Exhibit 10.19
CONVERTIBLE PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT
THIS CONVERTIBLE PROMISSORY NOTE AND WARRANT PURCHASE
AGREEMENT ("Agreement") is made and entered into as of the 29th day of
November, 1999, by and among [i] PRIMIS, INC., a Georgia corporation ("the
Company"), and [ii] those entities and persons whose names are set forth on
SCHEDULE 1 attached hereto (each an "Investor" and collectively the
"Investors").
RECITALS:
WHEREAS, the Company desires to sell and issue, and each
Investor desires to purchase and acquire, convertible promissory notes (the
"Notes") with an aggregate principal amount of Ten Million Eleven Thousand
One Hundred Seventy Four Dollars ($10,011,174), convertible, if at all, (i)
into shares of the Company's Series C Convertible Preferred Stock ("Series C
Preferred Stock") at the election of Investor , (ii) automatically into
shares of Series C Preferred Stock at the closing of the Company's next
Qualifying Financing (as defined in Section 1.1 below), provided that such
Qualifying Financing closes within one hundred eighty (180) days from the
respective dates of the Notes, or (iii) automatically into shares of the
Company's common stock ("Common Stock") issued at the closing of the
Company's IPO (as defined in Section 1.1 below); provided that such IPO
closes within one hundred eighty (180) days from the respective date of the
Notes; and
WHEREAS, in consideration of the purchase by the Investors of
the Notes, the Company desires to sell and issue warrants (the "Warrants") to
purchase the number of shares of Series C Preferred Stock or Common Stock, as
applicable, of the Company as determined in this Agreement and in the Warrants.
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties herein contained, and intending to be legally
bound, the Company and Investors agree as follows:
1. DEFINITIONS; AUTHORIZATION AND ISSUANCE OF NOTES AND WARRANTS.
1.1. DEFINITIONS.
a. "Qualifying Financing" shall mean a transaction in which the
Company sells preferred stock and the gross cash proceeds to
the Company equal or exceed $20,000,000 (including the value
of the Notes issued pursuant to this Agreement which will be
automatically converted at the closing of such financing
transaction).
b. "IPO" shall mean a firm commitment underwritten initial
public offering of shares of the Company's capital stock
under the Securities Act of 1933, as amended (the "1933
Act"), from which the Company receives net proceeds of not
less than Thirty Million Dollars ($30,000,000) at a public
offering price of not less than $15.31 per share (subject to
adjustment for any stock split, combination, consolidation
or stock distributions or stock dividends or
recapitalizations or the like).
c. "Sale of the Company", for purposes of Section 1.5 below,
shall mean (a) a sale or transfer of all or substantially
all of the Company's assets or (b) the acquisition of the
Company by another entity by means of merger, consolidation
or other transaction or series of related transactions
resulting in the exchange of the outstanding shares of the
Company's capital stock such that the Company's shareholders
prior to such transaction own, directly or indirectly, less
than fifty percent (50%) of the voting power of the
surviving entity or the entity that owns 100% of the
outstanding voting securities of such surviving entity.
1.2. AUTHORIZATION. The Company has authorized the sale and issuance
of the Notes and Warrants to the Investors.
1.3. AMENDED AND RESTATED ARTICLES OF INCORPORATION. The Company shall
adopt and file with the Georgia Secretary of State on or before
the Closing (as defined below) Amended and Restated Articles of
Incorporation in the format attached hereto as EXHIBIT A (the
"Amended and Restated Articles").
1.4. SALE AND ISSUANCE OF NOTES. Subject to the terms and conditions
hereof, the Company agrees to sell and issue to each of the
Investors, and the Investors severally agree to purchase from the
Company, a Note in the form attached as EXHIBIT B hereto, in the
amount set forth opposite such Investor's name on SCHEDULE 1
hereto.
1.5. SALE AND ISSUANCE OF WARRANTS. Subject to the terms and
conditions hereof, the Company agrees to sell and issue to each
of the Investors, and the Investors severally agree to purchase
from the Company, Warrants (in the form attached hereto as
EXHIBIT C) originally exercisable for that number of shares of
Series C Preferred Stock (or Common Stock for the purposes of
subsection (c) below) equal to:
a. in the event a Qualifying Financing closes within one
hundred eighty (180) days from the date hereof, the quotient
obtained by dividing (a) thirty-five percent (35%) of the
principal amount of the Note to which such Warrant relates
(the "Warrant Coverage") by (b) the lower of $15.31 (the
"Series C Price Per Share") and the price per share of the
preferred stock sold to investors in the Qualifying
Financing;
b. in the event that the Company closes prior to a Qualifying
Financing a Sale of the Company, the quotient obtained by
dividing (x) the Warrant Coverage by (y) the Series C Price
Per Share;
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c. in the event that the Company closes an IPO prior to a
Qualifying Financing or a Sale of the Company, the Warrants
shall convert to that number of shares of Common Stock of
the Company equal to the quotient obtained by dividing (x)
the Warrant Coverage by (y) the Series C Price Per Share; or
d. in the event that the Company does not close the Qualifying
Financing, a Sale of the Company or an IPO prior to the date
180 days from the date hereof, the quotient obtained by
dividing (a) the Warrant Coverage by (b) $6.00 (subject to
adjustment for any stock split, combination, consolidation
or stock distributions or stock dividends or
recapitalizations or the like).
Upon the first to occur of (i) a Qualifying Financing, (ii) an IPO,
(iii) a Sale of the Company, or (iv) the date which is one-hundred
eighty (180) days from the date hereof if no Qualifying Financing, IPO
or Sale of the Company occurs prior thereto, the number of shares of
Series C Preferred Stock or Common Stock, as applicable, into which the
Warrants may be exercised shall be permanently established and fixed in
accordance with the foregoing subsections and shall only be subject to
further adjustment, as described in Section 8 of each Warrant.
Notwithstanding anything herein to the contrary, the Warrant Shares
shall automatically be converted into Common Stock in accordance with
the terms of the Warrants upon the occurrence of an IPO at any time
while the Warrants remain exercisable.
2. CLOSING.
2.1. CLOSING; CLOSING DATE. The closing of the issuance of the Notes
and Warrants under this Agreement (the "Closing") shall take
place on the date of this Agreement (the "Closing Date"), in
accordance with arrangements mutually satisfactory to the
Investors and counsel for the Company.
2.2. CLOSING DELIVERY. At the Closing, upon delivery to the Company by
wire transfer or check made payable to the order of the Company
of the aggregate purchase price for the Note and the Warrant set
forth opposite such Investor's name on SCHEDULE 1 hereto, the
Company will deliver to each Investor (a) a Note payable to the
Investor in the principal amount set forth opposite such
Investor's name on SCHEDULE 1 hereto and (b) a Warrant to
purchase that number of shares of Series C Preferred Stock as
provided for in Section 1.4 hereof.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in
the disclosure letter dated the date hereof delivered to each Investor
(the "Disclosure Letter"), the Company hereby represents and warrants
to each Investor as follows:
3.1. CORPORATE STANDING . The Company is a corporation duly organized,
validly existing, and in good standing under the laws of Georgia.
The Company has all
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requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted
and as presently proposed to be conducted, to execute, deliver
and perform this Agreement and any other agreement to which the
Company is a party, the execution and delivery of which is
contemplated hereby (the "Ancillary Agreements"). The Company is
duly qualified and is authorized to transact business and is in
good standing as a foreign corporation in each jurisdiction in
which the failure so to qualify would have a material adverse
effect on its business, properties, prospects, or financial
condition. True and accurate copies of the articles of
incorporation and bylaws of the Company (and all amendments
thereto) and minute book (containing the records of meetings and
written consents of the stockholders, the board of directors and
any committees of the board of directors) of the Company have
previously been made available to Investors upon request.
3.2. AUTHORIZATION. The execution and delivery of this Agreement and
any Ancillary Agreement, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of the Company. Each of
this Agreement and any Ancillary Agreement have been duly
executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company enforceable against
it in accordance with its terms.
3.3. CAPITALIZATION. As of the Closing Date, the authorized capital
stock of the Company shall consist of 23,000,000 shares par value
$0.01 per share, divided into: (i) 15,000,000 shares of Common
Stock, and (ii) 8,000,000 shares of preferred stock ("Preferred
Stock") of which 1,200,000 shares have been designated Series A
Convertible Preferred Stock ("Series A Preferred Stock"),
3,000,000 shares have been designated Series B Convertible
Preferred Stock ("Series B Preferred Stock"), 2,500,000 shares
have been designated Series C Convertible Preferred Stock
("Series C Preferred Stock") and the remaining 1,300,000 shares
of which shall have such preferences, limitations and relative
rights as may be determined by the Board of Directors pursuant to
Article IV(B) of the Articles. Immediately prior to the Closing,
100% of the outstanding shares of Common Stock of the Company,
100% of the outstanding shares of Series A Convertible Preferred
Stock and 100% of the outstanding shares of Series B Convertible
Preferred Stock are owned by the stockholders and in the amounts
specified in Section 3.3 of the Disclosure Letter and no shares
of Series C Preferred Stock or other Preferred Stock are
outstanding. Except as set forth in Section 3.3 of the Disclosure
Letter, there are outstanding no subscriptions, options,
warrants, calls, commitments or rights (including conversion or
preemptive rights and rights of first refusal), proxy or
stockholder agreements or agreements of any character relating to
shares of the Company's capital stock or the instruments that can
be converted into shares of the Company's capital stock to be
issued hereunder. None of the shares of the Company's capital
stock have been issued in violation of any preemptive right.
There are no contractual obligations
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of the Company to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company. No bonds, debentures,
notes or other indebtedness having the right to vote (or
convertible into or exercisable for securities having the right
to vote) on any matters on which shareholders of the Company may
vote are issued or outstanding. The Company is not a party to or
subject to any agreement or understanding, and, to the Company's
best 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
any director of the Company.
3.4. VALIDLY ISSUED SHARES. The Notes and Warrants to be issued, sold
and delivered in accordance with the terms of this Agreement for
the consideration set out herein, will, upon issuance in
accordance with the terms hereof, be duly and validly issued,
fully paid and nonassessable, free of restrictions on transfer
other than restrictions on transfer under applicable federal and
state securities laws. The issuance of the Notes and Warrants to
Investors pursuant to this Agreement will comply with all
applicable laws, including federal and state securities laws, and
will not violate the preemptive rights of any person. The shares
of Series C Preferred Stock and/or Preferred Stock issuable upon
conversion of the Notes and exercise of the Warrants being
purchased under this Agreement will be, upon issuance and
delivery in accordance with the terms of the Articles of
Incorporation, duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Amended and
Restated Shareholders' Agreement dated as of June 16, 1998 by and
among the Company and certain of its shareholders, and under
applicable federal and state securities laws (other than those
created by investors). The issuance of the shares of Common Stock
upon conversion of the Series C Preferred Stock and/or Preferred
Stock will comply with all applicable laws, including federal and
state securities laws (assuming the accuracy of the
representations set forth in Section 4.1 through 4.6 of this
Agreement as of the date of issuance of such shares of Common
Stock), and will not violate the preemptive rights of any person.
The outstanding shares of the Company's Common Stock, Series A
Preferred Stock and Series B Preferred Stock have been duly
authorized and validly issued, are fully paid and nonassessable.
3.5. NO CONFLICT. The execution and delivery of this Agreement and any
Ancillary Agreement do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict
with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or
the loss of a material benefit under, or the creation of a lien,
pledge, security interest, charge or other encumbrance on assets
(any such conflict, violation, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation")
pursuant to, any provision of the Company's Articles of
Incorporation or Bylaws, or result in any Violation of any
material lease, agreement, obligation, instrument, permit,
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concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company, or
the Company's properties or assets.
3.6. CONTRACTS AND OTHER COMMITMENTS; COMPLIANCE. The Company is not
in violation or default of any provision of its Articles of
Incorporation or Bylaws or in any respect of any provision of any
material contract or other items listed on the Disclosure Letter.
3.7. SUBSIDIARIES. Except as set forth in Section 3.7 of the
Disclosure Letter, the Company does not own or control, directly
or indirectly, any interest in any other corporation,
partnership, limited liability company, association or other
business entity. Except as set forth in Section 3.7 of the
Disclosure Letter, the Company is not a participant in any joint
venture, partnership or similar arrangement.
3.8. CONSENTS. No consent, approval, qualification, order or
authorization of, or registration, declaration or filing with,
any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign,
or other third party is required by or with respect to the
Company in connection with the execution and delivery of this
Agreement, or the consummation by the Company of the transactions
contemplated hereby, which has not already been obtained, except
for notices of sale required to be filed with the Securities and
Exchange Commission, or such post closing filings as may be
required under applicable state securities laws which will be
timely filed within the applicable periods therefor.
3.9. FINANCIAL STATEMENTS. The Company has delivered to Investors
prior to the date hereof its audited financial statements for the
years ended December 31, 1997 and December 31, 1998, and its
unaudited financial statements (balance sheet and profit and loss
statement) for the Nine (9) month period ended September 30, 1999
(the "Financial Statements"). The Financial Statements, including
any footnotes thereto, were prepared in accordance with generally
accepted accounting principles and fairly present the financial
position and operating results of the Company as of the dates and
for the periods indicated therein. Since September 30, 1999,
there has not been any material adverse change in the assets,
liabilities, financial condition, results of operation or
prospects of the Company.
3.10. INDEBTEDNESS FOR BORROWED MONEY; NO UNDISCLOSED LIABILITIES.
Except as and to the extent reflected and adequately reserved
against in the Financial Statements, and except as set forth in
Section 3.10 of the Disclosure Letter, as of the Closing Date,
the Company has no direct or indirect indebtedness for borrowed
money, indebtedness by way of lease-purchase arrangements,
guarantees, undertakings, chattel mortgages or other security
arrangements with any bank, financial institution or other third
party and the Company will not have any liability or obligation
whatsoever, whether accrued, absolute, contingent or otherwise.
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3.11. TITLE TO PROPERTY AND ASSETS; LEASES. Except as set forth in
Section 3.11 of the Disclosure Letter, the Company owns no real
property in fee simple. The Company has good, valid and
marketable title to all the personal and mixed, tangible and
intangible properties and assets which it purports to own, free
and clear of all liens, restrictions, claims, charges, security
interests, easements or other encumbrances of any nature
whatsoever, except for liens for current taxes not yet due and
payable. With respect to the property and assets that it leases,
the Company is in compliance with such leases and, to the
Company's knowledge, holds a valid leasehold interest free and
clear of any liens, claims and encumbrances. All properties and
assets of the Company are in the possession or control of the
Company, and no other person is entitled to possession of any
such properties and assets. The Company is not bound or committed
to make any capital improvement or expenditure with respect to
its owned or leased real or personal property.
3.12. LEGAL PROCEEDINGS. Except as set forth in the Disclosure Letter
or which are not material to the Company, there are no claims of
any kind or any actions, suits, proceedings, arbitrations or
investigations pending or, to the Company's knowledge, threatened
against or affecting the Company or against any asset, interest
or right of the Company or which questions the validity of the
transactions contemplated by this Agreement and the Company knows
of no facts which may constitute a basis therefor.
3.13. ENVIRONMENTAL MATTERS. The Company is not in violation of any
applicable statute, law or regulation relating to the environment
or occupational health and safety (the "Environmental Laws"),
and, to the Company's knowledge, as of the date hereof no
material expenditures are required to be made by the Company in
order to comply with any of the Environmental Laws.
3.14. LICENSES AND PERMITS; COMPLIANCE WITH LAWS. Except as set forth
in Section 3.14 of the Disclosure Letter, the Company holds all
franchises, permits, licenses, variances, exemptions, orders and
approvals of all governmental entities which are material to the
operation of the Company's business and is in compliance with the
terms thereof. The Company has complied with and is not in any
default under (and has not been charged with or received notice
with respect to, nor is threatened with or under investigation
with respect to, any charge concerning any violation of any
provision of) any federal, state or local law, regulation,
ordinance, rule or order (whether executive, judicial,
legislative or administrative) or any order, writ, injunction or
decree of any court, agency or instrumentality and no action,
suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any
of them alleging any failures to comply.
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3.15. EMPLOYEE BENEFIT PLANS. Except as set forth in Section 3.15 of
the Disclosure Letter, the Company has no employee benefit plans
including any profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, phantom stock,
retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) providing benefits
to any current or former employee, officer or director of the
Company (collectively "Benefit Plans"), or any employment,
consulting, severance, termination or indemnification agreement,
arrangement or understanding between the Company and any officer,
director or employee of the Company. Each Benefit Plan has been
administered in all material respects in accordance with its
terms and all applicable laws.
3.16. LABOR RELATIONS.
(a) The Company is in compliance in all material respects with
all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours and occupational safety and health;
(b) There is no unfair labor practice charge or complaint or any
other matter against or involving the Company pending or, to
the Company's knowledge, threatened before the National
Labor Relations Board or any court of law;
(c) There is no labor strike, dispute, slowdown or stoppage
actually pending or, to the Company's knowledge, threatened
against the Company;
(d) The Company is not a party to or bound by any collective
bargaining agreement or any similar labor union arrangement;
(e) There are no charges, investigations, administrative
proceedings or formal complaints of discrimination
(including discrimination based upon sex, age, marital
status, race, color, religion, national origin, sexual
preference, disability, handicap or veteran status) pending
or, to the Company's knowledge, threatened, before the Equal
Employment Opportunity Commission or any federal, state or
local agency or court against the Company. There have been
no governmental audits of the equal employment opportunity
practices of the Company and, to the Company's knowledge, no
basis for any such claim exists; and
(f) To the Company's knowledge, the Company is in compliance in
all material respects with the requirements of the Americans
With Disabilities Act.
3.17. INSURANCE. Section 3.17 of the Disclosure Letter sets forth
a list of all insurance policies, including property,
casualty, liability and other insurance maintained with
respect to the assets and business of the Company (the
"Company Insurance"). The Company is not liable for any
material retroactive premium
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adjustments with respect to any of its insurance policies or
bonds. All such policies and bonds are legal, valid and
enforceable and in full force and effect and the Company is
not in breach or default (including with respect to the
payment of premiums or the giving of notices) and no event has
occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination,
modification or acceleration under the policy. Nor has the
Company received any notice of premium increases or
cancellations with respect to any of such policies and bonds.
The Company believes the amount and type of the Company
Insurance coverage is adequate for the Company's business and
is consistent with good business practice.
3.18. TAX MATTERS. The Company has timely filed or caused to be filed
all federal, state, foreign and local income, franchise, gross
receipts, payroll, sales, use, withholding, occupancy, excise,
real and personal property, employment and other tax returns, tax
information returns and reports ("Tax Returns") required to be
filed and all such Tax Returns were correct and complete in all
respects. The Company has paid, or made adequate provisions for
the payment of, all taxes, duties or assessments of any nature
whatsoever, interest payments, penalties and additions (whether
or not reflected in the returns as filed) due and payable (and/or
properly accruable for all periods ending on or before the date
of this Agreement) to any city, county, state, foreign country,
the United States or any other taxing authority. There are no
security interests on any of the assets of the Company that arise
in connection with any failure (or alleged failure) to pay any
tax. The Company has withheld and paid all taxes required to have
been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or
other third party. No deficiencies for any taxes have been
proposed, asserted or assessed against the Company that are not
adequately reserved for.
3.19. PATENTS AND TRADEMARKS. The Company owns or possesses sufficient
legal rights to all patents, trademarks, service marks, trade
names, copyrights, trade secrets, licenses, information, and
proprietary rights and processes necessary for its business as
now conducted and as proposed to be conducted without any
conflict with, or infringement of the rights of, others. Except
for agreements with its own employees or consultants and standard
end-user license agreements, if any, there are no outstanding
options, licenses, or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options,
licenses, or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information, and proprietary rights and
processes of any other person or entity. The Company has not
received any communications alleging that the Company has
violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade
names, copyrights, trade secrets, or other proprietary rights or
processes of any other person or entity. The Company is not aware
that any of its employees is obligated under any contract
(including licenses, covenants, or commitments of
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any nature) or other agreement, or subject to any judgment,
decree, or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to
promote the interests of the Company or that would conflict with
the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of
the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the
terms, conditions, or provisions of, or constitute a default
under, any contract, covenant, or instrument under which any of
such employees is now obligated. The Company does not believe it
is or will be necessary to use any inventions of any of its
employees (or persons it currently intends to hire) made prior to
their employment by the Company. Each independent contractor,
employee and/or officer of the Company who or which has
contributed to the development of the Computer Software (as
defined below) has executed proprietary
information/confidentiality agreements.
3.20. RELATED-PARTY TRANSACTIONS. Except as set forth in Section 3.20
of the Disclosure Letter, no employee, officer, or director of
the Company, or member of his or her immediate family is indebted
to the Company, nor is the Company 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 is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes
with the Company, except that employees, officers, or directors
of the Company, and members of their immediate families may own
stock in publicly traded companies that may compete with the
Company. Except as set forth in Section 3.20 of the Disclosure
Letter, no employee, officer or director of the Company, or, to
the Company's knowledge, any member of their immediate families
is, directly or indirectly, interested in any material contract
with the Company. For purposes of this Agreement, the Company
shall be deemed to have knowledge of a fact, event, condition,
matter or situation if any of the Company's officers or directors
are consciously aware of such fact, event, condition, matter or
situation, as appropriate.
3.21. SOFTWARE PRODUCTS. The Company has received no customer
complaints concerning alleged defects in its computer appraisal
software products, including, without limitation, Value Express
(collectively, the "Computer Software") that, if true, would
materially adversely affect the operations or financial condition
of the Company.
3.22. BROKERS' AND FINDERS' FEES. The Company has not employed any
broker, finder or financial advisor or incurred any liability for
fees or commissions payable to any broker, finder or financial
advisor in connection with the negotiations relating to or the
transactions contemplated by this Agreement.
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3.23. QUALIFIED SMALL BUSINESS STOCK.. As of and immediately following
the Closing, the shares of Series C Preferred Stock issuable upon
conversion of the Notes and exercise of the Warrants will meet
each of the requirements for qualification as "qualified small
business stock" set forth in Section 1202(c) of the Code,
including without limitation the following: (i) the Company will
be a domestic C Corporation; (ii) the Company will not have made
any purchases of its own stock described in Code Section
1202(c)(3)(B) during the one year period preceding the Closing;
(iii) the Company's (and any predecessor's) aggregate gross
asses, as defined by Code Section 1202(d)(2), at no time between
August 1, 1997 and through the Initial Closing have exceeded or
will exceed Fifty Million Dollars ($50,000,000), taking into
account the assets of any corporation required to be aggregated
with the Company in accordance with Code Section 202(d)(3); (iv)
as of the Closing, at least eighty percent (80%) (by value) of
the assets of the Company will, by virtue of Code Section
1202(e)(6), be considered to be used by it in the active conduct
of one or more qualified trades or businesses, as defined by Code
Section 1202(e)(3); and (v) the Company is an eligible
corporation, as defined by Code Section 1202(e)(4).
3.24. MATERIAL FACTS. The Company has provided each Investor with all
the information reasonably available to it that such Investor has
requested for deciding whether to purchase the Notes and
Warrants. This Agreement and the documents or written statements
furnished by the Company to Investors in connection with the
transactions contemplated hereby do not contain any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not
misleading.
4. INVESTMENT REPRESENTATIONS. Each Investor hereby represents and
warrants to the Company, severally and not jointly, as of the date
hereof, as follows:
4.1. It is acquiring the Note and Warrants for its own account, not as
nominee or agent, for investment and not with a view to, or for
resale in connection with, any distribution or public offering of
the Note, Warrants, or Warrant Shares within the meaning of the
1933 Act.
4.2. It understands that (i) the Note, Warrants, and Warrant Shares
have not been registered under the 1933 Act by reason of a
specific exemption therefrom, that they must be held by it
indefinitely, and that Investor must, therefore, bear the
economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the 1933 Act
or is exempt from such registration; and (ii) the Note, Warrants,
and each certificate representing the Warrant Shares will be
endorsed with the following legends, as applicable:
THESE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES
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LAWS. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH
ACT AND ANY APPLICABLE STATE SECURITIES
LAW OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL SATISFACTORY TO
PAYOR THAT SUCH REGISTRATION IS NOT
REQUIRED.
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN AMENDED
AND RESTATED SHAREHOLDERS' AGREEMENT
DATED JUNE 16, 1998 BY AND BETWEEN PRIMIS,
INC. AND CERTAIN OF ITS SHAREHOLDERS.
4.3. It has been furnished with such materials and has been given
access to such information relating to the Company as it or its
qualified representative has requested and it has been afforded
the opportunity to ask questions regarding the Company, the
Notes, and the Warrants, all as it has found necessary to make an
informed investment decision.
4.4. It is experienced in evaluating and investing in private
placement transactions of securities of companies in a similar
stage or development and acknowledges that it is able to fend for
itself, can bear the economic risk of such its investment, and
has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of
the investment in the Notes and Warrants.
4.5. If it is a corporation, partnership, trust, or other entity, it
was not formed for the specific purpose of acquiring the Notes or
Warrants offered hereunder.
4.6. It is an "accredited investor" as provided under the 1933 Act and
regulations adopted thereunder and is a resident of the state
listed on SCHEDULE 1 hereto; and all information supplied by it
to the Company with respect to his or its purchase of the Notes
and Warrants has been and shall be true, complete, and accurate.
5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement by any party to this Agreement
and any certificate or other instrument delivered by or on behalf of
any party pursuant to this Agreement shall be continuous and shall
survive the Closing and the issuance of all shares of the Company's
capital stock. Each party shall have the right to rely on each other
party's representations and warranties made herein, notwithstanding any
investigation conducted by such party.
12
6. COVENANTS OF THE COMPANY. The Company hereby covenants and agrees as
follows:
6.1. USE OF PROCEEDS. The proceeds from the sale of the Notes and
Warrants pursuant to this Agreement shall be used by the Company
for working capital, to make acquisitions and for other corporate
purposes.
6.2. FINANCIAL REPORTING. Subject to Section 6.3, the Company shall
furnish to the Investors:
(a) an audited balance sheet and statements of income and cash
flow within ninety (90) days after the end of each fiscal
year, together with comparative figures for the last
preceding fiscal year prepared by a firm of certified public
accountants acceptable from time to time to a majority in
interest of the outstanding Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Common Stock
of the Company voting together as a single class on an as if
converted basis;
(b) as soon as available, and in any event within thirty (30)
days after the close of each calendar month, an unaudited
balance sheet and statement of income and cash flows for
such month, together with comparative figures for both the
month just ended and the portion of the fiscal year then
ended, and a written one or two page monthly summary of the
Company's operations. Such financial statements shall be
prepared in accordance with generally accepted accounting
principles consistently applied (subject to audit and
year-end adjustments) by the principal financial or
accounting officer of the Company;
(c) as soon as available, and in any event within thirty (30)
days before the close of each fiscal year, a business plan
and projections for the Company's next fiscal year; and
(d) such additional information with respect to the Company's
financial condition as may be reasonably requested by the
Investors.
6.3. TERMINATION OF COVENANTS. The covenants set forth in Section 6.2
shall terminate and be of no further force or effect at such time
as the Company is required to file reports pursuant to Sections
13 or 15(d) of the Securities Exchange Act of 1934.
6.4. RESERVATION OF SHARES. On and after the Closing Date, the Company
will reserve and keep reserved at all times sufficient shares of
Series C Preferred Stock and/or Preferred Stock for issuance upon
conversion of the Notes and Warrants (and a correspondingly
sufficient number of shares of Common Stock for issuance upon
conversion of such Series C Preferred Stock and/or Preferred
Stock). Immediately prior to the occurrence of any event that
would cause the number of shares of Series C Preferred Stock
and/or Preferred Stock or type of securities into which the Notes
and Warrants would be convertible, to be adjusted, the Company
shall take any and all actions necessary to permit such
conversion or exercise. Upon
13
conversion of the Notes and/or exercise of the Warrants, the
Company will promptly issue and deliver the shares of Series C
Preferred Stock and/or Preferred Stock required to be delivered.
Upon conversion of such Series C Preferred Stock and/or Preferred
Stock, the Company will promptly issue and deliver the shares of
Common Stock in accordance with the Amended and Restated Articles
of Incorporation of the Company.
7. MISCELLANEOUS.
7.1. CONSTRUCTION; GOVERNING LAW. The section headings contained in
this Agreement are inserted as a matter of convenience and shall
not affect in any way the construction of the terms of this
Agreement. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Georgia.
7.2. PARTIES IN INTEREST; ASSIGNMENT. Except as otherwise provided
herein, all covenants and agreements contained in this Agreement
by or on behalf of any of the parties to this Agreement shall
bind and inure to the benefit of their respective heirs,
executors, successors, and assigns, whether so expressed or not.
Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto and their
respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
This Agreement is not assignable and any purported assignment
shall be null and void.
7.3. ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Disclosure Letter and the other documents delivered
pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof
and no party shall be liable or bound to any other party in any
manner by any representations, warranties, covenants, or
agreements except as specifically set forth herein or therein.
7.4. SEPARABILITY. Any invalidity, illegality, or limitation of the
enforceability with respect to any Investor of any one or more of
the provisions of this Agreement, or any part thereof, whether
arising by reason of the law of any such Investor's domicile or
otherwise, shall in no way affect or impair the validity,
legality, or enforceability of this Agreement with respect to
other Investors. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
7.5. AMENDMENT AND WAIVER. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived
with the written consent of the Company and the Investors of more
than two-thirds of the outstanding principal amount of the Notes.
Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities
purchased under this Agreement at the time outstanding (including
securities into which such
14
securities have been converted), each future holder of all such
securities, and the Company.
7.6. NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall
be mailed by first class, registered, or certified mail, postage
prepaid, or sent via overnight courier service, or delivered
personally:
If to Investors to the address set forth opposite their name on
SCHEDULE 1 hereto.
If to the Company to: Primis, Inc.
Suite 320
00000 Xxxxx Xxxx Xxx
Xxxxxxxxxx, XX 00000
Attn: C. Xxxxx Xxxxxxx,
President and CEO
or to such other address of which the addressee shall have
notified the sender in writing. Notices mailed in accordance with
this section shall be deemed given when mailed, and notices sent
by overnight courier service shall be deemed given when placed in
the hands of a representative of such service.
7.7. ATTORNEY'S FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement or any
Ancillary Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and disbursements in addition
to any other relief to which such party may be entitled.
7.8. PUBLIC STATEMENTS. Neither the Company nor Investors shall,
without the prior written approval of the other parties hereto,
make any press release or other public announcement concerning
the transactions contemplated by this Agreement. Investors and
the Company may disclose information with respect to the
transaction contemplated hereby to their respective employees,
agents, consultants and third parties only to the extent such
persons have a need to know such information.
7.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one instrument.
7.10. RIGHTS OF INVESTORS. Each holder of Notes and Warrants shall
have the absolute right to exercise or refrain from exercising
any right or rights that such holder may have by reason of this
Agreement or any Notes and Warrants, including without limitation
the right to consent to the waiver of any obligation of the
Company under this Agreement and to enter into an agreement with
the Company for the purpose of modifying this Agreement or any
agreement effecting any such
15
modification, and such holder shall not incur any liability to
any other holder or holders of capital stock of the Company with
respect to exercising or refraining from exercising any such
right or rights.
7.11. EXCULPATION AMONG INVESTORS. Each Investor acknowledges that he
is not relying upon any person, firm, or corporation, other than
the Company and its current officers and directors, in making its
investment or decision to invest in the Company. Each Investor
agrees that no other Investor nor the respective agents of any
other Investor shall be liable for any action heretofore or
hereafter taken or omitted to be taken by any of them in
connection with the Notes and Warrants.
[COUNTERPART SIGNATURE PAGES TO FOLLOW]
16
IN WITNESS WHEREOF, the Company has caused this counterpart signature
page to this Convertible Promissory Note and Warrant Purchase Agreement to be
signed by its duly authorized officer.
"THE COMPANY"
PRIMIS, INC.
By:______________________________
C. Xxxxx Xxxxxxx, President and CEO
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
IN WITNESS WHEREOF, the undersigned Investor has caused this
counterpart signature page to this Convertible Promissory Note and Warrant
Purchase Agreement to be signed by its duly authorized representative.
"THE INVESTOR"
____________________________________
J. Xxxxx Xxxxxxx
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
IN WITNESS WHEREOF, the undersigned Investor has caused this
counterpart signature page to this Convertible Promissory Note and Warrant
Purchase Agreement to be signed by its duly authorized representative.
"THE INVESTOR"
WINDCREST PARTNERS
By:_________________________________
Title:_________________________________
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
IN WITNESS WHEREOF, the undersigned Investor has caused this
counterpart signature page to this Convertible Promissory Note and Warrant
Purchase Agreement to be signed by its duly authorized representative.
"THE INVESTOR"
RICHLAND VENTURES II, L.P.
By:_________________________________
Title:_________________________________
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
IN WITNESS WHEREOF, the undersigned Investor has caused this
counterpart signature page to this Convertible Promissory Note and Warrant
Purchase Agreement to be signed by its duly authorized representative.
"THE INVESTOR"
SOUTH ATLANTIC PRIVATE EQUITY
FUND IV, LIMITED PARTNERSHIP
By: South Atlantic Private Equity
Partners, Limited Partnership, Its
General Partner
By:_________________________________
Its General Partner
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
IN WITNESS WHEREOF, the undersigned Investor has caused this
counterpart signature page to this Convertible Promissory Note and Warrant
Purchase Agreement to be signed by its duly authorized representative.
"THE INVESTOR"
SOUTH ATLANTIC PRIVATE EQUITY
FUND IV (Q.P.), LIMITED PARTNERSHIP
By: South Atlantic Private Equity Partners,
Limited Partnership, Its General Partner
By: _________________________________
Its General Partner
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
IN WITNESS WHEREOF, the undersigned Investor has caused this
counterpart signature page to this Convertible Promissory Note and Warrant
Purchase Agreement to be signed by its duly authorized representative.
"THE INVESTOR"
XXXXX GLOBAL INVESTMENTS, LTD.
By: Xxxxx Capital Management, Its Trading
Advisor
By:_______________________________________
Title: _____________________________________
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
IN WITNESS WHEREOF, the undersigned Investor has caused this
counterpart signature page to this Convertible Promissory Note and Warrant
Purchase Agreement to be signed by its duly authorized representative.
"THE INVESTOR"
REMINGTON INVESTMENTS STRATEGIES, L.P.
By: Xxxxx Capital Advisors, LLC, Its General Partner
By:_______________________________________
Title: _____________________________________
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
IN WITNESS WHEREOF, the undersigned Investor has caused this
counterpart signature page to this Convertible Promissory Note and Warrant
Purchase Agreement to be signed by its duly authorized representative.
"THE INVESTOR"
CHRYSALIS VENTURES LIMITED PARTNERSHIP
By: Chrysalis Ventures, LLC, Its
Manager
By: ________________________________
Xxxxx X. Xxxxx, Xx., Manager
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
IN WITNESS WHEREOF, the undersigned Investor has caused this
counterpart signature page to this Convertible Promissory Note and Warrant
Purchase Agreement to be signed by its duly authorized representative.
"THE INVESTOR"
JG FUNDING, LLC
By: Chrysalis Ventures, LLC, Its Manager
By:_______________________________________
Xxxxx X. Xxxxx, Xx., Manager
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
IN WITNESS WHEREOF, the undersigned Investor has caused this
counterpart signature page to this Convertible Promissory Note and Warrant
Purchase Agreement to be signed by its duly authorized representative.
"THE INVESTOR"
_______________________________________
W. Xxxxxxx Xxxxxx, III
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
IN WITNESS WHEREOF, the undersigned Investor has caused this
counterpart signature page to this Convertible Promissory Note and Warrant
Purchase Agreement to be signed by its duly authorized representative.
"THE INVESTOR"
_______________________________________
Xxxx Xxxxxxx
[COUNTERPART SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
BETWEEN PRIMIS, INC. AND THE INVESTORS NAMED HEREIN]
Schedule 1
INVESTOR NAME AND ADDRESS PRINCIPAL AMOUNT OF NOTE
J. Xxxxx Xxxxxxx $2,239,391
x/x Xxxxxxx Xxxxxxx
Xxxxx 0000
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Windcrest Partners $1,197,118
49th Floor
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Richland Ventures II, L.P. $1,969,759
0000 Xxxx Xxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000-0000
South Atlantic Private Equity Fund IV $827,299
Limited Partnership
000 X. Xxx Xxxxxx, Xxxxx 000
Xxxxx, XX 00000
South Atlantic Private Equity Fund IV $1,142,460
(Q.P.), Limited Partnership
000 X. Xxx Xxxxxx, Xxxxx 000
Xxxxx, XX 00000
Xxxxx Global Investments, Ltd. $1,575,807
c/o Citco Fund Services (Bahamas), Ltd.
Bahamas Financial Center
Charlotte & Xxxxxxx Street
P.O. Box CB 13136
Nassau, Bahamas
Remington Investments Strategies, L.P. $393,952
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
X.X. Funding, LLC $ 500,000
1850 National City Tower
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Xxxx Xxxxxxx
x/x Xxxxxxxx Xxxxxxxx XX, X.X. $103,596
0000 Xxxx Xxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000-0000
W. Xxxxxxx Xxxxxx, III
x/x Xxxxxxxx Xxxxxxxx XX, X.X. $51,797
0000 Xxxx Xxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000-0000
Xxxxxx X. Xxxxxx $10,000
0000 Xxxxxxx 000X
Xxxxx 00
Xxxxxxxxxx, Xxxxxxx 00000
EXHIBIT A
Amended and Restated Articles of Incorporation
EXHIBIT B
Form of Convertible Promissory Note
EXHIBIT C
Form of Warrant
