Exhibit 10.1
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SECURITIES PURCHASE AGREEMENT
BY AND BETWEEN
FRONTLINE CAPITAL GROUP
AND
DEUTSCHE BANK SHARPS XXXXXX INC.
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Dated as of December 13, 2000
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.........................................................................................1
ARTICLE II SALE AND PURCHASE...................................................................................6
SECTION 2.1. Agreement to Sell and to Purchase; Purchase Price..........................................6
SECTION 2.2. Closings...................................................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................9
SECTION 3.1. Organization and Standing..................................................................9
SECTION 3.2. Capital Stock..............................................................................9
SECTION 3.3. Authorization; Enforceability..............................................................10
SECTION 3.4. No Violation; Consents....................................................................10
SECTION 3.5. Commission Filings; Financial Statements..................................................11
SECTION 3.6. Absence of Certain Changes................................................................11
SECTION 3.7. Private Offering..........................................................................12
SECTION 3.8. Provided Information......................................................................12
SECTION 3.9. Litigation................................................................................12
SECTION 3.10. Permits and Licenses.....................................................................13
SECTION 3.11. Intellectual Property, etc...............................................................13
SECTION 3.12. Employee Benefit Plans and Employment Matters............................................14
SECTION 3.13. Taxes....................................................................................16
SECTION 3.14. Title to Assets..........................................................................18
SECTION 3.15. Contracts.................................................................................18
SECTION 3.16. Insurance.................................................................................19
SECTION 3.17. Investment Company.......................................................................19
SECTION 3.18. Environmental Laws and Regulations.......................................................19
SECTION 3.19. Brokers and Finders......................................................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER........................................................20
SECTION 4.1. Organization; Authorization; Enforceability...............................................20
SECTION 4.2. Private Placement.........................................................................21
SECTION 4.3. No Violation; Consents....................................................................22
ARTICLE V COVENANTS OF THE COMPANY............................................................................22
SECTION 5.1. [Reserved]................................................................................22
SECTION 5.2. Access to Books and Records...............................................................22
SECTION 5.3. Agreement to Take Necessary and Desirable Actions.........................................22
SECTION 5.4. Compliance with Conditions................................................................23
SECTION 5.5. HSR Act Notification......................................................................23
SECTION 5.6. Consents and Approvals....................................................................23
SECTION 5.7. Reservation of Shares.....................................................................24
SECTION 5.8. Use of Proceeds...........................................................................24
SECTION 5.9. Filing of Certificate of Designation......................................................24
SECTION 5.10. Listing of Shares........................................................................24
SECTION 5.11. Periodic Information.....................................................................24
SECTION 5.12. Legends..................................................................................24
SECTION 5.13. Directors and Officers Insurance; Indemnification........................................25
ARTICLE VI COVENANTS OF PURCHASER.............................................................................25
SECTION 6.1. Agreement to Take Necessary and Desirable Actions.........................................25
SECTION 6.2. Compliance with Conditions; Best Efforts...................................................25
SECTION 6.3. Consents and Approvals.....................................................................26
SECTION 6.4. Restrictions on Transfer...................................................................26
ARTICLE VII CONDITIONS PRECEDENT TO CLOSING....................................................................26
SECTION 7.1. Conditions to the Company's Obligations Regarding the Initial Closing.....................26
SECTION 7.2. Conditions to Purchaser's Obligations Regarding the Initial Closing.......................27
SECTION 7.3. Conditions to Purchaser's Obligations Regarding Additional Closings.......................28
ARTICLE VIII MISCELLANEOUS.....................................................................................29
SECTION 8.1. Survival; Indemnification.................................................................29
SECTION 8.2. Notices....................................................................................31
SECTION 8.3. Governing Law.............................................................................32
SECTION 8.4. Termination................................................................................32
SECTION 8.5. Entire Agreement...........................................................................33
SECTION 8.6. Modifications and Amendments..............................................................33
SECTION 8.7. Waivers and Extensions.....................................................................33
SECTION 8.8. Titles and Headings........................................................................33
SECTION 8.9. Exhibits and Schedules.....................................................................33
SECTION 8.10. Expenses..................................................................................34
SECTION 8.11. Press Releases and Public Announcements..................................................34
SECTION 8.12. Assignment; No Third Party Beneficiaries..................................................34
SECTION 8.13. Severability..............................................................................34
SECTION 8.14. Counterparts..............................................................................34
SECTION 8.15. Further Assurances........................................................................34
SECTION 8.16. Remedies Cumulative.......................................................................34
SECTION 8.17. Specific Performance......................................................................35
SECTION 8.18. No Purchaser Affiliate Liability..........................................................35
SECTION 8.19. Confidentiality...........................................................................35
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of December 13, 2000 (this
"Agreement"), by and between FrontLine Capital Group, a Delaware corporation
(the "Company"), and Deutsche Bank Sharps Xxxxxx Inc., a Delaware corporation
("Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company proposes, subject to the terms and conditions
set forth herein, to issue and sell to Purchaser up to 25,000 shares of its
9.25% Series B Convertible Cumulative Preferred Stock, par value $0.01 per
share, of the Company (the "Convertible Preferred Stock").
WHEREAS, Purchaser desires, subject to the terms and conditions set
forth herein, to purchase such Convertible Preferred Stock from the Company;
and
WHEREAS, the parties intend that the proceeds of the sale of such
shares of Convertible Preferred Stock will be used to provide funds for the
Company to (i) continue operations during its corporate restructuring,
including, without limitation, funding the operations of certain of its
partner companies, including RealtyIQ Corp. and (ii) repay certain Existing
Debt (as defined in the Certificate of Designation) pursuant to the terms of
the Certificate of Designation;
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows.
ARTICLE I
DEFINITIONS
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Applicable Law" means (a) any United States federal, state, local or
foreign law, statute, rule, regulation, order, writ, injunction, judgment,
decree or permit of any Governmental Authority and (b) any rule or listing
requirement of any applicable national stock exchange or listing requirement
of any national stock exchange or Commission recognized trading market on
which securities issued by the Company, or any of the Subsidiaries are listed
or quoted.
"Business Day" means any day other than a Saturday, a Sunday, or a
day when banks in The City of New York are authorized by Applicable Law to be
closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock and (ii) with respect to
any other Person, any and all partnership or other equity interests of such
Person.
"Certificate of Designation" means the Certificate of Designation of
the Powers, Preferences and Other Special Rights and Qualifications thereof
relating to the Convertible Preferred Stock, in the form attached hereto as
Exhibit A.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder.
"Commission" means the United States Securities and Exchange
Commission.
"Commission Filings" means, with respect to any point in time, all
reports, registration statements and other filings filed by the Company or any
Subsidiary with the Commission (and all notes, exhibits and schedules thereto
and all documents incorporated by reference therein) filed by the Company or
any Subsidiary, prior to such point in time, pursuant to the Exchange Act.
"Common Stock" means the common stock, par value $.01 per share, of
the Company.
"Company Disclosure Schedule" means the Company disclosure schedule
delivered to the Purchaser concurrently with the date hereof.
"Confidential Information" shall mean any and all secret,
confidential or proprietary technical and non-technical information, knowledge
or data regarding the business, affairs, products and financial information of
the Company and its Subsidiaries; provided, however, that any information
disclosed by a disclosing party will be considered "Confidential Information"
of such party by the receiving party only if such information (a) if provided
as information fixed in a tangible medium of expression, is conspicuously
designated as "Confidential", "Proprietary" or some similar designation, or
(b) if provided orally, is identified as confidential at the time of
disclosure and confirmed in writing within thirty (30) days of disclosure.
Notwithstanding anything to the contrary contained herein, "Confidential
Information" shall not include any information, knowledge or data which (a)
was in the public domain at or subsequent to the time such portion was
communicated to the receiving party by the disclosing party through no fault
of the receiving party, (b) was rightfully in the receiving party's possession
free of any obligation of confidence at or subsequent to the time such portion
was communicated to the receiving party by the disclosing party, (c) was
developed by employees or agents of the receiving party independently of and
without reference to any information communicated to the receiving party by
the disclosing party, or (d) was communicated by the disclosing party to an
unrelated third party free of any obligation of confidence.
"Contract" means any contract, lease, loan agreement, mortgage,
security agreement, trust indenture, note, bond, instrument, or other
agreement or arrangement (whether written or oral).
"Conversion Shares" means the shares of Common Stock issuable upon
the conversion or redemption of the Convertible Preferred Stock in accordance
with the terms of the Certificate of Designation.
"Convertible Preferred Stock" has the meaning set forth in the first
recital to this Agreement. The Convertible Preferred Stock has the
designation, powers, preferences and rights, and qualifications, limitations
and restrictions thereof set forth in the Certificate of Designation.
"DB Facility" means the amended and restated revolving line of credit
agreement by and between Bankers Trust Company and the Company dated as of
September 11, 2000, as amended from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all regulations promulgated thereunder, as in effect from time to
time.
"Equity Documents" means this Agreement, the Registration Rights
Agreement and the Certificate of Designation.
"Exchange Act" means the Securities Exchange Act of 1934, and the
rules and regulations of the Commission promulgated thereunder.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Governmental Authority" means (i) any foreign, United States
federal, state or local court or governmental or regulatory agency or
authority, (ii) any arbitration board, tribunal or mediator and (iii) any
national stock exchange or Commission recognized trading market on which
securities issued by the Company, or any of the Subsidiaries are listed or
quoted.
"HQ Global" means HQ Global Holdings, Inc., a Subsidiary of the
Company.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and applicable rules and regulations.
"Lien" means any mortgage, pledge, lien, security interest, claim,
restriction, charge or encumbrance of any kind.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, properties, operations, results
of operations or prospects of the Company and the Subsidiaries, taken as a
whole.
"Operating Entities" means each corporation, partnership, limited
liability company or other entity in which the Company has an ownership
interest.
"Permitted Transferee" means, with respect to any Purchaser, any
wholly owned subsidiary of such Person.
"Person" means any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Purchaser Affiliate" means (a) any direct or indirect holder of any
equity interests or securities in Purchaser (whether limited or general
partners, members, stockholders or otherwise), (b) any Affiliate of Purchaser,
(c) any director, officer, employee, representative or agent of (i) Purchaser,
(ii) any Affiliate of Purchaser or (iii) any holder of equity interests or
securities referred to in clause (a) above or (d) any person who is a "control
person" of Purchaser, as defined under Section 15 of the Securities Act or
Section 20 of the Exchange Act.
"Registration Rights Agreement" means the Registration Rights
Agreement, to be dated as of the Initial Closing Date, to be entered into by
and between the Company and Purchaser, in the form attached hereto as Exhibit
B.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations of the Commission promulgated thereunder.
"Spin Off" shall mean the spin off or other distribution of assets
(other than shares of HQ Global) to the stockholders of the Company approved
by the registered holders of the Shares in accordance with the Certificate of
Designation.
"subsidiary" means, with respect to any Person (i) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such Person, by a subsidiary of such Person, or by such Person and
one or more subsidiaries of such Person, (ii) a partnership in which such
Person or a subsidiary of such Person is, at the date of determination, a
general partner of such partnership and has the power to direct the policies
and management of such partnership or (iii) any other Person (other than a
corporation) in which such Person, a subsidiary of such Person or such Person
and one or more subsidiaries of such Person, directly or indirectly, at the
date of determination thereof, has (A) at least a majority ownership interest
or (B) the power to elect or direct the election of a majority of the
directors or other governing body of such Person.
"Subsidiary" means a subsidiary of the Company.
"Transactions" means the transactions contemplated by this Agreement.
(b) As used in this Agreement, the following terms shall have the
meanings given thereto in the Sections set forth opposite such terms:
Term Section
Additional Closing Date 2.2(b)
Additional Shares 2.2(a)
Additional Purchase Price 2.1(d)
Agreement Preamble
Closing 2.2(b)
Closing Date 2.2(b)
Company Preamble
Company Property 3.18
DGCL 3.2(d)
Employees 3.12(a)
Employee Plan 3.12(a)
Environmental Claims 3.18
Environmental Law 3.18
ERISA Affiliate 3.12
Governmental Licenses 3.10
Hazardous Materials 3.18
Immigration Laws 3.12(i)
Indemnified Party 8.1(b)
Indemnifying Party 8.1(c)
Information 3.8
Initial Closing 2.2(a)
Initial Closing Date 2.2(a)
Initial Issuance 2.1(a)
Initial Shares 2.1(a)
Initial Purchase Price 2.1(a)
Intellectual Property 3.11
Losses 8.1(b)
Material Contracts 3.15
Notice of Additional Closing 2.1(e)
Notices 8.2
Permitted Liens 3.14
Permitted Transferee Agreement 6.4
Projections 3.8
Purchase Price 2.1
Purchaser Preamble
Release 3.18
Shares 2.1(b)
Share Transfer 6.4
Tax 3.13(f)
Tax Controversy 3.13(c)
Tax Return 3.13(f)
URLs 3.11
ARTICLE II
SALE AND PURCHASE
SECTION 2.1. Agreement to Sell and to Purchase; Purchase Price. (a)
On the Initial Closing Date, and upon the terms and subject to the conditions
set forth in this Agreement, the Company shall issue and sell to Purchaser,
and Purchaser shall purchase from the Company (the "Initial Issuance"),
fifteen thousand (15,000) shares of Convertible Preferred Stock (the "Initial
Shares") for a purchase price of $15,000,000 (the "Initial Purchase Price").
(b) In addition to the Initial Shares the Company may, from time to
time authorize the issuance and sale of up to 10,000 additional shares of
Convertible Preferred Stock (any such shares of Convertible Preferred Stock
which are actually purchased by the Purchaser, the "Additional Shares" and,
together with the Initial Shares, the "Shares").
(c) The aggregate amount of Shares which shall be issued and sold
under this Agreement shall not exceed 25,000.
(d) The Company shall have the right, subject to compliance with the
provisions of this Agreement, to require the Purchaser to purchase Additional
Shares from time to time after the Initial Closing and on or prior to February
12, 2001 upon demand of the Company. The Company shall be entitled to exercise
such right no more than twice. In the event that the Company elects to
exercise such right and provided that a Notice of Additional Closing has been
given by the Company to the Purchaser on or before February 12, 2001, in
accordance with Section 2.1(e), the Purchaser will purchase from the Company
at each Additional Closing, the number of Additional Shares specified in the
relevant Notice of Additional Closing at a purchase price equal to $1,000 per
Additional Share (the "Additional Purchase Price").
(e) In the event that the Company elects to issue Additional Shares
pursuant to Section 2.1(d) (each an "Additional Issuance and, together with
the Initial Issuance, the "Issuances"), it shall give Purchaser written notice
(each a "Notice of Additional Closing") specifying (i) the aggregate amount of
Additional Shares to be issued (which amount shall be no less than 2,500 and,
if greater, an integral multiple of 500 in excess thereof) and (ii) the
applicable Closing Date for such Additional Closing (which date shall be a
Business Day no earlier than five Business Days after the giving of such
notice).
SECTION 2.2. Closings. (a) Subject to the satisfaction or waiver of
the conditions set forth in this Agreement, the purchase and sale of the
Initial Shares hereunder (the "Initial Closing") shall take place at 10:00
a.m. at the offices of White & Case LLP, counsel to Purchaser, at 1155 Avenue
of the Americas, New York, New York, on December 13, 2000 or on such other
date as the parties shall mutually agree upon (the "Initial Closing Date").
At the Initial Closing:
(i) Purchaser shall deliver:
(A) against delivery of certificates representing the Initial Shares
being purchased by Purchaser pursuant to Section 2.1(a), an amount equal
to the Initial Purchase Price via wire transfer of immediately available
funds to such bank account as the Company shall have designated not later
than one Business Day prior to the Initial Closing Date; and
(B) a copy of the Registration Rights Agreement executed by such
Purchaser.
(ii) The Company shall deliver to Purchaser:
(A) against payment of the Initial Purchase Price, a certificate or
certificates representing the Initial Shares being purchased by Purchaser
pursuant to Section 2.1(a), which shall be in definitive form and
registered in the name of Purchaser or its nominee or designee and in a
single certificate or in such other denominations as Purchaser shall have
requested not later than one Business Day prior to the Initial Closing
Date;
(B) an opinion of counsel to the Company, dated the Initial Closing
Date, substantially to the effect set forth in the form of Exhibit C
attached hereto;
(C) an officer's certificate of the Company as contemplated by
Section 7.2(f);
(D) a certificate of the secretary of the Company setting forth (w)
a copy of the First Amended and Restated Certificate of Incorporation of
the Company and all amendments thereto (including, without limitation,
the Certificate of Designation) as in effect on the Initial Closing Date,
all certified by the Secretary of State of the State of Delaware, (x) a
copy of the by-laws of the Company, as in effect on the Initial Closing
Date, (y) copies of all resolutions of the Company authorizing the
Transactions; and (z) an incumbency certificate setting forth the name,
title and authorized signature of each officer of the Company who will
execute documents in connection with the Transactions;
(E) a certificate of the Secretary of the Company setting forth, to
the best of his knowledge after reasonable investigation, (x) a copy of
the Certificate of Incorporation or similar organic document of each
direct Subsidiary of the Company and RealtyIQ Corp. and HQ Workplaces,
Inc., together with all amendments thereof, as in effect on the Initial
Closing Date, in each case certified by the Secretary of State or similar
authority of the applicable jurisdiction of incorporation and (y), to the
best of his knowledge, after reasonable investigation, the by-laws,
operating agreement or any similar document of each direct Subsidiary of
the Company and RealtyIQ Corp. and HQ Workplaces, Inc.;
(F) a long-form good standing certificate of the Company and HQ
Global issued by the Secretary of State of the State of Delaware; and
(G) a copy of the Registration Rights Agreement executed by the
Company.
(iii) The Company shall deliver to Purchaser (or its designee) a
placement fee in the amount of $750,000, in immediately available funds by
wire transfer to an account designated by Purchaser at least one Business Day
prior to the Initial Closing Date.
(iv) Purchaser shall have received evidence of the payment of all
costs and expenses of Purchaser for which invoices have been received prior to
the Initial Closing Date and which are required to be reimbursed by the
Company pursuant to Section 8.10 hereof.
(b) Subject to the satisfaction or waiver of the conditions set forth
in this Agreement, the purchase and sale of Additional Shares hereunder (each
an "Additional Closing" and together with the Initial Closing, each a
"Closing") shall take place at 10:00 a.m. at the offices of White & Case LLP,
counsel to the Purchaser, at 1155 Avenue of the Americas, New York, New York,
on such date as is specified in the relevant Notice of Additional Closing, or
such later date as the parties may mutually agree, and in no event shall be
later than February 19, 2001 (each an "Additional Closing Date" and together
with the Initial Closing Date, a "Closing Date").
At each Additional Closing:
(i) Purchaser shall deliver against delivery of certificates
representing the Additional Shares being purchased by Purchaser pursuant to
Section 2.1(b), an amount equal to the applicable Additional Purchase Price
via wire transfer of immediately available funds to such bank account as the
Company shall have designated not later than one Business Day prior to the
applicable Additional Closing Date; and
(ii) The Company shall deliver to Purchaser:
(A) against payment of the applicable Additional Purchase Price, a
certificate or certificates representing the Additional Shares being
purchased by Purchaser pursuant to Section 2.1(b), which shall be in
definitive form and registered in the name of Purchaser or its nominee or
designee and in a single certificate or in such other denominations as
Purchaser shall have requested not later than one Business Day prior to
the applicable Additional Closing Date;
(B) an opinion of counsel to the Company, dated the applicable
Additional Closing Date, substantially to the effect set forth in the
form of Exhibit C attached hereto;
(C) an officer's certificate of the Company as contemplated by
Section 7.3(f);
(D) a long-form good standing certificate of the Company and HQ
Global issued by the Secretary of State of the State of Delaware; and
(iii) Purchaser shall have received evidence of the payment of all
costs and expenses of Purchaser for which invoices have been received prior to
the relevant Additional Closing Date and which are required to be reimbursed
by the Company pursuant to Section 8.10 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company hereby represents and warrants to Purchaser on the date
hereof and on and as of each applicable Closing Date as follows:
SECTION 3.1. Organization and Standing. Each of the Company, HQ
Global and the other Subsidiaries is duly organized, validly existing and in
good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as it is now being
conducted and as proposed to be conducted. Each of the Company, HQ Global and
the other Subsidiaries is duly qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the nature of its
business makes such qualification necessary, except for any such failures to
so qualify or be in good standing that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The
Company has delivered to Purchaser true and complete copies of the Company's
Certificate of Incorporation (including, without limitation, the Certificate
of Designation), as amended to date, and by-laws, as in effect on the date
hereof and the certificates of incorporation, by-laws or other similar
organizational documents of the Subsidiaries, in each case, as amended through
the date hereof.
SECTION 3.2. Capital Stock. (a) As of the Initial Closing Date, the
authorized Capital Stock of the Company will consist solely of (i) 100,000,000
shares of Common Stock, of which only 36,631,278 shares are issued and
outstanding (assuming no additional exercises of existing stock options) no
shares are held in treasury and 8,007,290 are reserved for issuance upon the
exercise of outstanding warrants, options and other convertible or
exchangeable securities (other than the Shares), (ii) 25,000,000 shares of
Preferred Stock, $0.01 per value per share, of which only 26,000 shares of
87/8% Series A Convertible Cumulative Preferred Stock are issued and
outstanding and no shares are held in treasury and (iii) 25,000 shares of its
9.25% Series B Convertible Cumulative Preferred Stock of which, prior to the
issuance of the Initial Shares on the Initial Closing Date, as contemplated by
this Agreement, no Shares will be designated or outstanding and, after the
Initial Closing Date, only Shares issued pursuant to this Agreement will be
outstanding. Each share of Capital Stock of the Company that will be issued
and outstanding immediately following each applicable Closing, including
without limitation the Shares issued and outstanding at such time, will be
duly authorized and validly issued and fully paid and nonassessable, and the
issuance thereof will not have been subject to any preemptive rights or made
in violation of any Applicable Law.
(b) Except as disclosed in the Commission Filings or set forth on
Schedule 3.2 of the Company Disclosure Schedule, as of the date of this
Agreement, there are and on the Initial Closing Date there will be (i) no
outstanding options, warrants, agreements, conversion rights, exchange rights,
preemptive rights or other rights (whether contingent or not) to subscribe
for, purchase or acquire any issued or unissued shares of Capital Stock of the
Company or any Subsidiary, and (ii) no restrictions upon, or Contracts or
understandings of the Company or any Subsidiary, or, to the knowledge of the
Company, Contracts or understandings of any other Person, with respect to, the
voting or transfer of any shares of Capital Stock of the Company or any
Subsidiary.
(c) The Conversion Shares have been duly authorized and validly
reserved for issuance in contemplation of the conversion of the Convertible
Preferred Stock and, when issued and delivered in accordance with the terms of
the Certificate of Designation, will have been validly issued and will be
fully paid and nonassessable, and the issuance thereof will not have been
subject to any preemptive rights or made in violation of any Applicable Law.
(d) The holders of the Convertible Preferred Stock will, upon
issuance thereof, have the rights set forth in the Certificate of Designation
(subject to the limitations and qualifications set forth therein and under the
General Corporation Law of the State of Delaware (the "DGCL")), and the
Certificate of Designation, on each applicable Closing Date, will be in full
force and effect.
SECTION 3.3. Authorization; Enforceability. The Company has all
necessary power and authority to execute, deliver and perform its obligations
under each of the Equity Documents, and has taken all action necessary to
authorize the execution, delivery and performance by it of each of such Equity
Documents and to consummate the Issuances. No other corporate or stockholder
proceeding on the part of the Company is necessary for such authorization,
execution, delivery and consummation. The Company has duly executed and
delivered this Agreement and, at the Initial Closing, the Company will have
duly executed and delivered each of the other Equity Documents to be executed
and delivered at or prior to Initial Closing. This Agreement constitutes, and
the Registration Rights Agreement, when executed and delivered by the Company,
will constitute, a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
enforcement of creditors' rights generally or general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
SECTION 3.4. No Violation; Consents. (a) The execution, delivery and
performance by the Company of each of the Equity Documents and the
consummation by the Company of the Issuances do not and will not contravene
any Applicable Law. Except as set forth on Schedule 3.4 of the Company
Disclosure Schedule, the execution, delivery and performance by the Company of
each of the Equity Documents and the consummation of the Issuances (i) will
not (A) violate, result in a breach of or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under any Contract to which the
Company, HQ Global or any other Subsidiary is a party or by which the Company,
HQ Global or any other such Subsidiary is bound or to which any of its assets
is subject, or (B) result in the creation or imposition of any Lien upon any
of the assets of the Company, HQ Global or any other Subsidiary, except for
any such violations, breaches, defaults or Liens that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect
or have a material adverse effect on the ability of the Company to perform its
obligations under the Equity Documents and (ii) will not conflict with or
violate any provision of the certificate of incorporation or by-laws or other
governing documents of the Company, HQ Global or the other Subsidiaries.
(b) Except for (i) the filings, if any, required by applicable United
States federal and state securities laws which shall be made (to the extent
required) on or prior to the applicable Closing Date, and (ii) filing of the
Certificate of Designation with the Secretary of State of the State of
Delaware, which shall be made prior to the Initial Closing Date, no consent,
authorization or order of, or filing or registration with, any Governmental
Authority or other Person is required to be obtained or made by the Company
for the execution, delivery and performance of this Agreement or the
consummation by the Company of the Issuances, or for the execution, delivery
and performance by the Company of the Equity Documents, except where the
failure to obtain such consents, authorizations or orders, or make such
filings or registrations, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the ability of the Company to perform its obligations under the
Equity Documents.
SECTION 3.5. Commission Filings; Financial Statements. (a) The
Company has timely filed all reports, registration statements and other
filings, together with any amendments or supplements required to be made with
respect thereto, that it has been required to file with the Commission under
the Exchange Act. As of the respective dates of their filing with the
Commission, the Commission Filings complied in all material respects with the
applicable provisions of the Exchange Act and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.
(b) Each of the historical consolidated financial statements of the
Company (including any related notes or schedules) included in the Commission
Filings was prepared in accordance with GAAP (except as may be disclosed
therein), and complied in all material respects with the rules and regulations
of the Commission. Such financial statements fairly present the consolidated
financial position of the Company and the Subsidiaries as of the dates thereof
and the consolidated results of operations, cash flows and changes in
stockholders' equity for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal, recurring year-end audit
adjustments). Except as set forth or reflected in the Commission Filings filed
prior to the date hereof, the Company does not have any liabilities or
obligations of any nature (whether accrued, absolute, contingent, unasserted
or otherwise) that individually or in the aggregate would be expected to have
a Material Adverse Effect.
SECTION 3.6. Absence of Certain Changes. Except as disclosed in the
Commission Filings filed prior to the date hereof or on Schedule 3.6 of the
Company Disclosure Schedule, since December 31, 1999, (i) there has not been
any event, occurrence or development of a state of circumstances or facts (or
the failure of any of the foregoing to occur) that has had, or would
reasonably be expected to have (a) a Material Adverse Effect or (b) a material
adverse effect on the ability of the Company to perform its obligations under
this Agreement or the Equity Documents; (ii) the businesses of the Company, HQ
Global and the other material Subsidiaries have been conducted only in the
ordinary course; (iii) neither the Company, HQ Global or any of the other
material Subsidiaries has incurred any material liabilities (direct,
contingent or otherwise) or engaged in any material transaction or entered
into any material agreement outside of the ordinary course of business; (iv)
the Company, HQ Global and its other Subsidiaries have not increased the
compensation of any officer or director or granted any general salary or
benefits increase, other than in the ordinary course of business or pursuant
to severance arrangements entered into in connection with the restructuring of
the Company announced in October 2000; (v) there has been no declaration,
setting aside or payment of any dividend or distribution with respect to any
Capital Stock of the Company; or (vi) there has been no change by the Company,
HQ Global or the other Subsidiaries in accounting principles, practices or
methods.
SECTION 3.7. Private Offering. Assuming the accuracy of the
representations and warranties set forth in Section 4.2, the offer and sale of
the Shares to the Purchaser is exempt from the registration and prospectus
delivery requirements of the Securities Act. Neither the Company, nor anyone
acting on behalf of it, has offered or sold or will offer or sell any
securities, or has taken or will take any other action (including, without
limitation, any offering of any securities of the Company under circumstances
that would require, under the Securities Act, the integration of such offering
with the offering and sale of the Shares), which would subject the Issuances
to the registration provisions of the Securities Act.
SECTION 3.8. Provided Information. All written information (excluding
information of a general economic nature and financial projections) concerning
the Company and the Subsidiaries and the Transactions (the "Information") that
has been or will be prepared by or on behalf of the Company or any of the
Company's authorized representatives and that has been made or will be made
available to Purchaser or any of its authorized representatives in connection
with the Issuances, when taken as a whole, was or will be, at the time made
available, correct in all material respects and did not or will not, at the
time made available, contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements contained
therein not misleading in light of the circumstances under which such
statements are made. All financial projections concerning the Company, HQ
Global and the Issuances (the "Projections") that have been prepared by or on
behalf of the Company or any of the Company's authorized representatives and
that have been or will be made available to the Purchaser or any of its
authorized representatives in connection with the Issuances have been, and at
the time made available will be, reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the Company's management
as to the future financial performance of the Company and HQ Global and the
individual business segments thereof.
SECTION 3.9. Litigation. Except as disclosed in the Commission
Filings or as set forth in Schedule 3.9, there is no action, suit, proceeding
at law or in equity, or any arbitration or any administrative or other
proceeding by or before (or to the knowledge of the Company any investigation
by) any Governmental Authority, pending, or, to the best knowledge of the
Company, threatened, against or affecting the Company, HQ Global or any of its
other Subsidiaries or any of their properties or rights which could reasonably
be expected to have a Material Adverse Effect or would be reasonably likely to
prevent or materially delay consummation of the Transactions. There are no
such suits, actions, claims, proceedings or investigations pending or, to the
knowledge of the Company, threatened, seeking to prevent or challenging the
Transactions. Except as disclosed in the Commission Filings filed prior to the
relevant Closing Date, neither the Company, HQ Global nor any of its other
Subsidiaries is subject to any judgment, order or decree entered in any
lawsuit or proceeding which could reasonably be expected to have a Material
Adverse Effect or would be reasonably likely to prevent or materially delay
consummation of the Transactions.
SECTION 3.10. Permits and Licenses. The Company, HQ Global and the
other Subsidiaries have obtained all governmental permits, licenses,
franchises and authorizations required for the Company, HQ Global and the
other Subsidiaries to conduct their respective businesses as currently
conducted (collectively, "Governmental Licenses"), except for those of which
the failure to obtain would not have a Material Adverse Effect or prevent or
materially delay the consummation of the Transactions; the Company, HQ Global
and the other Subsidiaries, except where the failure to so comply would not,
singly or in the aggregate, reasonably be expected to (i) have a Material
Adverse Effect or (ii) prevent or materially delay the consummation of the
Transactions, are in compliance with the terms and conditions of all such
Governmental Licenses; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental Licenses or
the failure of such Governmental Licenses to be in full force and effect would
not reasonably be expected to (i) have a Material Adverse Effect, or (ii)
prevent or materially delay the consummation of the Transactions; and neither
the Company, HQ Global nor any of the other Subsidiaries has received any
notice of proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would reasonably be expected to (i)
have a Material Adverse Effect or (ii) prevent or materially delay the
consummation of the Transactions. There exists no reason or cause that could
justify the variation, suspension, cancellation or termination of any such
Governmental Licenses held by the Company, HQ Global or any of the other
Subsidiaries with respect to the current or contemplated operation of their
respective businesses, which variation, suspension, cancellation or
termination could reasonably be expected to (i) have a Material Adverse Effect
or (ii) prevent or materially delay the consummation of the Transactions.
SECTION 3.11. Intellectual Property, etc. In the operation of their
business the Company, HQ Global and the other Subsidiaries have used, and
currently use, domestic and foreign patents, patent applications, patent
licenses, software licenses, know-how licenses, trade names, trademarks,
copyrights, unpatented inventions, service marks, trademark registrations and
applications, service xxxx registrations and applications, copyright
registrations and applications, uniform resource locators ("URLs"), Internet
domain names, trade secrets and other confidential and proprietary information
(collectively the "Intellectual Property"). Schedule 3.11 of the Company
Disclosure Schedule contains an accurate and complete list of all Intellectual
Property which is of material importance to the operation of the business of
the Company, HQ Global and the other Subsidiaries taken as a whole. Unless
otherwise indicated in the Commission Filings or on Schedule 3.11 of the
Company Disclosure Schedule, the Company (or the Subsidiary indicated) owns
the entire right, title and interest in and to the Intellectual Property
listed on such Schedule 3.11 of the Company Disclosure Schedule (including,
without limitation, the exclusive right to xxx and license the same) free and
clear of any Liens (and without obligation to pay any royalty or other fee
with respect thereto) and each item constituting part of the Intellectual
Property which is owned by the Company, HQ Global or any other Subsidiary and
listed on Schedule 3.11 of the Company Disclosure Schedule has been, to the
extent indicated in Schedule 3.11 of the Company Disclosure Schedule, duly
registered with, filed in or issued by, as the case may be, the United States
Patent and Trademark Office or such other government entities, domestic or
foreign, or a duly accredited and appropriate domain name registrar, as are
indicated in Schedule 3.11 of the Company Disclosure Schedule and such
registrations, filings and issuances remain in full force and effect. Neither
the Company's, HQ Global's or any of the other Subsidiaries' use or practice
of the Intellectual Property listed on Schedule 3.11 infringes any other
Person's rights thereto. No Intellectual Property set forth on Schedule 3.11
of the Company Disclosure Schedule has been canceled, abandoned, or otherwise
terminated and all renewal fees (if applicable) in respect thereof have been
duly paid. Except as stated in Schedule 3.11 of the Company Disclosure
Schedule, there are no pending or to the best knowledge of the Company,
threatened proceedings or litigation or other adverse claims affecting or with
respect to the Intellectual Property listed on Schedule 3.11 of the Company
Disclosure Schedule. Schedule 3.11 of the Company Disclosure Schedule lists
all notices or claims currently pending or received by the Company, HQ Global
or any of its other Subsidiaries during the past two years which claim, as
applicable, infringement, contributory infringement, inducement to infringe,
misappropriation, misuse or breach by the Company, HQ Global or any of its
other Subsidiaries with respect to any Intellectual Property or license
thereof and, except as set forth on Schedule 3.11 of the Company Disclosure
Schedule, there is, to the knowledge of the Company, no reasonable basis upon
which any such claim may be asserted. To the best knowledge of the Company,
except as indicated on Schedule 3.11 of the Company Disclosure Schedule, no
Person is infringing, misappropriating or misusing any of its Intellectual
Property.
SECTION 3.12. Employee Benefit Plans and Employment Matters. (a)
Schedule 3.12 of the Company Disclosure Schedule sets forth as of the date
hereof a true and complete list of each "employee benefit plan" (as defined in
Section 3(3) of ERISA) of the Company, HQ Global and its other Subsidiaries in
which current or former employees, agents, directors, or independent
contractors of the Company, HQ Global or its other Subsidiaries ("Employees")
participate or pursuant to which the Company, HQ Global or any of its other
Subsidiaries or any organization (an "ERISA Affiliate") which, together with
the Company, HQ Global and/or any such Subsidiary may have a liability with
respect to Employees (each, an "Employee Plan"). Except as disclosed in the
Commission Filings or on Schedule 3.12 of the Company Disclosure Schedule,
neither the Company, HQ Global nor any of its other Subsidiaries has any
commitment to establish any additional Employee Plans or to modify or change
materially any existing Employee Plan. The Company has made available to
Purchaser with respect to each Employee Plan: (i) a true and complete copy of
all written documents comprising such Employee Plan (including amendments and
individual agreements relating thereto) or, if there is no such written
document, an accurate and complete description of such Employee Plan; and (ii)
the most recent financial statements, if any.
(b) Each Employee Plan has been established and maintained in
substantial compliance with its terms and the requirements of all Applicable
Law (including, without limitation, ERISA and the Code), and all contributions
and payments required to be made to the Employee Plans or related agreement
have been made in a timely fashion.
(c) To the best of the Company's knowledge, no event has occurred and
no condition exists with respect to any Employee Plan which is intended to be
"qualified" within the meaning of Section 401(a) of the Code which could cause
such Employee Plan not to be so qualified.
(d) Neither the Company, HQ Global nor any other Subsidiary or ERISA
Affiliate currently maintains or contributes to, or has at any time maintained
or contributed to or been obligated to contribute to, any plan, program or
arrangement covered by Title IV of ERISA or subject to Section 412 of the Code
or Section 302 of ERISA.
(e) Neither the Company, HQ Global nor any other Subsidiary, nor, to
the Company's knowledge, any other "disqualified person" or "party in
interest" (as defined in Section 4975(e)(2) of the Code and Section 3(14) of
ERISA, respectively) has engaged in any transactions in connection with any
Employee Plan that could reasonably be expected to result in the imposition of
a material penalty pursuant to Section 502 of ERISA, material damages pursuant
to Section 409 of ERISA or a material tax pursuant to Section 4975 of the
Code.
(f) Except as set forth in the Commission Filings or on Schedule 3.12
of the Company Disclosure Schedule, none of the execution or delivery of the
Equity Documents or the consummation of the transactions contemplated hereby
or thereby (either alone or together with any additional or subsequent
events), constitutes an event under any Employee Plan, loan to, or individual
agreement or contract with, an Employee or director that may result in any
material payment (whether of severance pay or otherwise), restriction or
limitation upon the assets of any Employee Plan, acceleration of payment or
vesting, increase in benefits or compensation, or required funding, with
respect to any Employee or directors, or the forgiveness of any loan or other
commitment of any Employees or directors.
(g) There are no actions, suits, arbitrations, inquiries, audits,
investigations or other proceedings (other than routine claims for benefits)
pending or, to the Company's knowledge, threatened, with respect to any
Employee Plan, except for any of the foregoing that do not and would not
reasonably be expected to result, individually or in the aggregate, in a
material liability of the Company, HQ Global or any other Subsidiary.
(h) Except as set forth on Schedule 3.12 of the Company Disclosure
Schedule, no amounts paid or payable by the Company, HQ Global or any other
Subsidiary to or with respect to any Employee (including any such amounts that
may be payable as a result of the execution and delivery of the Equity
Documents or the consummation of the transactions contemplated hereby or
thereby) will fail to be deductible for United States federal income tax
purposes by reason of Section 280G of the Code.
(i) the Company, HQ Global and the other Subsidiaries are in
compliance in all material respects with the terms and provisions of the
Immigration Reform and Control Act of 1986, as amended, and all related
regulations promulgated thereunder (the "Immigration Laws"). The Company, HQ
Global and the other Subsidiaries have never been the subject of any
inspection or investigation relating to its compliance with or violation of
the Immigration Laws, nor have they been warned, fined or otherwise penalized
by reason of any such failure to comply with the Immigration Laws, nor is any
such proceeding pending or to the Company's knowledge, threatened.
(j) Except as set forth in the Commission Filings or on Schedule 3.12
of the Company Disclosure Schedule, the Company, HQ Global and the other
Subsidiaries are in compliance in all material respects with all Applicable
Laws respecting employment and employment practices, terms and conditions and
wages and hours.
SECTION 3.13. Taxes. Except as set forth on Schedule 3.13 of the
Company Disclosure Schedule:
(a) The Company, HQ Global and the other Subsidiaries have timely
filed or caused to be timely filed with the appropriate taxing authority all
income Tax Returns and all other material United States federal, state,
county, local and foreign Tax Returns required to be filed by or with respect
to them. Such Tax Returns have accurately reflected all liability for Taxes of
the Company and the Subsidiaries for the periods covered thereby. All Taxes
have been paid in full on a timely basis other than (1) Taxes which
individually or, together with all other unpaid Taxes, are immaterial, or (2)
Taxes which are being contested in good faith by appropriate proceedings,
diligently pursued, and which have been fully reserved on the balance sheet of
the Company in accordance with GAAP.
(b) There are no material Tax assessments or adjustments that have
been asserted against the Company, HQ Global or the other Subsidiaries for any
period.
(c) There are no audits, examinations, actions, suits, proceedings,
investigations, claims or assessments pending or, to the knowledge of the
Company, threatened, against the Company, HQ Global or any of the other
Subsidiaries for any alleged deficiency in any Tax (a "Tax Controversy") and
the Company has not been notified of any proposed Tax Controversy against the
Company, HQ Global or any of the other Subsidiaries (other than a Tax
Controversy set forth on Schedule 3.13 of the Company Disclosure Schedule
which is being contested in good faith). Neither the Company, HQ Global nor
any of the other Subsidiaries have been included in any "consolidated,"
"unitary" or "combined" Tax Return provided for under the law of the United
States, any foreign jurisdiction or any state or locality with respect to
Taxes for any taxable period for which the statute of limitations has not
expired, other than such a Tax Return for which the Company, HQ Global or any
of the other Subsidiaries was a common parent. The Company has delivered to
Purchaser correct and complete copies of all United States federal, state, and
foreign income Tax Returns (to the extent filed as of the date hereof or, if
not filed, correct and complete copies of extensions thereof), examination
reports, statements of deficiencies assessed against or agreed to by the
Company and any of its Subsidiaries, or any other similar correspondence from
a taxing authority, relating to taxable years 1997, 1998 and 1999.
(d) There are no liens for Taxes on the assets of the Company, HQ
Global or any of the other Subsidiaries, except for statutory liens for
current Taxes not yet due and payable.
(e) (i) Neither the Company, HQ Global nor any of the other
Subsidiaries has entered into an agreement or waiver or been requested to
enter into an agreement or waiver extending any statute of limitations
relating to the payment or collection of Taxes of the Company, HQ Global or
any of the other Subsidiaries.
(ii) All Taxes which the Company, HQ Global or any of the other
Subsidiaries is (or was) required by law to withhold or collect (other than
immaterial amounts) have been duly withheld or collected, and have been timely
paid over to the proper authorities to the extent due and payable.
(iii) No claim has ever been made (and not settled) by any taxing
authority in a jurisdiction where the Company, HQ Global or any of the other
Subsidiaries does not file Tax Returns that the Company, HQ Global or any of
the other Subsidiaries is or may be subject to taxation by that jurisdiction.
(iv) There are no tax sharing, allocation, indemnification or similar
agreements in effect as between the Company, HQ Global or the other
Subsidiaries or any predecessor or affiliate thereof and any other party under
which the Company, HQ Global any other Subsidiary, or Purchaser could be
liable for Taxes or other claims of any third party.
(v) Neither the Company, HQ Global nor any of the other Subsidiaries
has applied for, been granted, or agreed to any accounting method change for
which it will be required to take into account any adjustment under Section
481 of the Code or any similar provision of the Code or the corresponding tax
laws of any nation, state or locality, which could reasonably be expected to
cause a Material Adverse Effect.
(vi) No election under Section 341(f) of the Code has been made or
shall be made prior to each applicable Closing Date to treat the Company, HQ
Global or any of the other Subsidiaries as a consenting corporation, as
defined in Section 341 of the Code.
(vii) Neither the Company, HQ Global nor any of the other
Subsidiaries is a party to any agreement that would require the Company, HQ
Global or any of its other Subsidiaries or any affiliate thereof to make any
payment that would constitute an "excess parachute payment" for purposes of
Sections 280G and 4999 of the Code, other than upon a change of control (as
defined in such agreements) that may occur in the future.
(viii) Neither the Company, HQ Global nor any of the other
Subsidiaries is a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code.
(f) For purposes of this Agreement, the term "Tax" means any United
States federal, state, county or local, or foreign or provincial income, gross
receipts, profits, capital gains, capital stock, occupation, severance, stamp,
withholding, property, sales, use, license, excise, franchise, employment,
payroll, value added, alternative or added minimum, ad valorem or transfer
tax, or any other tax, levy, custom, duty or governmental fee or other like
assessment or charge of any kind whatsoever (whether payable directly or by
withholding and whether or not requiring the filing of a Tax Return), together
with all estimated taxes, deficiency assessments, additions to tax, interest
or penalties imposed by any Governmental Authority, and shall include any
liability for such amounts as a result either of being a member of a combined,
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other entity. The term "Tax Return" means a report,
return or other information (including any attached schedules or any
amendments to such report, return or other information) required to be
supplied to or filed with any Governmental Authority with respect to any Tax,
including an information return, claim for refund, amended return or
declaration or estimated Tax.
SECTION 3.14. Title to Assets. The Company, HQ Global and each of the
other Subsidiaries has good, valid and marketable title to (i) all tangible
properties and assets (real and personal) which are material to the Company,
HQ Global and each of the other Subsidiaries taken as a whole, including,
without limitation, all the properties and assets reflected in the
consolidated balance sheet as of December 31, 1999 except as indicated in the
notes thereto and except for properties and assets reflected in the
consolidated balance sheet as of December 31, 1999 which have been sold or
otherwise disposed of in the ordinary course of business after such date, and
(ii) all tangible properties and assets purchased by the Company, HQ Global
and any of the other Subsidiaries since December 31, 1999, which are material
to the Company, HQ Global and each of the other Subsidiaries taken as a whole,
except for such properties and assets which have been sold or otherwise
disposed of in the ordinary course of business; in each case subject to no
Lien, except for Permitted Liens. "Permitted Liens" means: (i) Liens for Taxes
not yet due or payable; (ii) Liens reflected in the Commission Filings; (iii)
Liens imposed by Applicable Law and incurred in the ordinary course of
business for obligations not yet due and payable to laborers, materialmen and
the like; (iv) zoning and other restrictions, variances, covenants,
rights-of-way, encumbrances, easements and or other minor irregularities of
title, none of which, individually or in the aggregate, would reasonably be
expected to materially and adversely affect the value of any of the real
properties of the Company, or would impair in any material respect the ability
of the Company or the relevant Subsidiary of the Company to sell such
properties for their current use; (v) with respect to items of personal
property, unperfected purchase money security interests existing in the
ordinary course of business without the execution of a security agreement;
(vi) Liens pursuant to the DB Facility; and (vii) Liens which, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
SECTION 3.15. Contracts. Other than those referred to on Schedule
3.15 of the Company Disclosure Schedule or those included in the Commission
Filings, the Company is not a party to any contract or other agreement that is
"material" within the meaning of Item 601(b)(10) of Regulation S-K under the
Securities Act.
All such "material" contracts and agreements are referred to
hereafter as the "Material Contracts". With respect to the Material Contracts,
except as set forth in Schedule 3.15 of the Company Disclosure Schedule or in
the Commission Filings: (i) all are in full force and effect; (ii) neither the
Company, HQ Global nor any of the other Subsidiaries and, to the Company's
knowledge, no other party thereto, is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under any such
Material Contract; (iii) neither the Company, HQ Global nor any of the other
Subsidiaries has assigned any of its rights or obligations under any of the
Material Contracts; and (iv) neither the Company, HQ Global nor any of the
other Subsidiaries has received any outstanding notice of cancellation or
termination in connection with any of them.
SECTION 3.16. Insurance. The Company has obtained and maintained in
full force and effect insurance (including director's and officer's insurance)
with respect to the Company, HQ Global and the other Subsidiaries with
insurance companies or associations in such amounts, on such terms and
covering such risks as disclosed in Schedule 3.16 of the Company Disclosure
Schedule.
SECTION 3.17. Investment Company. None of the Company, HQ Global or
the other material Subsidiaries is an "investment company", as such term is
defined in the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
SECTION 3.18. Environmental Laws and Regulations. Except as set forth
in the Commission Filings or on Schedule 3.18 of the Company Disclosure
Schedule, (a) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Company Property or, to
the knowledge of the Company, any property adjoining or adjacent to any
Company Property except in compliance with applicable Environmental Law, (b)
Hazardous Materials have not at any time been released or disposed of on any
Company Property or, to the knowledge of the Company, any property adjoining
or adjacent to any Company Property, (c) the Company, HQ Global and each of
the other Subsidiaries are in compliance in all material respects with all
Environmental Laws and the requirements of any permits issued under such
Environmental Laws with respect to any Company Property, (d) there are no
past, pending or threatened material Environmental Claims against the Company,
HQ Global or any of the other Subsidiaries or any Company Property, (e) there
are no facts or circumstances, conditions or occurrences regarding any Company
Property or, to the knowledge of the Company, any property adjoining or
adjacent to any Company Property, that could reasonably be anticipated (A) to
form the basis of a material Environmental Claim against the Company, HQ
Global or any of the other Subsidiaries or any Company Property or (B) to
cause such Company Property to be subject to any material restrictions on its
ownership, occupancy, use or transferability under any Environmental Law, and
(f) there are not now and never have been any underground storage tanks
located on any Company Property or, to the knowledge of the Company, on any
property adjoining or adjacent to any Company Property.
For purposes of this Agreement, the following terms shall have the
following meanings: (A) "Company Property" means any real property and
improvements owned or leased by the Company, HQ Global or any of the other
Subsidiaries; (B) "Hazardous Materials" means (i) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls,
and radon gas; (ii) any chemicals, materials or substances defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import,
under any applicable Environmental Law; and (iii) any other chemical, material
or substance, exposure to which is prohibited, limited or regulated by any
governmental authority; (C) "Environmental Law" means any federal, state or
local statute, law, rule, regulation, ordinance, code or rule of common law in
effect and in each case as amended as of the date hereof and the applicable
Closing Date, and any judicial or administrative interpretation thereof
applicable to the Company or its operations or property as of the date hereof
and applicable Closing Date, including any judicial or administrative order,
consent decree or judgment, relating to the environment, health, safety or
Hazardous Materials, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended,
42 X.X.X.xx. 9601 et seq.; the Resource Conservation and Recovery Act, as
amended, 42 X.X.X.xx. 6901 et seq.; the Federal Water Pollution Control Act,
as amended, 33 X.X.X.xx. 1251 et seq.; the Toxic Substances Control Act, 15
X.X.X.xx. 2601 et seq.; the Clean Air Act, 42 U.S.C.ss.7401 et seq.; the Safe
Drinking Water Act, 42 X.X.X.xx. 3808 et seq.; and (D) "Environmental Claims"
means any and all administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings under any Environmental Law or any permit issued
under any such Environmental Law (for purposes of this subclause (D),
"Claims"), including, without limitation, (i) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law and (ii) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment; and (E)
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying or seeping into or upon any
land or water or air, or otherwise entering into the environment.
SECTION 3.19. Brokers and Finders. No agent, broker, Person or firm
acting on behalf of the Company is, or will be, entitled to any fee,
commission or broker's or finder's fees from any of the parties hereto, or
from any Person controlling, controlled by, or under common control with any
of the parties hereto, in connection with this Agreement or any of the
Transactions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
SECTION 4.1. Organization; Authorization; Enforceability. Purchaser
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite power and authority to
own its properties and assets and to carry on its business as it is now being
conducted and as currently proposed to be conducted. Purchaser has the power
to execute, deliver and perform its obligations under each of the Equity
Documents to which it is a party and has taken all action necessary to
authorize the execution, delivery and performance by it of such Equity
Documents and to consummate the transactions contemplated hereby and thereby.
No other proceedings on the part of Purchaser are necessary for such
authorization, execution, delivery and consummation. Purchaser has duly
executed and delivered this Agreement and, at the Initial Closing, Purchaser
will have duly executed and delivered each of the other Equity Documents to be
executed and delivered at or prior to the Initial Closing. This Agreement
constitutes, and each of the other Equity Documents to which Purchaser is a
party, when executed and delivered by Purchaser, will constitute, a legal,
valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the enforcement of creditors' rights generally
or general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
SECTION 4.2. Private Placement. (a) Purchaser understands that (i)
the offering and sale of the Shares in the Issuances by the Company has not
been registered under the Securities Act and is intended to be exempt from
registration under the Securities Act pursuant to Section 4(2) thereof and
(ii) there is no existing public or other market for the Shares.
(b) Purchaser (either alone or together with its advisors) has
sufficient knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of its investment in the Shares
and is capable of bearing the economic risks of such investment.
(c) Purchaser is acquiring the Shares to be acquired hereunder (and
will acquire the Conversion Shares) for its own account, for investment and
not with a view to the public resale or distribution thereof, in violation of
any securities law.
(d) Purchaser understands that the Shares will be issued in a
transaction exempt from the registration or qualification requirements of the
Securities Act and applicable state securities laws, and that such securities
must be held indefinitely unless a subsequent disposition thereof is
registered or qualified under the Securities Act and such laws or is exempt
from such registration or qualification.
(e) Purchaser (A) has been furnished with or has had full access to
all of the information (financial or other) that it considers necessary or
appropriate to make an informed investment decision with respect to the
Company and the Shares and that it has requested from the Company, (B) has had
an opportunity to discuss with management of the Company the intended
business, properties, condition (financial or other), operations and prospects
of the Company and to obtain information (to the extent the Company possessed
such information or could acquire it without unreasonable effort or expense)
necessary to verify any information furnished to it or to which it had access,
(C) can bear the economic risk of (x) an investment in the Shares indefinitely
and (y) a total loss in respect of such investment, and (D) has such knowledge
and experience in business and financial matters so as to enable it to
understand and evaluate the risks of and form an investment decision with
respect to its investment in the Shares and to protect its own interest in
connection with such investment; it being understood that nothing set forth in
this Section 4.2(e) shall affect the representations, warranties or other
obligations of the Company, or the rights and remedies of Purchaser, under
this Agreement in any way whatsoever.
SECTION 4.3. No Violation; Consents. (a) The execution, delivery and
performance by Purchaser of each of the Equity Documents to which it is a
party and the consummation of the Transactions do not and will not contravene
any Applicable Law. The execution, delivery and performance by Purchaser of
each of the Equity Documents to which it is a party and the consummation of
the transactions contemplated therein (i) will not violate, result in a breach
of or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under any Contract to which Purchaser is party or by which
Purchaser is bound or to which any of its assets is subject, except for any
such violations, breaches or defaults that would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of Purchaser to perform its obligations under this Agreement, and (ii)
will not conflict with or violate any provision of the certificate of
incorporation or by-laws or other governing documents of Purchaser.
(b) Except for applicable filings, if any, with the Commission
pursuant to the Exchange Act, in each case, which shall be made (to the extent
required) on or prior to each applicable Closing Date, no consent,
authorization or order of, or filing or registration with, any Governmental
Authority or other Person is required to be obtained or made by Purchaser for
the execution, delivery and performance of any of the Equity Documents to
which it is a party or the consummation of any of the transactions
contemplated therein, except where the failure to obtain such consents,
authorizations or orders, or make such filings or registrations, would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of Purchaser to perform its obligations under
this Agreement.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1. [Reserved]
SECTION 5.2. Access to Books and Records. The Company shall afford to
Purchaser and Purchaser's accountants, counsel and representatives full access
during normal business hours throughout the period prior to each applicable
Closing Date (or the earlier termination of this Agreement pursuant to Section
8.4) to all its properties, books, Contracts, commitments and records
(including, but not limited to, tax returns) and, during such period, shall,
upon request, furnish promptly to Purchaser (i) a copy of each report,
schedule and other document filed or received by any of them pursuant to the
requirements of Federal or state securities laws and (ii) all other
information concerning its business, properties and personnel as Purchaser may
reasonably request, provided that no investigation or receipt of information
pursuant to this Section 5.2 shall affect any representation, warranty or
other obligation of the Company or the rights and remedies and conditions to
the obligations of Purchaser.
SECTION 5.3. Agreement to Take Necessary and Desirable Actions. The
Company shall (a) subject to the satisfaction of the conditions set forth in
Section 7.1, execute and deliver the Equity Documents and such other
documents, certificates, agreements and other writings and (b) take such other
actions, in each case, as may be necessary or reasonably requested by
Purchaser in order to consummate or implement the Issuances in accordance with
the terms of this Agreement.
SECTION 5.4. Compliance with Conditions. The Company shall use its
reasonable best efforts to cause all conditions precedent to the obligations
of Purchaser to be satisfied. Upon the terms and subject to the conditions of
this Agreement, the Company will use its reasonable best efforts to take, or
cause to be taken, all action, and do, or cause to be done, all things
necessary, proper or advisable consistent with Applicable Law to consummate
and make effective in the most expeditious manner practicable the Issuances in
accordance with the terms of this Agreement.
SECTION 5.5. HSR Act Notification. To the extent required by the HSR
Act, the Company shall, to the extent it has not already done so, (a) file or
cause to be filed, at its own expense, as promptly as practicable after the
execution and delivery of this Agreement, with the United States Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice, all reports and other documents required to be filed by it under the
HSR Act concerning the transactions contemplated hereby, (b) pay any filing or
other fees required to be paid by Purchaser under the HSR Act (including,
without limitation, any expenses of Purchaser's counsel incurred in preparing
and filing any required documents and reports) and (c) promptly comply with or
cause to be complied with any requests by the United States Federal Trade
Commission or the Antitrust Division of the United States Department of
Justice for additional information concerning such transactions, in each case
so that the waiting period applicable to this Agreement and the transactions
contemplated hereby under the HSR Act shall expire as soon as practicable
after the execution and delivery of this Agreement. The Company agrees to
request, and to cooperate with Purchaser in requesting, early termination of
any applicable waiting period under the HSR Act.
SECTION 5.6. Consents and Approvals. The Company (a) shall use its
reasonable best efforts to obtain all necessary consents, waivers,
authorizations and approvals of all Governmental Authorities and of all other
Persons required in connection with the execution, delivery and performance of
the Equity Documents or the consummation of the Issuances and (b) shall
diligently assist and cooperate with Purchaser in preparing and filing all
documents required to be submitted by Purchaser to any Governmental Authority
in connection with the Issuances (which assistance and cooperation shall
include, without limitation, timely furnishing to Purchaser all information
concerning the Company and the Subsidiaries that counsel to Purchaser
determines is required to be included in such documents or would be helpful in
obtaining any such required consent, waiver, authorization or approval).
SECTION 5.7. Reservation of Shares. The Company shall:
(i) cause to be authorized and reserve and keep available at all
times during which any of the Shares remain outstanding, free from
preemptive rights, out of its treasury stock or authorized but unissued
shares of Capital Stock, or both, solely for the purpose of effecting the
conversion of the Shares pursuant to the terms of the Certificate of
Designation, sufficient shares of Common Stock to provide for the
issuance of the maximum number of shares issuable upon conversion of
outstanding Shares;
(ii) issue and cause the transfer agent to deliver such shares of
Common Stock as required upon conversion of the Shares and take all
actions necessary to ensure that all such shares of Common Stock will,
when issued and paid for pursuant to the conversion of the Shares, be
duly and validly issued, fully paid and nonassessable; and
(iii) if any shares of Common Stock reserved for the purpose of
issuance upon conversion of the Shares require registration with or
approval of any Governmental Authority under any Applicable Law before
such shares may be validly issued or delivered, secure such registration
or approval, as the case may be, and maintain such registration or
approval in effect so long as so required.
SECTION 5.8. Use of Proceeds. The Company shall use the proceeds from
the Issuances to provide funds for the Company to (i) continue operations
during its corporate restructuring, including, without limitation, funding the
operations of RealtyIQ Corp. and (ii) repay amounts outstanding under the DB
Facility.
SECTION 5.9. Filing of Certificate of Designation. Prior to the
Issuances, the Company shall file the Certificate of Designation with the
Secretary of State of the State of Delaware pursuant to Section 151(g) of the
DGCL.
SECTION 5.10. Listing of Shares. The Company shall, as promptly as
practicable, cause the Conversion Shares to be listed or otherwise eligible
for trading on the NASDAQ National Market System or such other national
securities exchange on which constitutes the principal trading U.S. market for
the Common Stock. The Company shall notify Purchaser of such listing within
five (5) Business Days of the completion therof.
SECTION 5.11. Periodic Information. For so long as the Shares or any
Conversion Shares are outstanding the Company shall file all reports, if any,
required to be filed by the Company under Section 13 or 15(d) of the Exchange
Act and, if no longer required to file such reports, shall provide the holders
of the Securities, the Conversion Shares and prospective purchasers of such
shares with the information specified in Rule 144A(d) under the Securities
Act.
SECTION 5.12. Legends. So long as applicable, each certificate
representing any portion of the Shares or the Conversion Shares shall be
stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH SHARES MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OTHER THAN PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS."
After the above requirement for a legend is no longer applicable because the
Shares are freely transferable under the Securities Act, the Company shall
remove such legend upon request from a holder of such Shares, if counsel for
the holder thereof, reasonably acceptable to the Company, reasonably
determines that the transfer of such Shares is no longer restricted under the
Securities Act and counsel for the Company reasonably concurs in such
determination.
SECTION 5.13. Directors and Officers Insurance; Indemnification. For
so long as Purchaser holds any Shares, the Company shall maintain directors'
and officers' insurance with policy limits and deductibles at least as
favorable to the beneficiaries of such insurance as are currently maintained
and otherwise on terms reasonably comparable to the coverage maintained by the
Company on the date hereof, such insurance to be maintained with either (i) a
Lloyds of London syndicate reasonably acceptable to Purchaser or (ii) an
insurer with an A.M. Best financial strength rating of "A" or better. For
purposes of this Section 5.13, it is understood that the directors' and
officers' insurance maintained by the Company on the date hereof is acceptable
to Purchaser. For so long as Purchaser holds any Shares, the Company shall
indemnify the Company's directors and officers to the fullest extent permitted
under the DGCL and shall enter into all such agreements and use its best
efforts to obtain any necessary amendments to its Certificate of Incorporation
or by-laws to give effect to this Section 5.13.
ARTICLE VI
COVENANTS OF PURCHASER
SECTION 6.1. Agreement to Take Necessary and Desirable Actions.
Purchaser shall (a) subject to the satisfaction of the conditions set forth in
Section 7.2, execute and deliver each of the Equity Documents to which it is a
party and such other documents, certificates, agreements and other writings
and (b) take such other actions as may be reasonably necessary, desirable or
requested by the Company in order to consummate or implement the Issuances to
Purchaser in accordance with the terms of this Agreement.
SECTION 6.2. Compliance with Conditions; Best Efforts. Purchaser will
use its reasonable best efforts to cause all of the obligations imposed upon
it in this Agreement to be duly complied with, and to cause all conditions
precedent to the obligations of the Company to be satisfied. Upon the terms
and subject to the conditions of this Agreement, Purchaser will use its
reasonable best efforts to take, or cause to be taken, all action, and to do,
or cause to be done, all things necessary, proper or advisable consistent with
Applicable Law to consummate and make effective in the most expeditious manner
practicable the Issuances to Purchaser in accordance with the terms of this
Agreement.
SECTION 6.3. Consents and Approvals. Purchaser (a) shall use its
reasonable best efforts to obtain all necessary consents, waivers,
authorizations and approvals of all Governmental Authorities and of all other
Persons required in connection with the execution, delivery and performance of
this Agreement or the consummation of the Issuances to Purchaser and (b) shall
assist and cooperate with the Company, at the Company's expense in preparing
and filing all documents required to be submitted by the Company to any
Governmental Authority in connection with such Transactions (which assistance
and cooperation shall include, without limitation, timely furnishing to the
Company all information concerning Purchaser that counsel to the Company
reasonably determines is required to be included in such documents or would be
helpful in obtaining any such required consent, waiver, authorization or
approval).
SECTION 6.4. Restrictions on Transfer. Prior to December 13, 2001,
Purchaser shall not sell, assign, transfer, pledge, hypothecate, deposit in a
voting trust or otherwise dispose of any portion of the Shares (any such
disposition, a "Share Transfer"), other than (a) to a Permitted Transferee of
such Purchaser that has agreed in writing (each, a "Permitted Transferee
Agreement") to be bound by the terms and provisions of this Section 6.4 to the
same extent that such Purchaser would be bound if it beneficially owned the
Shares transferred to such Permitted Transferee. After December 13, 2001, the
Shares will be freely transferable, subject only to the restrictions imposed
by Applicable Law on sixty days' written notice to the Company. The Conversion
Shares will be freely transferable at all times, subject only to the
restrictions imposed by Applicable Law. Prior to the first to occur of
December 13, 2001, and the occurrence of a Triggering Event (as defined in the
Certificate of Designation), the Purchaser shall hold at least a majority of
the Shares. Notwithstanding the foregoing and subject only to Applicable Law,
upon the occurrence and during the continuance of a Triggering Event, the
Shares shall be freely transferable by the Holders thereof.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
SECTION 7.1. Conditions to the Company's Obligations Regarding the
Initial Closing. The obligations of the Company with respect to Purchaser
required to be performed on the Initial Closing Date shall be subject to the
satisfaction or waiver in writing, at or prior to the Initial Closing, of the
following conditions:
(a) The representations and warranties of Purchaser contained in
this Agreement which are qualified by any "materiality", "material
adverse effect" or any similar qualifier shall be true and correct in all
respects and the representations and warranties of Purchaser which are
not so qualified shall be true and correct in all material respect, in
each case on and as of the date hereof and on and as of the Initial
Closing Date, as if made on and as of the Initial Closing Date.
(b) Purchaser shall have performed in all material respects all
obligations and agreements, and complied in all material respects with
all covenants, contained in this Agreement to be performed and complied
with by Purchaser at or prior to the Initial Closing Date.
(c) No provision of any Applicable Law, injunction, order or decree
of any Governmental Entity shall be in effect which has the effect of
making the Transactions illegal or shall otherwise restrain or prohibit
the consummation of the Transactions.
(d) The Company shall have received the Initial Purchase Price
payable in respect of the Initial Shares concurrently with Purchaser's
receipt of certificates representing the Initial Shares purchased by
Purchaser.
SECTION 7.2. Conditions to Purchaser's Obligations Regarding the
Initial Closing. The obligations of Purchaser required to be performed on the
Initial Closing Date shall be subject to the satisfaction or waiver in
writing, at or prior to the Initial Closing, of the following conditions:
(a) The representations and warranties of the Company contained in
this Agreement which are qualified by any "materiality", "material
adverse effect" or any similar qualifier shall be true and correct in all
respects and the representations and warranties of the Company which are
not so qualified shall be true and correct in all material respects, in
each case on and as of the date hereof and on and as of the Initial
Closing Date, as if made on and as of the Initial Closing Date.
(b) The Company shall have performed in all material respects all of
its obligations, agreements and covenants contained in this Agreement to
be performed and complied with at or prior to the Initial Closing Date.
(c) No provision of any Applicable Law, injunction, order or decree
of any Governmental Entity shall be in effect which has the effect of
making the Transactions illegal or shall otherwise restrain or prohibit
the consummation of the Transactions.
(d) All material governmental (domestic and foreign) and third party
approvals and/or consents in connection with the Initial Issuance and the
other Transactions being obtained and remaining in effect, and all
applicable waiting periods having expired without any action being taken
by any competent authority which restrains, prevents or imposes
materially adverse conditions upon, the consummation of the Transactions.
(e) The Company shall have filed the Certificate of Designation with
the Secretary of State of the State of Delaware and the Certificate of
Designation shall have been accepted for filing.
(f) The Company shall have delivered to Purchaser a certificate
executed by it or on its behalf by duly authorized representative, dated
the Initial Closing Date, to the effect that each of the conditions
specified in paragraph (a) through (e) and (j) of this Section 7.2 has
been satisfied.
(g) The Company shall have executed and delivered the Registration
Rights Agreement.
(h) Purchaser shall have received an opinion of counsel to the
Company, dated the Initial Closing Date, and addressed to Purchaser,
substantially to the effect set forth in the form attached hereto as
Exhibit C.
(i) Purchaser shall have received certificates representing the
Initial Shares purchased by Purchaser concurrently with the Company's
receipt of the Initial Purchase Price payable in respect of such Initial
Shares.
(j) Since September 30, 2000 there shall not have occurred any
event, circumstance, condition, fact, effect or other matter which has
had or could reasonably be expected to have a material adverse effect (x)
on the condition (financial or otherwise), business, properties,
operations, results of operations or prospects of the Company, HQ Global
and the Subsidiaries, taken as a whole or (y) on the ability of the
Company to perform on a timely basis any material obligation under this
Agreement or to consummate the Initial Issuance contemplated hereby.
(k) All purchases of Purchaser shall be in compliance with the Bank
Holding Company Act of 1956, and all other applicable foreign and
domestic banking statutes, and all regulations (including, without
limitation, all regulations of the Federal Reserve Board) promulgated
thereunder, in each case as amended through the closing.
(l) Purchaser (or its designee) shall have received from the Company
a placement fee equal to $750,000 in immediately available funds.
SECTION 7.3. Conditions to Purchaser's Obligations Regarding
Additional Closings. Obligations of Purchaser required to be performed on an
Additional Closing Date shall be subject to the satisfaction or waiver in
writing, at or prior to such Additional Closing, of the following conditions:
(a) The representations and warranties of the Company contained in
this Agreement which are qualified by any "materiality", "material
adverse effect" or any similar qualifier shall be true and correct in all
respects and the representations and warranties of the Company which are
not so qualified shall be true and correct in all material respects, in
each case on and as of the date hereof and on and as of such Additional
Closing Date, as if made on and as of such Additional Closing Date.
(b) The Company shall have performed in all material respects all of
its obligations, agreements and covenants contained in this Agreement to
be performed and complied with at or prior to such Additional Closing
Date.
(c) No provision of any Applicable Law, injunction, order or decree
of any Governmental Entity shall be in effect which has the effect of
making the Transactions illegal or shall otherwise restrain or prohibit
the consummation of the Transactions.
(d) All material governmental (domestic and foreign) and third party
approvals and/or consents in connection with such Additional Issuance and
the other Transactions being obtained and remaining in effect, and all
applicable waiting periods having expired without any action being taken
by any competent authority which restrains, prevents or imposes
materially adverse conditions upon, the consummation of the Transactions.
(e) The Company shall have delivered to Purchaser a certificate
executed by it or on its behalf by duly authorized representative, dated
such Additional Closing Date, to the effect that each of the conditions
specified in paragraph (a) through (d) and (h) of this Section 7.3 has
been satisfied.
(f) Purchaser shall have received an opinion of counsel to the
Company, dated such Additional Closing Date, and addressed to Purchaser,
substantially to the effect set forth in the form attached hereto as
Exhibit C.
(g) Purchaser shall have received certificates representing the
Additional Shares purchased by Purchaser concurrently with the Company's
receipt of the Additional Purchase Price payable in respect of such
Additional Shares.
(h) Since the immediately preceding Closing Date there shall not
have occurred any event, circumstance, condition, fact, effect or other
matter which has had or could reasonably be expected to have a material
adverse effect (x) on the condition (financial or otherwise), business,
properties, operations, results of operations or prospects of the
Company, HQ Global and the Subsidiaries, taken as a whole or (y) on the
ability of the Company to perform on a timely basis any material
obligation under this Agreement or to consummate the Additional Issuance
contemplated hereby.
(i) Neither a Triggering Event nor a Mandatory Redemption Event
shall have occurred.
(j) This Agreement shall not have been terminated in accordance with
its terms.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Survival; Indemnification. (a) All representations and
warranties and covenants contained in this Agreement or in any certificate
delivered in connection with a Closing shall survive the Initial Closing for
18 months (except (i) covenants that are required to be performed after the
Initial Closing Date and the representations contained in Sections 3.1, 3.2,
3.3 and 3.4, which shall survive indefinitely and (ii) representations and
warranties contained in Section 3.13, which shall survive for the applicable
statute of limitation). Notwithstanding the foregoing, with respect to claims
asserted pursuant to this Section 8.1 before the expiration of the applicable
representation or warranty, such claims shall survive until the date they are
finally adjudicated or otherwise resolved.
(b) The Company agrees to indemnify and hold harmless Purchaser, each
Purchaser Affiliate and each of their respective representatives, heirs,
successors and assigns (each an "Indemnified Party") on an after-tax basis,
from and against (and to reimburse each Indemnified Party as the same are
incurred) any and all losses (including, but not limited to, impairment of the
value of the Shares as of the date such loss first becomes known), claims,
damages, liabilities, costs and expenses (collectively, "Losses") to which any
Indemnified Party may become subject or which any Indemnified Party may incur
based upon, arising out of, or in connection with (i) a breach of any
representation or warranty of this Agreement by the Company, (ii) any breach
of any covenant or agreement contained herein by the Company or (iii) any
claim, litigation, investigation or proceeding brought by or on behalf of any
Person other than the Company relating to the Issuances, and to reimburse each
Indemnified Party upon demand for any reasonable legal or other reasonable out
of pocket expenses incurred in connection with investigating or defending any
of the foregoing; provided (A) the Company shall have no obligation to
indemnify any Indemnified Party for any Loss resulting from any breach of any
representation or warranty hereunder (other than representations and
warranties contained in Sections 3.1, 3.2, 3.3, 3.4 or 3.13, which shall be
indemnified from the first dollar of Loss) unless and until the aggregate
amount of all such Losses exceeds $250,000 (and then only to the extent of
such excess) and (B) the maximum amount indemnifiable to all Indemnified
Parties for breaches of the representations or warranties contained in this
Agreement shall not exceed $25,000,000; provided, further that the Company
shall have no obligation to indemnify any Indemnified Party for any Losses
which are finally determined by a court of competent jurisdiction to have been
caused by the gross negligence or willful misconduct of such Indemnified
Party.
(c) If an Indemnified Party asserts that the Company (the
"Indemnifying Party") has become obligated to the Indemnified Party pursuant
to Section 8.1(b), or if any suit, action, investigation, claim or proceeding
is begun, made or instituted as a result of which the Indemnifying Party may
become obligated to the Indemnified Party hereunder, the Indemnified Party
shall notify the Indemnifying Party promptly and shall cooperate with the
Indemnifying Party, at the Indemnifying Party's expense, to the extent
reasonably necessary for the resolution of such claim or in the defense of
such suit, action or proceedings, including making available any information,
documents and things in the possession of the Indemnified Party.
Notwithstanding the foregoing notice requirement, the right to indemnification
hereunder shall not be affected by any failure to give, or delay in giving,
notice unless, and only to the extent that, the rights and remedies of the
Indemnifying Party shall have been actually and materially prejudiced as a
result of such failure or delay.
(d) In fulfilling its obligations under this Section 8.1, after the
Indemnifying Party has provided each Indemnified Party with a written notice
of its acceptance of liability under this Section 8.1, as between such
Indemnified Party and the Indemnifying Party, the Indemnifying Party shall
have the right to investigate, defend, settle or otherwise handle, with the
aforesaid cooperation, any claim, suit, action or proceeding brought by a
third party in such manner as the Indemnifying Party may in its sole
discretion reasonably deem appropriate; provided, that (i) counsel retained by
the Indemnifying Party is satisfactory to the Indemnified Party and (ii) the
Indemnifying Party will not consent to any settlement or entry of judgment
imposing any obligations on any other party hereto other than financial
obligations for which such party will be indemnified hereunder, unless such
party has consented in writing to such settlement or judgment (which consent
may be given or withheld in its sole discretion) and (iii) the Indemnifying
Party will not consent to any settlement or entry of judgment unless, in
connection therewith, the Indemnifying Party obtains a full and unconditional
release of the Indemnified Party from all liability with respect to such suit,
action, investigation claim or proceeding. Notwithstanding the Indemnifying
Party's election to assume the defense or investigation of such claim, action
or proceeding, the Indemnified Party shall have the right to employ separate
counsel and to participate in the defense or investigation of such claim,
action or proceeding, which participation shall be at the expense of the
Indemnifying Party, if (i) on the advice of counsel to the Indemnified Party
use of counsel of the Indemnifying Party's choice could be expected to give
rise to a material conflict of interest, (ii) the Indemnifying Party shall not
have employed counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time after notice of the
assertion of any such claim or institution of any such action or proceeding,
(iii) the Indemnifying Party shall authorize the Indemnified Party to employ
separate counsel at the Indemnifying Party's expense or (iv) such action shall
seek relief other than monetary damages against the Indemnified Party.
(e) The obligations of the Indemnifying Party under this Section 8.1
shall survive the transfer, redemption or conversion of the Shares and the
Common Stock issued upon the conversion or exercise thereof, or the closing or
termination of any Equity Document. The agreements contained in this Section
8.1 shall be in addition to any other rights of the Indemnified Party against
the Indemnifying Party or others. The Indemnifying Party consents to personal
jurisdiction, service and venue in any New York court in which any claim
subject to this Agreement is brought by any Indemnified Party.
SECTION 8.2. Notices. All notices, demands, requests, consents,
approvals or other communications (collectively, "Notices") required or
permitted to be given hereunder or which are given with respect to this
Agreement shall be in writing and shall be personally served, delivered by
reputable air courier service with charges prepaid, or transmitted by hand
delivery, telegram, telex or facsimile, addressed as set forth below, or to
such other address as such party shall have specified most recently by written
notice. Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by telegram, telex or facsimile. Notice
otherwise sent as provided herein shall be deemed given on the next business
day following delivery of such notice to a reputable air courier service.
Notices shall be delivered as follows:
If to the Company:
FrontLine Capital Group
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx,
President
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxx & Wood LLP
0 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Xx.
Telephone: (000) 000-0000
Fax: (000) 000-0000
if to Purchaser:
Deutsche Bank Sharps Xxxxxx Inc.
c/o Bankers Trust Company
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: X. Xxxx Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Fax: (000) 000-0000
SECTION 8.3. Governing Law. This Agreement shall be governed by,
interpreted under, and construed in accordance with the laws of the State of
New York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of law thereof.
SECTION 8.4. Termination. (a) This Agreement may be terminated as
between the Company and Purchaser (i) at any time prior to the Initial Closing
Date by mutual written agreement of the Company and Purchaser, (ii) if the
Initial Closing shall not have occurred on or prior to December 13, 2000, by
either the Company or Purchaser, at any time after December 13, 2000, provided
that the right to terminate this Agreement under this Section 8.4(a)(ii) shall
not be available to any party whose failure to fulfill any obligation under
this Agreement was the cause of or resulted in the failure of the Closing to
occur on or before such date, (iii) in respect of Shares not previously
issued, including, without limitation, the obligation of Purchaser to purchase
Additional Shares, if any Governmental Authority shall have issued a
nonappealable final order, decree or ruling or taken any other action having
the effect of permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, by either the Company or
Purchaser, and (iv) if either the Company or Purchaser shall have breached any
of its material obligations under this Agreement, by the non-breaching party.
Any party desiring to terminate this Agreement pursuant to clauses 8.4(a)(ii),
(iii) or (iv) shall promptly give notice of such termination to the other
party.
(b) If this Agreement is terminated as between the Company and
Purchaser, as permitted by Section 8.4(a), such termination shall be without
liability of any party (or any stockholder, director, officer, partner,
employee, agent, consultant or representative of such party) to any other
party to this Agreement; provided, that if such termination shall result from
the willful (a) failure of any party to fulfill a condition to the performance
of the obligations of the other party, (b) failure to perform a covenant of
this Agreement or (c) breach by any party hereto of any representation or
warranty contained herein, such failing or breaching party shall be fully
liable for any and all losses incurred or suffered by the other party as a
result of such failure or breach. The provisions of Sections 6.4, 8.2, 8.3,
this Section 8.4, Sections 8.5, 8.8, 8.10, 8.11, 8.12, 8.13, 8.14, 8.16, 8.18
and 8.19 shall survive any termination hereof pursuant to Section 8.4(a).
(c) If this Agreement is hereafter terminated (other than by the
Company pursuant to Section 8.4(a)(iv) of this Agreement), the Company shall
pay to the Purchaser an amount equal to all documented out-of-pocket expenses
incurred by Purchaser in connection with this Agreement and the Transactions.
SECTION 8.5. Entire Agreement. As between the Company and Purchaser
this Agreement and the Equity Documents (including all agreements entered into
pursuant hereto and thereto and all certificates and instruments delivered
pursuant hereto and thereto) constitute the entire agreement of the parties
with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written, with respect to the
subject matter hereof.
SECTION 8.6. Modifications and Amendments. No amendment, modification
or termination of this Agreement as between the Company and Purchaser shall be
binding unless executed in writing by the Company and Purchaser intending to
be bound thereby.
SECTION 8.7. Waivers and Extensions. Any party to this Agreement may
waive any condition, right, breach or default that such party has the right to
waive, provided that such waiver will not be effective against the waiving
party unless it is in writing, is signed by such party, and specifically
refers to this Agreement. Waivers may be made in advance or after the right
waived has arisen or the breach or default waived has occurred. Any waiver may
be conditional. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof nor of any other agreement or provision herein contained. No waiver or
extension of time for performance of any obligations or acts shall be deemed a
waiver or extension of the time for performance of any other obligations or
acts.
SECTION 8.8. Titles and Headings. Titles and headings of sections of
this Agreement are for convenience only and shall not affect the construction
of any provision of this Agreement.
SECTION 8.9. Exhibits and Schedules. Each of the exhibits and
schedules referred to herein and attached hereto is an integral part of this
Agreement and is incorporated herein by reference.
SECTION 8.10. Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense;
provided, however, the Company shall reimburse the Purchaser for all expenses
of Purchaser (including the expenses of White & Case LLP, counsel to the
Purchaser) incurred in connection with the Transactions.
SECTION 8.11. Press Releases and Public Announcements. All public
announcements or disclosures relating to the Issuances or this Agreement shall
be made only if mutually agreed upon by the Company and Purchaser, except to
the extent such disclosure is, in the opinion of counsel, required by or
advisable under Applicable Law, provided that (a) any such required disclosure
shall only be made, to the extent consistent with Applicable Law and (b) no
such announcement or disclosure (except as required by Applicable Law) shall
identify Purchaser without Purchaser's prior consent.
SECTION 8.12. Assignment; No Third Party Beneficiaries. This
Agreement and the rights, duties and obligations hereunder may not be assigned
or delegated by the Company without the prior written consent of Purchaser,
and may not be assigned or delegated by Purchaser without the Company's prior
written consent except that Purchaser may assign any or all of its rights and
obligations under this Agreement to any Permitted Transferee. Any attempted
assignment or delegation of rights, duties or obligations hereunder other than
as contemplated in the preceding sentence shall be void and of no effect. This
Agreement and the provisions hereof shall be binding upon and shall inure to
the benefit of each of the parties and their respective successors and
permitted assigns. This Agreement is not intended to confer any rights or
benefits on any Persons other than the parties hereto, except as expressly set
forth in Section 5.2, Section 8.1, this Section 8.12 or Section 8.18.
SECTION 8.13. Severability. This Agreement shall be deemed severable,
and the invalidity or unenforceability of any term or provision hereof shall
not affect the validity or enforceability of this Agreement or of any other
term or provision hereof. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties hereto intend that there shall be
added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and
enforceable.
SECTION 8.14. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
SECTION 8.15. Further Assurances. As between the Company and
Purchaser, each party hereto, upon the request of any other party hereto,
shall do all such further acts and execute, acknowledge and deliver all such
further instruments and documents as may be necessary or desirable to carry
out the Transactions, including, in the case of the Company, such acts,
instruments and documents as may be necessary or desirable to convey and
transfer to Purchaser the Shares to be purchased by it hereunder.
SECTION 8.16. Remedies Cumulative. The remedies provided herein shall
be cumulative and shall not preclude the assertion by any party hereto of any
other rights or the seeking of any remedies against the other party hereto.
SECTION 8.17. Specific Performance. The parties hereto agree that the
remedy at law for any breach of this Agreement may be inadequate, and that as
between the Company and Purchaser any party by whom this Agreement is
enforceable shall be entitled to specific performance in addition to any other
appropriate relief or remedy. Such party may, in its sole discretion, apply to
a court of competent jurisdiction for specific performance or injunctive or
such other relief as such court may deem just and proper in order to enforce
this Agreement as between the Company and Purchaser, or prevent any violation
hereof, and, to the extent permitted by applicable as between the Company and
Purchaser law, each party waives any objection to the imposition of such
relief.
SECTION 8.18. No Purchaser Affiliate Liability. No Purchaser
Affiliate shall have any liability or obligation of any nature whatsoever in
connection with or under this Agreement or the Transactions, and the Company
hereby waives and releases all claims of any such liability and obligation, it
being understood that no such Person or entity (other than Purchaser) shall be
liable for or in respect of this Agreement with the Transactions.
SECTION 8.19. Confidentiality. (a) Each of the parties hereto agrees
that it will not (i) use, disseminate, or in any way disclose any Confidential
Information disclosed to it by the other party hereto, to any person, firm or
business, except to the extent necessary (x) in the case of Purchaser, to
manage its investment (including any sale of all or any portion thereof), to
discharge its fiduciary or regulatory obligations or for any other purpose
which the Company may hereafter authorize in writing and (y) in the case of
the Company, in order to discharge any fiduciary or regulatory obligation or
for any other purpose which the Purchaser may hereafter authorize in writing,
or (ii) use any Confidential Information of the other party for its own
benefit or the benefit of any third party. Each of the parties, agrees that
such it shall treat all Confidential Information received from the other
party, with the same degree of care as the receiving party accords to its own
Confidential Information, but in no case less than reasonable care.
(b) Notwithstanding anything to the contrary contained in the
immediately preceding paragraph (a) the disclosure by any party hereto of any
Confidential Information of the other party (i) to any Affiliate of such
party, or to any officer, director, employee, agent, representative, attorney
or other advisor of such party or any Affiliate of such party, who reasonably
needs to have access to the Confidential Information and agrees to be bound by
the provisions of this Section 8.19, (ii) to and as requested by any foreign
or domestic governmental or quasi-governmental regulatory authority, including
with out limitation, the Federal Reserve Bank of New York or any stock
exchange or other self-regulatory organization having jurisdiction over such
party, (iii) in response to an order by a court or other governmental body,
(iv) which is otherwise required by Applicable Law or regulation (including
any rule or regulation of any stock exchange or automated quotation system on
which such party's common securities are listed or traded or (v) which is
necessary or advisable to establish the rights of either party under this
Agreement, shall not be considered to be a breach of this Agreement by the
party making such disclosure; provided, however, such party required to make
such disclosure pursuant to clause (ii), (iii), (iv) or (v) hereof shall
provide written notice thereof to the party which owns such Confidential
Information to enable such party to seek a protective order or otherwise
prevent such disclosure of its Confidential Information.
[SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
FRONTLINE CAPITAL GROUP
By /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
DEUTSCHE BANK SHARPS XXXXXX INC.
By /s/ Xxxx X. Xxxxxxxx
----------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Vice President
By /s/ Xxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
