectual Property Rights which they own. To the best of the Company's
knowledge, the owners of any material Intellectual Property Rights licensed to
the Company or any Subsidiary have taken all reasonably necessary and desirable
actions to maintain and protect the Intellectual Property Rights which are
subject to such licenses.
(ii) Except as set forth on the attached Intellectual Property
---------------------
Schedule, (a) the Company and its Subsidiaries own all right, title and interest
--------
in and to all of the Intellectual Property Rights listed on such schedule, free
and clear of all Liens, (b) there have been no claims made against the Company
or any Subsidiary asserting the invalidity, misuse or unenforceability of any of
such Intellectual Property Rights, and, to the best of the Company's knowledge,
there are no grounds for the same, (c) neither the Company nor any Subsidiary
has received any notices of, and is not aware of any facts which indicate a
likelihood of, any infringement or misappropriation by, or conflict with, any
third party with respect to such Intellectual Property Rights (including,
without limitation, any demand or request that the Company or any Subsidiary
license any rights from a third party) and (d) the conduct of the Company's and
each Subsidiary's business has not infringed, misappropriated or conflicted with
and does not infringe, misappropriate or conflict with any Intellectual Property
Rights of other Persons, nor would any future conduct as presently contemplated
infringe, misappropriate or conflict with any Intellectual Property Rights of
other Persons. The transactions contemplated by this Agreement shall have no
material adverse effect on the Company's or any Subsidiary's right, title and
interest in and to the Intellectual Property Rights listed on the attached
Intellectual Property Schedule.
------------------------------
5M. Litigation, etc. Except as set forth on the attached Litigation
--------------- ----------
Schedule, there are no actions, suits, proceedings, orders, investigations or
--------
claims pending or, to the best of the Company's knowledge, threatened against or
affecting the Company or any Subsidiary (or to the best of the Company's
knowledge, pending or threatened against or affecting any of the officers,
directors or key employees of the Company and its Subsidiaries with respect to
their businesses or proposed business activities), or pending or threatened by
the Company or any Subsidiary against any third party, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, any actions, suit, proceedings
or investigations with respect to the transactions contemplated by this
Agreement); nor has there been any such actions, suits, proceedings, orders,
investigations or claims pending against or affecting the Company or any
Subsidiary during the past three years; neither the Company nor any Subsidiary
is subject to any arbitration proceedings under collective bargaining agreements
or otherwise or, to the best of the Company's knowledge, any governmental
investigations or inquiries (including, without limitation, inquiries as to the
qualification to hold or receive any material license or permit); and, to the
best of the Company's knowledge, there is no basis for any of the foregoing.
Neither the Company nor any Subsidiary is subject to any judgment, order or
decree of any court or other governmental agency, and neither the Company nor
any Subsidiary has received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to its business.
-26-
5N. Brokerage. Except as set forth on the attached Brokerage
--------- ---------
Schedule, there are no claims for brokerage commissions, finders' fees or
--------
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement binding upon the Company or any
Subsidiary. The Company shall pay, and hold each Purchaser harmless against,
any liability, loss or expense (including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses) arising in connection with any such
claim.
5O. Governmental Consent, etc. No permit, consent, approval or
-------------------------
authorization of, or declaration to or filing with, any governmental authority
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the other agreements contemplated hereby, or the
consummation by the Company of any other transactions contemplated hereby or
thereby, except as set forth on the attached Consents Schedule.
-----------------
5P. Insurance. Neither the Company nor any Subsidiary is in default
---------
with respect to its obligations under any insurance policy maintained by it, and
neither the Company nor any Subsidiary has been denied insurance coverage. The
insurance coverage of the Company and its Subsidiaries is customary for
corporations of similar size engaged in similar lines of business. The Company
and its Subsidiaries do not have any self-insurance or co-insurance programs.
5Q. Employees. The Company is not aware that any executive or key
---------
employee of the Company or any Subsidiary or any group of employees of the
Company or any Subsidiary has any plans to terminate employment with the Company
or any Subsidiary. The Company and each Subsidiary have complied in all
material respects with all laws relating to the employment of labor (including,
without limitation, provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes), and the Company is not aware that it or any Subsidiary has any material
labor relations problems (including, without limitation, any union organization
activities, threatened or actual strikes or work stoppages or material
grievances). Neither the Company, its Subsidiaries nor, to the best of the
Company's knowledge after due inquiry, any of their key employees is subject to
any noncompete, nondisclosure, confidentiality, employment, consulting or
similar agreements relating to, affecting or in conflict with the present or
proposed business activities of the Company and its Subsidiaries, except for
agreements between the Company and its present and former employees.
5R. ERISA.
-----
(i) Except as disclosed on the attached Employee Benefits Schedule,
---------------------------
the Company does not maintain, contribute to or have any actual or potential
liability with respect to any (x) "defined contribution plan" (as defined in
Section 3(34) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (the "Savings Plan"), (y) "employee welfare benefit plan" (as defined
----- ------------
in Section 3(1) of ERISA) (the "Welfare Plans") or (z) nonqualified deferred
-------------
compensation, incentive, bonus, material fringe benefit, stock bonus or other
material benefit arrangements (collectively (x), (y) and (z) above referred to
as the "Plans").
-----
(ii) The Company does not maintain, contribute to or have any actual
or potential liability with respect to any active or terminated, funded or
unfunded (x) multiemployer plan (as
-27-
defined in Section 3(37) or ERISA, (y) defined benefit plan (as defined in
Section 3(35) of ERISA) or (z) plan or arrangement to provide medical, health,
life insurance or other welfare-type benefits for current or future retired or
terminated employees (except for limited continued health benefit coverage
required to be provided under Section 4980B of the IRC or similar state law).
(iii) Each of the Welfare Plans, if any, and the Savings Plan and all
related funding arrangements comply in form and operation with its terms and the
applicable requirements of ERISA, the IRC and any other laws. Except as
disclosed on the attached Employee Benefits Schedule, the Savings Plan has
--------------------------
received a favorable determination letter that it qualifies under the IRC (and
that its trust is exempt from tax under the IRC) and such favorable letter
includes changes required by the 1986 Tax Reform Act. Except as disclosed on
the attached Employee Benefits Schedule, nothing has occurred since the date of
--------------------------
such favorable determination letter that could adversely affect the qualified
status of the Savings Plan or the tax-exempt status of the trust.
(iv) None of the Company, any trustee or administrator of any Plan or
other person has engaged in any transaction with respect to any Plan which could
subject the Company or any of its employees to any tax or penalty or other
liability imposed by ERISA or the IRC. No actions, suits, investigations or
claims with respect to any of the Plans (other than routine claims for benefits)
are pending or, to the knowledge of the Company, threatened, and the Company is
not aware of any facts or circumstances which could give rise to or be expected
to give rise to any such actions, suits, investigations or claims. The Company
has complied with the requirements of Section 4980B of the IRC and Section 601
et seq. of ERISA ("COBRA"). All contributions which are due under each of the
-----
Plans has been made and all other contributions have been properly accrued. The
Company has complied with all reporting and disclosure obligations with respect
to the Welfare Plans and the Savings Plan.
5S. Compliance with Laws. Except as set forth on the attached
--------------------
Compliance Schedule, neither the Company nor any Subsidiary has violated any law
-------------------
(including, without limitation, usury laws) or any governmental regulation or
requirement which violation has had or would reasonably be expected to have a
material adverse effect upon the financial condition, operating results, assets,
operations or business prospects of the Company and its Subsidiaries taken as a
whole, and neither the Company nor any Subsidiary has received notice of any
such violation. Except as set forth on the Compliance Schedule, the Company and
-------------------
its Subsidiaries have complied with and are currently in compliance with all
Environmental and Safety Requirements, and neither the Company nor its
Subsidiaries have received any oral or written notice, report or information
regarding any liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise) or any corrective, investigatory or remedial obligations arising
under Environmental and Safety Requirements which relate to the Company or its
Subsidiaries or any of their properties or their facilities and no facts or
circumstances exist with respect to the past or present operations or facilities
of the Company or any Subsidiary which would give rise to a material liability
or material corrective action or remedial obligation under any Environmental and
Safety Requirements. Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any obligations on the
Company or its Subsidiaries or otherwise for site investigation or cleanup, or
notification to or consent of any government agencies or third parties under any
Environmental
-28-
and Safety Requirements (including, without limitation, any so called
"transaction-triggered" or "responsible property transfer" laws and
regulations).
5T. Affiliated Transactions. Except as set forth on the attached
-----------------------
Affiliated Transactions Schedule, to the best of the Company's knowledge no
--------------------------------
officer, director, employee, stockholder or Affiliate of the Company or any
Subsidiary or any individual related by blood, marriage or adoption to any such
individual or any entity in which any such Person or individual owns any
beneficial interest, is a party to any agreement, contract, commitment or
transaction with the Company or any Subsidiary or has any material interest in
any material property used by the Company or any Subsidiary.
5U. Real Property Holding Corporation Status. Since its date of
----------------------------------------
incorporation, the Company has not been, and as of the date of the Closing shall
not be, a "United States real property holding corporation," as defined in
Section 897(c)(2) of the IRC, and in Section 1.897-2(b) of the Treasury
Regulations issued thereunder. The Company has no current plans or intentions
which would cause the Company to become (and shall use reasonable efforts
consistent with sound business practice to avoid becoming) a "United States real
property holding company," and the Company has filed with the IRS all
statements, if any, with its United States income tax returns which are required
under Section 1.897-2(h) of the Treasury Regulations.
5V. Disclosure. Neither this Agreement nor any of the exhibits,
----------
schedules, attachments, written statements, documents, certificates or other
items prepared and supplied to any Purchaser by or on behalf of the Company with
respect to the transactions contemplated hereby contain any untrue statement of
a material fact or omit a material fact necessary to make each statement
contained herein or therein not misleading; provided that with respect to the
-------- ----
financial projections furnished to the Purchasers by the Company, the Company
represents and warrants only that such projections were based upon assumptions
reasonably believed by the Company to be reasonable and fair as of the date the
projections were prepared in the context of the Company's history and current
and reasonably foreseeable business conditions. There is no fact which the
Company has not disclosed to the Purchasers in writing and of which any of its
officers, directors or executive employees is aware (other than general economic
conditions) and which has had or would reasonably be expected to have a material
adverse effect upon the existing or expected financial condition, operating
results, assets, customer or supplier relations, employee relations or business
prospects of the Company and its Subsidiaries taken as a whole.
Section 6. Definitions.
-----------
6A. Definitions. For the purposes of this Agreement, the following
-----------
terms have the meanings set forth below:
"Affiliate" of any particular Person means any other Person
---------
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
-------
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
-29-
"Affiliated Group" means any affiliated group as defined in IRC
----------------
(S)1504 that has filed a consolidated return for federal income tax purposes (or
any similar group under state, local or foreign law) for a period during which
any of the Company or any of its Subsidiaries was a member.
"Amended and Restated Registration Rights Agreement" means that
--------------------------------------------------
certain Amended and Restated Registration Rights Agreement dated as of February
28, 1997, by and among the Company, Primus, PNC and WSDF, and as amended
pursuant to the First Amendment to Amended and Restated Registration Rights
Agreement.
"Class A Common" means the Company's Class A Common Stock, par value
--------------
$1.00 per share.
"Class A Warrant" means that certain warrant to purchase 24,000 shares
---------------
of Class A Common issued pursuant to the 1996 Purchase Agreement.
"Class B Common" means the Company's Class B Common Stock, par value
--------------
$1.00 per share.
"Class B Warrant" means that certain warrant to purchase 24,000 shares
---------------
of Class B Common issued pursuant to the 1996 Purchase Agreement.
"Common Stock" means collectively the Class A Common and Class B
------------
Common.
"Environmental and Safety Requirements" means all federal, state,
-------------------------------------
local and foreign statutes, regulations, ordinances and other provisions having
the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including, without limitation, all those relating
to the presence, use, production, generation, handling, transport, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
Release, threatened Release, control or cleanup of any hazardous or otherwise
regulated materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation).
"Event of Noncompliance" has the meaning set forth in Part E of the
----------------------
Articles of Organization.
"Indebtedness" means at a particular time, without duplication, (i)
-------------
any indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with respect to which a Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade payables
and other current liabilities incurred in the ordinary course of business which
are not more than six months past due), (iv) any commitment by which a Person
assures a creditor against loss (including, without limitation, contingent
reimbursement obligations with respect to letters of credit), (v) any
-30-
indebtedness guaranteed in any manner by a Person (including, without
limitation, guarantees in the form of an agreement to repurchase or reimburse),
(vi) any obligations under capitalized leases with respect to which a Person is
liable, contingently or otherwise, as obligor, guarantor or otherwise, or with
respect to which obligations a Person assures a creditor against loss, (vii) any
indebtedness secured by a Lien on a Person's assets and (viii) any unsatisfied
obligation for "withdrawal liability" to a "multiemployer plan" as such terms
are defined under ERISA.
"Intellectual Property Rights" means all (i) patents, patent
----------------------------
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, logos and corporate names and registrations and
applications for registration thereof together with all of the goodwill
associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
(vii) other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
"Investment" as applied to any Person means (i) any direct or indirect
----------
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
---
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"IRS" means the United States Internal Revenue Service.
---
"Liens" means any mortgage, pledge, security interest, encumbrance,
-----
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any Subsidiary or any Affiliate,
any filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to the Company or any Subsidiaries under a
lease which is not in the nature of a conditional sale or title retention
agreement, or any subordination arrangement in favor of another Person (other
than any subordination arising in the ordinary course of business).
"Officer's Certificate" means a certificate signed by the Company's
---------------------
president or its chief financial officer, stating that (i) the officer signing
such certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
-31-
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.
"Permitted Liens" means:
---------------
(i) tax liens with respect to taxes not yet due and payable or
which are being contested in good faith by appropriate proceedings and for
which appropriate reserves have been established in accordance with
generally accepted accounting principles, consistently applied;
(ii) deposits or pledges made in connection with, or to secure
payment of, utilities or similar services, workers' compensation,
unemployment insurance, old age pensions or other social security
obligations;
(iii) purchase money security interests in any property acquired
by the Company or any Subsidiary to the extent permitted by this Agreement;
(iv) interests or title of a lessor under any lease permitted by
this Agreement;
(v) mechanics', materialmen's or contractors' liens or
encumbrances or any similar lien or restriction for amounts not yet due and
payable or which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established in
accordance with generally accepted accounting principles, consistently
applied;
(vi) easements, rights-of-way, restrictions and other similar
charges and encumbrances not interfering with the ordinary conduct of the
business of the Company and its Subsidiaries or detracting from the value
of the assets of the Company and its Subsidiaries; and
(vii) liens outstanding on the date hereof which secure
Indebtedness and which are described in the schedules to this Agreement,
including, without limitation, those liens contemplated by existing capital
leases or proposed capital leases with customers of the Company.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Private Placement Memorandum" means that certain Confidential Private
----------------------------
Placement Memorandum prepared by and on behalf of the Company and dated December
1, 1995.
-32-
"Public Offering" means any offering by the Company of its capital
---------------
stock or equity securities to the public pursuant to an effective registration
statement under the Securities Act of 1933, as then in effect, or any comparable
statement under any similar federal statute then in force.
"Qualified Public Offering" has the meaning given to such term in Part
-------------------------
E of the Articles of Organization.
"Restricted Securities" means (i) the Preferred Stock and Common Stock
---------------------
issued hereunder, (ii) the Class A Common issued upon conversion of the Class C
Preferred or upon conversion of the Class B Common, (iii) the Class B Common
issued upon conversion of the Class D Preferred, (iv) the Class C Preferred
issued upon conversion of the Class D Preferred and (v) any securities issued
with respect to the securities referred to in clauses (i) through (iv) above by
way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Restricted Securities, such securities shall cease to be
Restricted Securities when they have (a) been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (b) been distributed to the public through a broker, dealer or
market maker pursuant to Rule 144 (or any similar provision then in force) under
the Securities Act or become eligible for sale pursuant to Rule 144(k) (or any
similar provision then in force) under the Securities Act or (c) been otherwise
transferred and new certificates for them not bearing the Securities Act legend
set forth in paragraph 7C have been delivered by the Company in accordance with
paragraph 4B. Whenever any particular securities cease to be Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing a Securities Act
legend of the character set forth in paragraph 7C.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
----------------------------------
agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended, or any similar federal law then in force.
"Stockholder Shares" shall have the meaning set forth in the Amended
------------------
and Restated Stockholders Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
----------
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of
-33-
that Person or a combination thereof. For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a limited liability
company, partnership, association or other business entity if such Person or
Persons shall be allocated a majority of limited liability company, partnership,
association or other business entity gains or losses or shall be or control any
managing director or general partner of such limited liability company,
partnership, association or other business entity.
"Tax" or "Taxes" means federal, state, county, local, foreign or other
--- -----
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Liabilities" means liabilities for the payment of Taxes.
---------------
"Tax Return" means any return, information report or filing with
----------
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
"Treasury Regulations" means the United States Treasury Regulations
--------------------
promulgated under the IRC, and any reference to any particular Treasury
Regulation section shall be interpreted to include any final or temporary
revision of or successor to that section regardless of how numbered or
classified.
"Underlying Common Stock" means (i) the Class A Common issued or
-----------------------
issuable upon conversion of the Class C Preferred, (ii) the Class B Common
issued or issuable upon conversion of the Class D Preferred or exercise of the
Contingent Warrants and (iii) any Common Stock issued or issuable with respect
to the securities referred to in clauses (i) and (ii) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes
of this Agreement, any Person who holds Preferred Stock shall be deemed to be
the holder of the Underlying Common Stock obtainable upon conversion of the
Preferred Stock in connection with the transfer thereof or otherwise regardless
of any restriction or limitation on the conversion of the Preferred Stock, such
Underlying Common Stock shall be deemed to be in existence, and such Person
shall be entitled to exercise the rights of a holder of Underlying Common Stock
hereunder. As to any particular shares of Underlying Common Stock, such shares
shall cease to be Underlying Common Stock when they have been (a) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or
any similar provision then in force) or (c) repurchased by the Company or any
Subsidiary.
"Warrants" means collectively the Class A Warrant and the Class B
--------
Warrant.
-34-
"Wholly-Owned Subsidiary" means, with respect to any Person, a
-----------------------
Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly-Owned Subsidiary of such
Person.
"WSDF" means the Whitney Subordinated Debt Fund, L.P., a Delaware
----
limited partnership.
"WSDF Purchase Agreement" means that certain Securities Purchase
-----------------------
Agreement by and between the Company and WSDF dated as of February 28, 1998.
"WSDF Warrants" means, collectively, (i) that certain warrant to
-------------
purchase 118,038 shares of Class A Common Stock issued to WSDF pursuant to the
WSDF Purchase Agreement and (ii) that certain warrant to purchase up to an
additional 53,654 share of Class A Common Stock issued to WSDF pursuant to the
WSDF Purchase Agreement.
6B. Other Definitions. For purposes of this Agreement, the following
-----------------
terms are defined in the following paragraphs of this Agreement:
Article of Organization.................................2B
Capital Base............................................3D
Class A Preferred.......................................2B
Class B Preferred.......................................2B
Class C Preferred.................................Recitals
Class D Preferred.................................Recitals
Closing.................................................1C
COBRA...................................................5R
Company...........................................Recitals
Contingent Warrants.....................................3N
ERISA...................................................5R
First Amendment to Amended and Restated
Registration Rights Agreement......................2C
Latest Balance Sheets...................................5E
Plans...................................................5R
Preferred Stock...................................Recitals
PNC...............................................Recitals
Primus............................................Recitals
Purchaser.........................................Recitals
Purchasers........................................Recitals
Put and Call Agreement..................................3D
Redeemed Shares.........................................3N
Regulatory Problem......................................3L
Savings Plan............................................5R
Second Amendment to Purchase Agreement..................2E
Amended and Restated Stockholders Agreement.............2D
Welfare Plans...........................................5R
-35-
Section 7. Miscellaneous.
-------------
7A. Expenses. The Company shall pay, and hold each Purchaser and all
--------
holders of Preferred Stock and Underlying Common Stock harmless against
liability for the payment of, (i) the fees and expenses incurred in connection
with their due diligence investigation and review of the Company and its affairs
and operations (including accounting and other consulting fees and expenses)
which shall be payable at the Closing or, if the Closing does not occur, payable
upon demand, (ii) the fees and expenses of their special counsel arising in
connection with the negotiation and execution of this Agreement and the
consummation of the transactions contemplated by this Agreement which shall be
payable at the Closing or, if the Closing does not occur, payable upon demand,
(iii) the reasonable fees and expenses incurred with respect to any amendments
or waivers (whether or not the same become effective) requested by the Company
under or in respect of this Agreement, the agreements contemplated hereby or the
Articles of Organization (including, without limitation, in connection with any
proposed merger, sale or recapitalization of the Company), (iv) stamp and other
taxes which may be payable in respect of the execution and delivery of this
Agreement or the issuance, delivery or acquisition of any shares of Preferred
Stock or any shares of Common Stock issuable upon conversion of Preferred Stock,
(v) the reasonable fees and expenses incurred with respect to the enforcement of
the rights granted under this Agreement, the agreements contemplated hereby and
the Articles of Organization and (vi) the reasonable fees and expenses incurred
by each such Person in any filing with any governmental agency with respect to
its investment in the Company or in any other filing with any governmental
agency with respect to the Company which mentions such Person.
7B. Remedies. Each holder of Preferred Stock and Underlying Common
--------
Stock shall have all rights and remedies set forth in this Agreement and the
Articles of Organization and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
7C. Purchaser's Investment Representations.
--------------------------------------
(i) Investment Representations. Each of the Purchasers represents
--------------------------
severally and as to itself only, and not jointly, that it is its present
intention to acquire the Preferred Stock to be acquired by it for its own
account and that the Preferred Stock are being and will be acquired by it not
with a view to distribution or resale thereof in violation of the Securities
Act. The acquisition by each Purchaser of the Preferred Stock acquired by it
shall constitute a confirmation of this representation by each such Purchaser.
(ii) Access to Information. Each Purchaser or its representative
---------------------
during the course of this transaction, and prior to the purchase of the
Preferred Stock, has had the opportunity to ask questions of and receive answers
from representatives of the Company concerning the terms and conditions of the
offering of the Preferred Stock, and to obtain any additional information,
-36-
documents, records and books related to the Company, its business and an
investment in the Company.
(iii) General Access. Each Purchaser or its representative have
--------------
received and read or reviewed, and are familiar with, this Agreement and confirm
that all documents, records and books pertaining to the Purchaser's investment
in the Company and requested by the Purchaser or its representative from the
Company have been made available or delivered to such Purchaser.
(iv) Transfer Restrictions Imposed by Securities Laws. Each
------------------------------------------------
Purchaser understands that the Preferred Stock has not been registered under the
Securities Act and applicable state securities laws, and, therefore, cannot be
resold unless it is subsequently registered under the Securities Act and
applicable state securities laws or unless an exemption from such registration
is available; the Company does not have any present intention and is under no
obligation to register the Preferred Stock under the Securities Act and
applicable state securities laws, except as provided in the Amended and Restated
Registration Rights Agreement; and Rule 144 under the Securities Act may not be
available as a basis for exemption from registration of the Preferred Stock
thereunder.
(v) Lack of Liquidity. Each Purchaser acknowledges that it has no
-----------------
present need for liquidity in connection with its purchase of the Preferred
Stock.
(vi) Risk. Each Purchaser understands that the purchase of the
----
Preferred Stock involves a high degree of risk and there is no public market for
the Company's capital stock as of the Closing and there can be no assurances
that any public market for such stock will develop.
(vii) Accredited Investor Status. Each Purchaser is an "Accredited
--------------------------
Investor" as that term is defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933, as amended.
(viii) Legend. Each certificate or instrument representing Restricted
------
Securities shall be imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIG- INALLY
ISSUED ON MAY 28, 1998, AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE PURCHASE AGREEMENT, DATED AS OF MAY 28, 1998 AND AS
AMENDED AND MODIFIED FROM TIME TO TIME, BETWEEN THE ISSUER (THE
"COMPANY") AND CERTAIN INVESTORS, AND THE COMPANY RESERVES THE RIGHT
-------
RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS
HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH
CONDITIONS SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF
UPON WRITTEN REQUEST AND WITHOUT CHARGE."
-37-
7D. Treatment of the Preferred Stock. The Company covenants and
--------------------------------
agrees that (i) so long as federal income tax laws prohibit a deduction for
distributions made by the Company with respect to preferred stock, it shall
treat all distributions paid by it on the Preferred Stock as non-deductible
dividends on all of its tax returns and (ii) it shall treat the Preferred Stock
as preferred stock in all of its financial statements and other reports and
shall treat all distributions paid by it on the Preferred Stock as dividends on
preferred stock in such statements and reports. The Company acknowledges and
agrees that the increased dividend rate on the Preferred Stock provided for in
Part E of the Articles of Organization upon the occurrence of certain Events of
Noncompliance has been negotiated by (and is intended by) the Company and the
Purchasers as a reasonable increase in yield necessitated by the increased risk
to the holders of the Preferred Stock which would arise upon any such
occurrence. The Company agrees that the Preferred Stock is stock which
participates in corporate growth to a significant extent within the meaning of
Treasury Regulation (S)1.305-5(a), and hence will not be treated as preferred
stock for purposes of IRC (S)305 and the regulations thereunder. Accordingly,
the Company has determined that there will not be constructive distributions
under Treasury Regulation (S)1.305-5(b) with respect to the Preferred Stock.
7E. Consent to Amendments; Waivers. Except as otherwise expressly
------------------------------
provided herein, any provision of this Agreement may be amended or waived and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent or waiver of the holders of a majority of the outstanding
Preferred Stock; provided that if there is no Preferred Stock outstanding, any
-------- ----
provision of this Agreement may be amended or waived and the Company may take
any action herein prohibited, only if the Company has obtained the written
consent or waiver of the holders of a majority of the Underlying Common Stock.
No other course of dealing between the Company and the holder of any Preferred
Stock or Underlying Common Stock or any delay in exercising any rights hereunder
or under the Articles of Organization shall operate as a waiver of any rights of
any such holders. For purposes of this Agreement, shares of Preferred Stock or
Underlying Common Stock held by the Company or any Subsidiaries shall not be
deemed to be outstanding. If the Company pays any consideration to any holder of
Preferred Stock or Underlying Common Stock for such holder's consent to any
amendment, modification or waiver hereunder, the Company shall also pay each
other holder granting its consent hereunder equivalent consideration computed on
a pro rata basis.
7F. Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby (regardless of any
investigation made by any Purchaser or on its behalf) for a period of five (5)
years.
7G. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or holder of Preferred Stock or Underlying Common Stock are also for
the benefit of, and enforceable by, any subsequent holder of such Preferred
Stock or such Underlying Common Stock.
-38-
7H. Capital and Surplus; Special Reserves. The Company agrees that
-------------------------------------
the capital of the Company (as such term is used in the Business Corporation Law
of Massachusetts) in respect of the Preferred Stock issued pursuant to this
Agreement shall be equal to the aggregate par value of such shares and that it
shall not increase the capital of the Company with respect to any shares of the
Company's capital stock at any time on or after the date of this Agreement. The
Company also agrees that it shall not create any special reserves under the
Business Corporation Law of Massachusetts without the prior written consent of
the holders of a majority of the outstanding Preferred Stock.
7I. Generally Accepted Accounting Principles. Where any accounting
----------------------------------------
determination or calculation is required to be made under this Agreement or the
exhibits hereto, such determination or calculation (unless otherwise provided)
shall be made in accordance with generally accepted accounting principles,
consistently applied, except that if because of a change in generally accepted
accounting principles the Company would have to alter a previously utilized
accounting method or policy in order to remain in compliance with generally
accepted accounting principles, such determination or calculation shall continue
to be made in accordance with the Company's previous accounting methods and
policies, unless otherwise directed by the holders of a majority of the
outstanding Preferred Stock.
7J. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
7K. Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts (including by means of telecopied signature pages), any
one of which need not contain the signatures of more than one party, but all
such counterparts taken together shall constitute one and the same Agreement.
7L. Descriptive Headings; Interpretation. The descriptive headings
------------------------------------
of this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
7M. Governing Law. The Business Corporation Law of Massachusetts,
-------------
without regard to its principles of conflicts of laws, shall govern all issues
and questions concerning the relative rights and obligations of the Company and
its stockholders. All other issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of The Commonwealth of Massachusetts, without giving effect to any choice
of law or conflict of law rules or provisions (whether of The Commonwealth of
Massachusetts or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than The Commonwealth of Massachusetts.
-39-
7N. Notices. All notices, demands or other communications to be
-------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Purchaser at the address indicated on the
attached Schedule of Purchasers attached hereto and to the Company at the
----------------------
address indicated below:
BankVest Capital Corp.
000 Xxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: President
with a copy to:
--------------
Xxxxxxxxx & Manello, P.C.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
7O. Understanding Among the Purchasers. The determination of each
----------------------------------
Purchaser to purchase the Preferred Stock pursuant to this Agreement has been
made by such Purchaser independent of any other Purchaser and independent of any
statements or opinions as to the advisability of such purchase or as to the
properties, business, prospects or condition (financial or otherwise) of the
Company and its Subsidiaries which may have been made or given by any other
Purchaser or by any agent or employee of any other Purchaser.
7P. Delivery by Facsimile. This Agreement and any signed agreement
---------------------
or instrument entered into in connection with this Agreement, and any amendments
hereto or thereto, to the extent signed and delivered by means of a facsimile
machine, shall be treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal effect as if
it were the original signed version thereof delivered in person. At the request
of any party hereto or to any such agreement or instrument, each other party
hereto or thereto shall re-execute original forms thereof and deliver them to
all other parties. No party hereto or to any such agreement or instrument shall
raise the use of a facsimile machine to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or communicated through the
use of a facsimile machine as a defense to the formation of a contract and each
such party forever waives any such defense.
7Q. No Strict Construction. The parties hereto have participated
----------------------
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and
-40-
no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any of the provisions of this Agreement.
* * * * *
-41-
IN WITNESS WHEREOF, the parties have executed this Purchase Agreement
as of the date first written above.
BANKVEST CAPITAL CORP.
By __________________________________________________
Its __________________________________________________
PRIMUS CAPITAL FUND III LIMITED
PARTNERSHIP
By: Primus Venture Partners III Limited Partnership,
its general partner
By: Primus Venture Partners, Inc., its general partner
By __________________________________________________
Its __________________________________________________
PNC VENTURE CORP
By __________________________________________________
Its __________________________________________________
SCHEDULE OF PURCHASERS
----------------------
Primus Capital Fund III Limited Partnership
0000 Xxxxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. XxXxxxx
with a copy to:
--------------
Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxx X. Xxxx
PNC Venture Corp
c/o PNC Equity Management Corp.
3150 CNG Tower
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
with a copy to:
--------------
Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxx X. Xxxx
LIST OF EXHIBITS
----------------
Exhibit A - Restated Articles of Organization
Exhibit B - First Amendment to Amended and Restated Registration Rights
Agreement
Exhibit C - Amended and Restated Stockholders Agreement
Exhibit D - Second Amendment to 1996 Purchase Agreement
Exhibit E - Opinion of Counsel of the Company
LIST OF DISCLOSURE SCHEDULES
----------------------------
Capitalization Schedule
Subsidiary Schedule
Restrictions Schedule
Financial Statements Schedule
Liabilities Schedule
Developments Schedule
Employee Stock Purchase Schedule
Assets Schedule
Taxes Schedule
Contracts Schedule
Employee Benefits Schedule
Intellectual Property Schedule
Litigation Schedule
Brokerage Schedule
Consents Schedule
Compliance Schedule
Affiliated Transactions Schedule
