SECURITIES PURCHASE AGREEMENT
BETWEEN
INSURQUOTE SYSTEMS, INC.
AND
CCC INFORMATION SERVICES INC.
DATED AS OF FEBRUARY 10, 1998
TABLE OF CONTENTS
PAGE
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. PURCHASE OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Purchase and Issuance of Securities. . . . . . . . . . . . . . . . . 8
2.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . 9
3.1 Organization; Good Standing; Qualification . . . . . . . . . . . . . 9
3.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Valid Issuance of Common Stock, the
Subordinated Notes, and the Warrants . . . . . . . . . . . . . . . .10
3.4 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . .10
3.5 Capitalization and Voting Rights . . . . . . . . . . . . . . . . . .11
3.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.7 Contracts and Other Commitments. . . . . . . . . . . . . . . . . . .12
3.8 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . .12
3.9 Registration Right . . . . . . . . . . . . . . . . . . . . . . . . .13
3.10 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.11 Compliance With Other Instruments. . . . . . . . . . . . . . . . . .13
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
3.13 Title to Property and Assets; Leases . . . . . . . . . . . . . . . .14
3.14 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .15
3.15 Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.16 Holding Company Act and Investment Company
Act Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
3.17 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
3.18 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
3.19 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
3.20 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . .19
3.21 Offering of the Shares . . . . . . . . . . . . . . . . . . . . . . .20
3.22 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . .21
3.23 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . . .22
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. . . . . . . . . . . . . .22
4.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . .22
4.2 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
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4.3 Acquire Entirely for Own Account . . . . . . . . . . . . . . . . . .23
4.4 Reliance Upon Investor's Representations . . . . . . . . . . . . . .23
4.5 Sophisticated Investor . . . . . . . . . . . . . . . . . . . . . . .23
4.6 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.7 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . .24
4.8 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
5. COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . .25
5.1 Financial Statements and Other Reports . . . . . . . . . . . . . . .25
5.2 Other Financial Information. . . . . . . . . . . . . . . . . . . . .27
5.3 Inspection of Property . . . . . . . . . . . . . . . . . . . . . . .27
5.4 Lost, Stolen, Destroyed or Mutilated
Certificates or Subordinated Notes . . . . . . . . . . . . . . . . .27
5.5 Limitation on Payment Restrictions . . . . . . . . . . . . . . . . .27
5.6 Limitation on Transactions with Affiliates . . . . . . . . . . . . .28
5.7 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.8 Maintenance, etc.. . . . . . . . . . . . . . . . . . . . . . . . . .28
5.9 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . .29
5.10 [Intentionally Omitted]. . . . . . . . . . . . . . . . . . . . . . .29
5.11 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . .29
5.12 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .29
5.13 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . .29
5.14 Notice of Suits, Adverse Changes in Business
and Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
5.15 Liens or Encumbrances. . . . . . . . . . . . . . . . . . . . . . . .30
5.16 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
5.17 Consolidations, Mergers or Acquisitions. . . . . . . . . . . . . . .31
5.18 [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . .31
5.19 Fiscal Year-End. . . . . . . . . . . . . . . . . . . . . . . . . . .32
5.20 Payments on Subordinated Debt. . . . . . . . . . . . . . . . . . . .32
5.21 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . .32
5.22 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
5.23 Disaster Recovery and Contingency Program. . . . . . . . . . . . . .32
5.24 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
5.25 Issuance of Additional Equity. . . . . . . . . . . . . . . . . . . .33
[Intentionally Omitted].. . . . . . . . . . . . . . . . . . . . . . . . .33
6. [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . .33
7. DEFAULTS AND EVENTS OF DEFAULT UNDER THE NOTES. . . . . . . . . . . . . .33
8. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING . . . . . . . . . . . . .35
8.1 Representations and Warranties . . . . . . . . . . . . . . . . . . .36
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8.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
8.3 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . .36
8.4 Proceedings and Documents. . . . . . . . . . . . . . . . . . . . . .36
8.5 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . .36
8.6 Investment Agreement . . . . . . . . . . . . . . . . . . . . . . . .36
8.7 Registration Rights Agreement. . . . . . . . . . . . . . . . . . . .37
8.8 Restated Articles. . . . . . . . . . . . . . . . . . . . . . . . . .37
8.9 Purchase Documents . . . . . . . . . . . . . . . . . . . . . . . . .37
8.10 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . .37
8.11 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
8.12 Marketing and Sales Agreement. . . . . . . . . . . . . . . . . . . .37
9. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. . . . . . . . . . . .37
9.1 Representations and Warranties . . . . . . . . . . . . . . . . . . .37
9.2 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.3 Opinion of Investor's Counsel. . . . . . . . . . . . . . . . . . . .38
9.4 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.5 Investment Agreement . . . . . . . . . . . . . . . . . . . . . . . .38
9.6 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.7 Proceedings and Documents. . . . . . . . . . . . . . . . . . . . . .38
9.8 Purchase Documents . . . . . . . . . . . . . . . . . . . . . . . . .39
9.9 Registration Rights Agreement. . . . . . . . . . . . . . . . . . . .39
9.10 Marketing and Sales Agreement. . . . . . . . . . . . . . . . . . . .39
9.11 Restated Articles. . . . . . . . . . . . . . . . . . . . . . . . . .39
10. [Intentionally Omitted].. . . . . . . . . . . . . . . . . . . . . . . . .39
11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
11.1 Indemnification by the Company . . . . . . . . . . . . . . . . . . .39
11.2 Indemnification by the Investor. . . . . . . . . . . . . . . . . . .40
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
12.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .41
12.2 Expiration of Warranties . . . . . . . . . . . . . . . . . . . . . .41
12.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . .42
12.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
12.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
12.6 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . .42
12.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
12.8 Finder's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . .43
12.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . .44
12.10 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . .44
12.11 Specific Enforcement. . . . . . . . . . . . . . . . . . . . . . . .44
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APPENDIX I Alternative Covenants
EXHIBITS
EXHIBIT A Second Amended and Restated Articles of
Incorporation
EXHIBIT B Form of Subordinated Notes
EXHIBIT C Form of Warrants
EXHIBIT D Terms and Mechanics of Look Back Adjustment
EXHIBIT E Investment Agreement
EXHIBIT F Opinion of Company Counsel
EXHIBIT G Performance Targets
EXHIBIT H Registration Rights Agreement
EXHIBIT I Opinion of Winston & Xxxxxx
EXHIBIT J Employment Agreements
EXHIBIT K Marketing and Sales Agreements
SCHEDULES
Schedule 3 Schedule of Exceptions
Schedule 3.1 Organization of the Company
Schedule 3.3 Valid Issuance of Common Stock
Schedule 3.5(iii) Outstanding Shares of Capital Stock
Schedule 3.5(v) Outstanding Options and Warrants
Schedule 3.6 Subsidiaries
Schedule 3.7 Contracts and Other Commitments
Schedule 3.8 Related Party Transactions
Schedule 3.9 Registration Rights
Schedule 3.10 Permits
Schedule 3.11 Compliance with Other Instruments
Schedule 3.12 Litigation
Schedule 3.13 Title to Property and Assets; Leases
Schedule 3.14 Financial Statements
Schedule 3.15 Changes
Schedule 3.17 Taxes
Schedule 3.19 ERISA Plans
Schedule 3.20 Environmental Matters
Schedule 3.22(a) Intellectual Property
Schedule 3.22(b) Owned Software
Schedule 3.22(d) Third Party Software
Schedule 3.22(g) Intellectual Property Compliance
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Schedule 3.22(h) Proprietary Information and Inventions Agreements
Schedule 5.6 Transactions with Affiliates
Schedule 5.15(f) Liens and Encumbrances
Schedule 5.16(c) Senior Debt
Schedule 9.2 Third Party Consents
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SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement is made as of the 10th day of
February, 1998, by and between InsurQuote Systems, Inc., a Utah corporation
(the "Company"), and CCC Information Services Inc., a Delaware corporation
(the "Investor").
The Company and the Investor are entering into this Agreement in
connection with the issuance and sale by the Company to the Investor of (i)
333,750 shares of Common Stock, (ii) 145,414 shares of Series C Preferred
Stock, (iii) 320,203 shares of Series D Preferred Stock, (iv) $8,900,000 of
the Subordinated Notes and (v) Warrants to acquire up to 440,350 shares of
the Common Stock.
The parties hereto agree as follows:
1. DEFINITIONS
1.1 GENERAL. Each term defined in the preamble and in the recitals
of this Agreement shall have the meaning set forth above whenever used herein,
unless otherwise expressly provided or unless the context clearly requires
otherwise.
1.2 DEFINITIONS. As used herein, the following terms shall have the
meanings ascribed to them in this SECTION 1.2:
AFFILIATE. As defined in SECTION 3.8.
AGREEMENT. This Securities Purchase Agreement, together with all
Exhibits and Schedules referred to herein, as amended, modified or supplemented
from time to time in accordance with the terms hereof.
ANCILLARY AGREEMENT. As defined in SECTION 3.1.
ASSOCIATE. As defined in SECTION 3.8.
BANKRUPTCY CODE. As defined in SECTION 7(h).
CAPITAL EXPENDITURES (INCLUDING CAPITALIZED SOFTWARE). Means
expenditures (a) for any fixed assets or improvements,
replacements, substitutions or additions thereto that have a useful life or
more than one (1) year and an individual cost in excess of $1,000 per item,
including direct or indirect acquisition of such assets, or (b) for any
Capital Leases. NOTWITHSTANDING THE FOREGOING, the term Capital Expenditures
does not include permitted acquisitions under SECTION 5.17.
CAPITAL LEASES. Means capital leases and subleases as defined in the
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 13 dated November 1976 (as amended and updated from time to time).
CCC OPTION. As defined in the Investment Agreement.
CHANGE OF CONTROL. Any "person" or "group" (as defined in Section
13(d) and 14(d) of the Exchange Act), other than Investor and current
shareholders of the Company, becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than
50% of the total outstanding voting stock of the Company or the Company becomes
subject to a consolidation or merger with another corporation and the
shareholders of the Company immediately prior to such transaction own less than
50% of the voting power of the surviving corporation, or the Company sells or
transfers a majority of its assets to a third party.
CLOSING. The actual conveyance, transfer, assignment and delivery of
the Securities in exchange for the consideration payable to the Company on the
Closing Date pursuant to this Agreement.
CLOSING DATE. Five (5) days following the date on which Investor and
the Company mutually agree all closing conditions have been satisfied (or will
be satisfied on the Closing Date) or waived or such other date as Investor and
the Company may mutually agree in writing in either case, upon which the Closing
shall occur.
COMMON STOCK. The common stock of the Company, with no par value.
COMMISSION. Means the Securities and Exchange Commission.
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COMPANY. As defined in the preamble hereto.
COMPANY INDEMNIFIED PARTY. As defined in SECTION 11.2(b).
COMPANY PLAN. As defined in SECTION 3.19(g).
COMPANY'S KNOWLEDGE. The knowledge of the officers of the Company
after due inquiry and reasonable investigation.
CONSENTS. As defined in SECTION 3.4.
CONTENT. Insurance company-specific rating information for personal
auto insurance, obtained by the Company and integrated with the Company's rating
software for the purpose of developing insurance premiums and completing other
rating functions consistent with the Company's software.
DEFAULT. As defined in SECTION 7.
EMPLOYMENT AGREEMENTS. As defined in SECTION 8.10.
ERISA. As defined in SECTION 3.19(g).
EVENT OF DEFAULT. As defined in SECTION 7.
EXCHANGE ACT. The Securities Exchange Act of 1934, as amended.
FINANCIAL STATEMENTS. As defined in SECTION 3.14(a).
FULLY-DILUTED VOTING POWER. As defined in the Investment Agreement.
GAAP. Means generally accepted accounting principles in the United
States as in effect from time to time.
GOVERNMENTAL AUTHORITY. Shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial regulatory or administrative functions of or
pertaining to government.
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INDEBTEDNESS. Except as otherwise agreed to herein, means, without
duplication, (i) any obligation of such Person for borrowed money, including,
without limitation, (a) any obligation of such Person evidenced by bonds,
debentures, notes or other similar debt instruments, and (b) any obligation for
borrowed money which is non-recourse to the credit of such Person but which is
secured by a Lien on any asset of such Person, (ii) any obligation of such
Person on account of deposits or advances other than in the ordinary course of
business but in no event greater than $1,000,000, (iii) any obligation of such
Person for the deferred purchase price of any property or services, except trade
accounts payable, (iv) any obligation of such Person as lessee under a Capital
Lease, and (v) any Indebtedness of another Person secured by a Lien on any asset
of such first Person, whether or not such Indebtedness is assumed by such first
Person. For all purposes of this Agreement, the Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which such
Person is liable as a general partner or a joint venturer.
INTELLECTUAL PROPERTY. As defined in SECTION 3.22(a).
INVESTMENT AGREEMENT. As defined in SECTION 8.6.
INVESTOR. As defined in the preamble hereto.
INVESTOR INDEMNIFIED PARTY. As defined in SECTION 11.1(b).
KEY MAN INSURANCE. One or more insurance policies issued by one or
more insurers reasonably acceptable to the Investor on the lives of Xxxx
Xxxxxxx, Xxxx Xxxxx and Xxxxx Xxxxxxxxx, each having a death benefit to the
Company at all times of not less than $1,000,000.
LIEN. Shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract, other than a lease
properly classified as an operating lease under GAAP. The term "Lien" shall
also include liens and encumbrances affecting Property. For the purpose of this
Agreement, the Company shall be deemed to be the owner of any Property which it
has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the
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Property has been retained by or vested in some other Person for security
purposes.
LOSSES. As defined in SECTION 11.1.
MARKETING AGREEMENT. As defined in SECTION 8.12.
MATERIAL ADVERSE EFFECT. Shall mean the effect of any event or
condition which, alone or when taken together with other events or conditions
occurring or existing concurrently therewith, except for those events or
conditions that are primarily caused by conditions affecting the United States
economy as a whole or affecting the industry in which the Company competes as a
whole, (a) has or may be reasonably expected to have a material adverse effect
upon the business operations, assets, condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole, (b) materially impairs the
ability of the Company or any of its Subsidiaries to perform its respective
obligations under the Purchase Documents to which it is a party.
MATERIAL INDEBTEDNESS. As defined in SECTION 7(k).
ORGANIC DOCUMENT. Means, relative to any entity, its certificate and
articles of incorporation or organization, its by-laws or operating agreements,
all equity holder agreements, voting agreements and similar arrangements
applicable to any of its authorized shares of capital stock, its partnership
interests or its member interests, and any other arrangements relating to the
control or management of any such entity (whether existing as a corporation, a
partnership, an LLC or otherwise).
OWNED SOFTWARE. As defined in SECTION 3.22(b).
PERMITTED GUARANTEES. As defined in SECTION 5.24.
PERMITTED INDEBTEDNESS. As defined in SECTION 5.16
PERMITTED LIENS. Those Liens not prohibited by SECTION 5.15.
PERMITTED PURCHASE MONEY INDEBTEDNESS. Indebtedness permitted by
SECTION 5.16(b).
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PERMITTED SENIOR DEBT. As set forth on SCHEDULE 5.16(c) hereto. When
such Permitted Senior Debt is repaid by the Company, Permitted Senior Debt shall
be reduced by the amount of such repayment.
PERSON. Any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, limited liability company,
association, corporation, institution, entity, party or government (whether
national, federal, state, county, city, municipal or otherwise, including
without limitation any instrumentality, division, agency, body or department
thereof).
PLAN. As defined in SECTION 3.19(g).
PROPERLY CONTESTED. A contest currently being conducted by the
Company in good faith by appropriate proceedings diligently prosecuted.
PROPERTY. Shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
PURCHASE DOCUMENTS. As defined in SECTION 3.11.
PURCHASE MONEY LIENS. Liens arising in favor of sellers or lessors
for indebtedness and obligations incurred to purchase or lease fixed or capital
assets.
PURCHASE PRICE. As defined in SECTION 2.1(a).
REGISTRATION RIGHTS AGREEMENT. As defined in SECTION 8.7.
REPORTABLE EVENT. Shall mean a Reportable Event as defined in Section
4043(b) of ERISA as to which the PBGC has not by regulation waived the
requirement that it be notified within 30 days of the occurrence of such an
event.
RESTATED ARTICLES. The Second Amended and Restated Articles of
Incorporation of the Company in the form attached hereto as EXHIBIT A.
RETIREE WELFARE PLAN. As defined in SECTION 3.19(g).
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SECURITIES. The shares of Common Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and the Subordinated Notes
and the Warrants being acquired by the Investor pursuant to the Purchase
Documents.
SECURITIES ACT. Shall mean the Securities Act of 1933, as amended.
SENIOR DEBT DOCUMENTS. The documents pursuant to which the Company is
indebted under the Permitted Senior Debt.
SERIES A PREFERRED STOCK. The preferred stock of the Company,
designated series A, no par value per share.
SERIES B PREFERRED STOCK. The preferred stock of the Company,
designated series B, no par value per share.
SERIES C PREFERRED STOCK. The preferred stock of the Company,
designated series C, no par value per share.
SERIES D PREFERRED STOCK. The preferred stock of the Company,
designated series D, no par value per share.
SERIES E PREFERRED STOCK. The preferred stock of the Company,
designated series E, no par value per share.
SOFTWARE. Collectively, the Owned Software and the Third Party
Software.
STEP UP EVENT OF DEFAULT. As defined in SECTION 7.
STOCK OPTION PLAN. The 1994 Stock Option Plan of the Company, as
amended and restated.
SUBORDINATED NOTES. The 7.5% senior subordinated notes of the Company
in the form attached to this Agreement as EXHIBIT B.
SUBSIDIARY. Means (i) any Person of which 50% or more of the
securities having ordinary voting power for the election of directors are at the
time owned directly or indirectly by the Company or any Subsidiary thereof, (ii)
any Person of which 50% or more of the joint venture, limited partnership or
partnership interests are at the time owned directly or indirectly by the
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Company or any Subsidiary thereof or (iii) any Person which is a limited
partnership in which the Corporation or any Subsidiary is at the time the
general partner or at the time owns 50% or more of the general partner of such
Person.
SUBSIDIARIES' KNOWLEDGE. The knowledge of the officers of each
Subsidiary after due inquiry and reasonable investigation.
TAXES. All federal, state, local, foreign and provincial income,
capital gains, property transfer, payroll, withholding, excise, sales, use, use
and occupancy, mercantile, real estate, personal property, value added, capital
stock, franchise or other taxes, assessments or charges and estimated taxes
relating thereto.
THIRD PARTY SOFTWARE. As defined in SECTION 3.22(b).
WARRANTS. The warrants of the Company in the form attached to this
Agreement as EXHIBIT C.
WELFARE PLAN. As defined in SECTION 3.19(g).
2. PURCHASE OF SECURITIES
2.1 PURCHASE AND ISSUANCE OF SECURITIES
(a) Upon the terms and subject to the conditions of this Agreement,
the Investor agrees to acquire, and the Company agrees to issue to the Investor,
333,750 shares of Common Stock, 145,414 shares of Series C Preferred Stock,
(iii) 320,203 shares of Series D Preferred Stock, (iv) $8,900,000 face amount of
the Subordinated Notes which shall bear interest as provided in such notes and
shall mature and be due on February 10, 2003 and (v) Warrants to acquire 440,350
shares of Common Stock. In consideration of the issuance of the Securities and
the granting of the Option, the Investor will pay the following to the Company
at the Closing: (i) $1,530,114 for the Common Stock, (ii) $5,000,000 for the
Series C Preferred Stock, (iii) $4,469,886 for the Series D Preferred Stock,
(iv) $8,900,000 for the Subordinated Notes and (v) $100,000 for the Warrants
(collectively, the "PURCHASE PRICE").
(b) If, and only if, the Company performs as set forth in the
memorandum attached hereto as EXHIBIT D, the Investor shall make an adjustment
to its investment (including the Stage II
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Investment as set forth in Section 2.2. of the Investment Agreement)
hereunder as calculated in EXHIBIT D. In such a case, the Investor will
either (i) make an additional capital contribution in cash to the Company, or
(ii) in lieu of the capital contribution set forth in clause (i), reduce its
equity ownership in the Company by canceling the Warrants in part and
returning shares of the Common Stock as provided in EXHIBIT D and adjusting
the conversion features of the Series C Preferred Stock and the Series D
Preferred Stock in a manner consistent with EXHIBIT D. The Investor shall in
its sole discretion use the method of adjusting its investment under this
paragraph (b) as more fully set forth in EXHIBIT D.
2.2 CLOSING
The Closing shall take place at the office of Winston & Xxxxxx, 00
Xxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx, at 10:00 a.m. local time, February 10,
1998, or at such other time, date or place as the Company and the Investor may
mutually agree upon in writing. At the Closing, the Company shall deliver to
the Investor certificates representing the shares of Common Stock and Series C
Preferred Stock, Series D Preferred Stock and the Subordinated Notes and the
Warrants that the Investor is acquiring in exchange for the delivery by the
Investor to the Company of the Purchase Price by wire transfer of federal funds
as directed by the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor that,
except as set forth on SCHEDULE 3, under the title "Exceptions," furnished to
the Investor specifically identifying the relevant subparagraphs hereof:
3.1 ORGANIZATION; GOOD STANDING; QUALIFICATION
Except as set forth on SCHEDULE 3.1 hereto, the Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Utah, has all requisite corporate power and authority to
own and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute and deliver this
Agreement, the Investment Agreement, and the Registration Rights Agreement, the
Subordinated Notes, the Warrants and any Ancillary Agreement,
12
to execute, issue and deliver the Common Stock, the Series C Preferred Stock,
the Series D Preferred Stock, the Subordinated Notes and the Warrants, and to
carry out the provisions of this Agreement, the Investment Agreement, the
Registration Rights Agreement, the Restated Articles, the Subordinated Notes,
the Warrants and any Ancillary Agreement. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each
jurisdiction in which the failure so to qualify would have a Material Adverse
Effect. For purposes of this Agreement, the term "ANCILLARY AGREEMENT" shall
refer collectively to the Employment Agreements and the Restated Articles.
3.2 AUTHORIZATION
All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization, execution and
delivery of this Agreement, the Investment Agreement, the Registration Rights
Agreement, and any Ancillary Agreement, the performance of all obligations of
the Company hereunder and thereunder and the authorization, issuance (or
reservation for issuance), sale and delivery of the Common Stock, the Series C
Preferred Stock, the Series D Preferred Stock, the Subordinated Notes and the
Warrants being sold hereunder has been taken, and for the authorization and
reservation for issuance of the Series E Preferred Stock. This Agreement, the
Investment Agreement, the Registration Rights Agreement, the Subordinated Notes,
the Warrants and any Ancillary Agreement have been duly executed and delivered
by the Company and constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms (except as
enforcement hereof or thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium and similar laws, both state and federal, affecting
the enforcement of creditors' rights or remedies in general as from time to time
in effect or (ii) the exercise by courts of equity powers). Prior to the
Closing, the Restated Articles will have been filed with the Division of
Corporations and Commercial Code of the Department of Commerce of the State of
Utah in accordance with the Utah Revised Business Corporation Act.
3.3 VALID ISSUANCE OF COMMON STOCK, THE SUBORDINATED NOTES, AND THE
WARRANTS
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Except as set forth on SCHEDULE 3.3 hereto, the Common Stock, the
Series C Preferred Stock, the Series D Preferred Stock, the Subordinated Notes
and the Warrants that are being acquired by the Investor hereunder, when issued,
sold, and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free and clear of all liens, pledges, security
interests, options, rights of first refusal, encumbrances, claims, preemptive
rights and other third party rights other than as provided hereunder, the
Investment Agreement, the Registration Rights Agreement and any Ancillary
Agreement and under applicable state and federal securities laws.
3.4 GOVERNMENTAL CONSENTS
No consent, approval, qualification, order or authorization of, or
declaration or filing with, any local, state, or federal governmental authority
("CONSENTS") is required on the part of the Company in connection with the
Company's valid execution, delivery, or performance of the Investment Agreement
and the Purchase Documents and the offer, sale, issuance or delivery of the
Common Stock, the Series C Preferred Stock, the Series D Preferred Stock, the
Subordinated Notes, or the Warrants by the Company, except (i) the filing of the
Restated Articles with the Division of Corporations and Commercial Code of the
Department of Commerce of the State of Utah, and (ii) such Consents as have been
made prior to the Closing, except that any notices required to be filed with the
Securities and Exchange Commission under Regulation D of the Securities Act, or
such postclosing filings as may be required under applicable state securities
laws, any of which will be timely filed within the applicable periods therefor.
3.5 CAPITALIZATION AND VOTING RIGHTS
The authorized capital stock of the Company consists, or will consist
immediately prior to the Closing, of:
(i) PREFERRED STOCK. 3,000,000 shares of preferred stock, of which
167,399 shares have been designated Series A Preferred Stock, 695,485 shares
have been designated Series B Preferred Stock, 1,075,117 shares have been
designated Series C Preferred Stock, 320,203 shares have been designated as
Series D Preferred Stock and 100 shares have been designated as Series E
Preferred Stock. Shares of the Company's preferred stock will be
14
issued and outstanding immediately prior to the Closing as follows: 103,500
shares of Series A Preferred 603,164 shares of Series B Preferred Stock, no
shares of Series C Preferred Stock, no shares of Series D Preferred Stock,
and no shares of Series E Preferred Stock.
(ii) COMMON STOCK. 7,000,000 shares of Common Stock, of which 636,723
shares are issued and outstanding.
(iii) The outstanding shares of Common Stock, Series A Preferred Stock
and Series B Preferred Stock are owned by the stockholders and in the numbers
specified in SCHEDULE 3.5(iii) hereto.
(iv) The outstanding shares of Common Stock, Series A Preferred Stock
and Series B Preferred Stock have been issued in accordance with the
registration or qualification provisions of the Securities Act or exemptions
therefrom and any relevant state securities laws or pursuant to valid exemptions
therefrom.
(v) Except for (A) rights arising under the Investment Agreement, (B)
currently outstanding options to purchase 398,630 shares of Common Stock, and
(C) certain options and warrants set forth on SCHEDULE 3.5(V) hereto, there are
not outstanding any options, warrants, rights (including conversion or
preemptive rights and rights of first refusal), or agreements for the purchase
or acquisition from the Company of any shares of its capital stock. In addition
to the aforementioned options, the Company has reserved an additional 148,241
shares of its Common Stock for purchase upon exercise of options to be granted
in the future under the Company's Stock Option Plan or for direct stock awards
to employees. The Company is not a party or subject to any agreement or
understanding, and, to the Company's knowledge, there is no agreement or
understanding between any persons that affects or relates to the voting or
giving of written consents with respect to any security or the voting by a
director of the Company.
3.6 SUBSIDIARIES
SCHEDULE 3.6 hereto lists each of the Subsidiaries. Each of the
Subsidiaries is duly organized and existing under the laws of the jurisdiction
in which it is incorporated or organized and is in good standing under such
laws. Each Subsidiary is duly qualified as a foreign corporation to do business
and is in good
15
standing in every jurisdiction (domestic or foreign) in which the nature of
the respective business conducted or property owned by it makes such a
qualification necessary and where the failure to so qualify would have a
Material Adverse Effect. All of the outstanding shares of the capital stock
of each of the Subsidiaries have been duly and validly authorized and issued,
are fully paid and nonassessable, and are owned by the Company, free and
clear of any Lien. To the Company's Knowledge, there are not outstanding any
options, warrants, rights (including conversion or preemptive rights and
rights of first refusal) or agreements for the purchase or acquisition from
any Subsidiary of any shares of its capital stock. None of the Subsidiaries
is a party or subject to any agreement or understanding, and, to the
Company's Knowledge, there is no agreement or understanding between any
persons, that affects or relates to the voting or giving of written consents
with respect to any security or the voting by a director of any of the
Subsidiaries.
3.7 CONTRACTS AND OTHER COMMITMENTS
Set forth on SCHEDULE 3.7 hereto is a list of all contracts,
agreements, leases, commitments, or proposed transactions, written or oral,
absolute or contingent which are material to the Company and its Subsidiaries
taken as a whole.
3.8 RELATED-PARTY TRANSACTIONS
Except as set forth on SCHEDULE 3.8 hereto, no employee, officer, or
director of the Company or any of the Subsidiaries or any "AFFILIATE" or
"ASSOCIATE" (as such terms are defined in Rule 12b-2 under the Exchange Act) of
such employee, officer or director or member of his or her immediate family is
indebted to the Company or any of the Subsidiaries, nor is the Company or any of
the Subsidiaries indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the Company's Knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company or any of the Subsidiaries is affiliated or with which the Company
or any of the Subsidiaries has a business relationship, or any firm or
corporation that competes with the Company or any of the Subsidiaries, except
that employees, officers, or directors of the Company or the Subsidiaries, their
Affiliates and Associates and members of their immediate families may own stock
in publicly traded companies that may compete with the Company. There are no
16
transactions, excluding normal wages, stock options and other benefits in
accordance with standard Company employment policies and arrangements between
the Company or the Subsidiaries on the one hand and any employee or director of
the Company or the Subsidiaries, or any Affiliate, Associate or member of the
immediate family of any such employee or director on the other hand, in effect
on the Closing and involving, directly or indirectly, the (i) payment by the
Company or any of the Subsidiaries to any such employee or director or any
Affiliate, associate or member of the immediate family of any such employee or
director, of any aggregate amount in excess of $25,000 or (ii) transfer of
property by the Company or any of the Subsidiaries to any such employee or
director or any Affiliate, Associate or member of the immediate family of any
such employee or director, having an aggregate value in excess of $25,000.
Payments of cash and transfers of property to the Affiliates, Associates and
members of the immediate family of a person shall be aggregated with payments of
cash and transfers of property to such person for purposes of determining
whether the payments of cash or transfers of property to such person have an
aggregate value which exceeds $25,000.
3.9 REGISTRATION RIGHTS
Except as provided in the Registration Rights Agreement, or as set
forth on SCHEDULE 3.9 hereto, the Company is not obligated to register under the
Securities Act any of its presently outstanding securities or any of its
securities that may subsequently be issued.
3.10 PERMITS
Except as set forth on SCHEDULE 3.10 hereto, the Company and the
Subsidiaries have all franchises, permits, licenses, and any similar authority
necessary for the conduct of their respective businesses as now being conducted
by each of them, the lack of which could, individually or in the aggregate, have
a Material Adverse Effect. Neither the Company nor any of the Subsidiaries is
in default of or in violation in any material respect of any of such franchises,
permits, licenses or other similar authority.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS
Neither the Company nor any of the Subsidiaries is in violation or
default (i) of any provision of its charter or bylaws,
17
(ii) in any provision of any mortgage, indenture, agreement, instrument, or
contract to which it is a party or by which it is bound or (iii) of any
judgment, order, writ, decree, statute, rule, or regulation applicable to the
Company or the Subsidiaries other than, with respect to Clause (ii) or (iii),
such violations or defaults which, individually or in the aggregate, do not
have a Material Adverse Effect. Neither the execution and delivery of this
Agreement, the Investment Agreement, the Registration Rights Agreement, the
Subordinated Notes, the Warrants and any Ancillary Agreement, nor the
consummation of the transactions contemplated hereby and thereby, will
conflict with or result in a breach of the terms, conditions or provisions
of, or give rise to a right of termination under, or constitute a default
under, or result in any violation of, the Restated Articles or bylaws of the
Company, or any mortgage, agreement, instrument, order, judgment, decree,
statute, law, rule or regulation to which the Company or any of its
Subsidiaries or any of their respective property is subject other than
breaches, defaults or violations set forth on SCHEDULE 3.11 or which,
individually or in the aggregate, do not have a Material Adverse Effect or
materially adversely affect the ability of the Company to perform its
obligations under this Agreement, the Investment Agreement, the Registration
Rights Agreement, the Subordinated Notes, the Warrants, the Restated Articles
and any Ancillary Agreement (collectively, the "PURCHASE DOCUMENTS").
3.12 LITIGATION
There is no action, suit, proceeding, or investigation pending or to
the Company's Knowledge currently threatened against the Company or any of the
Subsidiaries or any of their respective properties or assets, that questions the
validity of any of the Purchase Documents or the right of the Company to enter
into such agreements, or to consummate the transactions contemplated hereby or
thereby, or that might result, either individually or in the aggregate, in any
Material Adverse Effect, or in any material change in the current equity
ownership of the Company or the Subsidiaries (including, without limitation, any
action, suit, proceeding, or investigation pending or currently threatened
involving the prior employment of any of the Company's or the Subsidiaries'
employees, their use in connection with the Company's or the Subsidiaries'
businesses of any information or techniques allegedly proprietary to any of
their former employers, their obligations under any agreements with prior
employers, or negotiations by the Company or the Subsidiaries with potential
18
backers of, or investors in, the Company or the Subsidiaries or their proposed
businesses). Neither the Company nor any of the Subsidiaries is a party to, or
to the best of the Company's Knowledge, named in any order, writ, injunction,
judgment, or decree of any court, government agency, or instrumentality. There
is no action, suit, or proceeding initiated by the Company or any of the
Subsidiaries currently pending or that the Company or any of the Subsidiaries
currently intends to initiate, except as set forth on SCHEDULE 3.12 hereto.
3.13 TITLE TO PROPERTY AND ASSETS; LEASES
Except (a) as reflected in the Financial Statements, (b) for liens for
current taxes not yet delinquent, (c) for liens imposed by law and incurred in
the ordinary course of business for obligations not past due to carriers,
warehousemen, laborers, materialmen and the like, (d) for liens in respect of
pledges or deposits under workers' compensation laws or similar legislation or
(e) for minor defects in title, none of which, individually or in the aggregate,
materially interferes with the use of such property, the Company and the
Subsidiaries have good and marketable title to their respective properties and
assets free and clear of all mortgages and Liens other than those Liens which,
individually or in the aggregate, do not have a Material Adverse Effect except
as set forth on SCHEDULE 3.13, hereto. With respect to the property and assets
it leases, the Company and the Subsidiaries are in compliance with such leases
and hold a valid leasehold interest free of any Liens, subject to clauses
(a)-(e) above. The Company and the Subsidiaries maintain insurance in such
amounts and of such a character as is usually maintained by or required for
companies engaged in the same or similar business.
3.14 FINANCIAL STATEMENTS
(a) The Company has delivered to the Investor its audited financial
statements, including the consolidated balance sheets as of June 30, 1997 and
1996 and related unaudited consolidating balance statements and the related
consolidated and unaudited consolidating statements of operations, statements of
stockholders' deficit and statements of cash flows for the fiscal years then
ended, and the related notes thereto (collectively such audited and unaudited
financial statements are referred to as the "FINANCIAL STATEMENTS").
19
(b) The Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods indicated and with
each other, except that unaudited Financial Statements may not contain all
footnotes required by GAAP. The Financial Statements fairly present the
financial condition, operating results and cash flows of the Company and its
Subsidiaries as of the dates, and for the periods, indicated therein. Except as
set forth in the Financial Statements, as of the date of this Agreement, the
Company has no material liabilities, contingent or otherwise, of a nature
required under GAAP to be disclosed on a balance sheet or notes to financial
statements of the Company other than liabilities incurred in the ordinary course
of business subsequent to June 30, 1997. Except as disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm, or corporation. The Company maintains a standard system
of accounting (except as set forth on SCHEDULE 3.14 hereto)and maintains and
will continue to maintain the books and records of the Company in a manner which
permits the Company to prepare financial statements in accordance with GAAP.
3.15 CHANGES
Except as contemplated or permitted by this Agreement or as set forth
in SCHEDULE 3.15 hereto, since June 30, 1997 through the date of this Agreement,
there has not been:
(a) any change in the assets, liabilities, financial condition, or
operating results of the Company from that reflected in the Financial Statements
that has had, in the aggregate, a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, that has had a Material Adverse Effect;
(c) any waiver or compromise by the Company or any of the
Subsidiaries of a materially valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any Lien or payment of any
obligation by the Company or any of the Subsidiaries, except in the ordinary
course of business and that is not, individually or in the aggregate, material
to the business, operations, condition (financial or other), results of
operations, assets, properties or
20
prospects of the Company (as such business is presently conducted and as it
is proposed to be conducted);
(e) any material change to a material contract or arrangement by
which the Company or any of the Subsidiaries or any of their assets are bound or
subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder of the Company or any of the
Subsidiaries;
(g) any sale, assignment, or transfer of any patents, trademarks,
copyrights, trade secrets, or other intangible assets, except in the ordinary
course of business;
(h) any resignation or termination of employment of any officer or
key employee of the Company or any of the Subsidiaries; and the Company, to its
knowledge, does not know of the impending resignation or termination of
employment of any such officer or employee;
(i) any receipt of notice that there has been a loss of, or material
order cancellation or reduction by, any customer of the Company or any of the
Subsidiaries which has accounted for 10% or more of the Company's revenues in
the year ended June 30, 1997;
(j) in any mortgage, pledge, transfer of a security interest in, or
Lien, created by the Company or any of the Subsidiaries, with respect to any of
its material properties or assets, except liens for taxes not yet due or
payable;
(k) any loans or guarantees made by the Company or any of its
Subsidiaries to or for the benefit of its employees, officers, or directors, or
any members of their immediate families, other than (i) normal travel advances
and other advances made in the ordinary course of its business, or (ii) loans or
guarantees which do not exceed $100,000 in the aggregate;
(l) any declaration, setting aside, or payment or other distribution
in respect of any of the Company's capital stock, or any direct or indirect
redemption, purchase, or other acquisition of any of such stock by the Company;
21
(m) to the Company's knowledge, any other event or condition of any
character that, individually or in the aggregate, reasonably could be expected
to have a Material Adverse Effect; or
(n) any agreement or commitment by the Company or any of the
Subsidiaries to do any of the things described in this SECTION 3.15 (other than
negotiations with the Investor regarding the transactions contemplated by this
Agreement).
3.16 HOLDING COMPANY ACT AND INVESTMENT COMPANY ACT STATUS
The Company is not a "holding company" or a "public utility company"
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not an "investment company", or a company "controlled"
by an "investment company", within the meaning of the Investment Company Act of
1940, as amended.
3.17 TAXES
Except as set forth on SCHEDULE 3.17 hereto, the Company and the
Subsidiaries have filed all required Tax returns and reports which are material
and have paid, or adequately provided for the payment of, all Taxes, assessments
and other governmental charges imposed upon them or upon any of their respective
assets, income or franchises.
3.18 DISCLOSURE
Neither this Agreement nor the Schedules hereto nor any certificate
referred to herein furnished to the Investor by or on behalf of the Company
pursuant to this Agreement or any other Purchase Document contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading.
3.19 ERISA
(a) SCHEDULE 3.19 hereto sets forth a true, correct, and complete
list of all Plans. The Company and the Subsidiaries have, with respect to each
Company Plan, made available to the Investor true and complete copies of (i) all
Plan documents and agreements; (ii) the most recent summary plan description for
each Plan and
22
material employee communications; (iii) the most recent annual report
(including all Schedules thereto); and (iv) if the Plan is intended to
qualify under Section 401(a) or 403(a) of the Code, the most recent
determination letter received from the Internal Revenue Service or opinion
letter received from the sponsor of a prototype plan.
(b) To the Company's Knowledge, with respect to each Plan, neither
the Company nor any of the Subsidiaries has direct or indirect, actual or
contingent, liability, other than to make payments for contributions, premiums
or benefits when due in the ordinary course, all of which payments that are due
and owing have been made and no Plan is a "defined benefit plan" (as defined in
Section 3(35) of ERISA). No assets of the Company or any of the Subsidiaries
are subject to any lien under Sections 302(f), 306(a), 307(a), 412 or 4068 of
ERISA or Sections 401(a)(29) or 412(n) of the Code.
(c) With respect to each Company Plan: (i) each such Plan materially
conforms to, and its administration is in material compliance with, all
applicable laws and regulations; (ii) each such Plan is intended to qualify
under Sections 401(a) or 403(a) of the Code so qualifies; (iii) all payments
required, due and owing with respect to such Plans to date have been made, all
amounts accrued as liabilities and expenses of the Company and the Subsidiaries
through the date of the Financial Statements which have not been paid have been
properly reflected in the Financial Statements through the date of the Financial
Statements; (iv) to the Company's Knowledge all payments, contributions, and
premiums paid or required to be paid meet the requirements for deductibility
under the Code, and no payment is required under any such Plan that, by
operation of Section 280G of the Code, would not be deductible; (v) no such Plan
is subject to Section 302 of ERISA or Section 412 of the Code; (vi) no such Plan
is subject to Title IV of ERISA; (vii) there are no actions, suits or claims
pending or, to the knowledge of the Company, threatened (other than routine
claims for benefits); (viii) each such Plan that is a group health plan has been
operated in compliance with Section 4980B of the Code at all times, except to
the extent that non-compliance has not resulted or will not result in a material
liability; and (ix) no event, condition or circumstance has occurred or is
expected to occur that could result in a partial termination (within the meaning
of Section 411(d)(3) of the Code) of such Plan.
23
(d) No Company Plan is funded through a "rabbi trust" or similar
funding vehicle, and no assets of the Company are held in such a trust or
funding vehicle. Except as specified on SCHEDULE 3.19 hereto there are no (i)
Retiree Welfare Plans, (ii) unfunded benefit obligations of the Company relating
to former or current employees of the Company or any of the Subsidiaries that
are not fairly reflected by reserves shown in the Financial Statements or (iii)
reserves, assets, surplus or prepaid premiums under any Welfare Plan. Except as
set forth in SCHEDULE 3.19 hereto, no Company Plan provides for severance pay,
unemployment compensation or any similar payment with respect to any current or
former employee, officer, director or agent of or consultant to the Company or
any of the Subsidiaries. The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee, officer,
director or agent of or consultant to the Company or any of the Subsidiaries to
severance pay, unemployment compensation or any similar payment, (ii) accelerate
the time of payment or vesting of or increase the amount of compensation due to
any current or former employee, officer, director or agent of or consultant to
the Company or any of the Subsidiaries, or (iii) constitute or involve a
"prohibited transaction" (as defined in Section 406 or 407 of ERISA or Section
4975 of the Code).
(e) The Company or any of the Subsidiaries, as the case may be, has
the unqualified right to prospectively amend, modify and terminate each Company
Plan (except to the extent prohibited by law).
(f) No Company Plan is a "multiple employer plan" or a "multiemployer
plan" within the meaning of ERISA or the Code; and neither the Company nor any
of the Subsidiaries has direct or indirect, actual or contingent, liability with
respect to any partial or complete withdrawal (as such terms are defined in
Sections 4203 and 4205 of ERISA) from any multiemployer plan.
(g) As these terms are used in this Section:
"Company Plan" means any Plan that provides benefits with respect to
employees or former employees of the Company or any of the Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
24
"Plan" means any "employee benefit plan" within the meaning of Section
3(3) of ERISA with respect to which the Company or any of the Subsidiaries has
any direct or indirect, fixed or contingent, liability.
"Welfare Plan" means any Plan that is a welfare plan within the
meaning of Section 3(1) of ERISA and provides benefits with respect to employees
or former employees of the Company or any of the Subsidiaries.
"Retiree Welfare Plan" means any Welfare Plan that provides benefits
with respect to employees or former employees of the Company or any of the
Subsidiaries beyond their retirement or other termination of service (other than
coverage mandated under Section 4980B of the Code).
3.20 ENVIRONMENTAL MATTERS
Neither the Company nor any of the Subsidiaries has disposed of or
arranged for the disposal of any hazardous substances, other than in conformity
with applicable laws and regulations, at any facility, location or site owned or
leased by the Company or any of the Subsidiaries except to the extent that such
disposals do not, individually or in the aggregate, have a Material Adverse
Effect and, to the Company's Knowledge, neither the Company nor any of the
Subsidiaries has been designated a potentially liable party for remedial action
or response costs in connection with such facility, location or site under the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Federal Resource Conservation and Recovery Act, as amended, the
Toxic Control Substance Act, the Clean Water Act, the Clean Air Act or
comparable state statutes, except to the extent that any such designation does
not have a Material Adverse Effect. Except as set forth on SCHEDULE 3.20
hereto, to the Company's Knowledge, except for such use or storage of hazardous
substances as is incidental to the conduct of the Company's or any of the
Subsidiaries' operations, which use and storage is or has been in conformity
with applicable laws and regulations, no property or asset owned or leased by
the Company or any of the Subsidiaries has been used for the storage, treatment,
generation, processing, production or disposal of any hazardous substances or as
a landfill or other waste disposal site, except to the extent that such uses or
storage do not, individually or in the aggregate, have a Material Adverse
Effect. To the Company's Knowledge,
25
underground storage tanks are not and have not been located on or under any
property or assets owned or leased by the Company or any of the Subsidiaries,
except to the extent that such storage tanks do not, individually or in the
aggregate, have a Material Adverse Effect. For the purposes of this SECTION
3.20, "hazardous substances" shall mean those substances defined or listed
by the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, the Federal Resource Conservation and Recovery Act, as amended,
the Toxic Control Substance Act, the Clean Water Act, the Clean Air Act or
comparable state statutes, and regulations thereunder.
3.21 OFFERING OF THE SHARES
Neither the Company nor, to the Company's Knowledge, any person
acting on its behalf has offered the Securities or any similar securities of the
Company for sale or exchange to, solicited any offers to buy such securities of
the Company from, or otherwise approached or negotiated with respect to such
securities of the Company with, any person other than the Investor and a limited
number of other "accredited investors" (as defined in Rule 501(a) under the
Securities Act). Neither the Company nor, to the Company's Knowledge, any
person acting on its behalf has taken or will take any action (including,
without limitation, any offering of any securities of the Company under
circumstances which would require the integration of such offering with the
offering of the Securities under the Securities Act and the rules and
regulations of the Commission thereunder) which might subject the offering,
issuance or exchange of the Securities to the registration requirements of
Section 5 of the Securities Act. The Company will offer and exchange the
Securities in compliance with all applicable state securities laws and will make
all necessary filings and qualifications required by such laws.
3.22 INTELLECTUAL PROPERTY
(a) Attached hereto as SCHEDULE 3.22(a) is a listing of all
intellectual property that is material to the Company and/or the Subsidiaries in
which the Company or any of the Subsidiaries holds any ownership interest or
written license to use ("INTELLECTUAL PROPERTY"). The Intellectual Property
includes: (i) patents and patent applications; (ii) registered copyrights,
material unregistered works and works for which copyright applications have been
filed; (iii) federal or state registered
26
trademarks, service marks and trade names for which applications have been
filed; (iv) material common law trademarks, service marks and trade names;
and (v) items which the Company or any of the Subsidiaries considers to be a
material trade secret.
(b) Attached hereto as SCHEDULE 3.22(b) is a listing of all software
and databases that are material to the conduct of the business of the Company
and the Subsidiaries in which the Company or any of the Subsidiaries: (i) holds
any ownership interest ("OWNED SOFTWARE"); or (ii) holds written license to use
(with said license agreement being also identified), but excluding PC based
software that is available pursuant to "shrink wrap" agreements ("THIRD PARTY
SOFTWARE"). To the Company's Knowledge and Subsidiaries' Knowledge, the Company
and the Subsidiaries do not use any software or databases that are material to
the business of the Company and the Subsidiaries for which the user has neither
ownership rights nor a valid license.
(c) To the Company's Knowledge and the Subsidiaries' Knowledge, the
Company or one of the Subsidiaries possesses legal rights in the Intellectual
Property and Owned Software that are sufficient to conduct the business of the
Company and the Subsidiaries as the same is presently conducted.
(d) To the Company's Knowledge and the Subsidiaries' Knowledge, the
Company and the Subsidiaries possess valid licenses to use the Third Party
Software used by the Company and the Subsidiaries that is available pursuant to
"shrink wrap" agreements, except as set forth on SCHEDULE 3.22(d) hereto.
(e) Except for options, licenses or agreements (i) with its own
employees, officers, directors or consultants, substantially in the form
referenced in subparagraph (h) below, or (ii) options, licenses or agreements
granted, received or entered into in the ordinary course of the Company's or any
Subsidiary's business, to the knowledge of the Company and the Subsidiaries,
there are no outstanding options, licenses or agreements of any kind relating to
the Intellectual Property to which the Company or the Subsidiaries is a party.
(f) Except for agreements with its own employees or consultants,
substantially in the form referenced in subparagraph (h) below, to the Company's
Knowledge and the Subsidiaries' Knowledge, there are no outstanding options,
licenses or agreements
27
of any kind relating to the Software to which the Company or the Subsidiaries
is a party.
(g) To the Company's Knowledge and the Subsidiaries' Knowledge,
neither the Company nor any of the Subsidiaries has received any written
communications alleging that the Company or any of the Subsidiaries has violated
or, by conducting its business as the same is proposed to be conducted by the
Company or any of the Subsidiaries, would violate any Intellectual Property of
any other person or entity nor, to the knowledge of the Company and the
Subsidiaries, does such a present violation exist.
(h) Except for the persons listed in SCHEDULE 3.22(h) hereto, each
employee and officer of the Company or any of the Subsidiaries has executed the
Company's or the Subsidiaries' standard Proprietary Information and Inventions
Agreement substantially in the form provided to the Investor.
3.23 LABOR RELATIONS
There is no pending or, to the Company's Knowledge, threatened strike,
picketing, work stoppage or work slowdown involving employees of the Company or
any of the Subsidiaries. No union is certified by the National Labor Relations
Board as collective bargaining agent for employees of the Company or any of the
Subsidiaries. To the Company's Knowledge, no written demand is pending for
recognition of such employees, no election for certification is pending, and, to
the best of the Company's Knowledge, no such demand is scheduled. The Company
has not incurred any liability or obligation, either directly or indirectly,
under the Worker Adjustment and Retraining Notification Act, as it may be
amended from time to time, or any state or local plant closing and severance
laws or regulations, and, to the Company's Knowledge within the six-month period
immediately following this transaction, the Company will not incur any such
liability or obligation if, during such six-month period, only terminations of
employment in the normal course of operations occur.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants that:
4.1 AUTHORIZATION
28
All corporate action on the part of the Investor, its officers,
directors and stockholders necessary for the authorization, execution and
delivery of this Agreement, the Investment Agreement, the Registration Rights
Agreement, and any Ancillary Agreement, the performance of all obligations of
the Investor hereunder and thereunder has been taken, and this Agreement,
Investment Agreement, the Registration Rights Agreement, the Ancillary Agreement
have and constitute valid and legally binding obligations of the Investor,
enforceable in accordance with their respective terms (except as enforcement
hereof or thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium and similar laws, both state and federal, affecting the enforcement
of creditors' rights or remedies in general as from time to time in effect or
(ii) the exercise by courts of equity powers).
4.2 NO CONFLICT.
Neither the execution of this Agreement, the Investment Agreement, nor
the Warrant Agreement by Investor nor the performance by Investor of its
obligations under this Agreement, the Investment Agreement or the Warrant
Agreement will conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any contract to which Investor is
a party or is bound, the articles of incorporation and bylaws of the Investor or
any applicable law or order to which Investor is a party or by which Investor is
bound.
4.3 ACQUIRE ENTIRELY FOR OWN ACCOUNT
This Agreement is made with the Investor in reliance upon the
Investor's representation to the Company, which by its execution of this
Agreement it hereby confirms, that, the Securities to be acquired by the
Investor will be acquired for investment for the Investor's own account, not as
a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, the Investor further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities.
29
4.4 RELIANCE UPON INVESTOR'S REPRESENTATIONS
The Investor understands that the Securities are not registered under
the Securities Act on the ground that the acquisition provided for in this
Agreement and the issuance of securities hereunder is exempt from registration
under the Securities Act pursuant to Section 4(2) thereof, and that the
Company's reliance on such exemption is predicated on the Investor's
representations set forth herein.
4.5 SOPHISTICATED INVESTOR
The Investor is a sophisticated purchaser with respect to the
Securities, has been given the opportunity to access the records of the Company
and its Subsidiaries and has made its own independent analysis and investigation
into the business, operations, financial condition and general creditworthiness
of the Company and the Subsidiaries and has made its own independent decision to
acquire on the date hereof the Securities pursuant to the terms and conditions
set forth in this Agreement, except that the Investor has relied upon the
representations, warranties and covenants of the Company contained in this
Agreement. The Investor is an "accredited investor" as such term is defined in
Rule 501 under the Securities Act.
4.6 ACCESS TO DATA
The Investor has received and reviewed information about the Company
and has had an opportunity to review and discuss the Company's business,
management and financial affairs with its management. The Investor understands
that such discussions, as well as any written information issued by the Company,
were intended to describe the aspects of the Company's business and prospects
which the Company believes to be material, but were not necessarily a thorough
or exhaustive description.
4.7 RESTRICTED SECURITIES
The Investor understands that the Securities may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Securities or an available exemption from
registration under the Securities Act, the Securities must be held indefinitely,
subject,
30
in the case of the Series C Preferred Stock, to redemption in accordance with
its terms. In particular, the Investor is aware that the Securities may not
be sold pursuant to Rule 144 promulgated under the Securities Act unless all
of the conditions of that Rule are met. Among the conditions for use of Rule
144 is the availability of current information to the public about the
Company. Such information is not now available and, except as otherwise
contemplated by this Agreement, the Company has no present plans to make such
information available.
4.8 LEGEND
To the extent applicable, each certificate or other document
evidencing any of the Securities being acquired hereunder shall be endorsed with
the legend set forth below, and the Investor covenants that, except to the
extent such restrictions are waived by the Company, such Investor shall not
transfer the shares represented by any such certificate without complying with
the restrictions on transfer described in the legend endorsed on such
certificate:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH
ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED."
5. COVENANTS OF THE COMPANY
From the date of this Agreement, and thereafter so long as the
Investor or any of its Affiliates shall hold Securities representing ten percent
(10%) or more of the Fully-Diluted Voting Power of the Company, and so long as
there shall be any Subordinated Note outstanding, the Company will duly perform
and observe for the benefit of the holders of the Securities, each and all of
the covenants and agreements hereinafter set forth, PROVIDED, that, if all of
the Subordinated Notes shall have been paid in full, the Company will not be
obligated to perform and
31
observe the covenants and agreements set forth in SECTIONS 5.15 THROUGH 5.18,
5.20 AND 5.22 THROUGH 5.25; FURTHER; PROVIDED, that so long as the Investor
or any of its Affiliates shall hold any of the Securities the Company will
duly perform and observe for the benefit of the holders of the Securities,
the covenants set forth in SECTIONS 5.1 AND 5.2; FURTHER; PROVIDED; that at
any time that a party other than the Investor or any of its Affiliates holds
the Subordinated Note, then the covenants and agreements set forth in
SECTIONS 5.2, 5.5, 5.22, 5.23 AND 5.25 shall no longer be in effect and
SECTIONS 5.15 AND 5.17 shall be replaced by the replacement sections set
forth on APPENDIX I hereto.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS
(a) as soon as practicable and in any event within thirty (30)
calendar days after the end of each calendar month, an unaudited consolidated
statement of operations, consolidated statement of stockholders equity/deficit
and a consolidated statement of cash flows of the Company and its Subsidiaries
for the period from the beginning of the then current calendar month to the end
of such month, and an unaudited consolidated balance sheet of the Company and
its Subsidiaries as of the end of such month, in the form prepared by the
Company for its internal use consistent with past practice and setting forth in
each case in comparative form figures for the corresponding period or date in
the preceding calendar year.
(b) as soon as practicable and in any event within sixty (60)
calendar days (thirty (30) calendar days after the end of each quarter nine
months after the Closing Date) after the end of each quarter (other than the
last quarter) in each year, an unaudited consolidated and consolidating
statement of operations, consolidated and consolidating statement of
stockholders equity/deficit and a consolidated and consolidating statement of
cash flows of the Company and its Subsidiaries for the period from the beginning
of the then current quarter to the end of such quarter, and an unaudited
consolidated and consolidating balance sheet of the Company and its Subsidiaries
as of the end of such quarter, setting forth in each case in comparative form
figures for the corresponding period or date in the preceding calendar year, all
in reasonable detail sufficient to permit the Investor to satisfy its Commission
reporting obligations and certified by an authorized financial officer of the
Company, subject to changes resulting from year-end adjustments and in each case
accompanied by
32
a review report by a nationally recognized firm of independent public
accountants which shall have performed such review in accordance with
Statements on Standards for Accounting and Review Services (or any applicable
successor statement) issued by the American Institute of Certified Public
Accountants;
(c) as soon as practicable and in any event within ninety (90)
days after the end of each year (sixty (60) days after the end of each year
beginning with the first fiscal year end nine months after the Closing Date),
audited consolidated and consolidating statements of operations and audited
consolidated and consolidating statements of cash flows and an audited
consolidated statement of stockholders equity/deficit (including all of the
related consolidating statements) of the Company and its Subsidiaries for such
year, and an audited consolidated and unaudited consolidating balance sheet of
the Company and its Subsidiaries as of the end of such year, together with
related schedules and notes thereof, setting forth in each case in comparative
form the corresponding figures from the preceding calendar year, all in
reasonable detail sufficient to permit the Investor to satisfy its Commission
reporting obligations and examined and reported on by a nationally recognized
firm of independent public accountants of recognized standing selected by the
Company;
(d) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as the Company shall
send to its stockholders and copies of all such registration statements, other
than registration statements relating to employee benefit or dividend
reinvestment plans, and all such regular and periodic reports as it shall file
with the Commission; and
Together with each delivery of financial statements required by clauses (b) and
(c) of this SUBSECTION 5.1, the Company will deliver to the Investor a
certificate by an authorized financial officer of the Company regarding
compliance by the Company with the covenants set forth in SUBSECTIONS 5.5, 5.6,
5.7, 5.8, 5.9, 5.11, 5.12, 5.13, 5.15, 5.16, 5.17, 5.22, 5.24 AND 5.25 hereof,
and that such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis.
5.2 OTHER FINANCIAL INFORMATION
33
The Company agrees that it will deliver to the Investor promptly after
the end of each calendar quarter, but in any event no more than sixty (60)
calendar days after the end of each calendar quarter (thirty (30) calendar days
after the end of each calendar quarter beginning with the first calendar quarter
nine months after the Closing Date), such financial information concerning the
business and operations of the Company and its Subsidiaries (i) for such
preceding calendar quarter as shall be reasonably necessary or desirable to
permit the Investor to prepare and issue to the public, in the ordinary course
of the Investor's business, an "earnings" release relating to the Investor's
consolidated operations for such fiscal period, and(ii) to permit the Investor
to compare month over month, year over year and month to budgeted financial
information of the Company.
5.3 INSPECTION OF PROPERTY
The Company will permit representatives of the Investor, to visit and
inspect, at the Investor's expense, any of the properties of the Company and its
Subsidiaries, to examine the corporate books and make copies or extracts
therefrom and to discuss the affairs, finances and accounts of the Company and
its Subsidiaries with the principal officers of the Company, all at such
reasonable times and as often as the Investor may reasonably request.
5.4 LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES OR SUBORDINATED
NOTES
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any certificate representing the Securities,
in the case of loss, theft or destruction, upon delivery of an indemnity
reasonably satisfactory to the Company, or, in the case of mutilation, upon
surrender and cancellation thereof, the Company will issue a new certificate or
Subordinated Note of like tenor for a number of shares of Common Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock or Warrants
or face value of the Subordinated Notes as the case may be, equal to the number
of shares of such stock or face value of such notes represented by the
certificate or Subordinate Note lost, stolen, destroyed or mutilated.
5.5 LIMITATION ON PAYMENT RESTRICTIONS. Other than in connection
with Permitted Senior Debt, unless the Investor
34
otherwise consents in writing, the Company will not, and will not permit any
of its Subsidiaries to, enter into any loan or other agreement containing a
dividend limitation which restricts the ability of the Company to pay
dividends on the Series C Preferred Stock in accordance with the Restated
Articles.
5.6 LIMITATION ON TRANSACTIONS WITH AFFILIATES
Except as set forth on SCHEDULE 5.6 or as contemplated by this
Agreement or any Purchase Document, unless the Investor consents in writing, the
Company will not, and will not permit any of its Subsidiaries to, conduct,
directly or indirectly, any business or enter into any transaction with any
employee or director of the Company or any of its Subsidiaries or any Affiliate,
Associate or member of the immediate family of any such employee or director
involving, directly or indirectly, the (i) payment by the Company or any of its
Subsidiaries to any such employee or director or any of the Affiliates,
Associates or members of the immediate family of any such employee or director
of an aggregate amount in excess of $50,000 or (ii) transfer of property by the
Company or any of its Subsidiaries to any such employee or director or any
Affiliate, Associate or member of the immediate family of any such employee or
director, having an aggregate value in excess of $50,000 without the approval of
the disinterested members of the Board of Directors. Payments of cash and
transfers of property to the Affiliates, Associates and members of the immediate
family of a person shall be aggregated with payments of cash and transfers of
property to such person for purposes of determining whether the payments of cash
or transfers of property to such person have an aggregate value which exceeds
$10,000.
5.7 INSURANCE
(a) Unless the Investor otherwise consents in writing, the Company
will maintain, and will cause each of its Subsidiaries to maintain, insurance
coverage by financially sound and reputable insurers in such forms and amounts
and against such risks which are approved by the board of directors of the
Company from time to time.
35
(b) Within ninety (90) days after the Closing, the Company shall use
its reasonable best efforts to obtain and at all times thereafter shall maintain
the Key Man Insurance.
5.8 MAINTENANCE, ETC.
Unless the Investor otherwise consents in writing, the Company will
maintain, preserve and keep, and will cause each of its Subsidiaries to
maintain, preserve and keep, its properties which are used or useful in the
conduct of its business (whether owned in fee or a leasehold interest) in good
repair and working order (ordinary wear and tear excepted) and from time to time
will make all necessary repairs, replacements, renewals and additions so that at
all times the efficiency thereof shall be maintained, unless the failure to
maintain would not reasonably be expected to have a Material Adverse Effect.
5.9 NATURE OF BUSINESS
Unless the Investor otherwise consents in writing, neither the Company
nor any of its Subsidiaries will engage in any business if, as a result, the
general nature of the business, taken on a consolidated basis, which would then
be engaged in by the Company and its Subsidiaries, would be materially changed
from the general nature of the business engaged in by the Company and its
Subsidiaries on the date of this Agreement.
5.10 [Intentionally Omitted].
5.11 USE OF PROCEEDS
The Company agrees that it will use the proceeds of the sale of the
Securities hereunder for the retirement of approximately $6.5 million of
indebtedness, product development, content development and working capital.
5.12 PAYMENT OF TAXES
The Company will, and will cause each of its Subsidiaries to pay and
discharge promptly as they become due and payable all material taxes,
assessments and other governmental charges or levies imposed upon it or its
income or upon any of its property, as well as all claims of any kind (including
claims for labor, materials and supplies) which, if unpaid, might by law become
a
36
Lien upon its property; PROVIDED that no such Person shall be required to pay
any such tax, assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings promptly initiated and diligently conducted and if it shall have set
aside on its books such reserves, if any, with respect thereto as are required
by GAAP; PROVIDED FURTHER, that the Company will, and will cause each of its
Subsidiaries to, pay any such tax, assessment, charge, levy or claim prior to
the commencement of any proceeding to foreclose any Lien securing the same.
5.13 CONDUCT OF BUSINESS
Subject to SECTION 5.17 hereof, the Company and each Subsidiary shall
(a) maintain its corporate existence, (b) maintain in full force and effect all
bonds, franchises, patents and trademarks, and all governmental licenses,
permits and authorizations, in each case which are material to the conduct of
its business, (c) maintain in full force and effect all leases, contracts and
other rights, and all non-governmental licenses, permits and authorizations, in
each case the loss of which would have a Material Adverse Effect, and (d) comply
with all applicable laws, orders, regulations and ordinances of all Governmental
Authorities, except for such laws, orders, regulations and ordinances the
violation of which would not be reasonably likely to have a Material Adverse
Effect.
5.14 NOTICE OF SUITS, ADVERSE CHANGES IN BUSINESS AND DEFAULTS
The Company and each Subsidiary shall immediately as to PARAGRAPH (d)
below, or as to all other paragraphs of this SECTION 5.14, as soon as possible,
and in any event within fifteen (15) days after it learns of any of the
following, give written notice to the Investor of:
(a) any proceeding(s) being instituted or threatened to be instituted
by or against the Company or a Subsidiary in any federal, state, local or
foreign court or before any Governmental Authority in which injunctive relief is
requested which would reasonably be expected to materially and adversely affect
the business of the Company and its Subsidiaries taken as a whole or in which
the amount in controversy exceeds $100,000 and any litigation, proceeding,
investigation or claim that would
37
reasonably be expected to materially impair the Company's ability to perform
any of its material obligations under (i) any of the Purchase Documents, or
(ii) the Restated Articles, as amended, or by-laws, as amended, of the
Company or any Subsidiary;
(b) any change in the business, assets or financial condition, of the
Company or any Subsidiary which can reasonably be expected to have a Material
Adverse Effect;
(c) the occurrence of any Event of Default as defined in any of the
Senior Debt Documents; and
(d) the occurrence of any Event of Default under SECTION 7 hereof or
the Subordinated Note.
5.15 LIENS OR ENCUMBRANCES
The Company will not create or suffer to exist or permit any
Subsidiary to create or suffer to exist, any Lien upon any of its Property,
income or profits, whether now owned or hereafter acquired, EXCEPT AS FOLLOWS
(collectively, the "PERMITTED LIENS"):
(a) Liens at any time granted in favor of the Investor;
(b) (A) Liens for taxes (excluding any Lien imposed pursuant to any
of the provisions of ERISA) not yet due or that are being Properly Contested and
(B) statutory Liens arising in the ordinary course of the Company's business by
operation of law or regulation, but only if payment in respect of any such Lien
is not at the time required or such Liens are being Properly Contested.
(c) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(d) Liens securing Indebtedness of one of the Company's Subsidiaries
to the Company or another such Subsidiary;
(e) reservations, exceptions, easements, rights-of-way and other
similar encumbrances affecting the real Property of the Company and its
Subsidiaries that do not interfere with the ordinary conduct of the business of
the Company and Subsidiaries;
(f) such other Liens existing on the Closing Date which are set forth
on SCHEDULE 5.15(f);
38
(g) Liens securing obligations of the Company in respect of Permitted
Senior Debt; and
(h) such other Liens as the Investor may hereafter approve in
writing.
5.16 INDEBTEDNESS
Except as expressly provided herein, neither the Company, nor any
Subsidiary will incur, create, assume, become or be liable in any manner with
respect to any Indebtedness, EXCEPT AS FOLLOWS (collectively, the "PERMITTED
INDEBTEDNESS"): (a) the Indebtedness evidenced by the Subordinated Notes and
other obligations of the Company under this Agreement and the other Purchase
Documents to which the Company is a party, (b) Indebtedness of the Company
secured by Purchase Money Liens and Indebtedness of the Company under Capital
Leases not to exceed $2,000,000 in the aggregate at any time outstanding and
shall be secured solely by trade accounts receivable and equipment; and (c)
Permitted Senior Debt(as set forth on SCHEDULE 5.16(c)).
5.17 CONSOLIDATIONS, MERGERS OR ACQUISITIONS
Neither the Company nor any Subsidiary will recapitalize or
consolidate with, merge with, acquire the capital stock of, or otherwise acquire
all or any substantial part of the assets or properties of any other Person
except that (i) a wholly-owned Subsidiary of the Company may merge into another
wholly-owned Subsidiary of the Company, (ii) a Subsidiary of the Company may
merge into the Company, and (iii) the Company may acquire the capital stock of,
or otherwise acquire all or any substantial part of the assets or Properties of
any other Person, if the aggregate consideration payable for such acquisition is
less than or equal to $1,000,000 for a rolling twelve (12) month period and such
acquisition is otherwise permitted by this Agreement.
5.18 [INTENTIONALLY OMITTED.]
5.19 FISCAL YEAR-END
Neither the Company nor any Subsidiary will change its fiscal year end
from June 30 of each year without the approval of the Investor which consent
will not be unreasonably withheld.
39
5.20 PAYMENTS ON SUBORDINATED DEBT
Except as expressly agreed to herein, the Company will not make any
principal payment of or interest payment on, or purchase or acquire, or prepay,
any Indebtedness which is subordinate to the Subordinated Notes; or permit any
notes or agreements evidencing Indebtedness which is subordinated to the
Subordinated Notes, or any subordination agreement executed in connection
therewith, to be modified or amended or any agreement or consent to be given
thereunder, whereby any provisions thereof relating to the subordination thereof
to the Subordinated Notes are waived, modified or discharged, or there is any
acceleration of the maturities therein provided.
5.21 BOOKS AND RECORDS
Beginning nine months after the Closing Date, the Company will keep
and maintain satisfactory and adequate books and records of account in which
entries are made in accordance with GAAP.
5.22 PERFORMANCE
The Company will deliver to the Investor promptly after the end of
each quarter, but in any event no more than thirty (30) calendar days after the
end of each quarter, a statement describing the percent of Content completed as
of the end of such quarter.
5.23 DISASTER RECOVERY AND CONTINGENCY PROGRAM
Within 120 days of the Closing Date, the Company and each Subsidiary
will implement and maintain (and at least annually review the sufficiency of) a
disaster recovery and contingency plan that addresses plans for continuing
operations upon the occurrence of a natural disaster or other event that
destroys or prevents the use of or access to any of the Company's primary
mainframe computer systems and addresses events that destroy or prevent the use
of or access to other material computer systems, material information databases
and records, and primary operations facility.
5.24 GUARANTIES
Neither the Company, nor any Subsidiary will guarantee, assume or
otherwise agree to become liable in any way, either directly or indirectly, for
any additional indebtedness or
40
liability of any other Person, EXCEPT AS FOLLOWS (collectively, the
"PERMITTED GUARANTIES"): (a) in favor of Investor, OR (b) to endorse checks
or drafts in the ordinary course of business, OR (c) guarantees or other
contingent obligations to secure on behalf of the Company performance or
payment bonds, bids, tenders, contracts, leases, franchises or public and
statutory obligations in the ordinary course of such business, (d) to the
extent that the Investor otherwise consents in writing, or (e) guarantees of
Permitted Indebtedness. NOTWITHSTANDING THE FOREGOING EXCEPTIONS, neither
the Company nor any Subsidiary may become so liable in a manner that
otherwise violates any covenant hereunder or that otherwise causes an Event
of Default hereunder.
5.25 ISSUANCE OF ADDITIONAL EQUITY
Neither the Company nor any Subsidiary will permit the issuance (or
reissuance) of any equity interests (common stock, preferred stock, partnership
interests, member interests or otherwise) or any options, warrants, convertible
securities or other rights to purchase such beneficial or equity interest,
except for (i) the grant of options under the Company's 1994 Stock Option Plan,
(ii) the issuance of stock upon exercise or conversion of outstanding options,
warrants or other securities convertible into or exchangeable for stock of the
Company, (iii) pursuant to written agreements provided to the Investor prior to
the date hereof that provide for the issuance of stock to former employees of
the Company on a future date; or (iv) as otherwise contemplated by or permitted
under the Purchase Documents.
5.26 [INTENTIONALLY OMITTED].
6. [INTENTIONALLY OMITTED]
7. DEFAULTS AND EVENTS OF DEFAULT UNDER THE NOTES
Upon the occurrence of any of the following events prior to the repayment
of the Subordinated Notes (each a "DEFAULT"):
(a) the Company fails to pay all or any portion of the principal on
the Subordinated Notes when due; or the Company fails to pay any interest or
fails to pay any other amounts payable under the Subordinated Notes, and such
failure to pay interest, or other amounts continues for more than five (5) days
after such amount becomes
41
due in accordance with the terms of the Subordinated Notes; or
(b) the Company fails or neglects to perform, keep or observe any of
the covenants, conditions, promises or agreements contained in SECTIONS 5.6,
5.9, 5.16, AND 5.17; or
(c) the Company fails or neglects to perform, keep or observe any of
the covenants, conditions, promises or agreements contained in SECTIONS 5.1,
5.2, 5.4, 5.7, 5.12, 5.13(d) OR 5.15 hereof or in the Subordinated Notes and
such failure or neglect continues for a period of thirty (30) days (only five
(5) days in the case of SECTION 5.1, 5.2 OR 5.22 and sixty (60) days in the case
of SECTION 5.12) after the Company's Knowledge or receives notice from Investor
of such failure, of such failure or neglect; or
(d) any warranty or representation heretofore, now or hereafter made
by the Company in or pursuant to any of the Purchase Documents is untrue or
incorrect in any material respect as of the date as of which made, or any
schedule, certificate, financial data or notice furnished at any time to the
Investor by the Company under or pursuant to the Purchase Documents, is untrue
or incorrect in any material respect on the date as of which made and in either
case results in a Material Adverse Effect; or
(e) a judgment or order requiring payment in excess of insurance
coverage by more than $100,000 shall be rendered against the Company and such
judgement or order shall remain unsatisfied or undischarged or unbonded and in
effect for thirty (30) consecutive days without a stay of enforcement or
execution; or
(f) a notice of Lien, levy or assessment (other than a Permitted
Lien) is filed or recorded with respect to any material portion of the assets of
the Company by any Governmental Authority for any taxes or debts owing at any
time or times hereafter to any one or more of them become a Lien (other than a
Permitted Lien) upon any material portion of the assets of the Company and any
of the foregoing is not cured within thirty (30) days; or
(g) any material portion of the assets of the Company is attached,
subjected to a writ or distress warrant, or is levied upon (and any of the
foregoing is not cured within ten (10) days)
42
seized or comes within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors; or
(h) a proceeding under 11 U.S.C. Sections 101 ET SEQ., as amended,
and any similar or successor Federal statute, and the rules and regulations
thereunder (collectively, the "BANKRUPTCY CODE"), seeking an order for relief or
under any other bankruptcy, reorganization, arrangement of debt, insolvency,
readjustment of debt or receivership law or statute is filed against the Company
and such proceeding is not dismissed within sixty (60) days of the date of its
filing, or a proceeding under the Bankruptcy Code seeking an order for relief or
under any bankruptcy, reorganization, arrangement of debt, insolvency,
readjustment of debt or receivership law or statute is filed by the Company, or
the Company makes an assignment for the benefit of creditors, or the Company
takes any corporate action to authorize any of the foregoing; or
(i) the Company voluntarily or involuntarily dissolves or is
dissolved, or its existence terminates or is terminated; or
(j) the Company becomes insolvent or fails generally to pay its debts
as they become due; or
(k) the Company fails to pay any principal of or interest on any
Indebtedness having an outstanding principal amount of $100,000 or more
("MATERIAL INDEBTEDNESS") (including without limitation any such Indebtedness
assumed or guaranteed and any Indebtedness pursuant to any Senior Debt
Documents) for a period longer than the grace period, if any, provided for such
payment; or any default under any instrument or agreement evidencing, creating,
securing or otherwise relating to Material Indebtedness (including without
limitation any guaranty or assumption agreement relating to such Material
Indebtedness) or other event occurs and continues beyond any applicable grace
period, if the effect of such default or other event is to cause, or to permit
the holder or holders of such Material Indebtedness (or their representative) to
cause, such Material Indebtedness (or the obligations under any such guaranty or
assumption agreement) to become due and payable prior to the stated maturity
thereof; or
(l) [Intentionally Omitted];
(m) a Change of Control shall occur; or
43
(n) the Company fails to meet any of the performance targets set
forth on EXHIBIT G. Such performance shall be measured on a cumulative annual
basis.
then, and in any such event, (x) if such event is of the type described in
paragraph (h) or (i) of this SECTION 7, there will be an automatic Event of
Default ("Event of Default") and the Subordinated Notes and all other amounts
owing under this Agreement shall automatically become due and payable, or (y) in
any other such Default, and at any time thereafter, if such Default shall then
be continuing, the Investor may, by written notice to the Company, declare an
Event of Default and declare due and payable the principal of, and interest on,
the Subordinated Notes and all other amounts owing under this Agreement,
whereupon the same shall be immediately due and payable. In the event of an
Event of Default, the Subordinated Notes shall become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. In the event of a Default described in Paragraph (n)
(a "STEP-UP EVENT OF DEFAULT"), then in addition to all other remedies allowed
hereunder and in the Subordinated Notes, the Warrants shall be immediately
adjusted pursuant to SECTION 4 of the Warrants.
8. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING
The obligations of the Investor under SECTION 2.1(a) of this Agreement
are subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall only be effective against the Investor if
it consents in writing thereto:
8.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company contained in SECTION
3 shall be true in all material respects on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
the Closing, except for changes contemplated by this Agreement (including
SCHEDULE 3 hereto) and except for those representations and warranties which
address matters only as of a particular date. Investor shall have received a
certificate dated as of the Closing Date signed by an executive officer of the
Company confirming the fulfillment of this condition.
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8.2 PERFORMANCE
The Company shall have performed and complied in all material respects
with all agreements, obligations, and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing and Investor shall have received a certificate dated as of the Closing
signed by an executive officer of the Company confirming the fulfillment of this
condition.
8.3 QUALIFICATIONS
All authorizations, approvals, waivers, Consents or permits, if any,
of any governmental authority or regulatory body that are required in connection
with the lawful issuance and transfer of the Securities pursuant to this
Agreement shall be duly obtained and effective as of the Closing. All required
third party consents shall have been obtained.
8.4 PROCEEDINGS AND DOCUMENTS
All corporate and other proceedings in connection with the
transactions contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Investor's special
counsel, which shall have received all such counterpart original and certified
or other copies of such documents as it may reasonably request.
8.5 OPINION OF COMPANY COUNSEL
The Investor shall have received from Wilson, Sonsini, Xxxxxxxx &
Xxxxxx, Professional Corporation, special counsel for the Company, an opinion,
dated the date of the Closing, in form and substance satisfactory to special
counsel to the Investor, to the effect set forth in EXHIBIT F.
8.6 INVESTMENT AGREEMENT
The Company, the Investor and the stockholders of the Company set
forth on Exhibit A to the Investment Agreement shall have entered into the
Investment Agreement in the form attached hereto as EXHIBIT E (the "Investment
Agreement").
8.7 REGISTRATION RIGHTS AGREEMENT
45
The Company and the Investor shall have entered into the Registration
Rights Agreement in the form attached hereto as EXHIBIT H (the "REGISTRATION
RIGHTS AGREEMENT").
8.8 RESTATED ARTICLES.
The Company shall adopt and file with the Division of Corporations and
Commercial Code of the Department of Commerce of the State of Utah on or before
the Closing the Restated Articles.
8.9 PURCHASE DOCUMENTS
The Company shall have issued and delivered to the Investor the
Securities to be issued by it pursuant to this Agreement; and the Investor shall
have received a counterpart of this Agreement and of each of the other Purchase
Documents, duly executed by each party thereto.
8.10 EMPLOYMENT AGREEMENTS
The Company and each of Xxxx Xxxxxxx, Xxxx Xxxxx and Xxxxx Xxxxxxxxx shall
have entered into an Employment Agreement in substantially the form attached
hereto as EXHIBIT J (the "EMPLOYMENT AGREEMENTS").
8.11 BLUE SKY
The Company shall have obtained all necessary Blue Sky law permits and
qualifications, or secured an exemption therefrom, required by any state for the
offer and sale of the Common Stock, Preferred Stock, Subordinated Notes and
Warrants hereunder and under the other Purchase Documents and the Common Stock
issuable upon conversion of such Preferred Stock and the exercise of such
Warrants.
8.12 MARKETING AND SALES AGREEMENT.
The Company and the Investor shall have entered into the Marketing and
Sales Agreement in the form attached hereto as EXHIBIT K (the "MARKETING
AGREEMENT").
46
9. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company to the Investor under this Agreement
are subject to the fulfillment on or before the Closing of each of the following
conditions by the Investor:
9.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Investor contained in
SECTION 4 shall be true in all material respects on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the Closing, except for changes contemplated by this Agreement
(including SCHEDULE 3 hereto) and except for those representations and
warranties which address matters only as of a particular date.
9.2 QUALIFICATIONS
All authorizations, approvals, waivers, Consents or permits, if any,
of any governmental authority or regulatory body that are required in connection
with the lawful issuance and exchange of the Common Stock, Series C Preferred
Stock, the Subordinated Notes and the Warrants pursuant to this Agreement shall
be duly obtained and effective as of the Closing. All required third party
consents identified on SCHEDULE 9.2 shall have been obtained.
9.3 OPINION OF INVESTOR'S COUNSEL
The Company shall have received from Winston & Xxxxxx, special counsel
for the Investor, an opinion, dated the date of the Closing, in form and
substance satisfactory to special counsel to the Company, to the effect set
forth in EXHIBIT I.
9.4 BLUE SKY
The Company shall have obtained all necessary Blue Sky law permits and
qualifications, or secured an exemption therefrom, required by any state for the
offer and sale of the Common Stock, Preferred Stock, Subordinated Notes and
Warrants hereunder and under the other Purchase Documents and the Common Stock
issuable upon conversion of such Preferred Stock and the exercise of such
Warrants.
47
9.5 INVESTMENT AGREEMENT
The Company, the Investor and the stockholders of the Company set
forth on Exhibit A to the Investment Agreement shall have entered into the
Investment Agreement.
9.6 PERFORMANCE
The Investor shall have performed and complied in all material
respects with all agreements, obligations, and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing and Company shall have received a certificate dated as of the
Closing signed by an executive officer of the Company confirming the fulfillment
of this condition.
9.7 PROCEEDINGS AND DOCUMENTS
All corporate and other proceedings in connection with the
transactions contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Company's special
counsel, which shall have received all such counterpart original and certified
or other copies of such documents as it may reasonably request.
9.8 PURCHASE DOCUMENTS
The Company shall receive a counterpart of this Agreement and of each
of the other Purchase Documents, duly executed by each party thereto.
9.9 REGISTRATION RIGHTS AGREEMENT
The Company and the Investor shall have entered into the Registration
Rights Agreement.
9.10 MARKETING AND SALES AGREEMENT.
The Company and the Investor shall have entered into the Marketing
Agreement.
9.11 RESTATED ARTICLES.
48
The Restated Articles shall have been filed with the Division of
Corporations and Commercial Code of the Department of Commerce of the State of
Utah.
10. [Intentionally Omitted].
11. INDEMNIFICATION
11.1 INDEMNIFICATION BY THE COMPANY
(a) The Company hereby agrees to indemnify and hold harmless the
Investor (including its officers, directors and employees) and its affiliates
against any and all losses, damages, liabilities, claims, demands, judgments,
settlements, costs and expenses of any nature whatsoever of the Investor
(including reasonable attorneys' fees) (collectively, "LOSSES") resulting from
or arising out of the inaccuracy of any representation or warranty or the breach
or non-performance of any covenant or agreement of the Company contained in this
Agreement.
(b) If any action, proceeding or claim shall be brought or asserted
against the Investor (including its officers, directors and employees) or its
Affiliates (each, an "INVESTOR INDEMNIFIED PARTY") by any third party, which
action, proceeding or claim, if determined adversely to the interest of the
Investor Indemnified Party, would entitle the Investor Indemnified Party to
indemnity pursuant to this SECTION 11.1, the Investor Indemnified Party shall
promptly but in no event later than 30 days from the date that such Investor
Indemnified Party shall become aware of such action, proceeding or claim, notify
the Company of the same in writing specifying in detail the basis of such claim
and the facts pertaining thereto, and the Company shall be entitled to assume
the defense thereof and have the sole control of the defense and settlement
thereof, including the employment of counsel and the payment of all expenses;
PROVIDED, HOWEVER, that the Investor Indemnified Party shall have the right to
employ counsel separate from counsel employed by the Company in any such action
and to participate in the defense thereof, and the fees and expenses of such
counsel shall be at the expense of the Investor Indemnified Party unless (i) (1)
the employment thereof has been specifically authorized by the Company in
writing or (2) the use of counsel chosen by the Company to represent the
Investor Indemnified Party would present such counsel with a conflict of
interest or (ii) the Company has failed to assume the defense and to employ
counsel.
49
The Company shall not be liable for any settlement of any such action or
proceeding effected without the written consent of the Company (unless such
consent is unreasonably withheld by the Company), but if settled with the
written consent of the Company, or if there shall be a final judgment for
plaintiff in any such action, the Company agrees to indemnify and hold
harmless the Investor Indemnified Party from and against any and all Losses
by reason of such settlement or judgment. Notwithstanding the foregoing,
without the written consent of the Investor Indemnified Party, the Company
shall not be entitled to settle any nonmonetary claim involving the business,
operations or assets of the Investor Indemnified Party if such settlement
would impose on it any obligation which cannot be satisfied by the payment of
money. The Company agrees to indemnify and hold harmless the Investor
Indemnified Party from any and all legal expenses reasonably incurred by such
Investor Indemnified Party in connection with the successful enforcement of
its rights, in whole or in part, to indemnity under this SECTION 11.1.
(c) The Company's total indemnification obligation hereunder shall
not exceed the Purchase Price.
11.2 INDEMNIFICATION BY THE INVESTOR
(a) The Investor hereby agrees to indemnify and hold harmless the
Company (including its officers, directors and employees) or its Affiliates
against any and all Losses resulting from or arising out of the inaccuracy of
any representation or warranty or the breach or non-performance of any covenant
or agreement of the Investor contained in this Agreement.
(b) If any action, proceeding or claim shall be brought or asserted
against the Company (including its officers, directors and employees) or its
Affiliates (each a "COMPANY INDEMNIFIED PARTY") by any third party, which
action, proceeding or claim, if determined adversely to the interests of the
Company Indemnified Party, would entitle the Company Indemnified Party to
indemnity pursuant to this SECTION 11.2, the Company Indemnified Party shall
promptly, but in no event later than 30 days from the date that such Company
Indemnified Party shall become aware of such action, proceeding or claim, notify
the Investor of the same in writing specifying in detail the basis of such claim
and the facts pertaining thereto, and the Investor shall be entitled to assume
the defense thereof and have sole control of defense and settlement
50
thereof, including the employment of counsel and the payment of all expenses;
PROVIDED, HOWEVER, that the Company Indemnified Party shall have the right to
employ counsel separate from counsel employed by the Investor in any such
action and to participate in the defense thereof, and the fees and expenses
of such counsel employed by the Company Indemnified Party shall be at the
expense of the Company Indemnified Party unless (i) (1) the employment
thereof has been specifically authorized by the Investor in writing or (2)
the use of counsel chosen by the Investor to represent the Company
Indemnified Party would present such counsel with a conflict of interest or
(ii) the Investor has failed to assume the defense and to employ counsel.
The Investor shall not be liable for any settlement of any such action or
proceeding effected without the written consent of the Investor (unless such
consent is unreasonably withheld by the Investor), but if settled with the
written consent of the Investor or if there shall be a final judgment for the
plaintiff in any such action, the Investor agrees to indemnify and hold
harmless the Company Indemnified Party against any and all Losses by reason
of such settlement or judgment. Notwithstanding the foregoing, without the
written consent of the Company Indemnified Party, the Investor shall not be
entitled to settle any nonmonetary claim involving the business, operations
or assets of the Company Indemnified Party if such settlement would impose on
the Company Indemnified Party any obligation which cannot be satisfied by the
payment of money. The Investor agrees to indemnify and hold harmless the
Company Indemnified Party from any and all legal expenses reasonably incurred
by the Company Indemnified Party in connection with the successful
enforcement of its rights, in whole or in part, to indemnity under this
SECTION 11.2.
12. MISCELLANEOUS
12.1 ENTIRE AGREEMENT
This Agreement and the documents referred to herein constitute the
entire agreement among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.
12.2 EXPIRATION OF WARRANTIES
51
The warranties and representations of the Company and the Investor
contained in this Agreement shall in no way be affected by an investigation of
the subject matter thereof made by or on behalf of the Company or the Investor
and shall expire three years from the date of the Closing and be of no further
force and effect on such date except that (i) the representations and warranties
contained in SECTIONS 3.17, 3.19 AND 3.20 shall survive the Closing until the
expiration of the applicable statute of limitations and (ii) the representations
and warranties contained in SECTIONS 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 and the
provisions of SECTION 6.1 shall survive the Closing and continue indefinitely.
12.3 SUCCESSORS AND ASSIGNS
Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
12.4 GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED UNDER
THE LAWS OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO THE PRINCIPLES OF THE
CONFLICTS OF LAWS THEREOF.
12.5 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
12.6 TITLES AND SUBTITLES
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
12.7 NOTICES
52
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified by hand or professional courier
service, upon confirmation of telex or telecopy, five days after deposit with
the United States Post Office, by registered or certified mail, postage prepaid
or upon the next day following deposit with a nationally recognized overnight
air courier, addressed as follows:
(a) if to the Investor, to:
CCC Information Services Inc.
World Trade Center Chicago
000 Xxxxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx
Telecopy: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxxxxxx
Xxxxxxx & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Telecopy: (000) 000-0000
(b) if to the Company, to:
InsurQuote Systems, Inc.
000 Xxxx 0000 Xxxxx
Xxxxx, Xxxx 00000
Attention: Xxxx Xxxxx
Telecopy: (000) 000-0000
With a copy to:
Xxxx Xxxxxx
Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
53
Any party may by notice given in accordance with this SECTION 12.7 to the other
party to this Agreement designate another address or person for receipt of
notice hereunder.
12.8 FINDER'S FEES
Each party represents that it neither is nor will be obligated for any
finder's fee or commission in connection with this transaction.
The Investor agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finder's fee
(and the cost and expenses of defending against such liability or asserted
liability) for which the Investor or any of its officers, partners, employees,
or representatives is responsible.
The Company agrees to indemnify and hold harmless the Investor from
any liability for any commission or compensation in the nature of a finder's fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees, or
representatives is responsible.
12.9 AMENDMENTS AND WAIVERS
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the parties hereto.
12.10 SEVERABILITY
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
12.11 SPECIFIC ENFORCEMENT
The Investor, on the one hand, and the Company, on the other hand,
acknowledge and agree that irreparable damage would
54
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the
United States or any state thereof having jurisdiction, this remedy being in
addition to any other remedy to which they may be entitled at-law or equity.
55
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CCC INFORMATION SERVICES INC.
By: __________________________
Name:
Title:
INSURQUOTE SYSTEMS, INC.
By: ___________________________
Name:
Title:
