SECURITIES PURCHASE AGREEMENT
dated as of
September 1, 2000
among
UNITED SHIPPING & TECHNOLOGY, INC.,
TH XXX.XXXXXX INTERNET PARTNERS, L.P.,
TH XXX.XXXXXX INTERNET PARALLEL PARTNERS, L.P.,
THLI COINVESTMENT PARTNERS LLC
and
BLUE STAR I, LLC.
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS...................................................1
SECTION 1.01 DEFINITIONS...............................................1
ARTICLE 2. PURCHASE AND SALE OF SECURITIES..............................5
SECTION 2.01 COMMITMENT TO PURCHASE....................................5
SECTION 2.02 ISSUE OF SERIES C WARRANTS AND CANCELLATION OF WARRANTS...5
SECTION 2.03 THE CLOSINGS..............................................6
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE ISSUER..................6
SECTION 3.01 ORGANIZATION, CORPORATE POWER AND LICENSES................6
SECTION 3.02 CAPITAL STOCK AND RELATED MATTERS.........................7
SECTION 3.03 SUBSIDIARIES; INVESTMENTS.................................7
SECTION 3.04 AUTHORIZATION; NO BREACH..................................8
SECTION 3.05 SECURITIES LAW COMPLIANCE.................................8
SECTION 3.06 COMMISSION DOCUMENTS......................................9
SECTION 3.07 FINANCIAL STATEMENTS......................................9
SECTION 3.08 ABSENCE OF UNDISCLOSED LIABILITIES........................9
SECTION 3.09 NO MATERIAL ADVERSE CHANGE...............................10
SECTION 3.10 ABSENCE OF CERTAIN DEVELOPMENTS..........................10
SECTION 3.11 ASSETS...................................................11
SECTION 3.12 REAL PROPERTY............................................11
SECTION 3.13 TAX MATTERS..............................................12
SECTION 3.14 CONTRACTS AND COMMITMENTS................................13
SECTION 3.15 INTELLECTUAL PROPERTY RIGHTS.............................15
SECTION 3.16 LITIGATION, ETC..........................................16
SECTION 3.17 BROKERAGE................................................17
SECTION 3.18 GOVERNMENTAL CONSENT, ETC................................17
SECTION 3.19 INSURANCE................................................17
SECTION 3.20 EMPLOYEES................................................17
SECTION 3.21 ERISA....................................................18
SECTION 3.22 COMPLIANCE WITH LAWS.....................................19
SECTION 3.23 ENVIRONMENTAL AND SAFETY MATTERS.........................20
SECTION 3.24 AFFILIATED TRANSACTIONS..................................21
SECTION 3.25 DISCLOSURE...............................................21
SECTION 3.26 CUSTOMERS AND SUPPLIERS..................................22
SECTION 3.27 REPORTS WITH THE SECURITIES AND EXCHANGE COMMISSION......22
SECTION 3.28 REGULATORY MATTERS.......................................22
SECTION 3.29 NO VOTE REQUIRED.........................................23
SECTION 3.30 KNOWLEDGE................................................23
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.............23
ARTICLE 5. COVENANTS OF THE ISSUER......................................24
SECTION 5.01 ACCESS TO INFORMATION....................................24
SECTION 5.02 CERTIFICATE OF DESIGNATION...............................25
SECTION 5.03 RESTRICTIONS PENDING THE CLOSINGS........................25
SECTION 5.04 RESERVATION OF SHARES....................................25
SECTION 5.05 TAX CONSISTENCY..........................................25
SECTION 5.06 USE OF PROCEEDS..........................................25
ARTICLE 6. COVENANTS OF THE PURCHASERS..................................25
SECTION 6.01 CONFIDENTIALITY..........................................25
ARTICLE 7. COVENANTS OF THE ISSUER AND THE PURCHASERS...................26
SECTION 7.01 CERTAIN FILINGS..........................................26
SECTION 7.02 PUBLIC ANNOUNCEMENTS.....................................27
ARTICLE 8. CONDITIONS PRECEDENT TO THE CLOSINGS.........................27
SECTION 8.01 CONDITIONS TO EACH PARTY'S OBLIGATIONS...................27
SECTION 8.02 FIRST CLOSING: CONDITIONS TO EACH PURCHASER'S...........27
SECTION 8.03 SECOND CLOSING: CONDITIONS TO EACH PURCHASER'S
OBLIGATIONS..............................................28
SECTION 8.04 CONDITIONS TO THE ISSUER'S OBLIGATIONS...................29
ARTICLE 9. MISCELLANEOUS................................................29
SECTION 9.01 NOTICES..................................................29
SECTION 9.02 NO WAIVERS; AMENDMENTS...................................30
SECTION 9.03 SURVIVAL.................................................30
SECTION 9.04 INDEMNIFICATION..........................................31
SECTION 9.05 PROCEDURES...............................................31
SECTION 9.06 TERMINATION..............................................31
SECTION 9.07 SUCCESSORS AND ASSIGNS...................................32
SECTION 9.08 GOVERNING LAW; WAIVER OF JURY TRIAL......................32
SECTION 9.09 JURISDICTION.............................................32
SECTION 9.10 COUNTERPARTS.............................................33
SECTION 9.11 ENTIRE AGREEMENT.........................................33
SECTION 9.12 REMEDIES.................................................33
SECTION 9.13 SEVERABILITY.............................................33
SECTION 9.14 DESCRIPTIVE HEADINGS; INTERPRETATION.....................33
SECTION 9.15 NO STRICT CONSTRUCTION...................................33
EXHIBITS, ANNEX AND SCHEDULES
Exhibit A - Certificate of Designation
Exhibit B - Form of Warrant
Exhibit C - Form of Stock Restriction Agreements
Exhibit D - Form of Registration Rights Agreement
Annex I - Share and Warrant Purchase Table
Schedule 3.02(a) - Capitalization (a)
Schedule 3.02(b) - Capitalization (b)
Schedule 3.03 - Subsidiaries
Schedule 3.08 - Liabilities
Schedule 3.10 - Developments
Schedule 3.11 - Assets
Schedule 3.12(a) - Real Property(a)
Schedule 3.12(b) - Real Property(b)
Schedule 3.13 - Taxes
Schedule 3.14 - Contracts
Schedule 3.15 - Intellectual Property
Schedule 3.16 - Litigation
Schedule 3.17 - Brokerage
Schedule 3.19 - Self Insurance
Schedule 3.21 - Employee Benefit Plans
Schedule 3.23 - Environmental and Safety Matters
Schedule 3.24 - Affiliated Transactions
Schedule 3.26 - Customers and Suppliers
Schedule 5.06 - Use of Proceeds
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of September 1, 2000 among United Shipping &
Technology, Inc., a Utah corporation (the "Issuer"), TH Xxx.Xxxxxx Internet
Partners, L.P., a Delaware limited partnership ("TH Xxx"), and TH
Xxx.Xxxxxx Internet Parallel Partners, L.P., a Delaware limited partnership
("TH Xxx Parallel"), THLi Coinvestment Partners LLC, a Delaware limited
liability company, and Blue Star I, LLC, a Delaware limited liability
company (together, the "Purchasers" and each a "Purchaser").
WHEREAS, the Issuer desires to sell the Securities (as defined
below) to the Purchasers, and the Purchasers desire to purchase the
Securities from the Issuer, upon the terms and subject to the conditions
hereinafter set forth;
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.01 Definitions. The following terms, as used herein, have the
following meanings:
"Additional Warrants" means the stock purchase warrants
(Certificate Nos. W-5 and W-6) to purchase Series B Shares issued by the
Issuer as of May 31, 2000.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such
Person, where "control" means the possession, directly or indirectly, of
the power to direct the management and policies of a Person whether through
ownership of voting securities, contract or otherwise; provided that none
of the Purchasers shall be considered an Affiliate of the Issuer or any of
its Subsidiaries.
"Agreement" means this Agreement, as it may be amended from time
to time.
"Applicable Law" means any applicable constitution, treaty,
statute, rule, regulation, ordinance, order, directive, code,
interpretation, judgment, decree, injunction, writ, determination, award,
permit, license, authorization, directive, requirement, ruling or decision
of, agreement with, or by any Governmental Authority.
"Certificate of Designation" means the Certificate of Designation
for the Series C Shares, in the form attached as Exhibit A hereto with such
changes and modifications as may be agreed to by the Issuer and the
Purchasers.
"Benefit Plan" has the meaning set forth in Section 3.21.
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized by law
to close.
"Closings" and "Closing" shall have the meaning set forth in
Section 2.03.
"Closing Date" shall have the meaning set forth in Section 2.03.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the U.S. Securities and Exchange Commission or
any governmental body or agency succeeding to the functions thereof.
"Common Stock" means the common stock, par value $.004 per share,
of the Issuer.
"Common Warrants" means the stock purchase warrants to purchase
shares of the Company's Common Stock issued by the Issuer to TH Xxx and TH
Xxx Parallel as of May 31, 2000.
"Common Stock Equivalents" has the meaning set forth in Section
3.02.
"Credit Agreement" means the credit agreement between UST Delivery
Systems, Inc., a Subsidiary of the Issuer, and General Electric Capital
Corporation, dated September 24, 1999, and all documents executed in
connection therewith.
"ERISA" has the meaning set forth in Section 3.21.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"First Closing" shall have the meaning set forth in Section 2.03.
"Governmental Authority" means any governmental body, agency or
official of any country or political subdivision of any country, including,
but not limited to, federal, state, county and local governments,
administrative agencies and courts.
"Indebtedness" means at a particular time, without duplication,
(i) any indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (ii) any indebtedness
evidenced by any note, bond, debenture or other debt security, (iii) any
indebtedness for the deferred purchase price of property or services with
respect to which a Person is liable, contingently or otherwise, as obligor
or otherwise (other than trade payables and other current liabilities
incurred in the ordinary course of business which are not more than six
months past due or being contested in good faith), (iv) any commitment by
which a Person assures a creditor against loss (including, without
limitation, contingent reimbursement obligations with respect to letters of
credit), (v) any indebtedness guaranteed in any manner by a Person
(including, without limitation, guarantees in the form of an agreement to
repurchase or reimburse), (vi) any obligations under capitalized leases
with respect to which a Person is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or with respect to which obligations a
Person assures a creditor against loss, (vii) any indebtedness secured by a
Lien on a Person's assets and (viii) any unsatisfied obligation for
"withdrawal liability" to a "multiemployer plan" as such terms are defined
under ERISA.
"Intellectual Property Rights" means all (i) patents, patent
applications and patent disclosures, (ii) trademarks, service marks, trade
dress, trade names, logos, corporate names, websites and internet domain
names and registrations and applications for registration thereof together
with all of the goodwill associated therewith, (iii) copyrights and
copyrightable works and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data, data bases and
documentation thereof, (vi) trade secrets and other confidential
information (including, without limitation, ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced
to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, financial and marketing plans
and customer and supplier lists and information), (vii) other intellectual
property rights and (viii) copies and tangible embodiments thereof (in
whatever form or medium).
"Investment" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, stock, securities or ownership interest
(including partnership interests, limited liability company interests and
joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Issuable Securities" has the meaning set forth in Section 3.05.
"Issuer SEC Reports" has the meaning given to it in Section 3.25.
"Latest Balance Sheet" means the audited balance sheet of the
Issuer for the most recent fiscal year ended June 30, 1999.
"Leased Property" has the meaning set forth in Section 3.12.
"Licenses" means all licenses, permits, construction permits,
certificates of public convenience and necessity and other authorizations
issued by any federal, state, county or local Governmental Authorities to
the Issuer and its Subsidiaries and used or necessary in connection with
the operation and conduct of their business, and including any applications
for any such licenses, permits, construction permits and other
authorizations applied for by the Issuer and its Subsidiaries that are
currently pending.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, a Person shall be deemed to
own subject to Lien any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Lock-Up Agreements" means the Stock Restriction Agreements to be
dated as of the date hereof by and among the Issuer, the Purchasers and
each of Xxxxx Xxxxx, Xxx Xxxxxx and Xxxxxxx Xxxxxx in the form attached as
Exhibit C hereto.
"Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there has been no sales on any
such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if
on any day such security is not quoted in the NASDAQ System, the average of
the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case
averaged over a period of the two (2) consecutive trading days immediately
prior to the day as of which "Market Price" is being determined. If at any
time such security is not listed on any securities exchange or quoted in
the NASDAQ System or the over-the-counter market, the "Market Price" shall
be the fair value thereof determined jointly by the Corporation and the
Required Holders. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities jointly selected by
the Corporation and the Required Holders. The determination of such
appraiser shall be final and binding upon the parties, and the Corporation
shall pay the fees and expenses of such appraiser.
"Material Adverse Change" means, with respect to the Issuer, means
(a) any change or effect (or aggregation of changes and effects) that is or
could reasonably be expected to significantly, fundamentally and materially
adversely affect the business, assets, condition (financial or otherwise)
or results of operations of the Issuer and its Subsidiaries, taken as a
whole, or (b) if the Market Price of (i) the Market Price of the Issuer's
Common Stock shall be below $4.25 on the date of the Second Closing, or
(ii) the five day trailing average of the Issuer's Common stock shall be
below $4.25 at any time after the date of the First Closing and prior to
the date of the Second Closing.
"Material Adverse Effect" means any change or effect (or
aggregation of changes and effects) that is or could reasonably be expected
to be materially adverse to the business, assets, condition (financial or
otherwise) or results of operations of the Issuer and its Subsidiaries,
taken as a whole.
"Owned Property" has the meaning set forth in Section 3.12.
"Person" means an individual or a corporation, partnership,
limited liability company, association, a joint stock company, trust, a
joint venture, an unincorporated organization, or any other entity or
organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Preferred Warrants" means the stock purchase warrants
(Certificate Nos. W-1 and W-2) to purchase Series B Shares issued by the
Issuer to TH Xxx and TH Xxx Parallel as of May 31, 2000.
"Real Property" has the meaning set forth in Section 3.12.
"Registration Rights Agreement" shall mean the Amended and
Restated Registration Rights Agreement to be dated as of the First Closing
Date by and among the Issuer and the Purchasers, substantially in the form
attached hereto as Exhibit D.
"SEC Documents" means all reports, schedules, registration
statements and other documents (including all Exhibits and Schedules
thereto) filed by the Issuer with the Commission.
"Second Closing" shall have the meaning set forth in Section 2.03.
"Securities" means the Series C Shares and the Warrants.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"Series B Shares" means the shares of Series B Convertible
Preferred Stock, par value $.004 per share, of the Issuer.
"Series C Shares" means the shares of Series C Convertible
Preferred Stock, par value $.004 per share, of the Issuer.
"Series C Warrants" means the stock purchase warrants to purchase
Series C Shares in the forms attached as Exhibit B hereto.
"Subsidiary" means, with respect to any Person any other Person of
which a majority of the capital stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Transaction Agreements" means this Agreement, the Registration
Rights Agreement and the Certificate of Designation.
"Warrants" means the Series C Warrants and the Common Warrants.
ARTICLE 2.
PURCHASE AND SALE OF SECURITIES
SECTION 2.01 Commitment to Purchase. Upon the basis of the
representations and warranties herein contained of each Purchaser, but
subject to the terms and conditions hereinafter stated, the Issuer agrees
to sell to each Purchaser, and each Purchaser, upon the basis of the
representations and warranties herein contained of the Issuer, but subject
to the terms and conditions hereinafter stated, agrees to purchase from the
Issuer at the Closings, the Series C Shares in the amount and for the
aggregate purchase price set forth opposite the name of such Purchaser on
Annex I hereto. The purchase price per Series C Share shall be $6.00. The
Series C Shares shall have the rights, terms and privileges set forth in
the Certificate of Designation, a copy of which is attached hereto as
Exhibit A.
SECTION 2.02 Issue of Series C Warrants and Cancellation of Warrants.
In addition to issuing Series C Shares, (a) at the First Closing (i) the
Issuer shall, subject to the terms and conditions of the Series C Warrants,
issue the Series C Warrants having the certificate numbers W-7, W-8, W-9
and W-10, and (ii) the Additional Warrants shall automatically be canceled
and shall be of no further force or effect, without further action by the
Company or any of the Purchasers, and (b) at the Second Closing, (i) the
Issuer shall, subject to the terms and conditions of the Series C Warrants,
issue the Series C Warrants having the certificate numbers W-11, W-12, W-13
and W-14, and (ii) the Preferred Warrants shall automatically be canceled
and shall be of no further force or effect, without further action by the
Company or any of the Purchasers.
SECTION 2.03 The Closings
(a) The first closing (the "First Closing") and the second
closing (the "Second Closing") (each a "Closing" and together, the
"Closings") of the purchase and sale of the Securities hereunder shall take
place at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, Four
Times Square, New York, New York. The First Closing shall occur immediately
following fulfillment of each of the conditions set forth in Sections 8.01,
8.02 and 8.04, or at such other time and place as the Issuer and the
Purchasers shall agree in their sole discretion. Subject to fulfillment of
the conditions set forth in Sections 8.03 and 8.04, the Second Closing
shall occur three (3) weeks following the First Closing. The date and time
of each Closing are referred to herein as the "First Closing Date" and the
"Second Closing Date" (each a "Closing Date" and together the "Closing
Dates").
(b) At the Closings, each Purchaser shall deliver to the
Issuer, by wire transfer to an account designated by the Issuer not later
than three Business Days prior to each Closing Date, an amount, in
immediately available funds, equal to the aggregate purchase price of the
Securities being purchased by such Purchaser.
(c) At each Closing, the Issuer shall deliver to each
Purchaser, against payment of the purchase price by such Purchaser to the
Issuer, certificates evidencing the Series C Shares being purchased by such
Purchaser in definitive form and registered in such names as such Purchaser
shall request not later than two Business Days prior to the Closing Date.
At the First Closing, the Issuer shall deliver to the Purchasers the Series
C Warrants to be issued to such Purchasers.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
The Issuer represents and warrants to each Purchaser that:
SECTION 3.01 Organization, Corporate Power and Licenses. The
Issuer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Utah and is qualified to do
business in every jurisdiction in which its ownership of property or
conduct of business requires it to qualify, except where the failure to be
so qualified would not have a Material Adverse Effect. The Issuer possesses
all requisite corporate power and authority and all material Licenses
necessary to own and operate its properties, to carry on its businesses as
now conducted and presently proposed to be conducted and to carry out the
transactions contemplated by this Agreement. The copies of the Issuer's and
each Subsidiary's charter documents and bylaws which have been furnished to
the Purchasers' counsel reflect all amendments made thereto at any time
prior to the date of this Agreement and are correct and complete.
SECTION 3.02 Capital Stock and Related Matters
(a) As of the First Closing (except as set forth below with
respect to the Series C Preferred as of the First Closing and the Second
Closing, and immediately thereafter, the authorized capital stock of the
Issuer shall consist of (a) 25,000,000 shares of preferred stock, of which
(i) 4,500,000 shares have been designated as Series A Cumulative
Convertible Preferred Stock (none of which shall be issued and outstanding
as of each Closing) and (ii) 10,000,000 shares shall be designated as
Series B Convertible Preferred Stock (2,806,796 of which shall be issued
and outstanding as of each Closing) and (iii) 5,000,000 shares shall be
designated as Series C Convertible Preferred Stock (833,333 of which shall
be issued and outstanding as of the First Closing and 2,000,000 of which
shall be issued and outstanding as of the Second Closing and the remainder
of which shall be reserved for issuance upon exercising the Series C
Warrants), (c) 75,000,000 shares of Common Stock, of which (i) 16,622,029
shares shall be issued and outstanding as of each Closing, (ii) 10,000,000
shares shall be reserved for issuance upon conversion of the Series B
Shares, (iii) 5,000,000 shares shall be reserved for issuance upon
conversion of the Series C Shares, (iv) 8,462,440 shares shall be reserved
for issuance upon exercise of stock options, warrants (including the Common
Warrants but excluding the securities described in clause (v) below) and
convertible securities and (v) certain of the remaining shares are reserved
for issuance upon the exercise the warrants issued to Bayview Capital
Partners L.P., the Convertible Subordinated Promissory Note issued to CEX
Holdings, Inc, and the 9% Convertible Subordinated Promissory Note issued
to J. Iver & Company. As of each Closing, neither the Issuer nor any
Subsidiary shall have outstanding any stock or securities convertible or
exchangeable for any shares of its capital stock or containing any profit
participation features, nor shall it have outstanding any rights or options
to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock or any
stock appreciation rights or phantom stock plans ("Common Stock
Equivalents"), except for the Series B Shares, the Series C Shares, the
Preferred Warrants (until the Second Closing) and the Warrants and except
as set forth on the attached Capitalization Schedule (a). Capitalization
Schedule (a) accurately sets forth the following information with respect
to all outstanding Common Stock Equivalents: the holder, the number of
shares covered, the exercise price and the expiration date. As of each
Closing, neither the Issuer nor any Subsidiary shall be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any warrants, options or other
rights to acquire its capital stock, except as set forth on the
Capitalization Schedule (a) and except pursuant to the Certificate of
Designation. As of each Closing, all of the outstanding shares of the
Issuer's capital stock shall be validly issued, fully paid and
nonassessable.
(b) Except as set forth on Capitalization Schedule (b) hereto,
there are no statutory or contractual stockholders' preemptive rights or
rights of first refusal with respect to the issuance of the Securities
hereunder or the issuance of the Common Stock upon conversion of the
Securities. Except as set forth on Capitalization Schedule (b) hereto, the
Issuer has not violated any applicable federal or state securities laws in
connection with the offer, sale or issuance of any of its capital stock.
There are no agreements between the Issuer and any of the Issuer's
stockholders with respect to the voting or transfer of the Issuer's capital
stock.
SECTION 3.03 Subsidiaries; Investments. The attached Subsidiary Schedule
correctly sets forth the name of each Subsidiary of the Issuer, the
jurisdiction of its incorporation and the Persons owning the outstanding
capital stock of such Subsidiary. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, possesses all requisite corporate or other power and
authority necessary to own its properties and to carry on its businesses as
now being conducted and as presently proposed to be conducted and is
qualified to do business in every jurisdiction in which its ownership of
property or the conduct of business requires it to qualify, except where
the failure to be so qualified would not have a Material Adverse Effect.
Except as set forth on the Subsidiary Schedule, all of the outstanding
shares of capital stock or other equity interests of each Subsidiary are
validly issued, fully paid and nonassessable or not subject to a capital
call or capital contribution requirement, as applicable, and all such
shares are owned by the Issuer or another Subsidiary free and clear of any
Lien and not subject to any option or right to purchase any such shares.
Except as set forth on the Subsidiary Schedule, neither the Issuer nor any
Subsidiary owns or holds the right to acquire any shares of stock or any
other security or interest in any other Person.
SECTION 3.04 Authorization; No Breach. The execution, delivery and
performance of the Transaction Agreements and all other agreements
contemplated hereby or thereby to which the Issuer or any of its
Subsidiaries is a party, the filing of the Certificate of Designation have
been duly and validly authorized by the Issuer. The Transaction Agreements
and all other agreements contemplated hereby to which the Issuer or any of
its Subsidiaries is a party each constitutes a valid and binding obligation
of the Issuer or such Subsidiary, as applicable, enforceable in accordance
with its terms. The issuance of the Common Stock upon conversion of the
Series C Shares will not require any further corporate action (except for
action related to any anti-dilution adjustments) on the part of the Issuer
except as required pursuant to Section 5.07 and, except as set forth in
Capitalization Schedule (b), will not be subject to any preemptive right,
right of first refusal or other similar right. The execution and delivery
by the Issuer of this Agreement and all other agreements contemplated
hereby to which the Issuer is a party, the offering, sale and issuance of
the Securities hereunder, the issuance of Common Stock upon conversion of
the Series C Shares, the filing of the Certificate of Designation, and the
fulfillment of and compliance with the respective terms hereof and thereof
by the Issuer, do not and shall not (i) conflict with or result in a breach
of the terms, conditions or provisions of, (ii) constitute a default under,
(iii) result in the creation of any Lien upon the Issuer's or any
Subsidiary's capital stock or assets pursuant to, (iv) give any third party
the right to modify, terminate or accelerate any obligation under, (v)
result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or
filing with, any court or administrative or governmental body or agency
pursuant to, the articles of incorporation or bylaws of the Issuer or any
Subsidiary, or any law, statute, rule or regulation, order, judgment or
decree to which the Issuer or any Subsidiary is subject, or any material
agreement or instrument to which the Issuer or any Subsidiary is subject,
except for such matters that would not have a Material Adverse Effect.
SECTION 3.05 Securities Law Compliance. Assuming the representations
and warranties of the Purchasers set forth in Article 4 hereof are true and
correct in all material respects, the offer and sale of the Series C Shares
and the shares of Common Stock issuable upon conversion of the Series C
Shares (the "Issuable Securities") pursuant to this Agreement will be
exempt from the registration requirements of the Securities Act. Neither
the Issuer nor any Person acting on its behalf has, in connection with the
offering of the Issuable Securities, engaged in (i) any form of general
solicitation or general advertising (as those terms are used within the
meaning of Rule 502(c) under the Securities Act), (ii) any action involving
a public offering within the meaning of Section 4(2) of the Securities Act,
or (iii) any action that would require the registration under the
Securities Act of the offering and sale of the Issuable Securities pursuant
to this Agreement. The Company has not made and will not prior to each
Closing make, directly or indirectly, any offer or sale of the Issuable
Securities or of securities of the same or similar class as the Issuable
Securities if, as a result, the offer and sale contemplated hereby could
fail to be entitled to exemption from the registration requirements of the
Securities Act. As used herein, the terms "offer" and "sale" have the
meanings specified in Section 2(3) of the Securities Act.
SECTION 3.06 Commission Documents. Upon request, the Issuer will make
available to the Purchasers true and complete copies of all SEC Documents
filed with the Commission prior to the date hereof and will furnish the
Purchasers a true and correct copy of each amendment thereto and any SEC
Documents filed by the Issuer with the Commission on or before each Closing
Date. As of their respective filing dates, the SEC Documents complied (or
will comply) in all material respects with the requirements of the
Securities Act, Exchange Act and the rules and regulations of the
Commission thereunder applicable to such SEC Documents, and as of their
respective dates none of the SEC Documents contained (or will contain) any
untrue statement of a material fact or omitted (or will omit) to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 3.07 Financial Statements. Each of the financial statements
(including, in each case, any notes and schedules thereto) contained in the
Issuer SEC Reports complied as to form in all material respects with the
applicable accounting requirements and rules and regulations of the
Commission and was prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto), and each fairly presented the consolidated financial position,
results of operations and cash flows of the Issuer and its consolidated
subsidiaries as at the respective dates thereof and for the respective
periods indicated therein in accordance with GAAP (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments and the
absence of footnotes none of which would, individually or in the aggregate,
reflect or be reasonably expected to reflect a Material Adverse Effect).
The Company has not been informed by its independent accountants that such
independent accountants will issue a qualified opinion in connection with
the audit of the financial statements of the Company for its fiscal year
2000.
SECTION 3.08 Absence of Undisclosed Liabilities. Except as set forth
on the attached Liabilities Schedule or as disclosed in the Issuer SEC
Reports, the Issuer and its Subsidiaries do not have any material
obligation or liability of a nature required to be reflected on a balance
sheet prepared in accordance with GAAP arising out of transactions entered
into at or prior to each Closing, or any action or inaction at or prior to
each Closing, or any state of facts existing or any occurrence at or prior
to each Closing other than: (i) liabilities set forth on the Latest Balance
Sheet (including any liabilities expressly disclosed in any notes thereto),
(ii) liabilities and obligations which have arisen after the date of the
Latest Balance Sheet in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit) and (iii) other liabilities and obligations
expressly disclosed in the other Schedules to this Agreement.
SECTION 3.09 No Material Adverse Change. Since April 1, 2000, except
as disclosed in the Issuer SEC Reports, there has been no change in the
financial condition, operating results, assets, operations, employee
relations or customer or supplier relations of the Issuer and its
Subsidiaries taken as a whole that could reasonably be expected to have a
Material Adverse Effect.
SECTION 3.10 Absence of Certain Developments. Except as expressly
contemplated by the Transaction Agreements or as set forth on the attached
Developments Schedule, and except as disclosed in the Issuer SEC Reports
filed prior to the date of this Agreement, since the date of the Latest
Balance Sheet, neither the Issuer nor any Subsidiary has:
(i) issued any notes, bonds or other debt securities or
any capital stock or other equity securities or any securities
convertible, exchangeable or exercisable into any capital stock or
other equity securities;
(ii) borrowed any amount in excess of $250,000 or
incurred or become subject to any material liabilities, except
current liabilities incurred in the ordinary course of business and
liabilities under contracts entered into in the ordinary course of
business;
(iii) discharged or satisfied any material Lien or paid
any material obligation or liability, other than current liabilities
paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash
or other property to its stockholders with respect to its capital
stock or other equity securities or purchased or redeemed any shares
of its capital stock or other equity securities (including, without
limitation, any warrants, options or other rights to acquire its
capital stock or other equity securities;
(v) mortgaged or pledged any of its properties or assets
or subjected them to any material Lien, except Liens for current
property taxes not yet due and payable;
(vi) sold, assigned or transferred any of its tangible
assets in excess of $50,000 individually or $250,000 in the aggregate
or any interest in any Subsidiary, except in the ordinary course of
business, or canceled any material debts or claims;
(vii) sold, assigned, transferred or abandoned any
material patents or patent applications, trademarks, service marks,
trade names, corporate names, copyrights or copyright registrations,
trade secrets or other Intellectual Property Rights, or disclosed any
material proprietary confidential information to any Person;
(viii) suffered any material extraordinary losses or
waived any rights of material value, whether or not in the ordinary
course of business or consistent with past practice;
(ix) made any Investment in or taken steps to incorporate
any Subsidiary; or
(x) entered into any other material transaction, other
than in the ordinary course of business.
SECTION 3.11 Assets. Except as disclosed in the Issuer SEC Reports
filed prior to the date of this Agreement or as set forth on the attached
Assets Schedule, the Issuer and each Subsidiary have good and marketable
title to, a valid leasehold interest in, or has the right or use, the
material assets (other than Real Property, which is addressed in Section
3.10) used by them, or shown on the Latest Balance Sheet or acquired
thereafter, free and clear of all Liens, except for (i) assets disposed of
in the ordinary course of business since the date of the Latest Balance
Sheet, (ii) Liens disclosed on the Latest Balance Sheet, (iii) Liens for
Taxes not yet due and payable, and (iv) covenants, conditions and
restrictions of record and minor title defects none of which individually
or collectively could reasonably be expected to interfere with Issuer's
business as presently conducted or planned to be conducted ("Permitted
Liens"). The Issuer and each Subsidiary owns, or has a valid leasehold
interest in, or has the right to use, all material tangible assets
necessary for the conduct of their respective businesses as presently
conducted and as presently proposed to be conducted.
SECTION 3.12 Real Property.
(a) The attached Real Property Schedule (a) sets forth the
address and description of each parcel of real property owned by the Issuer
or any of its Subsidiaries (the "Owned Property"). The Issuer or its
applicable Subsidiary has good and marketable fee simple title in and to
each parcel of the Owned Property with a fair market value in excess of
$250,000, subject to no liens, encroachments, encumbrances, claims, leases,
rights of possession or other defects in title (collectively, "Encumbrance"
), except (i) as disclosed on the Latest Balance Sheet, (ii) Liens for
Taxes not yet due and payable or as disclosed in the Issuer SEC Reports,
(iii) covenants, conditions and restrictions of record and minor title
defects none of which individually or collectively could reasonably be
expected to interfere with Issuer's business as presently conducted or as
planned to be conducted and (iv) for Permitted Liens or as described on
Real Property Schedule (a).
(b) The attached Real Property Schedule (b) sets forth a list
of all leases, subleases and other occupancy agreements providing for
annual payments in excess of $50,000, including all amendments, extensions
and other modifications thereto (the "Leases") for real property (the
"Leased Property"; and collectively with the Owned Property, the "Real
Property") to which the Issuer or any of its Subsidiaries is a party. To
the best of their respective knowledge, the Issuer or its applicable
Subsidiary has a good and valid leasehold interest in and to all of the
Leased Property, subject to no Encumbrances except for Permitted Liens or
as described on such Schedule. Each Lease is in full force and effect and
is enforceable in accordance with its terms in all material respects. To
the knowledge of the Issuer, there exists no default or condition which
with the giving of notice, the passage of time or both could become a
default under any Lease. Except as described on the Real Property Schedule
(b), no consent, waiver, approval or authorization is required from the
landlord under any Lease as a result of the execution of this Agreement or
the consummation of the transactions contemplated hereby.
(c) The Real Property constitutes all of the real property
owned, leased, occupied or otherwise utilized in connection with the
business of the Issuer and its Subsidiaries which is material to the
conduct of the business of the Issuer and its Subsidiaries. To the
knowledge of the Issuer, other than the Issuer, its Subsidiaries and the
landlords under the Leases, there are no parties in possession or parties
having any current or future right to occupy any of the Real Property which
are material to the conduct of the business of the Issuer and its
Subsidiaries. The Real Property and all plants, buildings and improvements
located thereon conform in all material respects to all applicable
building, zoning and other laws, ordinances, rules and regulations. All
permits, licenses and other approvals necessary to the current occupancy
and use of the Real Property which are material to the conduct of the
business of the Issuer and its Subsidiaries have been obtained, are in full
force and effect and have not been violated in any material respect. To the
knowledge of the Issuer or any of its Subsidiaries, there exists no
violation of any covenant, condition, restriction, easement, agreement or
order affecting any portion of the Real Property which is material to the
conduct of the business of the Issuer and its Subsidiaries. There is no
pending or, to the knowledge of the Issuer, any threatened condemnation
proceeding affecting any portion of the Real Property which is material to
the conduct of the business of the Issuer and its Subsidiaries. There are
no outstanding options, rights of first offer or rights of first refusal to
purchase the Owned Property or any portion thereof or interest therein.
SECTION 3.13 Tax Matters.
(a) Except as set forth on the attached Taxes Schedule: the
Issuer, each Subsidiary and each Affiliated Group have filed all Tax
Returns which they are required to have filed under Applicable Law, except
where the failure to do so would not have a Material Adverse Effect; all
such Tax Returns are complete and correct in all material respects and have
been prepared in compliance with Applicable Law; the Issuer, each
Subsidiary and each Affiliated Group in all material respects have paid all
Taxes due and owing by them (whether or not such Taxes are required to be
shown on a Tax Return) in all material respects and have withheld and paid
over to the appropriate taxing authority all Taxes which they are required
to withhold from amounts paid or owing to any employee, stockholder,
creditor or other third party; neither the Issuer, any Subsidiary nor any
Affiliated Group have outstanding any waiver of any statute of limitations
with respect to any material Taxes or agreement to extend the time with
respect to any material Tax assessment or deficiency; to the extent
required by GAAP, the accrual for Taxes on the Latest Balance Sheet would
be adequate to pay all Tax liabilities of the Issuer and its Subsidiaries
if their current tax year were treated as ending on the date of the Latest
Balance Sheet (excluding any amount recorded which is attributable solely
to timing differences between book and Tax income); since the date of the
Latest Balance Sheet, neither the Issuer nor any of its Subsidiaries have
incurred any material liability for Taxes other than in the ordinary course
of business; the federal income Tax Returns of the Issuer and its
Subsidiaries have been audited and closed for all tax years through 1998;
to the knowledge of the Issuer or its Subsidiaries, no foreign, federal,
state or local tax audits or administrative or judicial proceedings are
pending or being conducted with respect to the Issuer, any Subsidiary or
any Affiliated Group; except with respect to such audits or proceedings, to
the knowledge of the Issuer or its Subsidiaries, no information related to
Tax matters has been requested by any foreign, federal, state or local
taxing authority and no written notice indicating an intent to open an
audit or other review has been received by the Issuer from any foreign,
federal, state or local taxing authority; and there are no material
unresolved questions or claims raised by any such taxing authority
concerning the Issuer's, any Subsidiary's or any Affiliated Group Tax
liability.
(b) Except as set forth on the Taxes Schedule, neither the
Issuer nor any of its Subsidiaries has made an election under ss.341(f) of
the Internal Revenue Code of 1986, as amended. Neither the Issuer nor any
Subsidiary is liable for the Taxes of another Person that is not a
Subsidiary in a material amount under (a) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (b) as a transferee
or successor, (c) by contract or indemnity or (d) otherwise by operation of
Applicable Law. Neither the Issuer nor any Subsidiary is a party to any tax
sharing agreement except as a member of an Affiliated Group. Neither the
Issuer nor any Subsidiary has made any payments, is obligated to make
payments or is a party to an agreement that could obligate it to make any
payments that would not be deductible under IRC ss.280G.
(c) "Tax" or "Taxes" means federal, state, county, local,
foreign or other income, gross receipts, ad valorem, franchise, profits,
sales or use, transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock, license, payroll,
wage or other withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other taxes of any
kind whatsoever (including, without limitation, deficiencies, penalties,
additions to tax, and interest attributable thereto) whether disputed or
not. "Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including
any amendment thereof. "Affiliated Group" means any affiliated group as
defined in IRC ss.1504 that has filed a consolidated return for federal
income tax purposes (or any similar group under state, local or foreign
law) for a period and that includes any of the Issuer or any of its
Subsidiaries as a member.
SECTION 3.14 Contracts and Commitments.
(a) Except as expressly contemplated by this Agreement or as
disclosed in the Issuer SEC Reports filed prior to the date of this
Agreement or on the attached Contracts Schedule or the attached Employee
Benefits Schedule or the attached Real Property Schedule, neither the
Issuer nor any Subsidiary is a party to or bound by any written or oral:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(ii) contract for the employment of any officer,
individual employee or other Person on a full-time, part-time,
consulting or other basis providing annual compensation in excess of
$100,000 or contract relating to loans to officers, directors or
Affiliates;
(iii) contract under which the Issuer or Subsidiary has
advanced or loaned any other Person amounts in the aggregate
exceeding $250,000;
(iv) agreement or indenture relating to borrowed money or
other Indebtedness or the mortgaging, pledging or otherwise placing a
Lien on any material asset or material group of assets of the Issuer
and/or its Subsidiaries;
(v) guarantee of any obligation in excess of $100,000
(other than by the Issuer of a wholly-owned Subsidiary's debts or a
guarantee by a Subsidiary of the Issuer's debts or of another
wholly-owned Subsidiary's debts) other than in connection with the
Credit Agreement;
(vi) lease or agreement under which the Issuer or any
Subsidiary is lessee of or holds or operates any personal property
owned by any other party, except for any lease of personal property
under which the aggregate annual rental payments do not exceed
$50,000;
(vii) lease or agreement under which the Issuer or any
Subsidiary is lessor of or permits any third party to hold or operate
any property, real or personal, owned or controlled by the Issuer or
any Subsidiary, respectively;
(viii) contract or group of related contracts with the
same party or group of affiliated parties the performance of which
involves consideration in excess of $250,000;
(ix) assignment, license, indemnification or agreement
with respect to any material intangible property (including, without
limitation, any Intellectual Property Rights);
(x) express warranty agreement with respect to its
services rendered or its products sold or leased;
(xi) agreement under which it has granted any Person any
registration rights (including, without limitation, demand and
piggyback registration rights);
(xii) sales, distribution or franchise agreement the
performance of which involves consideration in excess of $250,000;
(xiii) agreement, the performance of which involves
consideration in excess of $250,000, with a term of more than six
months which is not terminable by the Issuer or any Subsidiary upon
less than 30 days notice without penalty;
(xiv) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world;
(xv) any joint venture agreement or other agreement
pursuant to which the Issuer or any Subsidiary has made, or any
agreement governing the Issuer's or any Subsidiary's investment in
any other person; or
(xvi) any other agreement which is material to its
operations and business prospects or involves a consideration in
excess of $250,000 annually.
(b) All of the contracts, agreements and instruments set forth
or required to be set forth on the Contracts Schedule are valid, binding
and enforceable in accordance with their respective terms. Except as set
forth on the Contracts Schedule, the Litigation Schedule, the Liabilities
Schedule or the Real Property Schedule, the Issuer and each Subsidiary has
performed all material obligations required to be performed by it under the
contracts, agreements and instruments listed on the Contracts Schedule or
required to be set forth and are not in default under or in breach of nor
in receipt of any claim of default or breach under any material contract,
agreement or instrument to which the Issuer or any Subsidiary is subject
and no event has occurred which with the passage of time or the giving of
notice or both would result in a default, breach or event of noncompliance
by the Issuer or any Subsidiary under any material contract, agreement or
instrument to which the Issuer or any Subsidiary is subject; the Issuer has
no present intention of not fully performing all such obligations; the
Issuer has no knowledge of any breach or anticipated breach by the other
parties to any material contract, agreement, instrument or commitment to
which it is a party; and neither the Issuer nor any Subsidiary is a party
to any contract or commitment or group of contracts or commitments the
performance of which could have a Material Adverse Effect.
(c) Upon request, the Issuer will make available to the
Purchasers a true and correct copy of each of the written instruments,
plans, contracts and agreements and an accurate description of each of the
oral arrangements, contracts and agreements which are listed on, referred
to or required to be listed on or referred to on the Contracts Schedule or
the Employee Benefits Schedule, together with all amendments, waivers or
other changes thereto.
SECTION 3.15 Intellectual Property Rights.
(a) The attached Intellectual Property Schedule contains a
complete and accurate list of all (a) patented or registered Intellectual
Property Rights owned or used by the Issuer or any Subsidiary and material
to the business of the Issuer and its Subsidiaries, (b) pending patent
applications and applications for registration of other Intellectual
Property Rights filed by the Issuer or any Subsidiary material to the
business of the Issuer and its Subsidiaries, (c) material unregistered
trade names and corporate names owned or used by the Issuer or any
Subsidiary and (d) material unregistered trademarks, service marks,
copyrights, mask works and computer software (other than commercially
available computer software) owned or used by the Issuer or any Subsidiary
and material to the business of the Issuer and its Subsidiaries. The
Intellectual Property Schedule also contains a complete and accurate list
of all material licenses and other material rights granted by the Issuer or
any Subsidiary to any third party with respect to any Intellectual Property
Rights and all material licenses and other material rights granted by any
third party to the Issuer or any Subsidiary with respect to any
Intellectual Property Rights, in each case identifying the subject
Intellectual Property Rights. The Issuer or one of its Subsidiaries is the
beneficial and record owner of all right, title and interest to, or has the
right to use pursuant to a valid and enforceable license, all Intellectual
Property Rights necessary for the operation of the businesses of the Issuer
and its Subsidiaries as presently conducted and as presently proposed to be
conducted, free and clear of all Liens, except where the failure to have
such right would not have a Material Adverse Effect. The loss or expiration
of any Intellectual Property Right or related group of Intellectual
Property Rights owned or used by the Issuer or any Subsidiary would not
reasonably be expected to have a Material Adverse Effect and no such loss
or expiration is, to the best of the Issuer's knowledge, threatened,
pending or reasonably foreseeable. The Issuer and its Subsidiaries have
taken all necessary actions to maintain and protect the Intellectual
Property Rights which they own, except where the failure to have taken such
actions would not have a Material Adverse Effect. To the best of the
Issuer's knowledge, the owners of any Intellectual Property Rights licensed
to the Issuer or any Subsidiary have taken all necessary actions to
maintain and protect the Intellectual Property Rights which are subject to
such licenses.
(b) Except as set forth on the Intellectual Property Schedule
or the Litigation Schedule, (i) to the best of the Issuer's knowledge,
there have been no claims made against the Issuer or any Subsidiary within
the past five (5) years asserting the invalidity, misuse or
unenforceability of any of the Issuer's or its subsidiaries' Intellectual
Property Rights or alleging infringement, misappropriation or other
conflict of any third Person's Intellectual Property Rights by the Issuer
or any of its Subsidiaries (including, without limitation, any demand or
request that the Issuer or any Subsidiary license any rights from a third
party), and, to the best of the Issuer's knowledge, there are no grounds
for the same, (ii) neither the Issuer nor any Subsidiary has received any
notices of, and is not aware of any facts which indicate a likelihood of,
any infringement or misappropriation by any third party with respect to the
Issuer's or its Subsidiaries' Intellectual Property Rights (including,
without limitation, any demand or request that the Issuer or any Subsidiary
license any rights from a third party) and (iii) to the best of the
Issuer's knowledge, the conduct of the Issuer's and each Subsidiary's
business has not infringed, misappropriated or conflicted with and does not
infringe, misappropriate or conflict with any Intellectual Property Rights
of other Persons, nor would any future conduct as presently contemplated
infringe, misappropriate or conflict with any Intellectual Property Rights
of other Persons. All Intellectual Property Rights owned or used by the
Issuer or any Subsidiary immediately prior to each Closing will be owned or
available for use by the Issuer or any such Subsidiary on identical terms
and conditions immediately subsequent to such Closing.
SECTION 3.16 Litigation, etc. Except as disclosed in the Issuer SEC
Reports filed prior to the date of this Agreement or on the attached
Litigation Schedule, there are no actions, suits, proceedings, orders,
investigations or claims pending or, to the best of the Issuer's knowledge,
threatened against or, to the Issuer's knowledge, affecting the Issuer or
any Subsidiary that individually or in the aggregate have a Material
Adverse Effect (or to the best of the Issuer's knowledge, pending or
threatened against or affecting any of the officers, directors or employees
of the Issuer and its Subsidiaries with respect to their respective
businesses or proposed business activities), or pending or threatened by
the Issuer or any Subsidiary against any third party, at law or in equity,
or before or by any governmental department, commission, board, bureau,
agency or instrumentality (including, without limitation, any actions,
suit, proceedings or investigations with respect to the transactions
contemplated by this Agreement); nor has there been any such actions,
suits, proceedings, orders, investigations or claims pending against or
affecting the Issuer or any Subsidiary during the past three years that
individually or in the aggregate have a Material Adverse Effect; and, to
the best of the Issuer's knowledge, there is no reasonable basis for any of
the foregoing. Neither the Issuer nor any Subsidiary is subject to any
judgment, order or decree of any court or Governmental Authority which
could have a Material Adverse Effect.
SECTION 3.17 Brokerage. Except as set forth on the attached Brokerage
Schedule, for which Issuer shall be solely responsible, there are no claims
for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on
any arrangement or agreement binding upon the Issuer or any Subsidiary. The
Issuer shall pay, and hold each Purchaser harmless against, any liability,
loss or expense (including, without limitation, reasonable attorneys' fees
and out-of-pocket expenses) arising in connection with any such claim.
SECTION 3.18 Governmental Consent, etc. No permit, license, consent,
approval or authorization of, or declaration to or filing with, any
governmental authority or any other Person is required in connection with
the execution, delivery and performance by the Issuer of this Agreement or
the other agreements contemplated hereby, or the consummation by the Issuer
of any other transactions contemplated hereby or thereby, except as set
forth on the attached Consents Schedule.
SECTION 3.19 Insurance. Neither the Issuer nor any Subsidiary is in
default with respect to its obligations under any insurance policy
maintained by it, and since January 1, 1996 neither the Issuer nor any
Subsidiary has been denied insurance coverage. The insurance coverage of
the Issuer and its Subsidiaries is consistent with the best insurance
practices for corporations of similar size engaged in similar lines of
business, is adequate and sufficient to cover all material liabilities
encountered in the ordinary course of business of the Issuer and all
material liabilities reasonably foreseen or projected by the Issuer, and
includes, without limitation, insurance in respect of pollution and
environmental liability, and personal injury liability. All of the insurers
through which the Issuer has sought insurance coverage in the past 10 years
have been and remain solvent. Except as set forth on Schedule 3.19, and
excluding deductibles under the Issuer's current insurance policies,
neither the Issuer nor its Subsidiaries have any self-insurance or
co-insurance programs.
SECTION 3.20 Employees. The Issuer is not aware that any executive or
key employee of the Issuer or any Subsidiary or any group of employees of
the Issuer or any Subsidiary has any plans to terminate employment with the
Issuer or any Subsidiary. The Issuer and each Subsidiary have complied in
all material respects with all laws relating to the employment of labor
(including, without limitation, provisions thereof relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes), and the Issuer is not aware that it or any
Subsidiary has any material labor relations problems or concerns
(including, without limitation, any union organization activities,
threatened or actual strikes or work stoppages or material grievances).
Except as disclosed on the Contracts Schedule, neither the Issuer, its
Subsidiaries nor, to the best of the Issuer's knowledge, any of their
employees is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreements relating to, affecting or in
conflict with the present or proposed business activities of the Issuer and
its Subsidiaries, except for agreements between the Issuer and its present
and former employees.
SECTION 3.21 ERISA.
(a) Schedule 3.21 sets forth an accurate and complete list of
each "employee benefit plan" (as such term is defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
that is material to the Issuer and each other employee benefit plan,
program or arrangement that is material to the Issuer maintained,
sponsored, or contributed to by the Issuer at any time in the last three
years, or with respect to which the Issuer has any material actual or
potential liability. Each such item listed on such attached schedule is
referred to herein as a "Benefit Plan" and collectively as the "Benefit
Plans".
(b) All material contributions to and payments from any Benefit
Plan that may have been required to be made in accordance with the terms of
the Benefit Plan, any applicable collective bargaining agreement, and
Section 302 of ERISA or Section 412 of the Code have been timely made in
all material respects. There has been no application for or waiver of the
minimum funding standards imposed by Section 412 of the Code with respect
to any Benefit Plan, and the Issuer is not aware of any facts or
circumstances that would materially change the funded status of any such
Benefit Plan at any time in the last three years. To the knowledge of the
Issuer, no asset of the Issuer is or is reasonably likely to become subject
to any lien under ERISA or the Code, and the Issuer has not incurred any
material liability under Title IV of ERISA (other than for contributions
not yet due) or to the Pension Benefit Guaranty Corporation (other than for
payment of premiums not yet due).
(c) Except as set forth on Schedule 3.21, each Benefit Plan
that is intended to be qualified under Section 401(a) of the Code has
received a determination from the IRS that such Benefit Plan is so
qualified, and, to the best knowledge of the Issuer, nothing has occurred
since the date of such determination that could adversely affect the
qualified status of such Benefit Plan.
(d) Each of the Benefit Plans and all related trusts, insurance
contracts and funds have been maintained, funded and administered in
compliance in all material respects with their terms and the terms of any
applicable collective bargaining agreements and in compliance in all
material respects with the applicable provisions of ERISA, the Code, and
any other applicable laws. To the knowledge of the Issuer, there are no
pending or threatened actions, suits, investigations or claims with respect
to any Benefit Plan (other than routine claims for benefits) that could
reasonably be expected to have a Material Adverse Effect. With respect to
each Benefit Plan, all required material payments, premiums, contributions,
distributions, or reimbursements for all periods ending prior to or as of
each Closing Date have been made or properly accrued in all material
respects.
(e) To the knowledge of the Issuer, neither the Issuer nor any
other "disqualified person" (within the meaning of Section 4975 of the
Code) or any "party in interest" (within the meaning of Section 3(14) of
ERISA) has engaged in any "prohibited transaction" (within the meaning of
Section 4975 of the Code or Section 406 of ERISA) with respect to any of
the Benefit Plans which could subject any of the Benefit Plans, the Issuer,
or any officer, director or employee of any of the foregoing to a penalty
or tax under Section 502 of ERISA or Section 4975 of the Code that could
reasonably be expected to have a Material Adverse Effect.
(f) Except as set forth otherwise on the Contracts Schedule,
each Benefit Plan which is subject to the health care continuation
requirements of Part 6 of Subtitle B of Title I of ERISA or Section 4980B
of the Code ("COBRA") has been administered in compliance in all material
respects with such requirements. No Benefit Plan provides medical or life
or other welfare benefits to any current or future retired or terminated
employee (or any dependent thereof) of the Issuer other than as required
pursuant to COBRA or applicable State law.
(g) To the knowledge of the Issuer, no Benefit Plan subject to
Title IV of ERISA which is a "multiemployer plan" (as such term is defined
in Section 3(37) of ERISA) (a "Multiemployer Plan") has been terminated; to
the knowledge of the Issuer, no proceeding has been initiated to terminate
any such Multiemployer Plan and there has been no "reportable event" within
the meaning of Section 4043(c) of ERISA) with respect to any such
Multiemployer Plan; to the knowledge of the Issuer, no Multiemployer Plan
is in reorganization as described in Section 4241 of ERISA and, to the
knowledge of the Issuer, no Multiemployer Plan is insolvent as described in
Section 4245 of ERISA. To the knowledge of the Issuer, the Issuer has not
incurred any liability on account of a "partial withdrawal" or a "complete
withdrawal" (within the meaning of Sections 4205 and 4203, respectively, of
ERISA) from any Multiemployer Plan, no such liability has been asserted,
and, to the knowledge of the Issuer, there are no events or circumstances
which could result in any such partial or complete withdrawal. The Issuer
is not bound by any contract or agreement nor does it have any obligation
or liability described in Section 4204 of ERISA.
(h) With respect to each Benefit Plan, upon request, the Issuer
will provide the Purchaser with true, complete and correct copies of (to
the extent applicable): (i) all documents pursuant to which the Benefit
Plan is maintained, funded and administered (including the plan and trust
documents, any amendments thereto, the summary plan descriptions, and any
insurance contracts or service provider agreements); (ii) the three most
recent annual reports (Form 5500 series) filed with the IRS (with
applicable attachments); (iii) the most recent actuarial valuation report;
and (iv) the most recent determination letter received from the IRS.
(i) The Issuer has no liability with respect to any "employee
benefit plan" (as defined in Section 3(3) of ERISA) solely by reason of
being treated as a single employer under Section 414 of the Code with any
trade, business or entity other than the Issuer.
SECTION 3.22 Compliance with Laws. Each of the Issuer and each
Subsidiary has operated its business and conducted its activities in
compliance in all material respects with all laws, regulations and
governmental requirements, which the failure to be in compliance with would
reasonably be expected to have a Material Adverse Effect and neither the
Issuer nor any Subsidiary has violated any law or any governmental
regulation or requirement which violation has had or would reasonably be
expected to have a Material Adverse Effect, and neither the Issuer nor any
Subsidiary has received notice of any such violation.
SECTION 3.23 Environmental and Safety Matters.
(a) For purposes of this Agreement, the term "Environmental and
Safety Requirements" shall mean all federal, state and local statutes,
regulations, ordinances and other provisions having the force or effect of
law, all judicial and administrative orders and determinations, all
contractual obligations and all common law, in each case concerning public
health and safety, worker health and safety and pollution or protection of
the environment (including, without limitation, all those relating to the
presence, use, production, generation, handling, transport, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
Release, threatened Release, control or cleanup of any hazardous or
otherwise regulated materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or
radiation); "Release" shall have the meaning set forth in CERCLA (as
defined below); and "Environmental Lien" shall mean any Lien, whether
recorded or unrecorded, in favor of any governmental entity, relating to
any liability of the Issuer or any Subsidiary arising under any
Environmental and Safety Requirements.
(b) Except as set forth on the attached Environmental Schedule:
(i) The Issuer and its Subsidiaries have complied in all
material respects with and are currently in compliance in all
material respects with all Environmental and Safety Requirements,
which the failure to be in compliance with would have a Material
Adverse Effect, and since January 1, 1997, neither the Issuer nor its
Subsidiaries have received any oral or written notice, report or
information regarding any liabilities (whether accrued, absolute,
unliquidated or otherwise) or any corrective, investigatory or
remedial obligations arising under Environmental and Safety
Requirements, which liabilities or obligations would have a Material
Adverse Effect and which relate to the Issuer or its Subsidiaries or
any of their properties or facilities.
(ii) Without limiting the generality of the foregoing,
the Issuer and its Subsidiaries have obtained and complied in all
material respects with and are currently in compliance in all
material respects with, all Environmental Permits. A list of all such
permits, licenses and other authorizations which are material to the
Issuer and its Subsidiaries is set forth on the attached
Environmental Schedule ("Environmental Permits").
(iii) None of the following exists at any property or
facility owned, occupied or operated by the Issuer or any of its
Subsidiaries:
(1) underground storage tanks or surface impoundments;
(2) asbestos-containing materials in any form or
condition; or
(3) materials or equipment containing polychlorinated
biphenyls;
the existence of which could reasonably be expected to
have a Material Adverse Effect.
(iv) To the knowledge of the Issuer, neither the Issuer
nor any of its Subsidiaries has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or
Released any hazardous substance or owned, occupied or operated any
facility or property, so as to give rise to liabilities of the Issuer
or its Subsidiaries for response costs, natural resource damages or
attorneys fees pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended, or any
other Environmental and Safety Requirements.
(v) Without limiting the generality of the foregoing, to
the knowledge of the Issuer, no facts, events or conditions relating
to the past or present properties, facilities or operations of the
Issuer or its Subsidiaries shall prevent, hinder or limit continued
compliance with Environmental and Safety Requirements, give rise to
any corrective, investigatory or remedial obligations pursuant to
Environmental and Safety Requirements or give rise to any other
liabilities pursuant to Environmental and Safety Requirements
(including, without limitation, those liabilities relating to onsite
or offsite Releases or threatened Releases of hazardous materials,
substances or wastes, personal injury, property damage or natural
resources) damage that could reasonably be expected to have a
Material Adverse Effect.
(vi) Neither the Issuer nor any of its Subsidiaries has,
either expressly or by operation of law, assumed or undertaken any
material liability or corrective, investigatory or remedial
obligation of any other Person relating to any Environmental and
Safety Requirements that could reasonably be expected to have a
Material Adverse Effect.
(vii) No Environmental Lien has attached to any property
owned, leased or operated by the Issuer or any of its Subsidiaries
that could reasonably be expected to have a Material Adverse Effect.
SECTION 3.24 Affiliated Transactions. Except as set forth on the
attached Affiliated Transactions Schedule or in the Issuer's SEC Reports,
no officer, director, significant stockholder or Affiliate of the Issuer or
any Subsidiary, to the knowledge of the Issuer, or any member of such
individual's immediate family or any entity in which any such Person or
individual owns any beneficial interest (other than less than 5% of the
outstanding securities of a publicly traded company), is a party to any
agreement, contract, commitment or transaction with the Issuer or any
Subsidiary or has any material interest in any material property used by
the Issuer or any Subsidiary.
SECTION 3.25 Disclosure. Neither this Agreement nor any of the
exhibits, schedules, attachments, written statements, documents,
certificates or other items prepared or supplied to any Purchaser by or on
behalf of the Issuer with respect to the transactions contemplated hereby
contain any untrue statement of a material fact or omit a material fact
necessary to make each statement contained herein or therein not
misleading; provided that with respect to the financial projections
furnished to the Purchasers by the Issuer, the Issuer represents and
warrants only that such projections were based upon assumptions reasonably
believed by the Issuer to be reasonable and fair as of the date the
projections were prepared in the context of the Issuer's history and
current and reasonably foreseeable business conditions. There is no fact
which the Issuer has not disclosed to the Purchasers in writing and of
which any of its officers, directors or executive employees is aware (other
than general economic conditions) and which has had or would reasonably be
expected to have a Material Adverse Effect.
SECTION 3.26 Customers and Suppliers.
(a) The attached Customer/Supplier Schedule lists the ten (10)
largest customers and suppliers of the Issuer (on a consolidated basis) for
each of the two most recent fiscal years and sets forth opposite the name
of each such customer or supplier the amount of revenues to such customer
in the case of any such customer or the amount of expenditures to such
supplier in the case of any such supplier. The Customer/Supplier Schedule
also lists any additional current customers and suppliers which the Issuer
anticipates shall be among the ten (10) largest customers or suppliers for
the current fiscal year.
(b) Since the date of the Latest Balance Sheet, no Supplier set
forth on the Customer/Supplier Schedule has stopped or materially decreased
the rate of or indicated that it shall stop, or materially decrease the
rate of, supplying materials, products or services to the Issuer or any
Subsidiary, and no customer listed on the Customer/Supplier Schedule has
stopped or materially decreased or, to the Issuer's knowledge, indicated
that it shall stop, or materially decrease the rate of, buying materials,
products or services from the Issuer or any Subsidiary.
SECTION 3.27 Reports with the Securities and Exchange Commission.
Since January 1, 1997, the Issuer has filed with the Commission all forms,
statements, reports and documents (including all exhibits, amendments and
supplements thereto) required to be filed by it under the Securities Act
and the Exchange Act, all of which complied when filed in all material
respects with all applicable requirements of the appropriate act and the
rules and regulations thereunder. Upon request, the Issuer will furnish the
Purchasers with complete and accurate copies of its annual report on Form
10-K for its three most recent fiscal years, all other reports or documents
required to be filed by the Issuer pursuant to Section 13(a) or 15(d) of
the Exchange Act since the filing of the most recent annual report on Form
10-K and its most recent annual report to its stockholders (collectively,
the "Issuer SEC Reports"). Such reports and filings did not as of the date
of filing contain any material false statements or any misstatement of any
material fact and do not omit to state any fact necessary to make the
statements set forth therein not misleading. The Issuer has made all
filings with the Commission which it is required to make, and the Issuer
has not received any request from the Commission to file any amendment or
supplement to any of the reports described in this paragraph.
SECTION 3.28 Regulatory Matters.
(a) Except as disclosed in the Litigation Schedule, the Issuer
and its Subsidiaries have all requisite power and authority and hold or
have applied for all Licenses required under any Applicable Law to own and
operate their properties and to carry on the business of the Issuer and its
Subsidiaries as such business is conducted on the date hereof and as
proposed to be conducted. Each material License issued to the Issuer or its
Subsidiaries is validly issued and is in full force and effect. The Issuer
does not know of any reason why any Governmental Authority might revoke any
License. The Issuer does not know of any party who has a current filing
pending in specific opposition to or expressed an interest in opposing the
grant of the material Licenses held or applied for by the Issuer or its
Subsidiaries, or of any reason why any Governmental Authority might not
grant any of the material Licenses or that have been applied for.
(b) Except as disclosed on the Litigation Schedule, none of the
Issuer or its Subsidiaries is a party to nor, to the best knowledge of the
Issuer and each Subsidiary, is there threatened any investigation, notice
of apparent liability, violation, show cause order, forfeiture or other
notice, order or complaint issued by or before any Governmental Authority,
or of any other proceeding (other than proceedings of general
applicability) that could in any manner threaten or adversely affect the
validity, future grant or continued effectiveness of the material Licenses
of the Issuer and its Subsidiaries. None of the Issuer and its Subsidiaries
has any reason to believe that each of the material Licenses will not be
renewed in the ordinary course.
SECTION 3.29 No Vote Required. Subject to a letter to the Issuer by
Th Xxx and TH Xxx Parallel dated as of the date hereof regarding exercise
of the Preferred Warrants prior to the Second Closing, no approval of the
holders of the Issuer's capital stock is required by Applicable Law, the
rules of the NASDAQ National Market or otherwise, with respect to the
filing of the Certificate of Designation, the issuance of the Series C
Shares pursuant to and as contemplated by this Agreement or the issuance of
Common Stock upon conversion of the Series C Shares.
SECTION 3.30 Knowledge. As used in this Section 3, the terms
"knowledge" or "aware" shall mean and include the actual knowledge or
awareness, following due inquiry, of the executive officers of the Issuer.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the
Issuer as of the date hereof and as of each Closing Date that:
(a) Such Purchaser understands that the offering and sale of
the Securities is intended to be exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act and any
applicable state securities or blue sky laws.
(b) The Securities to be acquired by such Purchaser pursuant to
this Agreement are being acquired for its own account and without a view to
the resale or distribution of such Securities or any interest therein other
than in a transaction exempt from registration under the Securities Act.
(c) Such Purchaser is an "Accredited Investor" as such term is
defined in Regulation D under the Securities Act.
(d) Such Purchaser has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits
and risks of its investment in the Securities and such Purchaser is capable
of bearing the economic risks of such investment, including a complete loss
of its investment in the Securities. Such Purchaser understands that
Purchaser's investment in the Securities involves a high degree of risk.
(e) Such Purchaser has been furnished with and carefully read a
copy of the Issuer SEC Reports and this Agreement (including the Schedules
hereto) and has been given the opportunity to ask questions of, and receive
answers from, the Issuer concerning the terms and conditions of the
Securities and other related matters. To such Purchaser's knowledge, the
Issuer has made available to such Purchaser or its agents all documents and
information relating to an investment in the Securities requested by or on
behalf of such Purchaser.
(f) Such Purchaser understands that the Securities shall bear a
restrictive legend in a form agreed between the parties.
ARTICLE 5.
COVENANTS OF THE ISSUER
The Issuer agrees that:
SECTION 5.01 Access to Information.
(a) From the date hereof until the First Closing Date, the
Issuer will (i) furnish to each Purchaser and its authorized
representatives such financial and operating data and other information
relating to the Issuer and its Subsidiaries as such Persons may reasonably
request and (ii) instruct its officers, employees, counsel, independent
accountants and financial advisors to cooperate with such Purchaser and its
authorized representatives in its investigation of the Issuer and its
Subsidiaries. Any investigation pursuant to this Section shall be conducted
in a manner that does not interfere unreasonably with the conduct of the
business of the Issuer and its Subsidiaries.
(b) After the First Closing Date, for so long as the
Purchasers, in the aggregate, own 20% of the Series C Shares issued to the
Purchasers at the Closings, the Purchasers shall be entitled to (i)
receive, within 90 days of the issuer's financial year end, audited annual
financial statements, and receive within 45 and 30 days of the relevant
respective periods, unaudited quarterly and monthly financial statements,
(ii) receive all information made available to shareholders of the Issuer
or members of the Board of Directors, in each case, at the same time as
such materials are distributed to the shareholders or directors, as the
case may be, (iii) designate up to two persons who shall be entitled to
observation rights at all meetings of the Issuer's Board of Directors,
(iii) meet on a quarterly basis with members of senior management, (v)
receive copies of management reports, and (vi) have reasonable access to
the Issuer's outside auditors.
(c) Each Purchaser agrees that any nonpublic information
furnished to such Purchaser pursuant to this Section 5.01 shall be deemed
confidential information and shall not be used by it as the basis for any
market transactions in the securities of the Issuer unless and until such
information is made generally available to the public.
SECTION 5.02 Certificate of Designation. Prior to the First
Closing, subject to the terms of this Agreement, the Issuer shall cause to
be filed the Certificate of Designation as required pursuant to the laws of
the State of Utah.
SECTION 5.03 Restrictions Pending the Closings. After the date
hereof and prior to the Closing Dates, except as expressly provided for in
this Agreement or as consented to in writing by the Purchasers, the Issuer
shall not:
(i) amend its Articles of Incorporation or bylaws;
(ii) split, combine or reclassify any shares of its
capital stock without appropriately adjusting the conversion price
and/or ratio and exercise price applicable to the Series C Shares and
the Warrants, respectively, prior to their issuance at the Closings;
(iii) declare or pay any dividend or distribution
(whether in cash, stock or property) in respect of its Common Stock;
(iv) take any action, or knowingly omit to take any
action, that could reasonably be expected to result in (A) any of the
representations and warranties of the Issuer set forth in Article 3
becoming untrue or (B) any of the conditions to the obligations of
the Purchasers set forth in Section 8.01 or 8.02 not being satisfied;
or
(v) enter into any agreement or commitment to do any of
the foregoing.
SECTION 5.04 Reservation of Shares. For so long as any of the
Securities are outstanding, the Issuer shall keep reserved for issuance a
sufficient number of shares of Common Stock to satisfy its conversion
obligations under the Certificate of Designation and its issuance
obligations under the Warrants.
SECTION 5.05 Tax Consistency. The Issuer will not treat the Series C
Shares as "preferred stock" for Tax purposes, unless otherwise required
pursuant to a final determination or a change in Applicable Law.
SECTION 5.06 Use of Proceeds. The Issuer shall use the proceeds
received upon the sale of the Series B Shares at the Closings solely for
the purposes set forth in Schedule 5.06 attached hereto.
ARTICLE 6.
COVENANTS OF THE PURCHASERS
SECTION 6.01 Confidentiality. Each Purchaser will hold, and will use
its reasonable best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors, financing sources, financial
institutions, and agents (the "Representatives") to hold, in confidence,
unless required to disclose by judicial or administrative process or by
other requirements of law, regulation or national stock exchange, all
confidential documents and information concerning the Issuer or any of its
Affiliates that are furnished to such Purchaser, except to the extent that
such information can be shown to have been (i) previously known on a
nonconfidential basis by such Purchaser or such Representatives, (ii) in
the public domain through no fault of such Purchaser or its Representatives
(with respect to information received in their capacity as such) or (iii)
later acquired by such Purchaser or such Representatives from sources other
than the Issuer or any of its Affiliates not known by such Purchaser or
such Representatives, as applicable, to be bound by any confidentiality
obligation; provided that such Purchaser may disclose such information to
any of its Representatives in connection with the transactions contemplated
by this Agreement and the Certificate of Designation so long as such
Persons are informed by such Purchaser of the confidential nature of such
information and are directed by such Purchaser to treat such information
confidentially. The obligation of each Purchaser to hold and to cause its
Representatives to hold any such information in confidence shall be
satisfied if such Purchaser exercises the same care with respect to such
information as such Purchaser would take to preserve the confidentiality of
its own similar information. If any Purchaser or any of its Representatives
is requested to disclose any confidential information by judicial or
administrative process or by other requirements of law or a national stock
exchange, such Purchaser will promptly notify the Issuer of such request so
that the Issuer may seek an appropriate protective order. Each Purchaser
agrees that it will not, and will use its reasonable best efforts to cause
its Representatives not to, use any confidential documents or information
for any purpose other than monitoring and evaluating its investment in the
Issuer and in connection with the transactions contemplated by this
Agreement and the Certificate of Designation. If this Agreement is
terminated, each Purchaser will, and will use its reasonable best efforts
to cause its Representatives to, destroy or deliver to the Issuer, upon
request, all documents and other materials, and all copies thereof,
obtained by such Purchaser or on its behalf from the Issuer, or any of the
Representatives, in connection with this Agreement that are subject to such
confidence.
ARTICLE 7.
COVENANTS OF THE ISSUER AND THE PURCHASERS
SECTION 7.01 Certain Filings. The Issuer and each Purchaser will, and
will cause their Affiliates to, cooperate with one another (i) in
determining whether any action by or in respect of, or filing with, any
Governmental Authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material contracts,
in connection with the consummation of the transactions contemplated by
this Agreement and the Certificate of Designation, the conversion by such
Purchaser of such Purchaser's Series C Shares or the exercise by such
Purchaser of such Purchaser's Warrants, and (ii) in taking such actions or
making any such filings, furnishing information required in connection
therewith and seeking timely to obtain any such actions, consents,
approvals or waivers. The Issuer and each Purchaser shall (A) give the
other parties prompt notice of the commencement of any action, suit,
litigation, arbitration, preceding or investigation by or before any
governmental body with respect to the transactions contemplated by this
Agreement and the Certificate of Designation, (B) keep the other parties
informed on a current basis as to the status of any such action, suit,
litigation, arbitration, preceding or investigation, and (C) promptly
inform the other parties of any communication to or from the Department of
Justice or any other governmental body regarding the transactions
contemplated by this Agreement and the Certificate of Designation.
SECTION 7.02 Public Announcements. In connection with the execution
of this Agreement, the Issuer shall issue a press release (a "Signing
Release") and shall file with the Commission a Report on Form 8-K with
respect to the transactions contemplated hereby (the "Signing 8-K" and
together with the Signing Release, the "Agreed Disclosure"). The Signing
Release shall be in form and substance as agreed by the parties hereto. The
Signing 8-K shall be provided to the Purchasers prior to filing and the
Purchasers shall be given a reasonable opportunity to comment thereon. The
Issuer shall accept all reasonable changes suggested by the Purchasers. If
the Issuer does not accept any changes suggested in good faith by the
Purchasers, the provisions of this Section 7.02 shall immediately terminate
and be of no further force or effect as to the Purchasers. If the Issuer
accepts all such changes, the Agreed Disclosure shall serve as the basis
for any public disclosure by the parties of the transactions contemplated
hereby and neither the Issuer nor any Purchaser shall make any statement or
representation regarding the transactions contemplated hereby, publicly or
in a manner which could reasonably be expected to result in its public
dissemination, which is materially inconsistent with the Agreed Disclosure.
Except as otherwise permitted pursuant to this Section 7.03, the Issuer
shall not use or refer to the name of any Purchaser in any public statement
or disclosure without the consent of such Purchaser.
ARTICLE 8.
CONDITIONS PRECEDENT TO THE CLOSINGS
SECTION 8.01 Conditions to Each Party's Obligations. The obligation
of each party hereto to consummate the Closings is subject to the
satisfaction, at or prior to each Closing Date, of the following
conditions:
(a) All filings with, notifications to and consents from
Governmental Authorities required for the consummation of such Closing
shall have been made or obtained, as applicable; and
(b) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of
such Closing.
SECTION 8.02 First Closing: Conditions to Each Purchaser's. The
obligation of each Purchaser to consummate the First Closing is further
subject to the satisfaction, at or prior to the First Closing Date, of the
following additional conditions:
(a) The representations and warranties of the Issuer contained
herein that are qualified as to materiality or Material Adverse Effect
shall be true and correct in all respects on and as of the First Closing
Date and the representations and warranties of the Issuer contained herein
that are not so qualified shall be true and correct in all material
respects on and as of the First Closing Date, in each case as if made on
and as of such date; the Issuer shall have performed and complied in all
material respects with all covenants and agreements required by this
Agreement to be performed or complied with by it at or prior to the First
Closing Date; and such Purchaser shall have received a certificate dated
the First Closing Date signed by an authorized officer of the Issuer to the
foregoing effect;
(b) The Certificate of Designation shall have been filed with
the Division of Corporations and Commercial Code of the State of Utah in
accordance with the law of the State of Utah;
(c) The Registration Rights Agreement shall have been executed
and delivered by the parties thereto and be in full force and effect;
(d) The Lock-Up Agreements shall have been executed and
delivered by the parties thereto and be in full force and effect;
(e) Each Purchaser shall have received opinions, dated the
First Closing Date, of counsel to the Issuer, addressing such matters as
shall be reasonably requested by the Purchasers;
(f) No action, suit, investigation, litigation or proceeding
challenging this Agreement or the transactions contemplated hereby or
seeking to prohibit, alter, prevent or materially delay the First Closing
or which could have an adverse affect on the ability of the Issuer to
perform its obligations under this Agreement shall have been instituted by
any Governmental Authority before any court, arbitrator or governmental
body, agency or official binding on any party hereto and be pending;
(g) Each Purchaser shall have received all documents reasonably
requested by it relating to the existence of Issuer, the corporate
authority for Issuer entering into, and the validity of, this Agreement,
the Certificate of Designation, the Series C Warrants and the Series C
Shares, all in form and substance reasonably satisfactory to it; and
(h) The Issuer shall have received all consents and waivers by
third parties that are required for the issuance of the Securities and the
consummation of the transactions contemplated hereby on terms reasonably
satisfactory to Purchaser (including (i) waivers of all shareholders'
contractual or other preemptive and similar rights, and (ii) any consents
required in order that the transactions contemplated hereby do not
constitute a breach of, a default under, or a termination or modification
of any material agreement to which the Issuer or any Subsidiary is a party
or to which any portion of the property of the Issuer or any Subsidiary is
subject).
Second Closing: Conditions to Each Purchaser's Obligations. The
obligation of each Purchaser to consummate the Second Closing is further
subject to the satisfaction, at or prior to the Second Closing Date, of the
following conditions:
(a) The representations and warranties of the Issuer contained
herein that are qualified as to materiality or Material Adverse Effect
shall be true and correct in all respects on and as of the Second Closing
Date and the representations and warranties of the Issuer contained herein
that are not so qualified shall be true and correct in all material
respects on and as of the Second Closing Date, in each case as if made on
and as of such date; the Issuer shall have performed and complied in all
material respects with all covenants and agreements required by this
Agreement to be performed or complied with by it at or prior to the Second
Closing Date; and such Purchaser shall have received a certificate dated
the Second Closing Date signed by an authorized officer of the Issuer to
the foregoing effect;
(b) No action, suit, investigation, litigation or proceeding
challenging this Agreement or the transactions contemplated hereby or
seeking to prohibit, alter, prevent or materially delay the Second Closing
or which could have an adverse affect on the ability of the Issuer to
perform its obligations under this Agreement shall have been instituted by
any Governmental Authority before any court, arbitrator or governmental
body, agency or official binding on any party hereto and be pending; and
(c) There shall not have occurred since the date of the First
Closing any Material Adverse Change with respect to the Issuer.
SECTION 8.04 Conditions to the Issuer's Obligations. The
obligation of the Issuer to consummate each Closing is further subject to
the satisfaction, at or prior to each Closing Date, of the following
additional conditions:
(a) The representations and warranties of each Purchaser
contained herein shall be true and correct in all respects on and as of
each Closing Date. Each Purchaser shall have performed and complied in all
material respects with all covenants and agreements required by this
Agreement to be performed or complied with by such Purchaser at or prior to
each Closing Date; and the Issuers shall have received a certificate dated
as of each Closing Date signed by an authorized officer of such Purchaser
to the foregoing effect; and
(b) No proceeding challenging this Agreement or the
transactions contemplated hereby or seeking to prohibit, alter, prevent or
materially delay either Closing shall have been instituted by any
Governmental Authority before any court, arbitrator or governmental body,
agency or official binding on any party hereto and be pending;
(c) The Issuer shall have received all consents and waivers by
third parties that are required for the issuance of the Securities and the
consummation of the transactions contemplated hereby on terms reasonably
satisfactory to Purchaser (including (i) waivers of all shareholders'
contractual or other preemptive and similar rights, and (ii) any consents
required in order that the transactions contemplated hereby do not
constitute a breach of, a default under, or a termination or modification
of any material agreement to which the Issuer or any Subsidiary is a party
or to which any portion of the property of the Issuer or any Subsidiary is
subject).
ARTICLE 9.
MISCELLANEOUS
SECTION 9.01 Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given to such party at its
address or facsimile number set forth below, or such other address or
facsimile number as such party may hereinafter specify for the purpose to
the party giving such notice. Each such notice, request or other
communication shall be effective (i) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified pursuant to this
Section 9.01 and the appropriate confirmation is received, (ii) if given by
mail, three days after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (iii) if given by
any other means, when delivered at the address specified below:
The Company: United Shipping & Technology, Inc.
0000 00xx Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
with a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxx
Fax: (000) 000-0000
The Purchasers: TH Xxx.Xxxxxx Internet Partners, L.P.
TH Xxx.Xxxxxx Internet Parallel Partners, L.P.
THLi Coinvestment Partners, LLC
Blue Star I, LLC.
000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
with a copy to: Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxx
Fax (000) 000-0000
SECTION 9.02 No Waivers; Amendments.
(a) No failure or delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
(b) Any provision of this Agreement may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by
all the parties hereto.
SECTION 9.03 Survival. All representations and warranties
contained herein or made in writing by any party in connection herewith
shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby for a period of 2
years following each Closing, regardless of any investigation made by any
Purchaser or on its behalf; provided, however, that the representations and
warranties contained in Sections 3.01, 3.02, and 3.04 shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby indefinitely.
SECTION 9.04 Indemnification. Effective upon the First Closing,
the Issuer hereby indemnifies each Purchaser and its Affiliates against and
agrees to hold such Purchaser and its Affiliates harmless from any and all
actions, causes of action or suits brought by third parties ("Third Party
Claims") damages, losses, liabilities and expenses (including, without
limitation, reasonable expenses of investigation and reasonable attorneys'
fees and expenses in connection with any action, suit or proceeding)
("Damages") arising from such Third Party Claim incurred or suffered by
such Purchaser or its Affiliates arising out of (a) any misrepresentation
or breach of warranty, covenant or agreement made or to be performed by the
Issuer pursuant to this Agreement, or (b) the breach by the Issuer of any
listing or other rules of any exchange upon which the Issuer's securities
are listed, or of any other laws or rules relating to the issue and
purchase of the Series C Shares pursuant to this Agreement.
SECTION 9.05 Procedures. The party seeking indemnification
under Section 9.04 (the "Indemnified Party") agrees to give prompt notice
to the party against whom indemnity is sought (the "Indemnifying Party")
and to all other Purchasers of the assertion of any claim, or the
commencement of any suit, action or proceeding in respect of which
indemnity may be sought under such Section. The Indemnifying Party may at
its election participate in and control the defense of any such suit,
action or proceeding at its own expense. The Indemnifying Party shall not
be liable under Section 9.04 for any settlement effected without its
consent of any claim, litigation or proceeding in respect of which
indemnity may be sought hereunder.
SECTION 9.06 Termination.
(a) This Agreement may be terminated at any time prior to each
Closing:
(i) by mutual written agreement of the Issuer and each
Purchaser;
(ii) by the Issuer or the Purchasers if there shall be
any law or regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if
consummation of the transactions contemplated hereby would violate
any nonappealable, final order, decree or judgment of any court or
governmental body having competent jurisdiction; or
(iii) by the Issuer if the Second Closing has not
occurred on or before the end of business on September 22, 2000, or
by the Purchasers if the Second Closing has not occurred on or before
the end of business on November 1, 2000.
The party desiring to terminate this Agreement pursuant to clauses
9.07(a)(ii) or (iii) shall give notice of such termination to the other
parties hereto.
(b) If this Agreement is terminated as permitted by Section
9.07(a), such termination shall be without liability of either party (or
any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other parties to this Agreement;
provided that if such termination shall result from the willful (i) failure
by any party to fulfill a condition to the performance of the obligations
of the other parties, (ii) failure by any party to perform a covenant of
this Agreement or (iii) breach by any party hereto of any representation,
warranty, covenant or agreement contained herein, such party shall be fully
liable for any and all Damages incurred or suffered by the other parties as
a result of such failure or breach. The provisions of Sections 6.01, 9.01,
9.07, 9.09, 9.10, 9.11, 9.12, 9.13, 9.14, 9.15 and 9.16 shall survive any
termination hereof pursuant to Section 9.06(a).
(c) Expenses; Documentary Taxes. The Issuer shall reimburse
each Purchaser at the Closing for all of their respective reasonable
out-of-pocket expenses, including, without limitation, the fees and
disbursements of their counsel incurred in connection with the negotiation,
preparation, execution and delivery of this Agreement (including the
exhibits hereto) and the consummation of the transactions contemplated by
this Agreement.
The Issuer shall pay any and all stamp, transfer and other similar
taxes payable or determined to be payable in connection with the execution
and delivery of this Agreement or the Certificate of Designation or the
issuance of the Securities or any shares of Common Stock issued upon
conversion or exercise of the Securities.
SECTION 9.07 Successors and Assigns. No party may assign any of
its rights and obligations hereunder without the prior written consent of
the other parties hereto. This Agreement shall be binding upon the parties
hereto and their respective successors and permitted assigns.
SECTION 9.08 GOVERNING LAW; WAIVER OF JURY TRIAL. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF NEW
YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK. EACH OF THE
PARTIES HERETO WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO
TRIAL BY JURY IN RESPECT OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR
ACTION OF ANY PARTY HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE PARTIES TO
THIS AGREEMENT EACH HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF A ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT
THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 9.09 JURISDICTION. THE PARTIES HERETO AGREE THAT ANY
SUIT, ACTION OR PROCEEDING SEEKING TO ENFORCE ANY PROVISION OF, OR BASED ON
ANY MATTER ARISING OUT OF OR IN CONNECTION WITH, THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY MAY ONLY BE BROUGHT IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR ANY NEW YORK STATE
COURT SITTING IN New YORK CITY, AND EACH OF THE PARTIES HEREBY CONSENTS TO
THE EXCLUSIVE JURISDICTION OF SUCH COURTS (AND OF THE APPROPRIATE APPELLATE
COURTS THEREFROM) IN ANY SUCH SUIT, ACTION OR PROCEEDING AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION
OR PROCEEDING IN ANY SUCH COURT OR THAT ANY SUCH SUIT, ACTION OR PROCEEDING
WHICH IS BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE SERVED ON ANY
PARTY ANYWHERE IN THE WORLD, WHETHER WITHIN OR WITHOUT THE JURISDICTION OF
ANY SUCH COURT. WITHOUT LIMITING THE FOREGOING, EACH PARTY AGREES THAT
SERVICE OF PROCESS ON SUCH PARTY AS PROVIDED IN SECTION 9.01 SHALL BE
DEEMED EFFECTIVE SERVICE OF PROCESS ON SUCH PARTY.
SECTION 9.10 Counterparts. This Agreement may be executed in
any number of counterparts each of which shall be an original with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION 9.11 Entire Agreement. This Agreement, the Registration
Rights Agreement, the Certificate of Designation, the Warrants and any
other documents executed concurrently herewith constitute the entire
agreement and understanding among the parties hereto and supersede any and
all prior agreements and understandings, written or oral, relating to the
subject matter hereof.
SECTION 9.12 Remedies. Each holder of Securities and Common
Stock issuable upon conversion or exercise thereof shall have all rights
and remedies set forth in this Agreement, the Warrants, the Articles of
Incorporation and the Certificate of Designation and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a
bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by
law.
SECTION 9.13 Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held
to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of this Agreement.
SECTION 9.14 Descriptive Headings; Interpretation. The
descriptive headings of this Agreement are inserted for convenience only
and do not constitute a substantive part of this Agreement. The use of the
word "including" in this Agreement shall be by way of example rather than
by limitation.
SECTION 9.15 No Strict Construction. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto,
and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any of the provisions of this
Agreement.
* * * * *
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first written above.
UNITED SHIPPING & TECHONOLOGY, INC.
By: /s/ Xxxxx X. Xxxxx
_______________________________
Name:
Title:
TH XXX.XXXXXX INTERNET PARTNERS, L.P.
By: TH Xxx.Xxxxxx Internet Advisors L.P.
Its: General Partner
By: /s/ Xxxxx Xxxxx
_______________________________
Name: Xxxxx Xxxxx
Title: Managing Director
TH XXX.XXXXXX INTERNET PARALLEL PARTNERS, L.P.
By: TH Xxx.Xxxxxx Internet Advisors L.P.
Its: General Partner
By: /s/ Xxxxx Xxxxx
_______________________________
Name: Xxxxx Xxxxx
Title: Managing Director
THLI COINVESTMENT PARTNERS, LLC
By: /s/ Xxxxx Xxxxx
_______________________________
Name: Xxxxx Xxxxx
Its: Managing Member
BLUE STAR I, LLC
By: /s/ Xxxxxx X. Xxx
_______________________________
Name: Xxxxxx X. Xxx
Its: Managing Member
ANNEX 1
NUMBER OF SERIES C CONSIDERATION FOR NUMBER OF SERIES C CONSIDERATION FOR
SHARES TO BE SHARES TO BE SHARES TO BE SHARES TO BE
PURCHASED AT THE PURCHASED AT THE PURCHASED AT THE PURCHASED AT THE
PURCHASER FIRST CLOSING FIRST CLOSING SECOND CLOSING SECOND CLOSING
TH Xxx 453,768 $ 2,722,608 635,275 $ 3,811,650
TH Xxx Parallel 344,138 $ 2,064,828 481,794 $ 2,890,764
THLI Coinvestment
Parties LLC 25,677 $ 154,064 35,948 $ 215,688
Blue Star I, LLC 9,750 $ 58,500 13,650 $ 81,898
833,333 $ 5,000,000 1,166,667 $ 7,000,000
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