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EXHIBIT 2(k)(vi)
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This Agreement dated as of August 30, 1995 is entered into by and
among NETTECH, INC., a North Carolina corporation (the "Company"), and the
persons and entities listed as Purchasers on Schedule A attached hereto and
incorporated herein by reference (collectively, the "Purchasers").
In consideration of the mutual promises and covenants contained in
this Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
1.1 Authorization. At the Closing (as hereinafter
defined), the Company will have duly authorized the sale and issuance, pursuant
to the terms of this Agreement, of 487,500 shares of its Series A Convertible
Preferred Stock, no par value per share (the "Series A Preferred"), having the
rights, restrictions, privileges and preferences set forth in the Articles of
Amendment of Articles of Incorporation attached hereto as Exhibit A (the
"Articles of Amendment"). At the Closing, the Company shall have adopted and
filed with the Secretary of State of North Carolina the Articles of Amendment
creating undesignated Preferred Stock and designating Series A Preferred.
1.2 Sale of Shares. Subject to the terms and conditions
of this Agreement, at the Closing the Company will (i) sell and issue to each
of the Purchasers, and each of the Purchasers will purchase, the number of
shares of Series A Preferred specified on Schedule A for the purchase price of
$2.00 per share. The shares of Series A Preferred being sold under this
Agreement are referred to as the "Shares."
1.3 Cancellation of Notes. The purchase price for the Shares
to be sold to certain of the Purchasers shall be paid by such Purchasers by the
cancellation of the outstanding principal of and accrued but unpaid interest on
certain promissory notes executed by the Company and payable to or for the
benefit of such Purchasers (the "Notes") and additional funds by certified
check or wire transfer (the "Additional Funds") as set forth on Schedule A
attached hereto, with accrued interest to be calculated at the closing as
necessary. With respect to each of the Notes, each of the Purchasers paying
for his shares by the cancellation of the Notes payable to him or for his
benefit hereby waives: (i) any provision or condition in the Notes upon which
the cancellation of the Notes is contingent, (ii) any provision in the Notes
that is contrary to the terms of this Agreement, and (iii) any default under
the Note occurring on or before the Closing Date.
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1.4 Use of Proceeds. The Company will use the proceeds
from the sale of the Shares as specified on Exhibit B attached hereto.
2. The Closing. The closing ("Closing") of the sale and purchase
of the Shares under this Agreement shall take place at the offices of Xxxxxx
Xxxxxxxx, L.L.P., Suite 400, 0000 Xxxx Xxxxx Xxxxx, Xxxxxxx, Xxxxx Xxxxxxxx
00000, as soon as practicable after each of the conditions to Closing specified
in Section 5 below has been satisfied, but in no event later than August 31,
1995. At the Closing, the Company shall deliver to each of the Purchasers (i)
a certificate for the number of Shares being purchased by such Purchaser,
registered in the name of such Purchaser, against payment to the Company of the
purchase price therefor, by certified check or wire transfer and/or the
cancellation of the indebtedness under the Notes owed to certain of the
Purchasers by the Company. The date of the Closing is hereinafter referred to
as the "Closing Date." If Closing shall not have been held by August 31, 1995
because any of the conditions specified in Section 5 shall not have been
fulfilled, the Purchasers shall, at their election, be relieved of all of their
obligations under this Agreement as their sole remedy.
3. Representations of the Company. Subject to and except as
disclosed by the Company in Exhibit C hereto, the Company hereby represents and
warrants to the Purchasers as follows:
3.1 Organization and Standing. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of North Carolina and has full corporate power and authority
to conduct its business as presently conducted and as proposed to be conducted
by it and to enter into and perform this Agreement and to carry out the
transactions contemplated by this Agreement. The Company is duly qualified to
do business as a foreign corporation and is in good standing in every
jurisdiction in which the failure to so qualify would have a material adverse
effect on the operations or financial condition of the Company. The Company
has made available to the Purchasers true and complete copies of its Articles
of Incorporation and By-Laws, each as amended to date and presently in effect.
The Company has all requisite legal and corporate power to own, lease and
operate its property and assets, to carry on its business as presently
conducted, to enter into this Agreement, to sell and issue the Shares and to
carry out and perform its obligations under the terms of this Agreement.
3.2 Capitalization. The authorized capital stock of the
Company (immediately prior to the Closing) shall consist of 8,000,000 shares of
common stock, no par value per share (the "Common Stock"), of which 1,525,000
shares are issued and outstanding, and 2,000,000 shares of Preferred Stock, no
par
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value per share, of which 487,500 shares shall have been designated as Series A
Preferred, none of which shares will be issued and outstanding. All of the
issued or outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth in
Exhibit C hereto or provided in this Agreement, (i) no subscription, warrant,
option, convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of the Company is authorized or
outstanding, (ii) the Company has no obligation (contingent or otherwise) to
issue any subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of any shares of its capital stock
any evidences of indebtedness or assets of the Company, and (iii) the Company
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof. All of the issued
and outstanding shares of capital stock of the Company and all options and
warrants listed on Exhibit C have been offered, issued and sold by the Company
in compliance with applicable Federal and state securities laws.
3.3 Subsidiaries, Etc. The Company has no subsidiaries
and does not own or control, directly or indirectly, any shares of capital
stock of any other corporation or any interest in any partnership, joint
venture or other noncorporate business enterprise.
3.4 Stockholder List and Agreements. Attached as Exhibit
D is a true and complete list of the stockholders of the Company, showing the
number of shares of Common Stock or other securities of the Company held by
each stockholder as of the date of this Agreement. Except as disclosed in
Exhibit D and as provided in this Agreement, there are no agreements, written
or oral, between the Company and any holder of its capital stock, or, to the
best of the Company's knowledge, among any holders of its capital stock,
relating to the acquisition (including without limitation rights of first
refusal or preemptive rights), disposition, registration under the Securities
Act of 1933, as amended (the "Securities Act"), or voting of the capital stock
of the Company.
3.5 Issuance of Shares. The issuance, sale and delivery
of the Shares in accordance with this Agreement, and the issuance and delivery
of the shares of Common Stock issuable upon conversion of the Shares (the
"Converted Shares"), have been, or will be on or prior to the Closing, duly
authorized by all necessary corporate action on the part of the Company, and
all such shares have been duly reserved for issuance. The Shares when so
issued, sold and delivered against payment therefor in accordance with the
provisions of this Agreement, and the
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Converted Shares, when issued upon such conversion, will be duly and validly
issued, fully paid and nonassessable.
3.6 Authority for Agreement. The execution, delivery and
performance by the Company of this Agreement and all other agreements and
instruments required to be executed by the Company on or prior to the Closing
pursuant to Section 5.4 (the "Ancillary Agreements"), and the consummation by
the Company of the transactions contemplated hereby and thereby, have been or
will be duly authorized by all necessary corporate action. This Agreement and
the Ancillary Agreements have been duly executed and delivered by the Company
and constitute valid and binding obligations of the Company enforceable in
accordance with their respective terms. The execution of and performance of
the transactions contemplated by this Agreement and the Ancillary Agreements
and compliance with their provisions by the Company will not violate any
provision of law and will not conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute a default under, or
require a consent or waiver under, its Articles of Incorporation or By-Laws
(each as amended to date) or any indenture, lease, agreement or other
instrument to which the Company is a party or by which it or any of its
properties is bound, or any decree, judgment, order, statute, rule or
regulation applicable to the Company.
3.7 Governmental Consents. No consent, approval, order
or authorization of, or registration, qualification, designation, declaration
or filing with, any governmental authority is required on the part of the
Company in connection with the execution and delivery of this Agreement, the
offer, issuance, sale and delivery of the Shares, the other transactions to be
consummated at the Closing, or the issuance of the Converted Shares when issued
upon conversion, all as contemplated by this Agreement, except such filings as
shall have been made prior to and shall be effective on and as of the Closing.
Based on the representations made by the Purchaser in Section 4 of this
Agreement, the offer and sale of the Shares to the Purchaser will be in
compliance with applicable Federal and state securities laws.
3.8 Litigation. There is no action, suit or proceeding,
or governmental inquiry or investigation, pending, or, to the best of the
Company's knowledge, any basis therefor or threat thereof, against the Company,
which questions the validity of this Agreement or the right of the Company to
enter into it, or which might result, either individually or in the aggregate,
in any material adverse change in the business, prospects, assets or condition,
financial or otherwise, of the Company, nor is there any litigation pending,
or, to the best of the Company's knowledge, any basis therefor or threat
thereof, against the Company by reason of the proposed activities of the
Company, or
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negotiations by the Company with possible investors in the Company.
3.9 Financial Statements. The Company has furnished to
the Purchaser complete and correct copies of (i) the unaudited balance sheet of
the Company (the "1995 Balance Sheet") as at March 31, 1995, (the "Balance
Sheet Date"), (ii) the related income statement for the fiscal year ending as
of the Balance Sheet Date, (iii) the unadjusted balance sheet of the Company as
of July 31, 1995, and (iv) the income statements for the period from the
Balance Sheet Date through July 31, 1995, all compiled by the Company
(collectively, the "Financial Statements"). The Financial Statements are
complete and correct, are in accordance with the books and records of the
Company and present fairly the financial condition and results of operations of
the Company, as at the dates and for the periods indicated, and have been
prepared in accordance with generally accepted accounting principles
consistently applied, except that the Financial Statements have been prepared
for the internal use of management and may not be in accordance with generally
accepted accounting principles because of the absence of footnotes normally
contained therein and are subject to normal year-end audit adjustments which in
the aggregate will not be material.
3.10 Absence of Liabilities. Except as disclosed in
Exhibit C, the Company did not have, at July 31, 1995, any liabilities of any
type which in the aggregate exceeded $5,000, whether absolute or contingent,
which were not fully reflected on the July 31, 1995 balance sheet, and, since
the Balance Sheet Date, the Company has not incurred or otherwise become
subject to any such liabilities or obligations except in the ordinary course of
business.
3.11 Taxes. The amount shown on the Balance Sheet as
provision for taxes is sufficient in all material respects for payment of all
accrued and unpaid Federal, state, county, local and foreign taxes for the
period then ended and all prior periods. The Company has filed or has obtained
presently effective extensions with respect to all Federal, state, county,
local and foreign tax returns which are required to be filed by it, such
returns are true and correct and all taxes shown thereon to be due have been
timely paid with exceptions not material to the Company. Federal income tax
returns of the Company have not been audited by the Internal Revenue Service,
and no controversy with respect to taxes of any type is pending or, to the best
of the Company's knowledge, threatened. Neither the Company nor any of its
stockholders has ever filed (a) an election pursuant to Section 1362 of the
Internal Revenue Code of 1986, as amended (the "Code"), that the Company be
taxed as an S Corporation or (b) consent pursuant to Section 341(f) of the Code
relating to collapsible corporations.
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3.12 Property and Assets. The Company has good title to
all of its material properties and assets, including all properties and assets
reflected in the July 31, 1995 balance sheet, except those disposed of since
the date thereof in the ordinary course of business, and none of such
properties or assets is subject to any mortgage, pledge, lien, security
interest, lease, charge or encumbrance other than those the material terms of
which are described in the July 31, 1995 balance sheet or in Exhibit C.
3.13 Intellectual Property. Set forth on Exhibit C is a
true and complete list of all patents, patent applications, trademarks, service
marks, trademark and service xxxx applications, trade names, copyright
registrations and licenses presently used by the Company or necessary for the
conduct of the Company's business as conducted and as proposed to be conducted,
as well as any agreement under which the Company has access to any confidential
information used by the Company in its business (the "Intellectual Property
Rights"). The Company owns, or has the right to use under the agreements or
upon the terms described in Exhibit C, all of the Intellectual Property Rights,
and has taken all actions reasonably necessary to protect the Intellectual
Property Rights. The business conducted or proposed by the Company does not
and will not cause the Company to infringe or violate any of the patents,
trademarks, service marks, trade names, copyrights, licenses, trade secrets or
other intellectual property rights of any other person or entity. The Company
is not aware that any employee is obligated under any contract (including any
license, covenant or commitment of any nature), or subject to any judgment,
decree or order of any court or administrative agency, that would materially
conflict or interfere with (i) the performance of the employee's duties as an
officer, employee or director of the Company, (ii) the use of the employee's
best efforts to promote the interests of the Company or (iii) the Company's
business as conducted or proposed to be conducted. Except as described in
Exhibit C, no other person or entity (including without limitation any prior
employer of any employee or of any other employee of the Company) has any right
to or interest in any inventions, improvements, discoveries or other
confidential information utilized by the Company in its business.
3.14 Insurance. The Company maintains valid policies of
workers' compensation insurance and of insurance with respect to its properties
and business of the kinds and in the amounts not less than is customarily
obtained by corporations of established reputation engaged in the same or
similar business and similarly situated, including, without limitation,
insurance against loss, damage, fire, theft, public liability and other risks.
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3.15 Material Contracts and Obligations. Exhibit C sets
forth a list of all material agreements or commitments of any nature to which
the Company is a party or by which it is bound, including without limitation
(a) each agreement which requires future expenditures by the Company in excess
of $10,000 or which might result in payments to the Company in excess of
$10,000, (b) all employment and consulting agreements, employee benefit, bonus,
pension, profit-sharing, stock option, stock purchase and similar plans and
arrangements, and distributor and sales representative agreements, (c) any
agreement with any stockholder, officer or director of the Company, or any
"affiliate" or "associate" of such persons (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such person or entity and (d) any agreement relating to the
Intellectual Property Rights. The Company has delivered to the Purchasers
copies of such of the foregoing agreements as such Purchasers have requested.
All of such agreements and contracts are valid, binding and in full force and
effect.
3.16 Compliance. The Company, in all material respects,
has complied with all laws, regulations and orders applicable to its present
and proposed business and has all material permits and licenses required
thereby. There is no term or provision of any mortgage, indenture, contract,
agreement or instrument to which the Company is a party or by which it is
bound, or, to the best of the Company's knowledge, of any provision of any
state or Federal judgment, decree, order, statute, rule or regulation
applicable to or binding upon the Company, which materially adversely affects
or, so far as the Company may now foresee, in the future is reasonably likely
to materially adversely affect, the business, prospects, assets or condition,
financial or otherwise, of the Company. To the best of the Company's
knowledge, none of the employees of the Company is in violation of any term of
any contract or covenant (either with the Company or with another entity)
relating to employment, patents, proprietary information disclosure,
noncompetition or nonsolicitation.
3.17 Absence of Changes. Since the Balance Sheet Date,
there has been no material adverse change in the condition, financial or
otherwise, net worth or results of operations of the Company, other than
changes occurring in the ordinary course of business which changes have not,
individually or in the aggregate, had a materially adverse effect on the
business, prospects, properties or condition, financial or otherwise, of the
Company.
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3.18 Employees. All employees of the Company whose
employment responsibility requires access to confidential or proprietary
information of the Company have executed and delivered Invention and
Non-Disclosure Agreements in the form of Exhibit E, and all of such agreements
are in full force and effect. None of the employees of the Company is
represented by any labor union, and there is no labor strike or other labor
trouble pending with respect to the Company (including, without limitation, any
organizational drive) or, to the best of the Company's knowledge, threatened.
3.19 ERISA. The Company does not have or otherwise
contribute to or participate in any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974.
3.20 Books and Records. The minute books of the Company
contain complete and accurate records of all meetings and other corporate
actions of its stockholders and its Board of Directors and committees thereof.
The stock ledger of the Company is complete and reflects all issuances,
transfers, repurchases and cancellations of shares of capital stock of the
Company.
3.21 Disclosures. Neither this Agreement nor any Exhibit
hereto, nor any report, certificate or instrument furnished to any of the
Purchasers or their respective special counsel in connection with the
transactions contemplated by this Agreement, including without limitation the
Business Plan of the Company dated July, 1995 (the "Plan"), when read together,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading. The Company knows of no information or fact which
has or would have a material adverse effect on the business, prospects, assets
or condition, financial or otherwise, of the Company which has not been
disclosed in Exhibit C. Each projection furnished in the Plan was prepared in
good faith based on reasonable assumptions and represents the Company's best
estimate of future results based on information available as of the date of the
Plan.
3.22 Tax Credit Status. The Company is qualified as a "qualified
business venture" pursuant to Section 105-163.013(b) of the General Statutes
of North Carolina.
3.23 Related Party Transactions. Except as reflected in the
Financial Statements or as set forth on Exhibit C, the Company is not a party
to any contracts or agreements, written or oral, with any officer, director,
shareholder or employee (or family member of same or entity owned or controlled
by same) (each a "Related Person") pursuant to which the Company buys or sells
goods or
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services to or from any Related Party except for (i) employment arrangements in
the ordinary course of business and (ii) the lease of the Company headquarters
from Xxxxx Xxxxxxx pursuant to an oral month-to-month lease at a current rental
rate of $2,000 per month.
3.24 Stock Options. All stock options issued under the NetTech,
Inc. Stock Option Plan adopted by the Company (the "Stock Option Plan") prior
to closing have been issued to the parties designated on Exhibit C and have a
minimum exercise price of $0.80 per share of common stock.
4. Representations of the Purchasers. Each of the Purchasers
severally represents and warrants to the Company as follows:
4.1 Investment. Such Purchaser is acquiring the Shares,
and the shares of Common Stock into which the Shares may be converted, for his
or its own account for investment and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; and, except as contemplated by this Agreement
and the Exhibits hereto, such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof.
4.2 Authority. Such Purchaser has full power and
authority to enter into and to perform this Agreement in accordance with its
terms. Such Purchaser represents that it has not been organized, reorganized
or recapitalized specifically for the purpose of investing in the Company.
4.3 Experience. Such Purchaser has carefully reviewed
the representations concerning the Company contained in this Agreement, has
read the Plan and has made detailed inquiry concerning the Company, its
business and its personnel; the officers of the Company have made available to
such Purchaser any and all written information which he or it has requested and
have answered to such Purchaser's satisfaction all inquiries made by such
Purchaser; and such Purchaser has sufficient knowledge and experience in
investing in companies similar to the Company so as to be able to evaluate the
risks and merits of his or its investment in the Company and is able
financially to bear the risks thereof.
4.4 Accredited Investor. Unless otherwise indicated in
writing by such Purchaser to the Company, such Purchaser is an Accredited
Investor within the definition set forth in Securities Act Rule 501(a).
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4.5 Authority for Agreement. The execution, delivery and
performance by such Purchaser of this Agreement and each Ancillary Agreement to
which such Purchaser is a party, and the consummation by such Purchaser of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary action. This Agreement and each Ancillary Agreement to which such
Purchaser is a party have been duly executed and delivered by such Purchaser
and constitute valid and binding obligations of such Purchaser enforceable in
accordance with their respective terms. The execution of and performance of
the transactions contemplated by this Agreement and each Ancillary Agreement to
which such Purchaser is a party and compliance with their provisions by such
Purchaser will not violate any provision of law and will not conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute a default under, or require a consent or waiver under its Articles
of Incorporation or By-Laws, each as amended to date (in the case of a
corporation) or its partnership agreement, as amended to date (in the case of a
partnership), or any indenture, lease, agreement or other instrument to which
such Purchaser is a party or by which he or it or any of his or its properties
is bound, or any decree, judgment, order, statute, rule or regulation
applicable to such Purchaser.
4.6 Waiver. Such Purchaser hereby waives any defaults
under the Note payable to or for his or its benefit.
5. Conditions to the Obligations of the Purchasers. The
obligation of the Purchasers to purchase Shares at the Closing is subject to
the fulfillment, or the waiver by the Purchasers, of each of the following
conditions on or before the Closing:
5.1 Accuracy of Representations and Warranties. Each
representation and warranty contained in Section 3 shall be true on and as of
the Closing Date with the same effect as though such representation and
warranty had been made on and as of that date.
5.2 Performance. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement
required to be performed or complied with by the Company prior to or at the
Closing.
5.3 Opinion of Counsel. The Purchaser shall have
received an opinion from Xxxxxx Xxxxxxxx, L.L.P., counsel for the Company,
dated the Closing Date, addressed to the Purchasers, and satisfactory in form
and substance to the Purchasers, to the effect that:
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of North
Carolina and has full corporate power and authority to conduct its business as
presently conducted, to enter into and
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perform this Agreement and to carry out the transactions contemplated by this
Agreement.
(b) Except for changes contemplated by this
Agreement, the authorized capital stock of the Company is as described in
Section 3.2 of this Agreement and, to the best of such counsel's knowledge, the
other representations and warranties contained in Section 3.2 are true and
correct (other than the last sentence thereof, as to which counsel has no
specific knowledge that such representation is not correct). The rights,
preferences and privileges of, and restrictions on, the Series A Preferred are
as stated in the Articles of Incorporation, as amended.
(c) The Shares and the Converted Shares have been
duly authorized and reserved for issuance by all necessary corporate action on
the part of the Company; and the Shares, when issued, sold and delivered
against payment therefor in accordance with the provisions of this Agreement,
and the Converted Shares, when issued upon such conversion, will be duly and
validly issued, fully paid and nonassessable.
(d) The execution, delivery and performance by
the Company of this Agreement and the Ancillary Agreements have been duly
authorized by all necessary corporate action and this Agreement and the
Ancillary Agreements have been duly executed and delivered by the Company.
This Agreement and the Ancillary Agreements (other than Section 1.11 of the
Registration Rights Agreement referred to in Section 5.4, as to which no
opinion need be expressed) constitute the valid and binding obligations of the
Company, enforceable in accordance with their respective terms, subject as to
enforcement of remedies to applicable bankruptcy, insolvency, reorganization or
similar laws affecting generally the enforcement of creditors' rights and
subject to a court's discretionary authority with respect to the granting of a
decree ordering specific performance or other equitable remedies. The
execution and delivery of this Agreement and the Ancillary Agreements, and the
offer, issue and sale of the Shares hereunder will not conflict with, or result
in any breach of any of the terms, conditions, or provisions of, or constitute
a default under, the Articles of Incorporation or By-Laws of the Company, or
any indenture, lease, agreement, or other instrument known to such counsel to
which the Company is a party or by which it or any of its properties are bound,
or any decree, judgment or order specifically naming the Company and known to
such counsel.
(e) Except as obtained and in effect at the
Closing, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration, or filing with, any governmental
authority (other than filings required to be made after the Closing under
applicable federal and state securities laws, which filings shall be specified
in such
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opinion) is required on the part of the Company in connection with the
execution and delivery of this Agreement, or the offer, issue, sale and
delivery of the Shares, or the other transactions to be consummated at the
Closing pursuant to this Agreement.
(f) Based on the representations of the Purchaser
in Section 4, the offer, issuance and sale of the Shares pursuant to this
Agreement are exempt from registration under the Securities Act.
(g) To the best of such counsel's knowledge,
except as set forth in Exhibit C to this Agreement, there is no action, suit or
proceeding, or governmental inquiry or investigation, pending or threatened
against the Company.
5.4 Other Agreements and Instruments.
(a) The Registration Rights Agreement (the
"Registration Rights Agreement") attached hereto as Exhibit F shall have been
executed and delivered by the Company and the Purchasers.
(b) The Put and Call Agreement attached hereto as
Exhibit G shall have been executed and delivered by the Company and Southeast
Interactive Technology Fund I, LLC.
(c) The Warrants in the form attached hereto as
Exhibit H shall have been executed and delivered by the Company to each of the
Purchasers.
5.5 Consents and Approvals. The Company shall have
received the requisite approvals of the securities commissioners of such states
as may require such approvals in connection with the offering and issuance of
the Shares hereunder and such approvals shall be in full force and effect on
the Closing Date.
5.6 Certificates and Documents. The Company shall have
delivered to the Purchasers:
(a) The Articles of Incorporation of the Company,
as amended and in effect as of the Closing Date (including the Articles of
Amendment), certified by the Secretary of State of the State of North Carolina;
(b) Certificates, as of the most recent
practicable dates, as to the corporate good standing of the Company issued by
the Secretary of State of the State of North Carolina;
(c) By-laws of the Company, certified by its
Secretary or Assistant Secretary as of the Closing Date; and
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(d) Resolutions of the Board of Directors of the
Company, authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby, certified by the Secretary
or Assistant Secretary of the Company as of the Closing Date.
5.7 Compliance Certificate. The Company
shall have delivered to the Purchaser a certificate, executed by the President
of the Company, dated the Closing Date, certifying to the fulfillment of the
conditions specified in Sections 5.1 and 5.2 of this Agreement.
5.8 Amendment to Wayfarer Agreement.
The agreement with Wayfarer Technology Group, LLC dated January 13, 1995 shall
have been amended in a form satisfactory to Southeast Interactive Technology
Fund I, LLC ("Southeast").
5.9 Cancellation of IFM Loan. The Loan
and Security Agreement dated January 13, 1995 with IFM Venture Group shall be
cancelled as of the closing and all security interests securing such loan
released (in connection with this transaction, the outstanding balance
[currently $170,000 of principal is outstanding] of the loan shall be paid in
full by the conversion of at least $73,000 of such loan into Shares at closing
with the balance to be paid with the proceeds of the transaction).
5.10 Election of Director. The Company
shall have entered into a Voting Agreement in the form attached hereto as
Exhibit I.
5.11 Other Matters. All corporate and
other proceedings in connection with the transactions contemplated by this
Agreement and all documents and instruments incident to such transactions shall
be reasonably satisfactory in substance and form to the Purchasers, and the
Purchasers shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
6. Conditions to the Obligations of the Company. The obligations
of the Company under Section 1.2 of this Agreement are subject to fulfillment,
or the waiver, of each of the following conditions on or before the Closing:
6.1 Accuracy of Representations and Warranties. The
representations and warranties of each of the Purchasers contained in Section 4
shall be true on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of that date.
6.2 Blue Sky Approvals. The Company shall have received
the requisite approvals of the securities commissioners
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of such states as may require such approvals in connection with the offering
and issuance of the Shares hereunder and such approvals shall be in full force
and effect on the Closing Date.
6.3 Compliance Certificate. Each of the Purchasers shall
have delivered to the Company a certificate, executed by a general partner (if
the Purchaser is a partnership), by an authorized officer (if the Purchaser is
a corporation), by an authorized manager (if the Purchaser is a limited
liability company) or by the Purchaser (if the purchaser is a natural person),
dated the Closing Date, certifying to the fulfillment of the conditions
specified in Section 6.1 of this Agreement.
6.4 Other Matters. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Company, and the Company shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.
7. Covenants of the Company.
7.1 Inspection. The Company shall permit the Purchasers,
or any authorized representatives thereof, to visit and inspect the properties
of the Company, including its corporate and financial records, and to discuss
its business and finances with officers of the Company, during normal business
hours following reasonable notice and as often as may be reasonably requested.
7.2 Financial Statements and Other Information.
(a) The Company shall deliver to the Purchaser:
(i) within 30 days after the end of each
fiscal quarter of the Company, the President of the Company will provide the
Purchasers with a report stating in brief the major operational activities of
the Company for the month and stating further that he has reviewed every
obligation of the Company under this Agreement, under any material agreement
and under any related instrument, and to his best knowledge and belief no
breach by the Company of this Agreement or of such related instrument, has
occurred, or through lapse of time will have occurred, and disclosing any such
breach of which he has obtained knowledge and setting forth what action, if
any, has been initiated or taken by the Company towards the curing of any such
breach. Such report shall discuss any material variances from budget for the
fiscal quarter and shall be accompanied by a reforecast or updated forecast of
financial performance covering the next twelve months from the end of such
fiscal quarter.
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(ii) within 15 days after the end of each
month, an unaudited balance sheet of the Company as at the end of such month
and unaudited statements of income of the Company for such month and for the
current fiscal year to the end of such month, setting forth in comparative form
the Company's projected financial statements for the corresponding periods for
the current fiscal year;
(iii) as soon as available, but in any
event at least 30 days prior to the end of each fiscal year, a budget and for
the next three fiscal years of the Company, projected financial statements on a
semi- annual basis for the first fiscal year of the Company following the date
of this Agreement and on an annual basis for the next two fiscal years, setting
forth balance sheets, income statements and statements of cash flow. The
Company will also deliver to the Purchasers any revisions to such budgets
within 10 days of their acceptance by the Board of Directors of the Company
with any explanation with respect to such deviation;
(iv) annually, at the option of the
Purchasers, within 90 days after the end of each fiscal year of the Company,
consolidated and consolidating financial statements of the Company including a
balance sheet as of the end of such fiscal year and statements of income and
retained earnings and of sources and applications of funds for such fiscal
year, prepared in reasonable detail and in accordance with generally accepted
accounting principles consistently applied and accompanied by the opinion
thereon of a nationally recognized firm of independent certified public
accountants as may be selected by the Board of Directors of the Company. The
Company's chief financial officer shall supply (or upon request of the
Purchasers, the Company shall request its auditor to supply) a report for the
Purchasers analyzing the compliance of the Company with this Agreement and any
other material agreements in light of the annual audited report;
(v) Promptly upon their becoming
available (and in no event later than the ten days after preparation) copies
(without duplication) of all financial statements, reports, press releases,
notices and proxy statements sent by the Company to its security holders and
the financial community and all annual, periodic or special reports or
registration statements filed by the Company with the Securities and Exchange
Commission (the "Commission"), and all other material communications sent by
the Company to its security holders or filed by the Company with the
Commission;
(vi) Within ten days of preparation or
occurrence, the Company will furnish the Purchasers with copies or notification
of any report made by an outside consultant for the Company, any reports filed
with state or federal regulatory
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agencies or securities exchanges by the Company, any report presented to the
Board of Directors, and communications with any person or persons interested in
acquiring the Company or forming a potential strategic relationship with the
Company; or
(vii) with reasonable promptness, such
other notices, information and data with respect to the Company as the Company
delivers to the holders of its Common Stock, and such other information and
data as the Purchasers may from time to time reasonably request.
(b) The foregoing financial statements shall be
prepared on a consolidated basis if the Company then has any subsidiaries. The
financial statements delivered pursuant to clauses (ii) and (iv) of paragraph
(a) shall be accompanied by a certificate of the President or the chief
financial officer of the Company stating that such statements have been
prepared in accordance with generally accepted accounting principles
consistently applied (except as noted) and fairly present the financial
condition and results of operations of the Company at the date thereof and for
the periods covered thereby.
7.3 Material Changes and Litigation. The Company shall
promptly notify the Purchasers of any material adverse change in the business,
prospects, assets or condition, financial or otherwise, of the Company and of
any litigation or governmental proceeding or investigation brought or, to the
best of the Company's knowledge, threatened against the Company, or any
officer, director, key employee or principal stockholder of the Company
materially adversely affecting or which, if adversely determined, would
materially adversely affect its business, prospects, assets or condition,
financial or otherwise.
7.4 Reservation of Common Stock. The Company shall
reserve and maintain a sufficient number of shares of Common Stock for issuance
upon conversion of all of the outstanding Shares.
7.5 Certain Actions Prohibited. Subject to the
termination of this Section 7.5 as provided below, without the unanimous
consent of the Board of Directors of the Company, the Company will not:
a. Enter into any lines of business that are not
substantially related to the current business of the Company;
b. Issue any stock that would have dividend or
liquidation preferences or registration rights that would be prior to the
rights of the holders of the Shares, except (1) in connection with any round of
financing in which the Company shall receive in excess of two million dollars
($2,000,000) or (2) with the unanimous consent of the Board of Directors of the
Company;
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c. Make any amendment to the Articles of Incorporation
or Bylaws of the Company that would change the number of directors or the
manner in which directors are elected.
d. Hire any employees with access to confidential or
proprietary information or for development of products unless such employees
execute an Invention and Non-Disclosure Agreement substantially in the form of
Exhibit E;
e. Incur additional indebtedness in an aggregate amount
at any one time outstanding in excess of $150,000 more than the amount
reflected in the July 31, 1995 balance sheet.
f. Increase the number of shares of common stock of the
Company (or securities convertible into common stock) that may be issued under
stock option plans or incentive compensation plans or similar arrangements
beyond the number currently authorized (except proportional adjustments in
connection with stock splits or similar recapitalizations that do not increase
the total percentage of stock of the Company that is subject to such plans);
g. Issue any shares of common stock or securities
convertible into common stock to officers, directors, consultants, suppliers or
customers as a form of compensation except under stock option plans limited as
provided in the preceding subsection.
h. Enter into a transaction with a Related Person or
modify any current transaction or arrangement with a Related Person in any
manner that would be materially adverse to the Company.
i. Enter into any employment agreements for a definite
term with any Related Person who is a holder of more than 10% of the capital
stock of the Company.
The restrictions contained in this Section 7.5 shall terminate with
respect to (and cease to be enforceable by) the holders of Series A Preferred
Stock (except for Southeast Interactive Technology Fund I, LLC) at such time as
the holders of Series A Preferred Stock (including Southeast Interactive
Technology Fund I, LLC) cease to own shares of Series A Preferred Stock
representing at least fifteen percent (15%) of the outstanding capital stock of
the Company on an as-converted basis. The restrictions contained in this
Section 7.5 shall terminate with respect to (and cease to be enforceable by)
Southeast Interactive Technology Fund I, LLC at such time as Southeast
Interactive Technology Fund I, LLC ceases to own shares of Series A Preferred
Stock representing at least five percent (5%) of the outstanding capital stock
of the Company on an as-converted basis.
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7.6 Termination of Covenants. The covenants of the
Company contained in this Section 7 shall terminate, and be of no further force
or effect, upon the effective date of a registration statement filed by the
Company under the Securities Act covering the Company's first public offering
of Common Stock (an "IPO") and with a selling price (before deducting
commissions and expenses) of at least $3.00 per share, or a merger of the
Company after which the shareholders of the Company immediately prior to the
merger hold less than fifty percent (50%) of the outstanding capital stock of
the surviving corporation and in which the consideration received by the
holders of the Shares is at least $3.00 per share.
8. Transfer of Shares.
8.1 Restricted Shares. "Restricted Shares" means (i) the
Shares, (ii) the shares of Common Stock issued or issuable upon conversion of
the Shares, or (iii) any shares of capital stock of the Company acquired by the
Purchasers pursuant to the right of first refusal set forth in the Bylaws of
the Company, and any other shares of capital stock of the Company issued in
respect of such shares (as a result of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); provided, however,
that shares of Common Stock which are Restricted Shares shall cease to be
Restricted Shares (i) upon any sale pursuant to the Registration Rights
Agreement, Section 4(1) of the Securities Act or Rule 144 under the Securities
Act or (ii) at such time as they become eligible for sale under Rule 144(k)
under the Securities Act.
8.2 Requirements for Transfer.
(a) Restricted Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act, or (ii) the Company first shall have been furnished with an
opinion of legal counsel, reasonably satisfactory to the Company, to the effect
that such sale or transfer is exempt from the registration requirements of the
Securities Act.
(b) Notwithstanding the foregoing, no
registration or opinion of counsel shall be required for (i) a transfer by a
Purchaser which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner, if the transferee agrees in writing to
be subject to the terms of this Section 8 to the same extent as if he were an
original Purchaser hereunder, or (ii) a transfer made in accordance with Rule
144 under the Securities Act.
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8.3 Legend. Each certificate representing Restricted
Shares shall bear a legend substantially in the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such shares are registered under
such Act or an opinion of counsel satisfactory to the Company
is obtained to the effect that such registration is not
required."
The foregoing legend shall be removed from the certificates
representing any Restricted Shares, at the request of the holder thereof, at
such time as they become eligible for resale pursuant to Rule 144(k) under the
Securities Act.
8.4 Rule 144A Information. The Company agrees, upon the
request of any Purchaser, to make available to the Purchasers and to any
prospective transferee of any Restricted Shares of the Purchasers the
information concerning the Company described in Rule 144A(d)(4) under the
Securities Act.
9. Miscellaneous.
9.1 Successors and Assigns. This Agreement, and the
rights and obligations of each Purchasers hereunder, may be assigned by such
Purchaser to any person or entity to which Shares are transferred by such
Purchaser, and such transferee shall be deemed a "Purchaser" for purposes of
this Agreement; provided that the transferee provides written notice of such
assignment to the Company.
9.2 Confidentiality. Each of the Purchasers agrees
that he or it will keep confidential and will not disclose or divulge any
confidential, proprietary or secret information which such Purchaser may obtain
from the Company pursuant to financial statements, reports and other materials
submitted by the Company to the Purchasers or pursuant to visitation or
inspection rights granted hereunder, unless such information is known, or until
such information becomes known, to the public; provided, however, that each of
the Purchasers may disclose such information (i) to his or its attorneys,
accountants, consultants, and other professionals to the extent necessary to
obtain their services in connection with his or its investment in the Company,
(ii) to any prospective purchaser of any Shares from such Purchaser as long as
such prospective purchaser agrees in writing to be bound by the provisions of
this Section or (iii) to any affiliate of such Purchaser or to a partner,
shareholder or subsidiary of such Purchaser.
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9.3 Survival of Representations and Warranties. All
agreements, representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the transactions
contemplated hereby for a period of two (2) years.
9.4 Expenses. Each party shall pay its respective
legal fees and expenses incurred in connection with the preparation of this
Agreement and the other agreement contemplated hereby and the closing of the
transactions contemplated hereby permitted, however, that the Company will pay
the reasonable legal fees of counsel for Southeast Interactive Technology Fund
I, LLC.
9.5 Notices. All notices, requests, consents, and
other communications under this Agreement shall be in writing and shall be
delivered by hand or mailed by first class certified or registered mail, return
receipt requested, postage prepaid:
If to the Company, at 0000 Xxxxxxx Xxxxx, Xxxxxxx, Xxxxx Xxxxxxxx
00000, Attention: Xxxxxxx X. Xxxxxx, President, or at such other address or
addresses as may have been furnished in writing by the Company to the
Purchasers, with a copy to Xxxx X. Xxxxxxxxx, Esquire, Xxxxxx Stockton, L.L.P.,
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx Xxxxxxxx 00000;
If to the Purchasers, at the addresses set forth in Schedule A hereto
or at such other address or addresses as may have been furnished to the Company
in writing by any of the Purchasers.
Notices provided in accordance with this Section 9.5 shall be deemed
delivered upon personal delivery or two business days after deposit in the
mail.
9.6 Brokers. The Company and each of the Purchasers
(i) represents and warrants to the other parties hereto that he or it has
retained no finder or broker in connection with the transactions contemplated
by this Agreement, and (ii) will indemnify and save the other parties harmless
from and against any and all claims, liabilities or obligations with respect to
brokerage or finders' fees or commissions, or consulting fees in connection
with the transactions contemplated by this Agreement asserted by any person on
the basis of any statement or representation alleged to have been made by such
indemnifying party.
9.7 Entire Agreement. This Agreement and the
Ancillary Agreements embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings relating to such subject matter.
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9.8 Amendments and Waivers. Except as otherwise
expressly set forth in this Agreement, 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), with the written consent of the Company (acting through its
Board of Directors with the board representatives of any of the Purchasers
abstaining from voting), and the Purchasers owning Seventy Percent (70%) or
more of the Shares. Any amendment or waiver effected in accordance with this
Section 9.8 shall be binding upon each holder of any Shares (including the
Converted Shares), each future holder of all such securities and the Company.
No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such term, condition or provision.
9.9 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original, but
all of which shall be one and the same document.
9.10 Section Headings. The section headings are for
the convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.
9.11 Severability. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
9.12 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of North Carolina.
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NETTECH, INC.
By:
-----------------------------------
Xxxxxxx X. Xxxxxx, President
PURCHASERS:
SOUTHEAST INTERACTIVE TECHNOLOGY
FUND I, LLC
By:
-----------------------------------
Xxxxx X. Xxxxxx
-----------------------------------
Xxxx X. Xxxxxx
-----------------------------------
Xxxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxxxx
-----------------------------------
Xxx X. Xxxxxx
-----------------------------------
Xxxxxxxxxxx X. Xxxx
-----------------------------------
Xxxx X. Xxxxx
-----------------------------------
Xxxx X. Xxxxxxxxx
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----------------------------------
Xxxxx X. Xxxxx
----------------------------------
Xxxxxx X. Price
----------------------------------
Xxxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxxxxxxxx X. Xxxxx
----------------------------------
X. Xxxxx Kalmbach
----------------------------------
Xxxxx Xxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxxxxx X. Xxxxxxxxxx
----------------------------------
E.L. Xxxxx
----------------------------------
Xxxxx X. Xxxxxx, Xx.
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SCHEDULES AND EXHIBIT
SCHEDULE A - PURCHASERS
EXHIBIT A - ARTICLES OF AMENDMENT OF ARTICLES OF INCORPORATION
EXHIBIT B - USE OF FUNDS
EXHIBIT C - EXCEPTIONS
EXHIBIT D - LIST OF STOCKHOLDERS
EXHIBIT E - FORM OF INVENTION AND NON-DISCLOSURE AGREEMENT
EXHIBIT F - REGISTRATION RIGHTS AGREEMENT
EXHIBIT G - PUT AND CALL AGREEMENT
EXHIBIT H - FORM OF WARRANT
EXHIBIT I - VOTING AGREEMENT
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