EXHIBIT 10.13
APEX PC SOLUTIONS, INC.
STOCK AND SUBORDINATED NOTE
PURCHASE AGREEMENT
DATED AS OF DECEMBER 29, 1995
TABLE OF CONTENTS
PAGE
ARTICLE I - PURCHASE AND SALE OF THE SHARES AND THE NOTES.....................1
1.1 The Shares......................................................1
1.2 The Closing of Purchase and Sale of the Shares and Notes........1
1.3 Designated Representative of the Investors......................1
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE INVESTORS..................2
2.1 Investment......................................................2
2.2 Authorization...................................................3
2.3 Other...........................................................3
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF COMPANY AND THE SHAREHOLDERS..4
3.1 Representations and Warranties of the Company and the
Shareholders....................................................4
ARTICLE IV - CONDITIONS PRECEDENT TO INVESTORS' OBLIGATIONS..................12
4.1 Representations and Warranties.................................12
4.2 Absence of Litigation..........................................12
4.3 Performance of Obligations.....................................12
4.4 Documentation at Closing.......................................13
4.5 Material Adverse Change........................................14
4.6 Due Diligence..................................................14
4.7 Financing......................................................14
4.8 Consents, Waivers, etc.........................................14
4.9 Key Person Life Insurance......................................14
ARTICLE V - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS.................................................................15
5.1 Representations and Warranties.................................15
5.2 Absence of Litigation..........................................15
5.3 Performance of Obligations.....................................15
5.4 Payment........................................................15
5.5 Stock Option Plan..............................................15
5.6 S Corporation Agreement........................................15
5.7 Shareholders' Agreement........................................15
5.8 Registration Rights Agreement..................................15
5.9 Financing......................................................16
5.10 Consents, Waivers, etc.........................................16
5.11 Key Person Life Insurance......................................16
ARTICLE VI - COVENANTS OF THE COMPANY........................................16
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6.1 Affirmative Covenants of the Company other than
Reporting Requirements.........................................16
6.2 Reporting Requirements.........................................19
6.3 Use of Proceeds................................................20
ARTICLE VII - OBLIGATIONS AT THE CLOSING.....................................21
7.1 Deliveries.....................................................21
ARTICLE VIII - NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES.........21
8.1 Survival of Representations and Warranties.....................21
ARTICLE IX - INDEMNIFICATION.................................................21
9.1 Indemnification by the Shareholders............................21
9.2 Claims for Indemnification.....................................22
9.3 Defense by Shareholders........................................22
9.4 Escrow.........................................................22
9.5 Threshold; Ceiling.............................................23
9.6 Exclusive Remedy...............................................23
ARTICLE X - DEFINITIONS AND ACCOUNTING TERMS.................................23
10.1 Certain Defined Terms..........................................23
10.2 Accounting Terms...............................................27
ARTICLE XI - MISCELLANEOUS...................................................27
11.1 No Waiver; Cumulative Remedies.................................27
11.2 No Company Recision............................................27
11.3 Amendments, Waivers and Consents...............................27
11.4 Addresses for Notices, etc.....................................27
11.5 Costs, Expenses and Taxes......................................29
11.6 Binding Effect; Assignment.....................................29
11.7 Prior Agreements...............................................29
11.8 Severability...................................................29
11.9 Governing Law..................................................29
11.10 Headings.......................................................29
11.11 Counterparts...................................................29
11.12 Further Assurances.............................................30
11.13 Independent Counsel............................................30
11.14 Confidentiality................................................30
11.15 Press Release..................................................30
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EXHIBITS
Exhibit
Exhibit Name Number
------------ -------
Schedule of Investors A
Form of Class A Subordinated Promissory Note B
Disclosure Schedule C
Restated Articles of Incorporation D
By-Laws E
Opinion of Company's Counsel F
Escrow Agreement G
S Corporation Indemnification Agreement H
Shareholders' Agreement I
Registration Rights Agreement J
Employment Agreement K
Voting Agreement L
Employee Invention and Non-Disclosure Agreement M
Form of Class B Subordinated Promissory Note N
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STOCK AND SUBORDINATED NOTE PURCHASE AGREEMENT
THIS STOCK AND SUBORDINATED NOTE PURCHASE AGREEMENT (the "Agreement") is
made and entered into as of December 29, 1995, by and among Apex PC Solutions,
Inc., a Washington corporation (the "Company"), Xxxxxxxx Xxxx ("Xxxx"),
Britannia Holdings Limited, a Nevis corporation ("Britannia") (severally,
Britannia and Xxxx may each be referred to as a "Shareholder," and jointly they
may be referred to as the "Shareholders"), and the entities listed on EXHIBIT A
hereto (the "Investors").
ARTICLE I
PURCHASE AND SALE OF THE SHARES AND THE NOTES
1.1 THE SHARES. Subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, the Company hereby agrees to
issue and sell 200,000 shares of Common Stock, no par value, of the Company at a
price of $1.47 per share and 300,000 shares of Series A Convertible Preferred
Stock, no par value, of the Company at a price of $7.35 per share (the "Series A
Preferred Stock") (the shares of Common Stock and the shares of Series A
Preferred Stock to be issued pursuant to this Agreement may be referred to as
the "Shares") and Class A Subordinated Promissory Notes in the aggregate
original principal amount of Ten Million Dollars ($10,000,000.00) and in the
form attached hereto as EXHIBIT B (the "Notes") to the Investors in the
respective amounts and for the price set forth opposite each Investor's name on
EXHIBIT A hereto, and the Investors agree to purchase such Shares and such Notes
from the Company for an aggregate consideration of Twelve Million Four Hundred
Ninety-Nine Thousand Dollars ($12,499,000.00).
1.2 THE CLOSING OF PURCHASE AND SALE OF THE SHARES AND NOTES. The
purchase and sale of the Shares and the Notes shall take place at a closing (the
"Closing") to be held at the office of Xxxxx Xxxxxx Xxxxxxxx, 0000 Xxxxxxx
Xxxxxx, 0000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000, on the date hereof, at
9:00 a.m. (Pacific Standard Time), or on such other date and at such time as may
be mutually agreed upon. At the Closing, the Company will deliver to the
Investors certificates evidencing the Shares and the Notes, all in the amounts
set forth opposite their respective names in EXHIBIT A hereto, against wire
transfers to the account of the Company in payment of a portion of the purchase
price for the Shares and the Notes, in the respective amounts indicated on
EXHIBIT A (the "Purchase Price").
1.3 DESIGNATED REPRESENTATIVE OF THE INVESTORS. The Investors hereby
designate Xxxxxxx X. Xxxxxxxx as Designated Representative, authorized to act on
behalf of the Investors with respect to all matters related to this Agreement,
and the Shareholders and the Company shall be entitled to rely, without further
investigation, on the actions of this Designated Representative. The Designated
Representative may be changed by a written instrument executed by all of the
Investors and provided to the Company and the Shareholders in accordance with
Section 11.4 hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
2.1 INVESTMENT. Each Investor, severally but not jointly, represents and
warrants to the Company and the Shareholders that:
(a) The Investor has been advised that the Shares and the Notes have
not been registered under the Securities Act nor qualified under any state
securities laws on the ground, among others, that no distribution or public
offering of the Shares and the Notes is to be effected, and that in this
connection the Company is relying in part on the representations of the
Investors set forth herein.
(b) It is the intention of the Investor to acquire the Shares and the
Notes for its own account and the Shares and the Notes are being and will be
acquired for the purpose of investment and not with a view to distribution or
resale thereof.
(c) The Investor is able to bear the economic risk of an investment
in the Shares and the Notes acquired by it pursuant to this Agreement and can
afford to sustain a total loss on such investment.
(d) The Investor is an experienced and sophisticated investor, is
able to fend for itself in the transactions contemplated by this Agreement, and
has such knowledge and experience in financial and business matters that it is
capable of evaluating the risks and merits of acquiring the Shares and the
Notes. The Investor has had, during the course of this transaction and prior to
its purchase of the Shares and the Notes, the opportunity to ask questions of,
and receive answers from, the Company and its management concerning the Company
and the terms and conditions of this Agreement. The Investor hereby
acknowledges that it or its representatives have received all such information
as it considers necessary for evaluating the risks and merits of acquiring the
Shares and the Notes and for verifying the accuracy of any information furnished
to it or to which it had access. The Investor represents and warrants that the
nature and amount of its investment in connection with the purchase of the
Shares and the Notes is consistent with its investment objectives, abilities and
resources.
(e) The Investor understands that there is no public market for the
Shares or the Notes and that there may never be such a public market, and that
even if a market develops it may never be able to sell or dispose of the Shares
or the Notes and may thus have to bear the risk of its investment for a
substantial period of time, or forever. The Investor is aware that none of the
Shares or the Notes may be sold pursuant to Rule 144 adopted under the
Securities Act unless certain conditions have been met and until such Investor
has held the Shares or the Notes for at least two years. Among the conditions
required for use of Rule 144 is the availability of current information to the
public about the Company. The Investor understands that the Company has not
made such information available and has no present plans to do so.
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(f) The Investor is an "accredited investor" for purposes of
Regulation D promulgated by the Securities and Exchange Commission under the
Securities Act.
(g) The Investor acknowledges that the certificates representing the
Shares shall contain the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN
ACQUIRED BY THE HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
AS MAY BE AUTHORIZED UNDER THE SECURITIES ACT OF 1933 AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER.
2.2 AUTHORIZATION. Each Investor, severally but not jointly, further
represents and warrants to the Company and the Shareholders that:
(a) It has duly authorized, executed and delivered this Agreement and
any other agreements and instruments executed in connection herewith.
(b) The Investor is a duly organized and validly existing limited
partnership in good standing under the laws of the jurisdiction in which it was
organized and has all necessary corporate or partnership power and authority and
has taken all corporate or partnership action required to make all the
provisions of this Agreement, and any other agreements and instruments executed
in connection herewith, the valid and enforceable obligations of the Investor.
(c) This Agreement and such other agreements and instruments
constitute the valid and binding obligations of such Investor enforceable
against it in accordance with their respective terms.
(d) No consent or approval of any Person is required in connection
with the execution, delivery and Performance of this Agreement and such other
agreements and instruments by such Investor which has not heretofore been
obtained.
(e) The execution and performance of this Agreement shall not result
in a material default of any material agreements by such Investor.
2.3 OTHER. Each Investor, severally and not jointly, represents and
warrants to the Company and the Shareholders that, except as otherwise set forth
in this Agreement or the Exhibits hereto, no Person has or will have, as a
result of the transactions contemplated by this Agreement, any right, interest
or valid claim upon or against the Company for any commission, fee or other
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compensation as a finder or broker because of any act or omission by the
Investors, and the Investors agree to indemnify and hold the Company harmless
against any such commissions, fees or other compensation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
COMPANY AND THE SHAREHOLDERS
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS.
The Company and each Shareholder, jointly and severally, represent and warrant
to the Investors that, except as otherwise set forth in the Company Disclosure
Schedule attached hereto as EXHIBIT C (which Disclosure Schedule shall, when
qualifying a representation or warranty, refer specifically to the section
number of the representation or warranty so qualified):
(a) ORGANIZATION AND STANDING OF THE COMPANY. The Company is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction in which it is organized and has all requisite corporate power
and authority for the ownership and operation of its properties and for the
carrying on of its business as now conducted and as now proposed to be
conducted. The Company is duly licensed or qualified and in good standing as a
foreign corporation authorized to do business in all jurisdictions in which the
character of the property owned or leased, or the nature of the activities
conducted, by it makes such licensing or qualification necessary and where
failure to qualify would have a material adverse effect upon such corporation.
(b) CORPORATE ACTION.
(i) The Company has all necessary corporate power and authority
and has taken all corporate action required to execute and deliver this
Agreement and any other agreements and instruments executed in connection
herewith. This Agreement and each other agreement executed in connection
herewith has been duly and validly executed and delivered by the Company, and
constitute the valid and enforceable obligations of the Company, enforceable
against the Company in accordance with their respective terms, except where
enforcement may be limited by applicable laws relating to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally or the principles governing the
availability of equitable remedies.
(ii) Britannia and Xxxx have all necessary power and authority
and have taken all action necessary to execute and deliver this Agreement and
any other agreements and instruments executed in connection herewith. This
Agreement and each other agreement executed in connection herewith has been duly
and validly executed and delivered by Britannia and Xxxx, and constitute the
valid and enforceable obligations of Britannia and Xxxx, enforceable against
Britannia and Xxxx in accordance with their respective terms, except where
enforcement may be limited by applicable laws relating to bankruptcy,
insolvency, reorganization, moratorium or similar
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laws affecting the enforceability of creditors' rights generally or the
principles governing the availability of equitable remedies.
(c) GOVERNMENTAL APPROVAL. No authorization, consent, approval,
license, exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for, or in connection with the execution or
delivery by the Company or the Shareholders of, or for the performance by any of
them of their respective obligations under, this Agreement except for filings to
be made, if any, to comply with exemptions from registration or qualification
under federal and state securities laws.
(d) LITIGATION. There is no litigation or governmental proceeding or
investigation pending or threatened against the Company affecting any of its
properties or assets, or against any officer or key employee of the Company or
the Shareholders that might result, either in any case or in the aggregate, in
any material adverse change in the business, operations, affairs or conditions
of the Company or any of its properties or assets, or that might call into
question the validity of this Agreement, any of the Shares or Notes, or any
action taken or to be taken pursuant hereto.
(e) COMPLIANCE WITH OTHER INSTRUMENTS. The Company is in compliance
in all respects with the terms and provisions of its Articles of Incorporation
or Bylaws and in all respects with the terms and provisions of this Agreement
and in all material respects with the terms and provisions of each mortgage,
indenture, lease, agreement and other instrument either (i) relating to
obligations of the Company in excess of $25,000, individually or in the
aggregate, or (ii) relating to patents, licenses, trademarks, service marks,
trade names, copyrights, trade secrets, inventions, processes, designs,
franchises, computer software or other proprietary rights. The Company is in
compliance in respect of all judgments, decrees, governmental orders, statutes,
rules or regulations by which it is bound or to which its properties or assets
are subject. There is no term or provision in any of the foregoing documents
and instruments that the Company believes is reasonably likely to materially
adversely affect the business, assets or financial condition of the Company.
Neither the execution and delivery of this Agreement nor the consummation of any
transaction contemplated hereby has constituted or resulted in or will
constitute or result in a default or violation of any term or provision in the
Articles of Incorporation or Bylaws of the Company and has constituted or
resulted in a default or violation of any term or provision in any documents or
instruments. Each of Britannia and Xxxx is in compliance in all respects with
the terms and provisions of this Agreement and in all material respects with the
terms and provisions of each mortgage, note, lease, agreement and other
instrument relating to obligations of such party in excess of $25,000 in
aggregate, and, in respect of all judgments, decrees, governmental orders,
statutes, rules or regulations by which it is bound or to which its properties
or assets are subject.
(f) REGISTRATION RIGHTS AND SHAREHOLDER AGREEMENTS. No Person has
any right to cause the Company to file any registration statement under the
Securities Act relating to any securities of the Company or any right to
participate in an offering of securities under any such registration statement.
Except as specifically set forth in this Agreement, there is no voting,
shareholders, co-sale, right of first refusal or similar agreement among the
Company and any
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holders of any of its equity securities (or instruments convertible or
exercisable into any of its equity securities). To the best knowledge of the
Company, there is no voting, shareholders, co-sale, right of first refusal or
similar agreement, that the Company is not a party to, among any of the holders
of any of the Company's equity securities or instruments convertible or
exercisable into any of the Company's equity securities.
(g) SECURITIES ACT OF 1933. The Company has complied with all
applicable federal and state securities laws in connection with the issuance and
sale of the Shares and the Notes. Neither the Company nor anyone acting on its
behalf has offered or will offer to sell the Shares or the Notes, or similar
securities to, or solicit offers with respect thereto from, or enter into any
preliminary conversations or negotiations relating thereto with, any Person, so
as to bring the issuance and sale of the Shares or the Notes under the
registration provisions of the Securities Act.
(h) NO BROKERS OR FINDERS. The Company and Shareholders have not
taken any action nor failed to take any action and know of no such act or
omission by any Person, which would give rise to any right, interest or valid
claim against or upon the Company for any commission, fee or other compensation
as a finder or broker as a result of the transactions contemplated by this
Agreement.
(i) CAPITALIZATION; STATUS OF CAPITAL STOCK. Immediately preceding
the Closing, the Company will have a total authorized capitalization consisting
of 10,000,000 shares of Common Stock, of which 1,000,000 shares are issued and
outstanding, and 500,000 shares of Preferred Stock, no par value (the "Preferred
Stock"), none of which is issued or outstanding. The Preferred Stock is in two
series. Immediately preceding the Closing, the Company will have authorized
300,000 shares of Series A Preferred Stock, none of which is issued or
outstanding, and 200,000 shares of Series B Redeemable Preferred Stock, none of
which is issued and outstanding. All outstanding shares of Common Stock were
duly authorized and validly issued, are fully paid and nonassessable and were
issued in compliance with all applicable federal and state securities laws. The
Shares, when issued in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable. Immediately preceding
the Closing, the issued and outstanding shares of Common Stock and holders
thereof will be as set forth in the Disclosure Schedule. Prior to the Closing,
the Company will adopt the 1995 Employee Stock Plan in the form attached to the
Disclosure Schedule and shall reserve for issuance thereunder an aggregate of
176,470 shares of Common Stock. Immediately prior to the Closing, Xxxxx Xxxxx
("Xxxxx") will hold an option to purchase 88,235 shares of Common Stock at a
price of $1.47 per share, a copy of which option is attached as an annex to the
Disclosure Schedule and which option shall have been granted pursuant to the
aforementioned 1995 Employee Stock Plan.
Except as set forth herein, there are no options, warrants or rights to
purchase shares of capital stock or other securities authorized, issued or
outstanding, nor is the Company obligated in any other manner to issue shares of
its capital stock or other securities. The Restated Articles of Incorporation
of the Company on file with the Secretary of State of the State of Washington
shall be in the form of EXHIBIT D. The Bylaws of the Company in effect shall be
in the form of EXHIBIT E hereto.
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(j) FINANCIAL STATEMENTS. The Financial Statements of the Company
for the years ended December 31, 1992, 1993 and 1994 as reviewed by Xxxxx Xxxxx
Co. P.S., and of the Company for the eleven months ended November 22, 1995
(collectively, the "Financial Statements"), copies of which Financial
Statements, along with any officers reports, heretofore have been delivered to
Investors and are attached to the Disclosure Schedule, were prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods presented, subject to year-end adjustments which would
not be materially adverse with respect to the Financial Statements at and for
the period ending November 22, 1995, and fairly present the financial position
and results of operations of the Company for the periods presented.
(k) ABSENCE OF CHANGES. Since November 22, 1995 there has not been
any event occurrence, circumstance, state of facts or condition of any type,
whether or not in the ordinary course of business and whether or not covered by
insurance, that has materially and adversely affected, or might reasonably be
expected to materially and adversely effect, the business, properties, assets,
prospects, or financial condition of the Company.
(l) GOOD AND MARKETABLE TITLE. The Company has good and marketable
title to, or a valid leasehold interest in, its properties and assets in each
case free and clear of all liens, claims, security interests, charges and
encumbrances and the right to use all the assets it presently uses in the
operation of its business. The properties and assets of the Company are in all
material respects in good condition and repair, ordinary wear and tear excepted.
(m) SUBSIDIARIES. The Company does not control, directly or
indirectly, any other corporation, association, partnership or other business
entity or own any shares of capital stock or other securities of any other
Person.
(n) TAXES AND TAX RETURNS.
(i) The Company has duly filed all Tax Returns (as
hereinafter defined) which are required by law to be filed by it; (ii) the
Company has duly paid all Taxes (as hereafter defined) due or claimed to be due
from it (whether or not shown on any Tax Return), and there are no assessments
or claims for payment of Taxes now pending or, to the best knowledge of the
Company, threatened, nor is there any audit of the records of the Company being
made or threatened by any taxing authority; (iii) to the Company's best
knowledge, there are no facts or circumstances which could reasonably be
expected to constitute a basis for assessments or claims for the payment of
additional Taxes with respect to such Tax Returns; (iv) each Tax Return of the
Company previously filed, or to be filed in the future relating to any period up
to the date of Closing, is or will be (as the case may be) correct and complete
in all respects; and (v) the Company is not currently the beneficiary of any
extension of time within which to file any Tax Return. The amounts set up as
provisions for Taxes, if any, on the December 31, 1994 and November 30, 1995
balance sheets of the Company included in the Financial Statements are
sufficient for the payment of all unpaid Taxes of the Company accrued for or
applicable to the periods ended on such date and all years and periods prior
thereto and for which the Company, at those dates, may have been liable. The
Company has properly withheld and paid, or accrued for
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payment, when due, to appropriate state and/or federal authorities, all sales
and use taxes, if any, and all amounts required to be withheld from payments
made to its employees, independent contractors, creditors, Shareholders, or
other third parties and has also paid all employment taxes as required under
applicable laws.
(ii) The Company has not waived any statute of limitation in
respect of any taxes or assessments by any federal, state, county, local,
foreign or other taxing jurisdiction or agreed to any extension of time with
respect to an assessment or deficiency in any tax. The Company has not filed a
consent under Section 341(f) of the Internal Revenue Code of 1986, as amended
(the "Code") concerning collapsible corporations.
(iii) The Company has not made any payments, and is not
obligated to make any payments, nor is the Company a party to any agreement that
under any circumstances could obligate it to make any payments, that would not
be deductible under Section 280G of the Code. The Company has not been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(a)(ii)
of the Code. The Company is not a party to any tax allocation or tax sharing
agreement.
(iv) The Company (i) is not and never has been required to
file a consolidated or combined state or federal income Tax Return with any
other person or entity and (ii) is not liable for the Taxes of any person under
Treas. Reg. Section 1. 1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract or otherwise.
(o) INSURANCE. Included in the Disclosure Schedule is a complete
list of all insurance policies currently maintained by the Company and in
effect, and, with respect to each of such policies, a general description of the
risks covered and claims insured; copies of all of such policies have been
furnished or made available to Investors. The Company has, with responsible and
reputable insurance companies or associates, insurance in such amounts and
covering such risks as is usually carried by companies of similar size engaged
in similar businesses and owning similar properties in the same general areas in
which the Company operates, but in any event in amounts sufficient to allow the
Company to replace any of its properties that might be damaged or destroyed
without additional expenditures by the Company (except for reasonable
deductibles).
(p) CERTAIN TRANSACTIONS. The Company is not indebted, either
directly or indirectly, to any of the officers, directors or shareholders of the
Company, or, to their respective spouses or children, in any amount whatsoever,
other than for payment of salary for services rendered and reasonable expenses,
and none of said officers, directors, shareholders or any members of their
immediate families, are indebted to the Company. None of the Shareholders nor,
to the best knowledge of the Company, any officer, director or other shareholder
of the Company, has any direct or indirect ownership interest in (other than
ownership interests of one percent (1%) or less in companies whose securities
are publicly traded), or any contractual relationship with, any firm,
corporation or other Person with which the Company is Affiliated or with which
the Company has a business relationship, or any firm, corporation or other
Person which competes with the Company. None of the Shareholders, nor, to the
best knowledge of the Company, any officer, director or other
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shareholder of the Company, or any member of their immediate families, are,
directly or indirectly, a party to or otherwise an interested party with respect
to any material contract with the Company.
(q) CONTRACTS AND COMMITMENTS.
(i) Except as expressly contemplated by this Agreement as
of the Closing the Company will not be a party to, or bound by, any currently
effective written or oral:
(A) any contract with any labor union;
(B) contract for the employment of any officer, individual
employee, or other person or entity on a full-time, part-time, consulting or
other basis which, in any way, restricts or limits its right to terminate such
contract at will (other than the existence of any law, public policy, or any
oral discussions, or oral statements of policy which might, under current law,
be interpreted as imposing upon the Company any covenant of good faith and fair
dealing, or otherwise generally restrict the Company's ability to terminate its
employees other than on an "at-will" basis or within sixty (60) days following
delivery of such notice);
(C) agreement or indenture relating to the borrowing of
money or to the mortgaging, pledging, transfer of a security interest, or
otherwise placing a lien on any material asset or material group of assets of
the Company;
(D) guarantee of any obligation;
(E) lease or agreement under which it is the lessee of or
holds or operates any property, real or personal, owned by any other party,
other than leases or agreements under which the aggregate annual rental payments
of the Company do not, in the aggregate, exceed $25,000;
(F) agreement or group of related agreements with the same
party or any group of parties who are affiliated, which requires an aggregate
payment by or to the Company in an amount in excess of (x) with respect to
purchase or sales orders in the ordinary course of business, $50,000, and
(y) with respect to any other contracts, $25,000;
(G) warranty agreement of the Company with respect to
services provided or products sold, licensed or leased by the Company as seller,
licensor or lessor;
(H) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world; or
(I) any other agreement which in the best judgment of the
Company is material to its business.
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(ii) The Company has performed in all material respects all
obligations required to be performed by it and is not in default under, or in
material breach of, or after due inquiry, in receipt of any claim of default
under or breach of, any material agreement, to which it is a party or to which
its assets are subject; the Company has no present expectation or intention of
not fully performing all such obligations; the Company does not have any
knowledge of any material breach or anticipatory breach by the other parties to
any material contract or commitment, to which it is a party or to which any of
its assets is subject; and the Company is not a party to any contract or
contracts which, either individually or in the aggregate, are reasonably likely
to result in a material loss to the Company. There are no warranty claims or
other uninsured claims under completed contracts which is reasonably likely to
involve a material monetary liability which is not reserved against in the
Financial Statements.
(iii) To the best knowledge of the Company, no officer of the
Company is a party to any oral or written contract which prohibits, or
materially restricts or limits his performance of his duties or the fulfillment
of his obligations as an employee and an officer of the Company.
(iv) A true and correct copy of each of the written
contracts referred to in the Disclosure Schedule and a description of the oral
contracts which are referred to in the Disclosure Schedule, together with any
amendments, waivers or other changes thereto, have been supplied to the
Investors' special counsel, Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
(r) ERISA.
(i) Neither the Company nor any ERISA Affiliates of the
Company maintains or has at any time maintained any employee benefit plan (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), pension, bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or benefit plans, programs or arrangements (collectively, the "Employee
Plans"). Neither the Company nor any ERISA Affiliate of the Company maintains
or has at any time maintained any Employee Plan for the benefit of any active,
retired or former employee or their spouses or dependents. For purposes of this
Agreement, the term "ERISA Affiliate" shall refer to all members of the group
consisting of all corporations and all trades or businesses (whether or not
incorporated) under common control with the Company within the meaning of
Section 414 of the Code.
(ii) No Employee Plan of the Company or any ERISA Affiliate
of the Company is subject to either Title IV of ERISA or Section 412 of the
Code, and no such Employee Plan has been terminated within the last six years.
The Company and its ERISA Affiliates have administered their respective Employee
Plans in material compliance with the health care continuation coverage
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"). Each Employee Plan of the Company and any ERISA Affiliate of the
Company intended to be qualified under Section 401(a) of the Code has either
obtained a current favorable determination letter as to its qualified status
(including its compliance with the Tax Reform Act of
-10-
1986) from the Internal Revenue Service or still has a remaining period of time
under applicable Treasury Regulations in which to apply for such determination
letter and make amendments necessary to obtain a favorable determination. Each
such Employee Plan has been maintained and administered in all material respects
in compliance with its terms and with the requirements prescribed by all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such Employee Plan. All contributions,
premiums or other payments due from the Company or any ERISA Affiliate of the
Company to (or under) any such Employee Plan have been fully paid or adequately
provided for on the Company's or its ERISA Affiliates' most recent financial
statements.
(s) INTELLECTUAL PROPERTY. The Company has sufficient title to and
ownership of, or has sufficient licenses to, all necessary patents, licenses,
trademarks, service marks, trade names, copyrights, trade secrets, inventions,
processes, designs, franchises, computer software and other proprietary rights
necessary for its business as now conducted and as proposed to be conducted,
without any conflict with or infringement of the rights of others. The
Disclosure Schedule sets forth all inventions which are the subject of issued
patents, or an application therefor, which are owned and used or held for use by
the Company and which are material to the business of the Company. The Company
has taken measures it deems reasonable to maintain the confidentiality of the
processes and formulae, research and development results and other know-how of
the Company, the value of which to the Company is contingent upon maintenance of
the confidentiality thereof. The Company has not violated or infringed, and the
Company's business as now conducted and as proposed to be conducted does not and
will not violate or infringe, any of the patents, licenses, trademarks, service
marks, trade names, copyrights, trade secrets or other proprietary rights of any
other person or entity, and the Company has not received any communication or
notice claiming or alleging any such violation or infringement. The Company is
not aware of any third party which is infringing or violating any of the
patents, licenses, trademarks, service marks, trade names, copyrights, trade
secrets or other proprietary rights of the Company. The Company has not granted
any license or option or entered into any agreement of any kind with respect to
the use of its proprietary information, other than licenses to and uses of its
products made in the ordinary course of their business.
(t) ENVIRONMENTAL MATTERS.
(i) Other than Hazardous Materials reasonably necessary for
the conduct of the business of the Company which are properly stored in material
compliance with applicable Environmental Laws, no Hazardous Material is present
on any Company Facility and no reasonable likelihood exists that any Hazardous
Material present on other property will come to be present on a Company Facility
as a result of any action or inaction of the Company.
(ii) The Hazardous Material Activities of the Company have
been conducted in material compliance with applicable Environmental Laws.
(iii) The Disclosure Schedule accurately describes all of the
Environmental Permits currently held by the Company and such Environmental
Permits are all of the
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Environmental Permits necessary for the continued conduct of any Hazardous
Material Activities of the Company as such activities are currently being
conducted. All such Environmental Permits are valid, in full force and effect,
and will survive the Closing. To the best knowledge of the Company, no
circumstances exist which are reasonably likely to cause any Environmental
Permit to be revoked, modified, or rendered non-renewable upon payment of the
permit fee or which are reasonably likely to impose upon the Company the
obligation to obtain any additional Environmental Permit. To the best knowledge
of the Company, all Environmental Permits and all other consents and clearances
required by any Environmental Law or any agreement to which the Company is bound
as a condition to the performance and enforcement of this Agreement or which are
required by any Governmental Authority in connection with the transactions
contemplated by this Agreement have been obtained.
(iv) The Company has transferred or made arrangements for
the disposal of Hazardous Materials only to those Disposal Sites described in
the Disclosure Schedule. No action, proceeding, liability or claim exists or,
to the best knowledge of the Company, is threatened, against the Company or, to
the best knowledge of the Company, any Disposal Site with respect to any
transfer or release of Hazardous Materials to a Disposal Site in connection with
the operations of the Company and, to the best knowledge of the Company, there
is no valid basis for such claim.
(u) COMPLIANCE WITH LAWS. The Company has complied in all material
respects with all applicable United States federal, state, municipal and other
political subdivision or governmental agency statutes, ordinances and
regulations, and the Company has complied in all material respects with all
applicable foreign statutes, ordinances and regulations and with all United
States federal statutes, ordinances and regulations as they apply to doing
business in other countries.
(v) MARGIN REGULATIONS; USE OF PROCEEDS. The Company neither owns
nor intends to acquire any "margin stock" as defined in Regulation G of the
Board of Governors of the Federal Reserve System (12 CFR 207).
(w) DISCLOSURE. No representation, warranty or statement by the
Company or the Shareholders in this Agreement, in any written certificate
required by this Agreement to be furnished to the Investors or their counsel or
in any other document delivered by the Company or the Shareholders to the
Investors contains or will contain any untrue statement of material fact or,
omits or will omit to state a material fact necessary to make the statements
made herein or therein, in the light of the circumstances under which they were
made, not misleading. To the extent that the foregoing representation and
warranty applies to any projections which may have been delivered by the Company
to the Investors, the Company represents only that such projections were
prepared in good faith, that the Company believes that there was at the time of
the preparation of such projections a reasonable basis for such projections, and
that the Company is not aware of any change in its circumstances or other fact
that has occurred that causes it to believe that it will be unable to meet the
forecasts set forth in such projections.
-12-
ARTICLE IV
CONDITIONS PRECEDENT TO INVESTORS' OBLIGATIONS
The obligation of the Investors to purchase and pay for the Shares and the
Notes at the Closing is subject to the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company and the Shareholders set forth in Article III hereof
shall be true in all material respects on the date of the Closing.
4.2 ABSENCE OF LITIGATION. There shall be no litigation, whether brought
against the Company, the Investors or either of the Shareholders, seeking to
prevent the consummation of the transactions contemplated by this Agreement, and
no such litigation shall have been threatened nor shall there be in effect any
order restraining or prohibiting the consummation of the transactions
contemplated by this Agreement nor any proceedings pending with respect thereto.
There shall be no pending or threatened litigation, or asserted or unasserted
claims, assessments, or other loss contingencies, materially affecting the
Company, its business, assets or future prospects, other than as disclosed in
the Exhibits delivered pursuant hereto as of the date of this Agreement.
4.3 PERFORMANCE OF OBLIGATIONS. The Company and the Shareholders shall
have performed and complied, in all material respects, with all covenants,
conditions and obligations required by this Agreement to have been performed by
the Company and the Shareholders at or prior to the Closing.
4.4 DOCUMENTATION AT CLOSING. The Investors shall have received prior to
or at the Closing all of the following, each in form and substance satisfactory
to the Investors and their special counsel, and all of the following events
shall have occurred prior to or simultaneous with the Closing hereunder:
(a) A copy of all charter documents of the Company certified by the
Secretary of State of Washington, a certified copy of the resolutions of the
Board of Directors and, if required, the shareholders of the Company evidencing
approval of this Agreement and the other matters contemplated hereby, a
certified copy of the Bylaws of the Company, and certified copies of all
documents evidencing other necessary corporate or other action and governmental
approvals, if any, with respect to this Agreement, the Shares and the Notes.
(b) An opinion of Xxxxx Xxxxxx Xxxxxxxx, counsel for the Company, as
to the matters set forth on EXHIBIT F hereto.
(c) A certificate of the Secretary or an Assistant Secretary of the
Company stating the names of the officers of the Company authorized to sign this
Agreement and the other documents or certificates to be delivered pursuant to
this Agreement by the Company or any of its officers, together with the true
signatures of such officers. The Investors may conclusively rely on such
certificate until they shall receive a further certificate of the Secretary or
Assistant Secretary of the
-13-
Company cancelling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate.
(d) A certificate from each of the Shareholders, severally and
jointly, and a certificate from the President of the Company, each stating that
the representations and warranties of the Company and the Shareholders contained
in Article III hereof and otherwise made by the Shareholders or the Company in
writing in connection with the transactions contemplated hereby are true and
correct as of the date of Closing and that all conditions required to be
performed by the Company prior to or at the Closing have been performed, and
that no condition or event has occurred or is continuing or will result from the
execution and delivery of this Agreement, which is a breach of a material term
hereof or would constitute a breach of a material term hereof but for the
requirement that notice be given or time elapse or both.
(e) Stock Certificates representing the Shares shall be delivered by
the Company on or prior to the Closing.
(f) The Notes shall be delivered by the Company on or prior to the
Closing.
(g) An Escrow Agreement, in substantially the form attached hereto as
EXHIBIT G (the Escrow Agreement"), shall have been executed and delivered by
the Shareholders, the Company and the escrow agent named therein, and shall be
in full force and effect and binding upon the parties thereto.
(h) An S Corporation Indemnification Agreement, in substantially the
form attached hereto as EXHIBIT H (the "S Corporation Agreement"), shall have
been executed and delivered by Xxxx and the Company and shall be in full force
and effect and binding upon the parties thereto.
(i) A Shareholders' Agreement, in substantially the form attached
hereto as EXHIBIT I (the "Shareholders' Agreement"), shall have been executed
and delivered by the Shareholders, Xxxxx and the Company and shall be in full
force and effect and binding upon the parties thereto.
(j) A Registration Rights Agreement, in substantially the form
attached hereto as EXHIBIT J (the "Registration Rights Agreement"), shall have
been executed and delivered by the Company.
(k) An Employment Agreement, in substantially the form attached
hereto as EXHIBIT K, shall have been executed and delivered by the Company and
Xxxxx.
(l) A Voting Agreement, in substantially the form attached hereto as
EXHIBIT L, shall have been executed and delivered by the Company and Xxxxx.
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(m) The 1995 Employee Stock Plan, in the form attached to the
Disclosure Schedule, shall have been duly adopted by the Company, and an
aggregate of 176,470 shares of Common Stock shall have been reserved for
issuance pursuant thereto.
4.5 MATERIAL ADVERSE CHANGE. There shall not have been, subsequent to
November 30, 1995, any material adverse change in the financial condition of the
business of the Company, or its assets, liabilities, business, results of
operations, prospects or customer, supplier or employee relations.
4.6 DUE DILIGENCE. The Investors and their representatives shall have
completed their business, legal and accounting due diligence investigation and
Investors shall be satisfied, in their sole discretion, with the results
thereof.
4.7 FINANCING. The Company shall have obtained bank, or other
institutional lender, financing, satisfactory to the Investors and the Company,
providing for loan proceeds of not less than Eight Million Dollars ($8,000,000)
net to the Company.
4.8 CONSENTS, WAIVERS, ETC. Prior to the Closing, the Shareholders and
the Company shall have obtained all consents or waivers, if any, necessary to
execute and deliver this Agreement, to sell and issue the Shares and the Notes,
and to carry out the transactions contemplated hereby, and all such consents and
waivers shall be in full force and effect. All corporate and other action and
governmental filings necessary to effect the terms of this Agreement and other
agreements and instruments executed and delivered by the Company in connection
herewith shall have been made or taken, except for any post-sale filing that may
be required under federal and state securities laws. In addition to the
documents set forth above, the Company shall have provided the Investors any
other information or copies of documents that they may reasonably request.
4.9 KEY PERSON LIFE INSURANCE. The Company shall have obtained term key
person life insurance payable to the Company in the amount of $5,000,000 on the
life of Xxxxx Xxxxx.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
THE COMPANY AND THE SHAREHOLDERS
The obligations of the Company to consummate the sale and issuance of the
Shares and the Notes to the Investors at the Closing and of the Shareholders and
the Company to perform their other obligations under this Agreement shall be
subject to the fulfillment, at or prior to the Closing, unless waived by the
Shareholders and the Company, of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Investors in this Agreement shall have been true and correct at and
as of the date hereof, and they shall be true and correct at and as of the
Closing with the same force and effect as though made at and as of that time.
-15-
5.2 ABSENCE OF LITIGATION. There shall be no litigation, whether brought
against the Company, the Investors or either of the Shareholders, seeking to
prevent the consummation of the transactions contemplated by this Agreement, and
no such litigation shall have been threatened nor shall there be in effect any
order restraining or prohibiting the consummation of the transactions
contemplated by this Agreement nor any proceedings pending with respect thereto.
There shall be no pending or threatened litigation, or asserted or unasserted
claims, assessments, or other loss contingencies, materially affecting the
Company, its business, assets or future prospects, other than as disclosed in
the Exhibits delivered pursuant hereto as of the date of this Agreement.
5.3 PERFORMANCE OF OBLIGATIONS. The Investors shall have performed and
complied, in all material respects, with all of their covenants, conditions and
obligations required by this Agreement to be performed or complied with by them
at or prior to the Closing.
5.4 PAYMENT. The Company shall have received payment in full from the
Investors for the Shares and the Notes, in the respective amounts set forth in
EXHIBIT A hereto.
5.5 STOCK OPTION PLAN. The 1995 Employee Stock Plan reserving 176,470
shares of Common Stock for issuance thereunder shall have been duly adopted by
the Company.
5.6 S CORPORATION AGREEMENT. The S Corporation Agreement shall have been
executed and delivered by Xxxx.
5.7 SHAREHOLDERS' AGREEMENT. The Shareholders' Agreement shall have been
executed and delivered by Xxxxx and the Investors.
5.8 REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement
shall have been executed and delivered by the Investors.
5.9 FINANCING. The Company shall have obtained bank, or other
institutional lender, financing, satisfactory to the Investors and the Company,
providing for loan proceeds of not less than Eight Million Dollars ($8,000,000)
net to the Company.
5.10 CONSENTS, WAIVERS, ETC. Prior to the Closing, the Shareholders and
the Company shall have obtained all consents or waivers, if any, necessary to
execute and deliver this Agreement, to sell and issue the Shares and the Notes,
and to carry out the transactions contemplated hereby, and all such consents and
waivers shall be in full force and effect. All corporate and other action and
governmental filings necessary to effect the terms of this Agreement and other
agreements and instruments executed and delivered by the Company in connection
herewith shall have been made or taken, except for any post-sale filing that may
be required under federal and state securities laws.
5.11 KEY PERSON LIFE INSURANCE. The Company shall have obtained term key
person life insurance payable to the Company in the amount of $5,000,000 on the
life of Xxxxx Xxxxx.
-16-
ARTICLE VI
COVENANTS OF THE COMPANY
6.1 AFFIRMATIVE COVENANTS OF THE COMPANY OTHER THAN REPORTING
REQUIREMENTS. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that, after the Closing and for so long as any of
the Shares or the Notes remain outstanding, the Company will perform and observe
the following covenants and provisions and will cause each Subsidiary (if any)
to perform and observe such of the following covenants and provisions as are
applicable to such Subsidiary, and will not, without approval of holders of
sixty-six and two thirds percent (66 2/3%) in interest of each of the Shares (or
Common Stock issued upon conversion of the Shares) and the Notes, amend or
revise any terms of this Section 6.1:
(a) PAYMENT OF TAXES AND TRADE DEBT. The Company will pay and
discharge, and cause each Subsidiary to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or business, or upon any properties belonging to it, prior to
the date on which penalties attach thereto, and all lawful claims, which, if
unpaid, might result in a lien or charge upon any properties of the Company or
any Subsidiary, provided that neither the Company nor any Subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim that is being
contested in good faith and by appropriate proceedings if the Company or the
applicable Subsidiary shall have set aside on its books adequate reserves with
respect thereto as shall be determined by its Board of Directors. The Company
will pay and cause each Subsidiary to pay, when due, or in conformity with
customary trade terms, all lease obligations, all trade debt, and all other
Indebtedness incident to the operations of the Company or its Subsidiary, except
such as are being contested in good faith and by appropriate proceedings if the
Company or the applicable Subsidiary shall have set aside on its books adequate
reserves with respect thereto as shall be determined by its Board of Directors.
(b) MAINTENANCE OF INSURANCE. The Company will maintain, and cause
each Subsidiary to maintain, with responsible and reputable insurance companies
or associations, insurance in such amounts and covering such risks as is usually
carried by companies of similar size engaged in similar businesses and owning
similar properties in the same general areas in which the Company or such
Subsidiary operates, but in any event in amounts sufficient to allow the Company
or applicable Subsidiary to replace any of their properties that might be
damaged or destroyed without additional expenditures by the Company or its
Subsidiary (except for reasonable deductibles). During the period that he is
employed by the Company, the Company shall maintain term key-man life insurance
payable to the Company in the amount of $5,000,000 on the life of Xxxxx Xxxxx,
with the proceeds of such insurance payable to the Company.
(c) PRESERVATION OF CORPORATE EXISTENCE. The Company will preserve
and maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified as a foreign
corporation in each jurisdiction in which such qualification is necessary or
desirable in view of its business and operations or the ownership of its
properties. The Company will preserve and maintain all material licenses and
other rights to
-17-
use patents, processes, licenses, trademarks, trade names, inventions,
intellectual property rights or copyrights owned or possessed by it and
necessary to the conduct of its business.
(d) COMPLIANCE WITH LAWS. The Company will comply, and cause each
Subsidiary to comply, in all material respects with all applicable laws, rules,
regulations and orders of any United States federal or state governmental
authority, the noncompliance with which could materially adversely affect the
business or condition, financial or otherwise, of the Company and its
Subsidiaries, taken as a whole, except non-compliance being contested in good
faith through appropriate proceedings so long as the Company or the applicable
Subsidiary shall have set up sufficient reserves, if any, required under
generally accepted accounting principles, consistently applied, with respect to
such items. The Company will use its best efforts to comply, and cause each
Subsidiary to comply, in all material respects with all applicable foreign laws,
rules, regulations and orders of any foreign governmental authority,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise, of the Company and its Subsidiaries, taken as
a whole, except non-compliance being contested in good faith through appropriate
proceedings so long as the Company or the applicable Subsidiary shall have set
up sufficient reserves, if any, required under generally accepted accounting
principles, consistently applied, with respect to such items.
(e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company will keep,
and cause each Subsidiary to keep, adequate records and books of account, in
which complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of the Company and such Subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection within its
business shall be made.
(f) MAINTENANCE OF PROPERTIES, ETC. The Company will maintain and
preserve, and cause each Subsidiary to maintain and preserve, all of its
properties necessary or useful in the proper conduct of its business, in good
repair, working order and condition, ordinary wear and tear excepted.
(g) COMPENSATION. The Company will prepare and submit to, and obtain
the approval of the Board of Directors a compensation policy for its officers,
which shall contain guidelines for reasonable levels of salary and other
employment benefits, and which shall be periodically updated, and comply with
such compensation policy in making all compensation offers to new officers and
compensation changes to existing officers, of which all cash compensation and
equity compensation offers or changes shall be subject to the approval of the
Board of Directors.
(h) NEW DEVELOPMENTS. The Company will cause all material
technological or other proprietary developments, inventions, discoveries or
improvements by the employees of the Company to be fully documented in
accordance with the prevailing appropriate industrial professional standards,
where possible and appropriate, in the judgment of the Board of Directors, to
file and prosecute United States and foreign patent applications relating to and
protecting such developments on behalf of the Company.
-18-
(i) BUDGETS AND BOARD APPROVAL. The Company will prior to the
commencement of each fiscal year, prepare and submit to the Board of Directors a
budget and operating plan for the upcoming fiscal year, including projections or
forecasts of capital and operating expenses, cash flow, and profits and losses,
all itemized in reasonable detail and obtain the approval of such budget and
plan by the Board of Directors not more than sixty (60) days following the end
of the prior fiscal year.
(j) EMPLOYEE INVENTION AND NON-DISCLOSURE AGREEMENT. The Company
will use its best efforts to cause each officer, Key Employee, consultant and
other personnel, including employees, agents and contractors, who have
contributed to or participated in the conception and development of the
intellectual property on behalf of the Company, and all employees now or
hereafter employed by the Company or any Subsidiary promptly to execute an
agreement substantially in the form of EXHIBIT M hereto or in such other form as
is approved by the Board of Directors.
(k) FINANCINGS. The Company will promptly, fully and in detail,
inform the Board of Directors in advance of any commitments or contracts
relating to financing of any nature in which the Company pledges corporate
assets, other than under purchase money security interests secured only by the
assets purchased with such financing in the ordinary course of business.
(l) BOARD OF DIRECTORS; INDEMNIFICATION. The Board of Directors
shall consist of not less than three (3) directors. The articles of
incorporation and bylaws of the Company shall at all times provide for the
indemnification of the directors of the Company to the fullest extent provided
by the law of the jurisdiction in which the Company is organized. Prior to such
time as the Company effects the first and underwritten public offering of its
Common Stock, the Company will obtain and maintain directors and officers
liability insurance with limits of not less than $10,000,000. The Company shall
pay for reasonable travel and living expenses of the members of the Board of
Directors who are not employees of the Company in attending meetings of the
Board of Directors and committees thereof and in conducting other business on
behalf of the Company.
(m) SUBORDINATION OF CLASS B NOTES. The Company shall not take any
action that would eliminate or reduce the full subordination of the Class B
Notes to the Notes. The Company shall take all necessary and desirable action
to maintain such subordination.
6.2 REPORTING REQUIREMENTS. The Company will furnish the following to
each Shareholder and to each holder who owns of record or beneficially any Notes
or Shares.
(a) as soon as available, and in any event within twenty (20) days
after the end of each fiscal month of the Company, Consolidated balance sheets
of the Company and its Subsidiaries as of the end of such month and Consolidated
statements of income and of statements of cash flow of the Company and its
Subsidiaries for the period ending with such month, setting forth in each case
in comparative form the corresponding figures for the corresponding period of
-19-
the prior fiscal year and the corresponding figures from the Company's budget
and operating plan, all in reasonable detail and duly certified by the chief
executive officer or chief financial officer of the Company as having been
prepared in accordance with generally accepted accounting principles
consistently applied except for a lack of customary year end disclosures and
year end adjustments;
(b) as soon as available, and in any event within ninety (90) days
after the end of each fiscal year of the Company, a copy of the annual audit
report for such year for the Company and its Subsidiaries, including therein
consolidated balance sheets of the Company and its Subsidiaries as of the end of
such fiscal year and consolidated statements of income and retained earnings and
of statements of cash flow of the Company and its Subsidiaries for such fiscal
year, setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, and the corresponding figures from the Company's
budget and operating plan all duly certified by a "Big Six" independent public
accounting firm selected by the Company's Board of Directors;
(c) at the time of delivery of each monthly and annual statement, a
certificate, executed by the chief executive officer or chief financial officer
of the Company, in the case of monthly statements, and the Company's independent
public accountants, in the case of annual statements, stating that such officer
or accountants, as the case may be, has no knowledge of any default by the
Company or any Subsidiary in the performance or observance of any of the
provisions of this Agreement or, if such officer or accountant has such
knowledge, specifying such default and the nature thereof;
(d) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, materially
affecting the Company and the Subsidiaries when considered as a whole;
(e) at least thirty (30) days prior to the commencement of each
fiscal year of the Company, a copy of the initial operating plan and budget
provided for in Section 6.1(i);
(f) copies of all materials provided to the committees of the Board
of Directors, and to any such holder or Person who is not a member of the Board
of Directors copies of all materials provided to the Board of Directors;
(g) promptly after sending, making available or filing the same, all
reports and financial statements that the Company or any Subsidiary sends or
makes available to the Shareholders of the Company or for documents publicly
filed with the Securities and Exchange Commission under the Exchange Act; and
(h) all other information respecting the business, properties or the
condition or operations, financial or otherwise, of the Company or any of its
Subsidiaries that any Investor may from time to time reasonably request.
6.3 USE OF PROCEEDS; REPRESENTATIONS AND WARRANTIES OF BRITANNIA.
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(a) Promptly following the Closing, the Company will use $12,499,000
of the proceeds from the sale and issuance of the Shares and the Notes to redeem
from Britannia 500,000 shares of Common Stock for an aggregate price of
$22,499,000, consisting of cash in the aggregate amount of $12,499,000 and Class
B Subordinated Promissory Notes in the form attached hereto as EXHIBIT N (the
"Class B Notes") in the aggregate original principal amount of Ten Million
Dollars ($10,000,000.00). The Company and the Shareholders agree and
acknowledge that the Class B Notes are, by their terms, subordinated to the
Notes, that the Notes are considered Senior Debt pursuant to the terms of the
Class B Notes and that the holders of the Notes are entitled to the benefits of
Section 2 of the Class B Notes. The purchase and redemption of Britannia's
shares of Common Stock shall take place at the Closing, and at the Closing,
Britannia shall deliver to the Company certificates evidencing 500,000 shares of
Common Stock, duly endorsed in blank and in good order for transfer, against
wire transfer to the account of Britannia in payment of the purchase price for
the shares of Common Stock redeemed in the amount of Twelve Million Four
Hundred and Ninety-Nine Thousand Dollars ($12,499,000), net of the Two Million
Five Hundred Thousand Dollars ($2,500,000) to be placed into escrow in
accordance with Section 9.4 hereof and net of any other amounts withheld and
paid by the Company to third parties on behalf of Britannia pursuant to written
instructions from Britannia.
(b) Britannia represents and warrants to the Company and the
Investors that:
(i) Britannia owns of record and beneficially 850,000
shares of Common Stock;
(ii) All consents, approvals, authorizations, and orders
necessary for the sale and delivery of such shares of Common Stock to the
Company have been obtained, and Britannia has, and immediately prior to the
Closing will have, full right, power, authority and capacity to sell, sign,
transfer and deliver such shares of Common Stock to the Company pursuant to this
Agreement; and
(iii) Britannia has, and immediately prior the Closing, will
have, good and marketable title to such shares of Common Stock free and clear of
all liens, claims, security interests, charges, options, or other encumbrances
of any kind, and at the Closing, will deliver such shares of Common Stock to the
Company free and clear of all liens, claims, security interests, charges,
options, or other encumbrances of any kind.
ARTICLE VII
OBLIGATIONS AT THE CLOSING
7.1 DELIVERIES. At the Closing, the parties hereto shall also execute and
deliver all agreements and instruments referred to in Articles IV and V hereof
and otherwise provided herein.
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ARTICLE VIII
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made in this Agreement or any other instrument or document delivered
in connection herewith or therewith, shall survive the execution of this
Agreement until the thirtieth (30th) day following the publication by the
Company of audited financial statements for the year ended December 31, 1996
(the "Expiration Date"); PROVIDED, HOWEVER, that if, at any time prior to the
Expiration Date, any Investor (acting in good faith) delivers to any of the
Shareholders a written notice alleging the existence of an inaccuracy in or a
breach of any of the representations and warranties made by the Company and the
Shareholders (and setting forth in reasonable detail the basis for such
Investor's belief that such an inaccuracy or breach may exist) and asserting a
claim for recovery under Article IX based on such alleged inaccuracy or breach,
then the claim asserted in such notice shall survive the Expiration Date until
such time as such claim is fully and finally resolved. Such representations and
warranties shall not be limited or otherwise affected by or as a result of any
information furnished to or any investigation made by or knowledge of, any of
the Investors or their representatives.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE SHAREHOLDERS. Subject to the limitations set
forth in this Article IX, the Shareholders shall each indemnify and hold
harmless the Investors and their respective officers, directors, employees,
successors and assigns in respect of any and all claims, actions, suits or other
proceedings and any and all losses, costs, expenses, liabilities, fines,
penalties, interest and damages, whether or not arising out of any claim,
action, suit or other proceeding (and including reasonable counsel and
accountants' fees and expenses and all other reasonable costs and expenses of
investigation, defense or settlement of claims and amounts paid in settlement)
incurred by, imposed on or borne by the Investors or the Company ("Damages")
resulting from the breach of any of the representations, warranties or covenants
made by the Company or the Shareholders in this Agreement or in any other
document or instrument delivered in connection herewith. The Shareholders
acknowledge and agree that, if the Company suffers, incurs or otherwise becomes
subject to any Damages as a result of or in connection with any inaccuracy in or
breach of any representation, warranty, covenant or obligation, then the
Investors also shall be deemed, by virtue of their ownership of the stock of
the Company, to have incurred Damages as a result of and in connection with such
inaccuracy or breach in the same amount and to the same extent as has the
Company. The Shareholders shall be jointly and severally liable for any
indemnification liability of either of the Shareholders under this Article.
9.2 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the Investors shall promptly notify the Shareholders
of the claim and, when known, the facts constituting the basis for such claim;
provided that the Investors' failure to give such notice shall not affect any
rights or remedies of the Investors hereunder with respect to indemnification
for
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Damages except to the extent that the Shareholders are materially prejudiced
thereby. In the event of any claim for indemnification hereunder resulting from
or in connection with any claim or legal proceedings by a third party, the
notice to the Shareholders shall specify, if known, the amount or an estimate of
the amount of the liability arising therefrom. The Investors shall not settle
or compromise any claim by a third party for which they are entitled to
indemnification hereunder, without the prior written consent of the Shareholders
(which shall not be unreasonably withheld) unless suit shall have been
instituted against them and the Shareholders shall not have taken control of
such suit after notification thereof as provided in Section 9.3 of this
Agreement. Any Shareholder who is required to hold harmless, indemnify,
compensate or reimburse any Investor pursuant to this Article IX with respect to
any Damages also shall be liable to such Investor for interest on the amount of
such Damages (for the period commencing as of the date on which such Damages
were incurred and ending on the date on which the liability of such Shareholder
to such Investor is fully satisfied by such Shareholder) at a floating rate
equal to the sum of (a) the rate of interest publicly announced by Bank of
America, N.T. & S.A. from time to time as its prime, base or reference rate plus
(b) four percent (4%).
9.3 DEFENSE BY SHAREHOLDERS. In connection with any claim giving rise to
indemnity hereunder or resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Shareholders at
their sole cost and expense may, upon written notice to the Investors, assume
the defense of any such claim or legal proceeding if they acknowledge to the
Investors in writing their obligations to indemnify the Investors with respect
to all elements of such claim, and thereafter diligently conduct the defense
thereof with counsel reasonably acceptable to the Investors. The Investors
shall be entitled to participate in (but not control) the defense of any such
action with their counsel and at their own expense. If the Shareholders do not
assume or fail to conduct in a diligent manner the defense of any such claim or
litigation resulting therefrom, (a) the Investors may defend against such claim
or litigation, in such manner as they may deem appropriate, including, but not
limited to, settling such claim or litigation, after giving notice of the same
to the Shareholders, on such terms as the Investors may deem appropriate, and
(b) the Shareholders shall be entitled to participate in (but not control) the
defense of such action, with their counsel and at their own expense. If the
Shareholders thereafter seek to question the manner in which the Investors
defended such third party claim or the amount or nature of any such settlement,
the Shareholders shall have the burden to prove by a preponderance of the
evidence that the Investors did not defend or settle such third party claim in a
reasonably prudent manner. Each party agrees to cooperate fully with the other
such cooperation to include, without limitation, attendance at depositions and
the provision of relevant documents as may be reasonably requested by the
Shareholders, provided that the Shareholders will hold the Investors harmless
from all of their expenses, including reasonable attorneys' fees, incurred in
connection with such cooperation by the Investors.
9.4 ESCROW. At the Closing, Two Million Five Hundred Thousand Dollars
($2,500,000) shall be deposited by the Company in escrow (the "Escrow Fund") in
accordance with the Escrow Agreement. The Investors shall have the right to be
paid in respect of indemnification claims under this Article IX from the Escrow
Fund.
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9.5 THRESHOLD; CEILING.
(a) The Shareholders shall not be required to make any
indemnification payment pursuant to Section 9.1 until such time as the total
amount of all Damages (including the Damages arising from such inaccuracy or
breach and all other Damages arising from any other inaccuracies in or breaches
of any representations or warranties) that have been directly or indirectly
suffered or incurred by any one or more of the Investors, or to which any one or
more of the Investors has or have otherwise become subject, exceeds One Hundred
Thousand Dollars ($100,000.00) in the aggregate.
(b) The maximum liability of the Shareholders under Section 9.1 shall
be equal to Two Million Five Hundred Thousand Dollars ($2,500,000.00).
9.6 EXCLUSIVE REMEDY. The remedies provided in this Article IX shall be
exclusive as to any claims by a party (including the Investors and their
assigns) with respect to a breach of any representation or warranty set forth in
this Agreement or in any other document or instrument delivered in connection
herewith and shall preclude assertion by any party of any other rights or the
seeking of any other remedies against another party with respect to any such
breach of a representation or warranty; PROVIDED, HOWEVER, that nothing in this
Section 9.6 shall limit rights or remedies expressly provided for in this
Agreement, rights or remedies pursuant to federal or state securities laws or
rights or remedies which, as a matter of applicable law or public policy, cannot
be limited or waived.
ARTICLE X
DEFINITIONS AND ACCOUNTING TERMS
10.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Affiliate" (and, with a correlative meaning, "AFFILIATED") shall
mean, with respect to any Person, any other Person that directly, or through one
or more intermediaries, controls or is controlled by or is under common control
with such first Person, and, if such a Person is an individual, any member of
the immediate family of such individual and any trust whose principal
beneficiary is such individual or one or more members of such immediate family
and any Person who is controlled by any such member or trust. As used in this
definition, "control" (including, with correlative meanings, "controlled by" and
"under common control with") shall mean possession, directly or indirectly, of
power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise), and "immediate family" shall mean parents, spouse and
children.
"Agreement" means this Preferred Stock and Subordinated Note Purchase
Agreement as from time to time amended and in effect between the parties.
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"Any Public Offering" means and includes the closing of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Common Stock for the
account of the Company.
"Board of Directors" shall mean the then present members of the Board
of Directors of the Company.
"Common Stock" includes (a) the Company's Common Stock, no par value,
as authorized on the date of this Agreement, (b) any other capital stock of any
class or classes (however designated) of the Company, authorized on or after the
date hereof, the holders of which shall have the right, without limitation as to
amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies, be entitled to vote for the election of directors of
the Company (even though the right so to vote has been suspended by the
happening of such a contingency), and (c) any other securities into which or for
which any of the securities described in (a) or (b) may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
"Company" means and shall include Apex PC Solutions, Inc., a
Washington corporation, and its successors and assigns.
"Company Facility" shall mean any real property asset (including the
land, the improvements and fixtures thereon and the ambient air ground water and
surface water thereof), that the Company owns, operates, occupies, controls or
leases as of the date of this Agreement.
"Consolidated" when used with reference to any term defined herein
shall mean that term as applied to the accounts of the Company and its
Subsidiaries consolidated in accordance with generally accepted accounting
principles, consistently applied, after eliminating intercompany items and
minority interests.
"Debt Securities" means and includes (i) any debt security of the
Company that by its terms is convertible into or exchangeable for any equity
security of the Company that is a combination of debt and equity, or (ii) any
option, warrant or other right to subscribe for, purchase or otherwise acquire
any such debt security of the Company.
"Disposal Site" shall mean a landfill, incinerator, disposal agent,
waste hauler or recycler of Hazardous Materials.
"Environmental Law" means any Law pertaining to land use, air, soil,
surface water, groundwater (including the protection, cleanup, removal,
remediation or damage thereof), public or employee health or safety or any other
environmental matter, including, without limitation, the following laws as the
same may be amended from time to time: (a) Clean Air Act (42 U.S.C. Section
7401, et seq.); (b) Clean Water Act (33 U.S.C. Section 1251, et seq.); (c)
Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.); (d)
Comprehensive Environmental Response
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Compensation and Liability Act (42 U.S.C. Section 9601, et seq.); (e) Safe
Drinking Water Act (42 U.S.C. Section 300f, et seq.); (f) Toxic Substances
Control Act (15 U.S.C. Section 2601, et seq.); (g) Rivers and Harbors Act (33
U.S.C. Section 401, et seq.); (h) Endangered Species Act (16 U.S.C. Section
1531, et seq.); and (i) Occupational Safety and Health Act (29 U.S.C. Section
651, et seq.); together with any other foreign or domestic laws (federal, state,
provincial or local) relating to Hazardous Materials of Hazardous Materials
Activities.
"Environmental Permit" shall mean any approval, permit, license,
clearance or consent required to be obtained from any Person or any Governmental
Authority with respect to a Hazardous Materials Activity which is or was
conducted by the Company, its Subsidiaries or any of their past or present
subsidiaries.
"Exchange Act" means the Securities Exchange Act of 1934 and the rules
and regulations of the Securities and Exchange Commission (or of any other
federal agency then administering the Exchange Act) thereunder, all as the same
shall be in effect at the time.
"Governmental Authority" means any local, state, federal, foreign or
international governmental authority, agency or entity, including, but not
limited to, any court, commission, tribunal or panel having jurisdiction over
the matter at issue.
"Hazardous Material" shall mean any material or substance that is
prohibited or regulated by any Environmental Law or that has been designated by
any Governmental Authority to be radioactive, toxic, hazardous or otherwise a
danger to health, reproduction or the environment, including without limitation
asbestos, petroleum, radon gas, and radioactive matter.
"Hazardous Materials Activity" shall mean the handling,
transportation, transfer, recycling, storage, use, treatment, manufacture,
investigation, removal, remediation, release, exposure of others to, sale, or
distribution of any Hazardous Material or any product containing a Hazardous
Material.
"Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with generally accepted accounting principles,
consistently applied, be classified upon the obligor's balance sheet as
liabilities, excluding any liabilities in respect of deferred federal or state
income taxes, but in any event including, without limitation, liabilities
secured by any mortgage on property owned or acquired subject to such mortgage,
whether or not the liability secured thereby shall have been assumed, and also
including, without limitation, (i) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be so reflected in said balance sheet, except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and (ii) the present value of
any lease payments due under leases required to be capitalized in accordance
with applicable Statements of Financial Accounting Standards, determined by
discounting all such payments at the interest rate determined in accordance with
applicable Statements of Financial Accounting Standards.
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"Investors" means and shall include the persons listed on EXHIBIT A
hereto.
"Key Employee" means and includes the Chairman of the Board of
Directors, the President, any Vice-President and the Chief Financial Officer of
the Company or any Subsidiary, or any person who is not an officer of the
Company or any Subsidiary and is in charge of one or more of the following
functions: sales, marketing, production, or engineering and technical
development or any other position or employee so designated by the Board of
Directors of the Company or any employee with access to the confidential
information of the Company.
"Law" means any national, international, state, or local law, statute,
rule, regulation, ordinance, requirement for approval or permit, judgment,
injunction, decree of any court of applicable jurisdiction, or any treaty,
international understanding, or other rule which has the force of law,
including, without limitation, any Environmental Law.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, trust, or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Qualified Public Offering" means and includes the closing of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act, covering the offer and sale of Common Stock for the
account of the Company from which the aggregate net proceeds to the Company
exceed $15,000,000 and in which the price per share is at least $10.00 per share
(such amount to be equitably adjusted whenever there shall occur a stock split,
combination, reclassification or other similar event affecting the Common
Stock).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission (or of any other
federal agency then administering the Securities Act) thereunder, all as the
same shall be in effect at the time.
"Senior Debt" means all Indebtedness of the Company (which is not
convertible into equity securities of the Company and is not issued in
conjunction with equity securities of the Company or options or warrants to
purchase equity securities of the Company) for money borrowed from banks or
other institutional or commercial finance lenders, including any extensions or
renewals thereof, whether outstanding on the date hereof or thereafter created
or incurred.
"Subsidiary" or "Subsidiaries" means any corporation, 50% or more of
the outstanding voting stock of which shall at the time be owned by the Company
or by one or more Subsidiaries, or any other entity or enterprise, 50% or more
of the equity of which shall at the time be owned by the Company or by one or
more Subsidiaries.
"Tax" or "Taxes" shall mean any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise profits, withholding,
social security, unemployment, disability, real property, personal
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property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Wholly-Owned Subsidiary" or "Wholly-Owned Subsidiaries" means any
corporation, 100% of the outstanding voting stock of which shall at the time be
owned by the Company or by one or more Wholly-Owned Subsidiaries, or any other
entity or enterprise, 100% of the equity of which shall at the time be owned by
the Company or by one or more Wholly-Owned Subsidiaries.
10.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles, consistently applied, and all other financial data submitted
pursuant to this Agreement shall be prepared and calculated in accordance with
such principles.
ARTICLE XI
MISCELLANEOUS
11.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of
any Investor, or any other holder of the Preferred Stock, in exercising any
right, power or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
11.2 NO COMPANY RECISION. The Company specifically waives any rights to
rescind any transaction contemplated by this Agreement, unless the Investors
fail to pay the amounts owing to the Company at the Closing, when due or on
demand.
11.3 AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this Agreement to
the contrary notwithstanding, changes in or additions to this Agreement may be
made, and compliance with any covenant or provision herein or therein set forth
may be omitted or waived, upon the written consent of the Company, each of the
Shareholders and the Designated Representative. Any waiver or consent may be
given subject to satisfaction of conditions stated therein and any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
11.4 ADDRESSES FOR NOTICES, ETC. Any notices and other communications
required or permitted under this Agreement shall be effective if in writing and
delivered personally or sent by telecopier, Federal Express or registered or
certified mail, postage prepaid, addressed as follows:
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If to the Shareholders, to:
Xxxxxxxx Xxxx
0000 000xx Xxxxxx, X.X.
Xxxxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
and
Britannia Holdings Limited
Kings House, The Grange, Xx. Xxxxx Xxxx
Xxxxxxxx, Xxxxxxx Xxxxxxx XX0 0XX
Telecopier: 00-0000-000000
If to the Company, to: Apex PC Solutions, Inc.
00000 000xx Xxxxxx, X.X.
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxx Xxxxx
Telecopier: (000) 000-0000
with a copy to: Xxxxxx X. Xxxxxxxx, Esq.
Xxxxx Xxxxxx Xxxxxxxx
0000 Xxxxxxx Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
If to the Investors, to: the name(s) and address set forth on EXHIBIT A
hereto.
with a copy to: Xxxxxxx X. Xxxxx, Esq.
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Telecopier: (000) 000-0000
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Unless otherwise specified herein, such notices or other communications
shall be deemed effective (a) on the date delivered, if delivered personally,
(b) two business days after being sent, if sent by Federal Express or other
commercial overnight delivery service, (c) one business day after being sent, if
sent by telecopier with confirmation of good transmission and receipt, and
(d) three business days after being sent, if sent by registered or certified
mail. Each of the parties herewith shall be entitled to specify another address
by giving notice as aforesaid to each of the other parties hereto.
11.5 COSTS, EXPENSES AND TAXES. The Company agrees to pay on demand the
reasonable fees and out-of-pocket expenses of professional advisors incurred by
the Investors in connection with the investigation, preparation, execution and
delivery of this Agreement and the other instruments and documents to be
delivered hereunder and the transactions contemplated hereby and thereby,
including the fees and out-of-pocket expenses of Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, P.C., special counsel for the Investors. Notwithstanding the foregoing,
if the Closing does not occur for any reason, then the Company shall not be
responsible to pay any costs and expenses of the Investors in connection with
the investigation, preparation, execution and delivery of this Agreement and the
other instruments and documents to be delivered hereunder and the transactions
contemplated hereby and thereby. In addition, if the Closing occurs, the
Company shall pay any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this Agreement and the
purchase of the Shares and agrees to save the Investors harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and filing fees.
11.6 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Company, the Shareholders and the Investors and
their respective successors and assigns, except that no party shall have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the other parties; provided, however, that the holders of the
Notes and the Class B Notes may, subject to compliance with applicable
securities laws, assign the Notes and the Class B Notes, respectively.
11.7 PRIOR AGREEMENTS. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
11.8 SEVERABILITY. The invalidity or unenforceability of any provision
hereto shall in no way affect the validity or enforceability of any other
provision.
11.9 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Washington.
11.10 HEADINGS. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
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11.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.12 FURTHER ASSURANCES. From and after the date of this Agreement, upon
the request of the Investors, the Company and each Subsidiary shall execute and
deliver such instruments, documents and other writings as may be necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
11.13 INDEPENDENT COUNSEL.
(a) The Shareholders have had the opportunity to be represented by
counsel of their choosing in the negotiation and execution of this Agreement and
have not relied upon counsel for the Company, Xxxxx Xxxxxx Xxxxxxxx, or counsel
for the Investors, Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., with respect to any
matter relating hereto.
(b) The Company has been represented by Xxxxx Xxxxxx Xxxxxxxx in the
negotiation and execution of this Agreement and has not relied on any other
legal counsel with respect to any matter relating thereto.
11.14 CONFIDENTIALITY. Until the date of Closing, any information
relating to the terms of this Agreement and the transactions contemplated hereby
shall be treated as confidential and shall not be disclosed, by any of the
parties hereto, to a third party without the consent of the Board of Directors
of the Company and the mutual consent of the Investors.
11.15 PRESS RELEASE. No party hereto shall release a press release
relating to this Agreement or any of the transactions or documents contemplated
hereby without first submitting a copy of such press release to the other
parties hereto and obtaining the prior approval of such other parties to any
such press release, which approval shall not be unreasonably withheld.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
COMPANY: APEX PC SOLUTIONS, INC.,
a Washington corporation
By: /s/ Xxxxx Xxxxx
-----------------------------------
Xxxxx Xxxxx, President
SHAREHOLDERS: /s/ Xxxxxxxx Xxxx
----------------------------------------
Xxxxxxxx Xxxx
BRITANNIA HOLDINGS LIMITED
By: /s/ Xxxxxxx Xxxxxx Xxxx
-----------------------------------
Name: Xxxxxxx Xxxxxx Xxxx
Title: Director
[Signature Page to Stock and Subordinated Note Purchase Agreement]
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INVESTORS: ADVENT VII L.P.
By: TA Associates VII L.P., its General Partner
By: TA Associates, Inc., its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxxx, Managing Director
ADVENT ATLANTIC AND PACIFIC II L.P.
By: TA Associates AAP II Partners, its General
Partner
By: TA Associates, Inc., its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxxx, Managing Director
ADVENT NEW YORK L.P.
By: TA Associates VI L.P., its General Partner
By: TA Associates, Inc., its General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxxx, Managing Director
TA VENTURE INVESTORS LIMITED PARTNERSHIP
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxxx, General Partner
[Signature Page to Stock and Subordinated Note Purchase Agreement]
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