EXHIBIT 10.1
SECURITIES EXCHANGE AGREEMENT
SECURITIES EXCHANGE AGREEMENT (this "Agreement") dated as of August 15,
2001, among Xxxxxxxx Xxxxxxx, Xxxxxx Xxxxxxx (collectively referred to
hereinafter as "Xxxxxxx"), Xxxxxx Xxxxxx ("Xxxxxx") (Xxxxxxx and Xxxxxx are
sometimes hereinafter collectively referred to as the "Critical Owners" and
individually as a "Critical Owner"), and xXxxxxxx.xxx, Inc., a corporation
organized and existing under the laws of the State of Delaware (the "Company").
RECITALS
A. The Critical Owners own all of the membership interests ("Membership
Interests") of each of Critical Investments, LLC, a limited liability company
organized and existing under the laws of the State of Virginia ("Critical
Investments"), and Critical Advisors, L.L.C., a limited liability company
organized and existing under the laws of the State of Virginia ("Critical
Advisors").
B. Critical Investments is the sole general partner of Critical
Infrastructure Fund, L.P., a limited partnership organized and existing under
the laws of the State of Delaware ("Critical Infrastructure LP").
C. Critical Advisors is the sole investment manager of Critical
Infrastructure Fund, Ltd., an international business company organized and
existing under the laws of the British Virgin Islands ("Critical Infrastructure
Ltd.").
D. Each of Critical Infrastructure LP and Critical Infrastructure Ltd.
hold a portfolio of securities in the telecommunications, Internet, cable
television, information technology, utility and allied industries and have
placed all of their assets in, and conduct all of their investment and trading
activities through, Critical Infrastructure Fund (BVI), LP, a limited
partnership organized and existing under the laws of the British Virgin Islands
("Critical Infrastructure BVI") (Critical Infrastructure LP, Critical
Infrastructure Ltd. and Critical Infrastructure BVI are sometimes hereinafter
collectively referred to as the "Funds").
E. The Company's common stock, par value $.01 per share (the "Common
Stock"), is currently traded on the OTC Bulletin Board.
F. The Critical Owners desire to sell all of the Membership Interests to
the Company and the Company desires to purchase the Membership Interests in
exchange for: (a) the Company (i) issuing to Xxxxxxxx Xxxxxxx 400,000 shares of
Common Stock and warrants to purchase 400,000 shares of Common Stock, (b) the
Company (i) issuing warrants to Xxxxxx to purchase 100,000 shares of Common
Stock and (ii) entering into an employment agreement with Xxxxxx,
(c) the Company providing Xxxxxx with 8% of the earnings before income taxes,
depreciation and amortization ("EBITA") after the first $100,000 of earnings of
Critical Investments and Critical Advisors based on Critical Investment's and
Critical Advisor's share of all earnings of the Funds for each of the calendar
years ending 2001 and 2002, and (d) the Company providing Xxxxxxxx Xxxxxxx with
32% of the EBITA after the first $100,000 of earnings of Critical Investments
and Critical Advisors based on Critical Investments and Critical Advisors share
of all earnings of the Funds for each of the calendar years ending 2001 and
2002, all upon the terms and conditions set forth hereinafter.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants hereinafter set forth and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
Critical Owners and the Company hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Affiliate" shall mean, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person. "Control"
(including the terms "controlling," "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
shall mean the possession, directly or indirectly or as trustee or executor, of
the power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership or operation of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.
"Bankruptcy" shall mean (a) an adjudication of bankruptcy under the U.S.
Bankruptcy Reform Act of 1978, as amended, or any successor statute, (b) the
making of a winding up or administration order in respect of the specified
Person, (c) an assignment for the benefit of creditors, (d) the specified Person
either does, resolves to do or commences negotiations with a view to doing any
of the following: (i) makes a general or special arrangement or composition
(whether voluntary or compulsory) with its creditors or any class of creditors,
(ii) declares or agrees to a moratorium, or (iii) issues a notice convening a
meeting to resolve to do any of the foregoing (other than for the purpose of a
solvent amalgamation or reconstruction), (e) the filing of a voluntary petition
in bankruptcy or reorganization or the passing of a resolution for voluntary
liquidation, reconstruction or winding up (other than for the purpose of a
solvent amalgamation or reconstruction), or (f) the failure to vacate the
appointment of a receiver, trustee, provisional liquidator or administrative
receiver for any part or all of the assets or property of a party within 60 days
from the date of such appointment.
"Business Day" shall mean any day that is not a Saturday or a Sunday and on
which banks are open for the conduct of normal banking business in the cities of
New York City, New York and Miami, Florida.
2
"Capital Shares" shall mean the Common Stock and any shares of any other class
of common stock whether now or hereafter authorized, having the right to
participate in the distribution of earnings and assets of the Company.
"Capital Shares Equivalents" shall mean any securities, rights, or obligations
that are convertible into or exchangeable for or give any right to subscribe for
any Capital Shares of the Company or any Warrants, options or other rights to
subscribe for or purchase Capital Shares or any such convertible or exchangeable
securities.
"Damages" shall mean any loss, claim, damage, judgment, penalty, deficiency,
liability, costs and expenses (including, without limitation, reasonable
attorney's fees and disbursements and reasonable costs and expenses of expert
witnesses and investigation).
"EBITDA" shall mean the aggregate total revenues and allocations of Critical
Investments and Critical Advisors with respect to the Funds, minus expenses or
portions of expenses not allocated to the limited partners of the Funds.
"Employment Agreement" shall mean the agreement regarding the employment of
Xxxxxx by the Company, substantially in the form of Exhibit A attached hereto.
"Encumbrance" shall mean any security interest, pledge, mortgage, lien,
(including, without limitation, Tax liens), change, adverse claim, warrant,
preferential arrangement or restriction of any kind, including, without
limitation, any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Governmental Authority" shall mean any federal, state or local, or foreign
government, governmental, regulatory or administrative authority (or subdivision
thereof) and any agency or commission or any court, tribunal or judicial or
arbitral body that has jurisdiction over the business of the specified Person or
its assets, including, without limitation, the United States and the British
Virgin Islands.
"Governmental Order" shall mean any order, writ, judgment, injunction, decree,
stipulation, determination or award by or with any Governmental Authority.
"Intellectual Property" shall mean (a) inventions, whether or not patentable,
whether or not reduced to practice, and whether or not yet made the subject of a
pending patent application or applications, (b) ideas and conceptions of
potentially patentable subject matter, including, without limitation, any patent
disclosures, whether or not reduced to practice and whether or not yet made the
subject of a pending patent application or applications, (c) national (including
the United States) and multinational statutory invention registrations, patents,
patent registrations and patent applications (including all reissues, divisions,
continuations, continuations-in-part,
3
extensions and reexaminations) and all rights therein provided by international
treaties or conventions and all improvements to the inventions disclosed in each
such registration, patent or application, (d) trademarks, service marks, trade
dress, logos, trade names and corporate and partnership names, whether or not
registered, including all common law rights, and registrations and applications
for registration thereof, including, but not limited to, all marks registered in
trademark offices throughout the world, and all rights therein provided by
international treaties or conventions, (e) copyrights (registered or otherwise)
and registrations and applications for registration thereof, and all rights
therein provided by international treaties or conventions, (f) moral rights
(including, without limitation, rights of paternity and integrity), and waivers
of such rights by others, (g) computer software, including, without limitation,
operating systems and specifications, data, data bases, files, documentation and
other materials related thereto, (h) trade secrets and confidential, technical
and business information (including ideas, flow charts, logic diagrams,
formulas, compositions, patterns, devices, methods, techniques, processes,
inventions, and conceptions of inventions whether patentable or unpatentable and
whether or not reduced to practice), (i) whether or not confidential, technology
(including know-how and show-how), manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, selling, pricing and cost information or
procedures, business and marketing plans and customer and supplier lists and
information, (j) copies and tangible embodiments of all the foregoing, in
whatever form or medium, (k) all rights to obtain and rights to apply for
patents, and to register trademarks and copyrights, (l) all rights to xxx or
recover and retain damages and costs and attorneys' fees for present and past
infringement of any of the foregoing, and (m) all goodwill associated with the
foregoing.
"Knowledge" shall mean the actual knowledge of the applicable Party and/or any
executive, manager or director of the Party, and an individual shall be deemed
to have "Knowledge" of a particular fact, circumstance or other matter if: (a)
such Person is actually aware of such fact or matter, or (b) a prudent
individual would be expected to discover or otherwise become aware of such fact,
circumstance or other matter in the course of conducting a reasonably
comprehensive inquiry concerning the truth or existence of such fact,
circumstance or other matter. Each of the Critical Owners shall be deemed to
have notice and Knowledge of any Governmental Order delivered to, or served on,
Critical Investments, Critical Advisors or any of the Funds, or any of their
Affiliates.
"Law" shall mean any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order, or other requirement or rule of law issued by any
Governmental Authority.
"Legend" shall mean the legend set forth in Section 13.1 hereof.
"Material Adverse Effect" shall mean any effect on the business, operations,
properties, prospects or financial condition of the Specified Person that is
material and adverse to such Person and its subsidiaries and Affiliates, taken
as a whole, and/or any condition, circumstance, or situation that would prohibit
or otherwise interfere with the ability of such Person to enter into and perform
any of his, her or its obligations under this Agreement, the Employment
Agreement, the Registration Rights Agreement, or the Warrants in any material
respect.
4
"Outstanding" when used with reference to shares of Common Stock or Capital
Shares (collectively the "Shares"), shall mean, at any date as of which the
number of such Shares is to be determined, all issued and outstanding Shares,
and shall include all such Shares issuable in respect of outstanding scrip or
any certificates representing fractional interests in such Shares; provided,
however, that "Outstanding" shall not mean any such Shares then directly or
indirectly owned or held by or for the account of the Company.
"Party" shall mean Xxxxxxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxxxx or the
Company, as the context of this Agreement requires. The plural usage of Party
collectively refers to Xxxxxxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxxxx and the
Company.
"Person" shall mean any individual, corporation, partnership, firm, limited
liability company, limited liability partnership, joint venture, association,
trust, unincorporated organization or other entity, including a government or
political entity or subdivision or an agency or instrumentality thereof, as well
as any syndicate or group that would be deemed a person under Section 13(d)3 of
the Exchange Act.
"Principal Market" shall mean the American Stock Exchange, the New York Stock
Exchange, the NASDAQ National or SmallCap Markets, or the OTC Bulletin Board,
whichever is at the time the principal trading exchange or market for the Common
Stock, based upon share volume.
"Registrable Securities" shall mean the Shares and the Warrant Shares until (i)
the Registration Statement has been declared effective by the SEC, and all
Shares and Warrant Shares have been disposed of pursuant to the Registration
Statement, (ii) all Shares and Warrant Shares have been sold under circumstances
under which all of the applicable conditions of Rule 144 (or any similar
provision then in force) under the Securities Act ("Rule 144") are met, (iii)
all Shares and Warrant Shares have been otherwise transferred to holders who may
trade such shares without restriction under the Securities Act, and the Company
has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (iv) such time as, in the opinion
of counsel to the Company, all Shares and Warrant Shares may be sold without any
time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act and the Company has delivered
a new certification or other evidence of ownership for such securities not
bearing a restrictive legend.
"Registration Rights Agreement" shall mean the agreement regarding the filing of
the Registration Statement for the resale of the Registrable Securities, entered
into among the Company, Xxxxxxxx Xxxxxxx and Xxxxxx, substantially in the form
of Exhibit B attached hereto.
"Registration Statement" shall mean a registration statement on Form SB-2 (or on
such other form promulgated by the SEC for which the Company then qualifies and
which counsel for the Company shall deem appropriate, and which form shall be
available for the resale by the Critical Owners of the Registrable Securities to
be registered thereunder in accordance with the provisions of this Agreement,
the Registration Rights Agreement and in accordance with the intended method of
distribution of such securities), for the registration of the resale by the
Critical Owners of the Registrable Securities under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
5
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SEC Documents" shall mean the Company's Annual Report on Form 10-KSB, as
amended, for the fiscal year ended December 31, 2000 and each report, proxy
statement, information statement or registration statement filed by the Company
with the SEC pursuant to the Exchange Act or the Securities Act since the filing
of such Annual Report through the date hereof.
"Shares" shall mean the shares of Common Stock purchased pursuant to this
Agreement.
"Taxes" shall mean any and all taxes, stamp duties, fees, levies, duties,
tariffs, impose, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amount imposed with respect
thereto) imposed by any Governmental Authority or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth: taxes or other charges in the name of
excise withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs, duties, tariffs and
similar charges.
"Trading Day" shall mean any day during which the Principal Market shall be open
for business.
"Warrants" shall mean the warrants to purchase up to 400,000 and 100,000 shares
of the Common Stock to be issued to Xxxxxxxx Xxxxxxx and Xxxxxx, respectively,
hereunder substantially in the forms of Exhibit C and D attached hereto.
"Warrant Shares" shall mean all shares of Common Stock or other securities
issued or issuable pursuant to exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE
Section 2.1. Closing. The closing of the purchase and sale of the Shares,
the Warrant Shares and the Membership Interests and the Concurrent Transactions
(as defined in Section 6.1 hereof) (the "Closing") shall take place at 10:00
a.m., local time, on August 15, 2001, or (if later) within five (5) Business
Days after the satisfaction or written waiver by the appropriate Party(ies) of
the conditions set forth in Article VI hereof (the "Closing Date"). On the
Closing Date, the Parties shall exchange signature pages transmitted by
facsimile, with original signature pages and other transaction documents
delivered to the Parties within two (2) Business Days after the Closing Date.
Section 2.2 Purchase and Sale. Subject to the fulfillment of the
conditions precedent, and based upon the representations and warranties set
forth herein, at the Closing the Critical Owners
6
shall purchase from the Company, and the Company shall sell to the Critical
Owners, the Shares and the Warrants free and clear of any and all Encumbrances
(other than such Encumbrances as are created by the Critical Owners or under
applicable law). In consideration of and in full payment for the Shares and the
Warrants, the Critical Owners, at the Closing, shall transfer to the Company all
of the Membership Interests, free and clear of any and all Encumbrances (other
than such Encumbrances as are imposed by each of the respective operating
agreements of Critical Investments and Critical Advisors or applicable law and
such other Encumbrances as are created by the Company).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO CRITICAL INVESTMENTS AND CRITICAL ADVISORS
As an inducement to the Company to enter into this Agreement and the
Concurrent Transactions, each of the Critical Owners, jointly and severally,
represents and warrants to the Company as follows:
Section 3.1 Organization, Qualification, etc. of Critical Investments and
Critical Advisors. Each of Critical Investments and Critical Advisors is a duly
organized and validly existing limited liability company under the laws of the
State of Virginia and has all necessary limited liability company power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it and to carry on its business as it has been, is currently and is
presently anticipated to be conducted.
Section 3.2 Title to the Shares. Each of the Critical Owners (a) has good
and marketable title to and beneficial ownership of the Membership Interests
issued in the name of each of the Critical Owners to be sold by each of the
Critical Owners to the Company hereunder and, immediately prior to such sale to
the Company, collectively will have beneficial ownership of all outstanding
Membership Interests in each of Critical Investments and Critical Advisors, (b)
has prepaid all transfer taxes of any kind (other than stamp duties) if any,
applicable to the transfer the Membership Interests to the Company, (c) has full
right, power and authority to sell, assign, transfer and deliver the Membership
Interests hereunder, free and clear of any Encumbrance other than those imposed
by the Articles of Organization and the Operating Agreement of each of Critical
Investments and Critical Advisors.
Section 3.3 Binding Effect. This Agreement has been duly executed and
delivered by each of the Critical Owners and (assuming due authorization,
execution and delivery by the Company) constitutes the legal, valid and binding
obligation of each of the Critical Owners is enforceable against each of the
Critical Owners in accordance with its terms, except as such enforcement may be
subject to (a) Bankruptcy or other similar laws now or hereafter in effect
relating to creditors rights generally and (b) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
7
Section 3.4 No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.5 hereof have been
obtained and all filings and notifications listed on Schedule 3.4 have been
made, the execution, delivery and performance of this Agreement by each of the
Critical Owners and the consummation of the transactions contemplated hereby do
not and will not (a) violate, conflict with or result in the breach of any
provision of the Articles of Organization and the Operating Agreement of each of
Critical Investments and Critical Advisors, (b) conflict with or violate any Law
or Government Order applicable to each of the Critical Owners, which violation
or conflict would, individually or in the aggregate, have a Material Adverse
Effect on Critical Investors or Critical Advisors or on the transactions
contemplated hereby (including the Concurrent Transactions), or (c) except as
set forth on Schedule 3.4, conflict with, result in any breach of, constitute a
default (or an event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on any of the
assets or properties of Critical Investments or Critical Advisors pursuant to,
any note, bond, mortgage or indenture, contract, agreement, lease, sublease,
license, permit, franchise or other instrument, agreement or arrangement to
which any of the Critical Owners is a party or by which any of such assets or
properties is bound or affected which conflict or violation would, individually
or in the aggregate, have a Material Adverse Effect on the ability of each of
the Critical Owners to consummate the transactions contemplated hereby.
Section 3.5 Consents and Approvals. Except as set forth on Schedule 3.5,
the execution, delivery and performance of this Agreement by each of the
Critical Owners do not and will not require any consent, approval, authorization
or other order of, action by, filing with or notification to any Governmental
Authority or any third party.
Section 3.6 Financial Information. (i) The audited balance sheets as of
December 31, 2000 and the related audited profit and loss account for the fiscal
year then ended, together with all notes and schedules thereto (the "Critical
Year End Financial Statements") and (ii) the unaudited balance sheets of
Critical Investments and Critical Advisors at June 30, 2001 and the related
unaudited profit and loss account and statement of cash flows of each of the
Funds (the "Critical Interim Financial Statements") have been prepared in
accordance with United States generally accepted accounting principles and
practices (except as noted therein) as in effect during the relevant period and
applied consistently throughout the periods involved ("GAAP"), and give a true
and fair view in all material respects of the state of affairs of each of
Critical Investments and Critical Advisors as at the dates therefore and the
results of their operations for the periods then ended, subject to year-end
adjustments consisting only of normal recurring accruals. On the Closing Date,
each of Critical Investments and Critical Advisors will not have any
liabilities, greater than $5,000 individually or in the aggregate, whether
prospective, contingent or otherwise, including for Taxes, long-term leases or
unusual forward or long-term commitments, which are not fully provided for in
the Critical Interim Financial Statements, whether or not required to be so
fully provided for as of the date thereof, except for those liabilities incurred
since the date thereof in the ordinary course of each of Critical Investments
and Critical Advisor's business or as described on Schedule 3.6 and those
liabilities reflected in the footnotes to the Year End Financial Statements.
8
Section 3.7. Books and Records. The books of account and other financial
records of each of Critical Investments and Critical Advisors: (a) reflect all
items of income and expense and all assets and liabilities required to be
reflected therein, except to the extent that the omission to reflect such items
could not reasonably, individually or in the aggregate, have a Material Adverse
Effect on either Critical Investments and Critical Advisors, (b) are complete
and correct, not misleading and do not contain or reflect any inaccuracies or
discrepancies, except as could not, reasonably individually or in the aggregate,
have a Material Adverse Effect on either Critical Investments or Critical
Advisors, and (c) have been maintained in accordance with good business and
accounting practices.
Section 3.8. Conduct of Business in the Ordinary Course. Since the date of
the Critical Interim Financial Statements, each of the Funds has conducted
business only in the ordinary course and consistent with past practice.
Section 3.9. Material Contracts.
(a) The Critical Owners have, or have caused to be, made available
to the Company for review and duplication, correct and complete copies (or in
the case of oral contracts, summaries thereof) of all of the following contracts
and agreements of Critical Investments and Critical Advisors (such material
contracts and agreements, listed on Schedule 4.13(a), collectively, "Material
Contracts"):
(i) each contract and agreement for the purchase of
personal property with any supplier or for the furnishing of services to
Critical Investments or Critical Advisors, or otherwise related to the business
of each of Critical Investments or Critical Advisors under the terms of which
Critical Investments or Critical Advisors; (A) is reasonably anticipated to pay
or otherwise give consideration of more than $1,000 in the aggregate over the
remaining term of such contract of (B) cannot cancel without penalty or further
payment and without more than 30 days' notice;
(ii) each contract and agreement for the sale of personal
property or for the furnishing of services by Critical Investments or Critical
Advisors which: (A) is reasonably anticipated to involve consideration of more
than $1,000 in the aggregate during the fiscal year ending December 31, 2001, or
in any fiscal year thereafter; (B) is reasonably anticipated to involve
consideration of more than $1,000 in the aggregate over the remaining term of
the contract or (C) cannot be cancelled by Critical Investments or Critical
Advisors without penalty or further payment and without more than 30 days'
notice;
(iii) all broker, distributor, dealer, franchise, agency,
sales promotion, market research, marketing, consulting and advertising
contracts and agreements to which Critical Investments or Critical Advisors is a
party;
(iv) all management contracts and contracts with
independent contractors, consultants or other persons (including Affiliates) (or
similar arrangements) involving exclusive rights or requiring payments in excess
of $1,000 individually to which Critical Investments or
9
Critical Advisors is a party and which are not cancelable without penalty or
further payment on 30 days' or less notice;
(v) all contracts and agreements relating to indebtedness
of either Critical Investments or Critical Advisors in excess of $1,000
individually or $2,500 in the aggregate;
(vi) all contracts and agreements with any Governmental
Authority to which either Critical Investments or Critical Advisors is a party;
(vii) all contracts and agreements that limit or purport to
limit the ability of Critical Investments or Critical Advisors to compete in any
line of business, or with person, or in any geographic area or during any period
of time;
(viii) all contracts and agreements between or among
Critical Investments or Critical Advisors on the one hand and any Affiliate of
either Critical Investments or Critical Advisors on the other hand;
(ix) all leases and subleases for tangible personal
property having a value in excess of $1,000, for purposes of this Agreement, the
term "lease" shall include any and all leases, subleases, sale/leaseback
agreements or similar arrangements.
(x) all contracts relating to Intellectual Property and
all contracts relating to real property owned, leased or used by Critical
Investors or Critical Advisors; and
(xi) all other contracts and agreements whether or not
made in the ordinary course of business, which are material to Critical
Investments and Critical Advisors.
(b) Each Material Contract: (i) is valid and binding on the
respective parties thereto and is in full force and effect and (ii) upon
consummation of the transactions contemplated hereby shall continue in full
force and effect without penalty or other adverse consequence. Neither of
Critical Investors nor Critical Advisors is and, to the Critical Owners'
Knowledge, no other party to any Material Contract is, in breach of or default
under any Material Contract, which breach or default would have a Material
Adverse Effect on Critical Investors or Critical Advisors and no Material
Contract contravenes any Law.
(c) There is no contract, agreement or other arrangement granting
any Person any preferential right to purchase, any of the properties, assets or
services of Critical Investors or Critical Advisors.
(d) There is not now outstanding any guarantee or agreement for
indemnity or for suretyship either given by or for the benefit of Critical
Investors or Critical Advisors.
Section 3.10 Intellectual Property.
(a) The Company heretofore has been provided a true and complete
list of all material Intellectual Property which Critical Investors and Critical
Advisor has the right to use.
10
Each of Critical Investors and Critical Advisors has full ownership thereof or
the right to use all such rights, in each case except to the extent heretofore
disclosed in writing to the Company, and no Critical Owner has any Knowledge
that the conduct of the business of Critical Investments and Critical Advisors
as now operated, as of the date hereof, conflicts with, misappropriates or
infringes, or has been alleged to infringe, any Intellectual Property rights or
franchises of any person (including patents, trade secrets or other proprietary
rights of any third party). The Company heretofore has been provided with a true
and complete copy of every material license or other material agreement,
including all amendments thereto, pursuant to which Critical Investments and
Critical Advisors agreed to grant or has granted rights with respect to the
Intellectual Property to which Critical Investments and Critical Advisors enjoys
rights in any Intellectual Property of any Person. No current or former
consultant, employee or Affiliate of Critical Investments or Critical Advisors
or any of their respective equity owners, officers or directors has any right,
title or interest in any of the Intellectual Property used and/or owned by
Critical Investments or Critical Advisors.
(b) Except to the extent heretofore disclosed to the Company, to
the Knowledge of the Critical Owners, none of the Intellectual Property owned by
or licensed to Critical Investments or Critical Advisors is being infringed by
any person.
(c) To the Knowledge of the Critical Owners, the Intellectual
Property heretofore disclosed in writing to the Company comprises all of the
Intellectual Property required to enable Critical Investments and Critical
Advisors to lawfully carry on the business as now conducted.
Section 3.11 Taxes.
(a) Except as set forth on Schedule 3.11(a), (i) all returns and
reports in respect of all Taxes required to be filed with respect to Critical
Investments and Critical Advisors have been timely filed; (ii) all Taxes shown
on such returns and reports or otherwise due have been timely paid; (iii) all
such returns and reports are true, correct and complete; (iv) no adjustment
relating to such returns has been proposed by any tax authority and, to the
Knowledge of each of the Critical Owners, no basis exists for any such
adjustment; (v) there are no pending or, to the Knowledge of each of the
Critical Owners, threatened actions or proceedings for the assessment or
collection of Taxes against Critical Investments or Critical Advisors; (vi)
there are no Encumbrances on any assets of Critical Investments or Critical
Advisors, and (vii) all Taxes required to be withheld, collected or deposited by
or with respect to Critical Investments or Critical Advisors have been timely
withheld, collected or deposited, as the case may be and to the extent required,
have been paid to the relevant taxing authority.
(b) Except as disclosed on Schedule 3.11(b), (i) there are no
outstanding waivers or agreements extending the statute of limitations for any
period with respect to any Tax to which Critical Investments or Critical
Advisors may be subject; (ii) to the Knowledge of the Critical Owners, there are
no proposed reassessments of any property owned by Critical Investments or
Critical Advisors or other proposals that could increase the amount of any Tax
to which either Critical Investments or Critical Advisors would be subject; and
(iii) no power of attorney that is currently in force has been granted with
respect to any matter relating to Taxes that could affect Critical Investments
or Critical Advisors.
11
(c) The Critical Owners have delivered to the Company correct and
complete copies of all federal, state and foreign income, franchise and similar
tax returns for the tax year ended December 31, 2000, and correct and complete
summaries of all examination reports; and statements of deficiencies assessed
against or agreed to by Critical Investments and Critical Advisors since for the
tax year ended December 31, 2000.
(d) On the balance sheet included in the Critical Interim
Financial Statements, reserves and allowances have been provided adequate in all
material respects to satisfy all liabilities for Taxes relating to each of
Critical Investments and Critical Advisors for periods through the date thereof.
(e) None of the representations set forth in this Section 3.11
relate to any Taxes not yet due and payable as of the date hereof.
Section 3.12. Litigation. Except as set forth on Schedule 3.12 (which, with
respect to each action disclosed therein, sets forth: the parties, nature of the
proceeding, date and method commenced, amount of damages or other relief sought
and, if applicable, paid or granted), there are no claims or proceedings by or
against any of the Critical Owners (or, to any of the Critical Owners'
Knowledge, any of the directors, officers, employees or agents of either
Critical Investments or Critical Advisors) pending or, to the Knowledge of any
of the Critical Owners, threatened and which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect or could reasonably be
expected to affect the legality, validity or enforceability of this Agreement or
the consummation of the transactions contemplated hereby, including without
limitation the Concurrent Transactions.
Section 3.13. Indebtedness of Critical Investments and Critical Advisors.
Neither Critical Investments nor Critical Advisors is obligated to any of the
Critical Owners, directly or indirectly, for any indebtedness.
Section 3.14. Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with this
Agreement or the Concurrent Transactions based upon arrangements made by or on
behalf of any of the Critical Owners.
Section 3.15. Compliance with Laws. To the Knowledge of each of the Critical
Owners, each of Critical Investors and Critical Advisors has conducted and
continues to conduct its business in all material respects in accordance with
all applicable Laws and all applicable Governmental Orders entered by or with
any Governmental Authorities, and each of Critical Investments and Critical
Advisors is in compliance with all such Laws or Governmental Orders, including,
but not limited to, all securities Laws.
12
Section 3.16. Investment Intent. Each of the Critical Owners is entering
into this Agreement for his or her own account for investment and not with a
view to or for sale in connection with any distribution of the Shares, the
Warrants or the Warrant Shares or any part thereof. Each of the Critical Owners
has no present arrangement (whether or not legally binding) at any time to sell
the Shares, the Warrant or the Warrant Shares to or through any person or entity
other than as set forth in the Registration Rights Agreement; provided, however,
that by making their representations herein, each of the Critical Owners does
not agree to hold such securities for any minimum or other specific term and
reserves the right to dispose of the Shares, the Warrants and the Warrant Shares
at any time in accordance with federal or state securities laws applicable to
such disposition.
Section 3.17. Accredited and Sophisticated Investors. Each of the Critical
Owners: (a) is an accredited investor (as defined in Rule 501 of Regulation D
promulgated under the Securities Act), (b) has such knowledge and experience in
financial and business matters that he or she has the capacity to protect his or
her own interests in connection with the transactions contemplated by this
Agreement and (c) is capable of evaluating the merits and risks of an investment
in the Shares, the Warrants and the Warrant Shares. Each of the Critical Owners
acknowledges that an investment in the Shares, the Warrants and the Warrant
Shares is speculative and involves a high degree of risk.
Section 3.18. Disclosure; Access to Information. Each of the Critical Owners
has received all documents, records, books and other publicly available
information pertaining to each of the Critical Owners' investment in the Company
that have been requested by each of the Critical Owners. The Company is subject
to the periodic reporting requirements of the Exchange Act, and each of the
Critical Owners has reviewed copies of all SEC Documents deemed relevant by each
Critical Owner. Each of the Critical Owners and his or her advisors have been
furnished or have otherwise obtained all information necessary to enable each of
the Critical Owners to evaluate the merits and risks of an investment in the
Company and, after review of such information, have had access to and have
obtained such additional information as each of the Critical Owners requested or
required.
Section 3.19. Manner of Sale. At no time was a Critical Owner presented with
or solicited by or through any leaflet, public promotional meeting, published or
publicly available advertisement or any other form of general solicitation or
advertising relating to the Shares, the Warrants or the Warrant Shares.
Section 3.20. Full Disclosure. No representation or warranty of a Critical
Owner contained in this Agreement, any schedule, annex or exhibit hereto and any
agreement, instrument or certificate furnished by or on behalf of a Critical
Owner to the Company pursuant to this Agreement contains any untrue statement of
a material fact, or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE CRITICAL OWNERS
WITH RESPECT TO EACH OF THE FUNDS
As an inducement to the Company to enter into this Agreement and the
Concurrent Transactions, each of the Critical Owners, jointly and severally,
represents and warrants to the Company as follows:
Section 4.1 Organization, Qualification, Etc. of Each of the Funds.
Critical Infrastructure LP is duly registered, organized and a validly existing
limited partnership under the Laws of the State of Delaware. Critical
Infrastructure Ltd. is a duly registered, incorporated and a validly existing
international business company under the Laws of the British Virgin Islands.
Critical Infrastructure (BVI) is a duly registered and validly existing limited
partnership under the laws of the British Virgin Islands. Each of the Funds has
all necessary power and authority to own, operate and lease the properties and
assets now owned, operated or leased by it and to carry on its business as it
has been, is currently and as currently anticipated to be conducted. Each of the
Funds is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it or the operation
of its business makes such licensing or qualification necessary, except where
the failure to be so licensed, qualified or in good standing does not have, or
could not reasonably be expected to have, a Material Adverse Effect. All
material partnership or corporate actions, as the case may be, of each of the
Funds have been duly authorized and each of the Funds has not taken any action
that in any material respect conflicts with, constitutes a default under or
results in a violation of any provision of its limited partnership agreement or
memorandum and articles of association, as the case may be. True and correct
copies of (a) the Memorandum and Articles of Association, as amended and
restated through the date hereof of Critical Infrastructure Ltd., (b)
resolutions of the members of the Board of Directors of Critical Infrastructure
Ltd. adopted prior to the date hereof heretofore have been delivered to the
Company and all such resolutions remain in full force and effect in the form
delivered to the Company, (c) the Limited Partnership Agreement of each of
Critical Infrastructure LP and Critical Infrastructure (BVI) and (d) resolutions
of the limited partners and the general partner of Critical Infrastructure LP
and Critical Infrastructure (BVI) adopted prior to the date hereof heretofore
have been delivered to the Company and all of such resolutions remain in full
force and effect in the form delivered to the Company.
Section 4.2 Capitalization of the Funds. Schedule 4.2 accurately (a) sets
forth as of the date indicated the names of the holders of all of the
outstanding equity securities of each of the Funds and the number of shares or
amount of partnership interests, as the case may be, owned by each such holder
and (b) describes any preferences in distributions to which each such holder is
entitled. There are not any preemptive rights with respect to any of the equity
securities of each of the Funds and there are not any outstanding options,
subscriptions, warrants, calls, contracts, convertible securities, or other
rights, agreements, arrangements or commitments of any character under which any
of the Funds is or may become obligated to issue, assign or transfer any equity
securities of any of the Funds or purchase, redeem or otherwise acquire any
outstanding equity securities of any of the Funds. Each outstanding equity
security of each of
14
the Funds has been duly and validly authorized and issued and is fully paid and
owned, of record and, to the Knowledge of the Critical Owners, beneficially by
the holders listed on Schedule 4.2.
Section 4.3 Litigation. There are no actions, disputes or claims (other
than proceedings filed but not yet served on any of the Funds being brought or,
to any of the Critical Owners' Knowledge, threatened by or against any of the
Funds (or, to the Knowledge of any of the Critical Owners, any of the Funds'
directors, officers, employees or agents), or affecting any of the Funds'
assets, pending (or, is to the Knowledge of any of the Critical Owners,
threatened) and which, if adversely determined, could reasonably be expected to
have a Material Adverse Effect. None of the Funds' assets is subject to any Law
or Governmental Order ( nor, to the Knowledge of any of the Critical Owners, are
there any such Governmental Orders threatened to be imposed by any Governmental
Authority) which has had or could reasonably be expected to have a Material
Adverse Effect.
Section 4.4 Financial Information. All balance sheets, profit and loss
accounts and all other financial information of each of the Funds which have
been or hereafter shall be furnished by or on behalf of each of the Funds to the
Company for the purposes of or in connection with this Agreement or any
transaction contemplated hereby, including (i) the audited balance sheets as of
December 31, 2000 and the related audited profit and loss account for the fiscal
year then ended, together with all notes and schedules thereto (the "Fund Year
End Financial Statements") and (ii) the unaudited balance sheets of each of the
Funds at June 30, 2001 and the related unaudited profit and loss account and
statement of cash flows of each of the Funds (the "Fund Interim Financial
Statements") have been prepared in accordance with GAAP except as noted therein,
and give a true and fair view in all material respects of the state of affairs
of each of the Funds as at the dates therefore and the results of their
operations for the periods then ended, subject to year-end adjustments
consisting only of normal recurring accruals. On the Closing Date, each of the
Funds will not have any liabilities, greater than $1,000 individually or in the
aggregate, whether prospective, contingent or otherwise, including for Taxes,
long-term leases or unusual forward or long-term commitments, which are not
fully provided for in the Fund Interim Financial Statements, whether or not
required to be so fully provided for as of the date thereof, except for those
liabilities incurred since the date thereof in the ordinary course of each of
the Fund's business or as described on Schedule 4.4 and those liabilities
reflected in the footnotes to the Fund Year End Financial Statements.
Section 4.5 Books and Records. The books of account and other financial
records of each of the Funds: (a) reflect all items of income and expense and
all assets and liabilities required to be reflected therein, except to the
extent that the omission to reflect such items reasonably could not,
individually or in the aggregate, have a Material Adverse Effect on the business
of each of the Funds, (b) are complete and correct, not misleading and do not
contain or reflect any inaccuracies or discrepancies, except as reasonably could
not, individually or in the aggregate, have a Material Adverse Effect on each of
the Funds, and (c) have been maintained in accordance with good business and
accounting practices.
Section 4.6 Assets. Schedule 4.6 lists the assets of each of the Funds.
Each of the Funds owns, leases or has the legal right to use all of the
properties and assets used or intended to be used or required in the conduct of
their respective operations and which are material and, with
15
respect to contract rights, is a party to and enjoys the right to the benefits
of all material contracts and agreements used and/or intended to be used by each
of the Funds or required in or relating to the conduct of such entities
businesses (such properties, assets and contract rights are collectively
referred to as the "Assets"). Each of the Funds has good title to or, in the
case of leased or subleased Assets, valid and subsisting leasehold interests in,
all the Assets, free and clear of all Encumbrances, except as disclosed on
Schedule 4.6. All the Assets are in good operating condition and repair,
ordinary wear and tear excepted, and are suitable for the purposes for which
they are used and intended.
Section 4.7 Conduct of Business in the Ordinary Course. Since the date of
the Fund Interim Financial Statements, each of the Funds has conducted business
only in the ordinary course and consistent with past practice.
Section 4.8 Compliance with Laws. Each of the Funds has conducted and
continues to conduct its business in all material respects in accordance with
all Laws and all Governmental Orders entered by or with any Governmental
Authorities, and each of the Funds is in compliance with all such Laws or
Governmental Orders, except to the extent that the failure to so conduct or
comply therewith would not, in the aggregate, have a Material Adverse Effect on
any of the Funds or on the transactions contemplated hereby (including the
Concurrent Transactions).
Section 4.9 Material Contracts.
(a) The Critical Owners have, or have caused to be, made available
to the Company for review and duplication, correct and complete copies (or in
the case of oral contracts, summaries thereof) of all of the following contracts
and agreements of each of the Funds (such material contracts and agreements,
listed on Schedule 4.9(a), collectively, "Material Contracts"):
(i) each contract and agreement for the purchase of
personal property with any supplier or for the furnishing of services to any of
the Funds, or otherwise related to the business of each of the Funds under the
terms of which a Fund; (A) is reasonably anticipated to pay or otherwise give
consideration of more than $1,000 in the aggregate over the remaining term of
such contract of (B) cannot cancel without penalty or further payment and
without more than 30 days' notice;
(ii) each contract and agreement for the sale of other
personal property or for the furnishing of services by a Fund which: (A) is
reasonably anticipated to involve consideration of more than $1,000 in the
aggregate during the fiscal year ending December 31, 2001, or in any fiscal year
thereafter; (B) is reasonably anticipated to involve consideration of more than
$1,000 in the aggregate over the remaining term of the contract or (C) cannot be
cancelled by a Fund without penalty or further payment and without more than 30
days' notice;
(iii) all broker, distributor, dealer, franchise, agency,
sales promotion, market research, marketing, consulting and advertising
contracts and agreements to which a Fund is a party;
16
(iv) all management contracts and contracts with
independent contractors, consultants or other persons (including Affiliates) (or
similar arrangements) involving exclusive rights or requiring payments in excess
of $1,000 individually to which a Fund is a party and which are not cancelable
without penalty or further payment on 30 days' or less notice;
(v) all contracts and agreements relating to indebtedness
of any of the Funds in excess of $1,000 individually or $2,500 in the aggregate;
(vi) all contracts and agreements with any Governmental
Authority to which any of the Funds is a party;
(vii) all contracts and agreements that limit or purport to
limit the ability of a Fund to compete in any line of business, or with any
person, or in any geographic area or during any period of time;
(viii) all contracts and agreements between or among the
Funds on the one hand and any Affiliate of any of the Funds on the other hand;
(ix) all leases and subleases for tangible personal
property having a value in excess of $1,000, for purposes of this Agreement, the
term "lease" shall include any and all leases, subleases, sale/leaseback
agreements or similar arrangements.
(x) all contracts relating to Intellectual Property and
all contracts relating to real property owned, leased or used by any of the
Funds; and
(xi) all other contracts and agreements whether or not
made in the ordinary course of business, which are material to each of the
Funds.
(b) Each Material Contract: (i) is valid and binding on the
respective parties thereto and is in full force and effect and (ii) upon
consummation of the transactions contemplated hereby shall continue in full
force and effect without penalty or other adverse consequence. None of the Funds
is and, to the Critical Owners' Knowledge, no other party to any Material
Contract is, in breach of or default under any Material Contract, which breach
or default would have a Material Adverse Effect on any of the Funds, and no
Material Contract contravenes any Law.
(c) There is no contract, agreement or other arrangement granting
any Person any preferential right to purchase any of the properties, assets or
services of any of the Funds.
(d) There is not now outstanding any guarantee or agreement for
indemnity or for suretyship either given by or for the benefit of any of the
Funds.
Section 4.10 Intellectual Property.
(a) The Company heretofore has been provided a true and complete
list of all Intellectual Property which each of the Funds owns or has the right
to use. Each of the Funds
17
has full ownership thereof or the right to use all such rights, in each case
except to the extent heretofore disclosed in writing to the Company, and no
Critical Owner has any Knowledge that the conduct of the business of each of the
Funds as now operated, as of the date hereof, conflicts with, misappropriates or
infringes, or has been alleged to infringe, any Intellectual Property rights or
franchises of any person (including patents, trade secrets or other proprietary
rights of any third party). The Company heretofore has been provided with a true
and complete copy of every material license or other material agreement,
including all amendments thereto, pursuant to which each of the Funds agreed to
grant or has granted rights with respect to the Intellectual Property to which
each of the Funds enjoys rights in any Intellectual Property of any Person. No
current or former consultant, employee or Affiliate of each of the Funds or any
of their respective equity owners, officers or directors has any right, title or
interest in any of the Intellectual Property used and/or owned by each of the
Funds.
(b) Except to the extent heretofore disclosed to the Company, to
the Knowledge of the Critical Owners, none of the Intellectual Property owned by
or licensed to any of the Funds is being infringed by any person.
(c) To the Knowledge of the Critical Owners, the Intellectual
Property heretofore disclosed in writing to the Company comprises all of the
Intellectual Property required to enable each of the Funds to lawfully carry on
the business as now conducted.
Section 4.11 Real Property. The particulars of the real property set forth
on Schedule 4.11 attached hereto (the "Real Property") are true and correct in
all respects and each of the Funds has good and marketable title to the Real
Property free from Encumbrances and other adverse rights. The Real Property
comprises all the real property owned, used or occupied by each of the Funds.
There is no violation of any Law (including, without limitation, any building,
planning, zoning law or environmental law) or any covenants, stipulations or
conditions relating to any of the Real Property and each of the Funds is in
peaceful and undisturbed possession of each parcel of Real Property, except to
the extent failure to be in such possession could not have a Material Adverse
Effect. There are no contractual or legal restrictions that preclude or restrict
in any material manner the ability to use any of the Real Property in the manner
in which they are currently being used and the Real Property has all rights and
easements reasonably necessary for their use and enjoyment for the purposes of
the Business. None of the Funds is leasing or subleasing nor has leased or
sublet any parcel or any portion of any parcel of Real Property to any other
Person, nor has any Fund assigned its interest under any lease or sublease for
any leased Real Property to any third party. There are no outstanding material
disputes with any Person relating to the Real Property or its use and no notices
have been given or received by any of the Funds which would adversely affect the
use and enjoyment of the Real Property.
Section 4.12 Taxes.
(a) Except as set forth on Schedule 4.12(a), (i) all returns and
reports in respect of all Taxes required to be filed with respect to the Funds
have been timely filed; (ii) all Taxes shown on such returns and reports or
otherwise due have been timely paid; (iii) all such returns and reports are
true, correct and complete; (iv) no adjustment relating to such returns has been
proposed by any tax authority and, to the Knowledge of each of the Critical
Owners, no basis
18
exists for any such adjustment; (v) there are no pending or, to the Knowledge of
each of the Critical Owners, threatened actions or proceedings for the
assessment or collection of Taxes against the Funds; (vi) there are no
Encumbrances on any Assets, and (vii) all Taxes required to be withheld,
collected or deposited by or with respect to the Funds have been timely
withheld, collected or deposited, as the case may be and to the extent required,
have been paid to the relevant taxing authority.
(b) Except as disclosed on Schedule 4.12(b), (i) there are no
outstanding waivers or agreements extending the statute of limitations for any
period with respect to any Tax to which Critical Investments, Critical Advisors
or the Funds may be subject; (ii) to the Knowledge of the Critical Owners there
are no proposed reassessments of any property owned by any of the Funds or other
proposals that could increase the amount of any Tax to which would be subject;
and (iii) no power of attorney that is currently in force has been granted with
respect to any matter relating to Taxes that could affect the Funds.
(c) The Critical Owners have delivered to the Company correct and
complete copies of all federal, state and foreign income, franchise and similar
tax returns for the tax year ended December 31, 2000, and correct and complete
summaries of all examination reports; and statements of deficiencies assessed
against or agreed to by any of the Funds for the tax year ended December 31,
2000.
(d) On the balance sheet included in the Interim Financial
Statements, reserves and allowances have been provided adequate in all material
respects to satisfy all material liabilities for Taxes relating to each of any
of the Funds for periods through the date thereof.
(e) None of the representations set forth in this Section 4.12
relate to any Taxes not yet due and payable as of the date hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to the Critical Owners to enter into this Agreement,
the Company hereby represents and warrants to each of the Critical Owners as
follows:
Section 5.1. Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own the securities of or control any other business
entity, except as set forth in the SEC Documents and except for securities which
have been acquired as compensation for services provided in the normal course of
the Company's business. The Company is duly qualified and is in good standing as
a foreign corporation to do business in every jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not
reasonably have a Material Adverse Effect.
19
Section 5.2. Authority. (i) The Company has the requisite corporate power
and corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, and the Warrants and to issue the
Shares, the Warrants and the Warrant Shares pursuant to their respective terms,
(ii) the execution, issuance and delivery of this Agreement, the Registration
Rights Agreement, the Common Stock certificates, the Warrants and the Warrant
Shares by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required, and (iii) this Agreement, the Registration Rights
Agreement, the Common Stock certificates representing the Shares, and the
Warrants have been duly executed and delivered by the Company and shall
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. The Company has duly and
validly authorized and reserved for issuance shares of Common Stock sufficient
in number for the exercise of the Warrants.
Section 5.3. Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock, par value $0.01 per share, of
which 19,565,717 shares are issued and outstanding as of August 14, 2001 and
2,500,000 shares of "blank check" preferred stock, of which 122,500 shares are
issued and outstanding as Series A Convertible Preferred Stock, par value $.01
per share, and 50,000 shares are issued and outstanding as Series B Convertible
Preferred Stock, par value $.01 per share. (The Series A Convertible Preferred
Stock and the Series B Convertible Preferred Stock are sometimes hereinafter
referred to as the "Preferred Stock".) The Preferred Stock is convertible into
shares of Common Stock as described in the SEC Documents. There are no
outstanding Capital Shares Equivalents nor any agreements or understandings
pursuant to which any Capital Shares Equivalents may become outstanding except
in each case for outstanding options and warrants as set forth in the SEC
Documents. Except as set forth in the SEC Documents, the Company is not a party
to any agreement granting registration or anti-dilution rights to any person
with respect to any of its equity or debt securities. All of the outstanding
shares of Common Stock and Preferred Stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable.
Section 5.4. Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or (g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company is in
compliance with all requirements for the continued listing or quotation of its
Common Stock, and such Common Stock is currently listed or quoted on, the
Principal Market. As of the date hereof, the Principal Market is the OTC
Bulletin Board and the Company has not received any notice regarding, and to its
Knowledge there is no threat of, the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 5.5. SEC Documents. The Company has made available to each of the
Critical Owners true and complete copies of the SEC Documents. The Company has
not provided to each of the Critical Owners any information that, according to
applicable Law, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed.
20
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act, and rules and regulations of
the SEC promulgated thereunder and the SEC Documents 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 therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents complied in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC or other applicable rules and regulations with respect
thereto at the time of such inclusion. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they exclude footnotes or may be
condensed or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited interim statements, to normal year-end audit adjustments). Neither the
Company nor any of its subsidiaries has any material indebtedness, obligations
or liabilities of any kind (whether accrued, absolute, contingent or otherwise,
and whether due or to become due) that would have been required to be reflected
in, reserved against or otherwise described in the financial statements or in
the notes thereto in accordance with GAAP, which were not fully reflected in,
reserved against or otherwise described in the financial statements or the notes
thereto included in the SEC Documents or was not incurred in the ordinary course
of business consistent with the Company's past practices since the last date of
such financial statements.
Section 5.6. Exemption from Registration; Valid Issuances. Subject to the
accuracy of each of the Critical Owner's representations in Article III hereof,
the sale of the Shares, the Warrants and the Warrant Shares will not require
registration under the Securities Act and/or any applicable state securities
law. When issued and paid for in accordance with the Warrants, the Warrant
Shares will be duly and validly issued, fully paid, and non-assessable. Neither
the sales of the Shares, the Warrants or the Warrant Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, or the Warrants will (i) result in the creation or imposition
by the Company of any liens, charges, claims or other encumbrances upon the
Shares, the Warrants or the Warrant Shares or, except as contemplated herein,
any of the assets of the Company, or (ii) entitle the holders of Outstanding
Capital Shares to preemptive or other rights to subscribe for or acquire the
Capital Shares or other securities of the Company. The Shares, the Warrants and
the Warrant Shares shall not subject the Critical Owners to personal liability
to the Company or its creditors by reason of the possession thereof.
Section 5.7. No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its Affiliates nor, to the Knowledge
of the Company, any person acting on its or their behalf (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Shares or
the Warrants, or (ii) made any offers or sales of any security or solicited any
offers to buy any security under any circumstances that would require
registration of the Shares, the Warrants or the Warrant Shares under the
Securities Act.
Section 5.8. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby,
21
including without limitation the issuance of the Shares, the Warrants and the
Warrant Shares, do not and will not (i) result in a violation of the Company's
Certificate of Incorporation, as amended, or By-Laws or (ii) conflict with, or
constitute a material default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument, or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company is a party, or (iii) result in a violation of any
federal, state or local law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or by which any material property or asset of the Company is bound or
affected, nor is the Company otherwise in violation of, conflict with or default
under any of the foregoing (except in each case for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not have, individually or in the aggregate, a Material Adverse Effect). The
business of the Company is not being conducted in violation of any Law, except
for possible violations that either singly or in the aggregate would not have a
Material Adverse Effect. The Company is not required under any Law to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement or issue and sell the Shares or the
Warrants in accordance with the terms hereof (other than any SEC or state
securities filings that may be required to be made by the Company subsequent to
Closing or any registration statement that may be filed pursuant hereto);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Critical Owners herein.
Section 5.9. No Material Adverse Change. Since March 31, 2001, no Material
Adverse Effect has occurred or exists with respect to the Company, except as
expressly disclosed in the SEC Documents.
Section 5.10. No Undisclosed Events or Circumstances. Since March 31, 2001,
no material adverse event or circumstance has occurred or exists with respect to
the Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 5.11. No Integrated Offering. Other than pursuant to an effective
registration statement under the Securities Act, or pursuant to the issuance or
exercise of employee stock options, or pursuant to its discussion with the
Critical Owners in connection with the transactions contemplated hereby, the
Company has not issued, offered or sold its Common Stock, or any securities
convertible into or exchangeable or exercisable for Common Stock within the
six-month period next preceding the date hereof, and the Company shall not
permit any of its directors, officers or affiliates directly or indirectly to
take, any action (including, without limitation, any offering or sale to any
Person of the Shares or Warrants), so as to make unavailable the exemption from
Securities Act registration being relied upon by the Company for the offer and
sale to the Critical Owners of the Shares and the Warrants (and the Warrant
Shares) as contemplated by this Agreement.
Section 5.12. Litigation and Other Proceedings. Except as disclosed in
Schedule 5.12 and the SEC Documents, there are no lawsuits or proceedings
pending or, to the Knowledge of the
22
Company, threatened, against the Company or any subsidiary, nor has the Company
received any written or oral notice of any such action, suit, proceeding or
investigation, which could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, to the Knowledge of the
Company, requested of any court, arbitrator or governmental agency which could
result in a Material Adverse Effect.
Section 5.13. No Misleading or Untrue Communication. The Company and, to the
Knowledge of the executive officers of the Company, after reasonable inquiry,
any person representing the Company, or any other person selling or offering to
sell the Shares or the Warrants in the sale contemplated by this Agreement, have
not made, at any time, any oral communication in connection with the offer or
sale of the same which contained any untrue statement of a material fact.
Section 5.14. Material Non-Public Information. The Company has not disclosed
to the Investors any material non-public information that (i) if disclosed,
would reasonably be expected to have a material effect on the price of the
Common Stock or (ii) according to applicable law, rule or regulation, should
have been disclosed publicly by the Company prior to the date of issuance of the
Common Stock and the Warrants but which has not been so disclosed.
Section 5.15. Insurance. The Company and each subsidiary maintains property
and casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with industry standards and the
Company's historical claims experience. The Company has not received notice
from, and has no Knowledge of any threat by, any insurer (that has issued any
insurance policy to the Company) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.
Section 5.16. Tax Matters.
(a) (i) All returns and reports in respect of all Taxes required
to be filed with respect to the Company have been timely filed, except to the
extent the failure to timely file such returns and reports would not have a
Material Adverse Effect; (ii) all Taxes required to shown on such returns and
reports or otherwise due have been timely paid; (iii) all such returns and
reports are true, correct and complete in all material respects; (iv) no
material adjustment relating to such returns has been proposed by any tax
authority and, to the Knowledge of the Company, no basis exists for any such
adjustment; (v) there are no pending or, to the Knowledge of the Company,
threatened actions or proceedings for the assessment or collection of Taxes
against the Company; (vi) there are no Encumbrances on any Assets which could
have a Material Adverse Effect, and (vii) all Taxes required to be withheld,
collected or deposited by or with respect to the Company have been timely
withheld, collected or deposited, as the case may be and to the extent required,
have been paid to the relevant taxing authority, except to the extent the
failure to do so would not have a Material Adverse Effect.
(b) (i) There are no outstanding waivers or agreements extending
the statute of limitations for any period with respect to any Tax to which the
Company may be subject; (ii) there are no proposed reassessments of any property
owned by the Company or other proposals
23
that could increase the amount of any Tax to which the Company would be subject;
and (iii) no power of attorney that is currently in force has been granted with
respect to any matter relating to Taxes that could affect the Company.
Section 5.17. Property. Neither the Company nor any of its subsidiaries owns
any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as would not have a Material Adverse
Effect; and to the Company's knowledge any real property, mineral or water
rights, and buildings held under lease by the Company as tenant are held by it
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.
Section 5.18. Intellectual Property.
(a) The conduct of the business of the Company as now operated, as
of the date hereof does not conflict with, misappropriate or infringe, nor has
it been alleged to infringe, any Intellectual Property rights or franchises of
any person (including patents, trade secrets or other proprietary rights of any
third party) except to the extent that such conflict, misappropriation or
infringement would not have a Material Adverse Effect.
(b) Except to the extent heretofore disclosed to the Critical
Owners, to the Knowledge of the Company, none of the Intellectual Property owned
by or licensed to the Company is being infringed by any person.
Section 5.19. Regulatory Compliance. The Company has all necessary permits
and licenses and has made all filings to such regulatory bodies to conduct its
business as it is now being conducted, and is not in violation of any thereof,
except in each case for such matters as would not have a Material Adverse
Effect.
Section 5.20. Internal Controls and Procedures. The Company maintains books
and records and internal accounting controls which provide reasonable assurance
that (i) all transactions to which the Company or any subsidiary is a party or
by which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 5.21. Payments and Contributions. Neither the Company, any
subsidiary, nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment of Company funds to
any foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other similar payment to any person with respect to Company matters.
24
Section 5.22. Investment Intent. The Company is acquiring the Membership
Interests for investment purposes and not with a view to, or for resale in
connection with, the distribution or disposition thereof (except in a
transaction or transactions permitted under the applicable securities laws). The
Company represents that it has such knowledge and experience in financial and
business matters (as required by Rule 506 Regulation D of the Securities Act),
and has had such opportunity as it deems necessary or appropriate to ask
questions of and receive answers from the Critical Owners concerning Critical
Investment, Critical Advisors and each of the Funds, to enable the Company to
evaluate the merits and risks associated with the ownership of the Membership
Interests.
Section 5.23. Access to Information. The Company has been afforded an
opportunity to discuss the business and financial affairs of Critical
Investments, Critical Advisors and each of the Funds with the Critical Owners.
Section 5.24. Full Disclosure. The representations and warranties of the
Company contained in this Agreement, any schedule, annex or exhibit hereto and
any agreement, instrument or certificate furnished by the Company to the
Critical Owners pursuant to this Agreement, do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated herein
or therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE VI
CONCURRENT TRANSACTION; DELIVERIES: CONDITIONS
Section 6.1 Concurrent Transaction. The Parties acknowledge that each of
the parties hereto has relied upon the accuracy, validity and effectiveness of
such other Parties' representations, warranties and agreements in entering into
this Agreement and that, concurrently with the Closing:
(a) The Company shall issue the Warrants to Xxxxxxxx Xxxxxxx and
Xxxxxx in substantially the forms attached hereto as Exhibits C and D,
respectively;
(b) The Company shall enter into an employment agreement with
Xxxxxx Xxxxxx, in substantially the form attached hereto as Exhibit A;
(c) The Company, Xxxxxxxx Xxxxxxx and Xxxxxx shall enter into the
Registration Rights Agreement, in substantially the form attached hereto as
Exhibit B;
(d) All outstanding indebtedness of Critical Investments and
Critical Advisors to Xxxxxx Xxxxxxx or Xxxxxxxx Xxxxxxx shall be forgiven by
Xxxxxxx and evidence of the forgiveness of such indebtedness shall be provided
to the Company;
(e) Section 11(a) of that certain Investment Management Agreement,
dated as of
25
May 1, 2000 ("Management Agreement"), between Critical Infrastructure Ltd. and
Critical Advisors shall be amended so that the Management Agreement shall remain
in full force and effect through December 31, 2002, and thereafter shall be
renewed automatically for successive one-year periods, unless either party
thereto notifies the other party in writing of its decision not to renew the
Management Agreement at least ninety (90) days prior to the commencement of any
one-year renewal period.
(f) Critical Infrastructure Ltd. shall provide the Company with
its consent to the transfer of the Critical Owners Membership Interests in
Critical Advisors Ltd. to the Company in accordance with Section 14 of that
certain Investment Management Agreement dated as of May 1, 2000, between
Critical Infrastructure Ltd. and Critical Advisors; and
(g) The Critical Owners shall liquidate Xxxx Xxxxx'x entire equity
ownership of Critical Investors and Critical Advisors.
The Parties agree that all of the documents to be executed and delivered
pursuant to this Section 6.1 shall be deemed to be executed and delivered
concurrently with this Agreement and none of such documents shall become
effective until all such documents have been fully executed and delivered.
Section 6.2 Deliveries by of the Critical Owners. On or prior to the
Closing, each of the Critical Owners shall execute (where necessary) and deliver
or cause to be delivered to the Company the following documents and
certificates:
(a) Membership Interests. All Membership Interests of the Critical
Owners in Critical Investments and Critical Advisors, together with transfer
forms duly executed to effect transfer of the Membership Interests to the
Company on the books and records of each of Critical Investments and Critical
Advisors;
(b) Consent of Critical Infrastructure Ltd. True and complete
copies, certified by an authorized representative of Critical Infrastructure
Ltd., of the resolutions duly and validly adopted by the appropriate members of
Critical Infrastructure Ltd., evidencing their consent to the transfer by the
Critical Owners of their entire Membership Interests in Critical Advisors to the
Company;
(c) Stamp Duties. Each of the Critical Owners shall have paid all
stamp duties of any kind required by the State of Virginia applicable to or as a
result of a transfer of each of their Membership Interests to the Company, and
shall provide evidence of same to the Company;
(d) Books and Records. All books and records relating to the
activities and equity owners of Critical Investors, Critical Advisors and each
of the Funds;
(e) Bank or Securities Accounts. Transfer of authority to the
President of the Company to act as the signatory on any bank or securities
accounts which Critical Investments, Critical Advisors and each of the Funds
maintain, and notice which the President of the Company may deliver to all banks
in which such entities maintain accounts regarding such transfer of authority;
26
(f) Directors. Signed resolutions of the Boards of Directors of
each of Critical Investments and Critical Advisors appointing as members of each
of the Boards of Directors two nominees of the Company;
(g) Liquidation of Xxxx Xxxxx'x Interests. A written statement
from Xxxx Xxxxx to the Critical Owners (witnessed by an independent third party)
acknowledging that all of his Membership Interests in each of Critical
Investments and Critical Advisors have been liquidated and he has received full
and complete payment in connection with such liquidation; and
(h) Concurrent Transactions. A copy of the Registration Rights
Agreement executed by each of the Critical Owners and a copy of the Employment
Agreement executed by Xxxxxx.
Section 6.3 Deliveries by the Company. On or prior to the Closing, the
Company shall execute (where necessary) and deliver or cause to be delivered to
each of the Owners the following documents, certificates and agreements:
(a) Stock Certificates. Certificates representing all of the
Shares to be issued to Xxxxxxxx Xxxxxxx;
(b) Warrants. The Warrants to be issued to Xxxxxxxx Xxxxxxx and
Xxxxxx in accordance with the terms of this Agreement;
(c) Representations and Warranties. A certificate executed by a
duly authorized officer of the Company certifying that the representations and
warranties relating to the Company contained in this Agreement are true and
correct in all material respects as of the Closing, except for any
representations or warranties that relate solely to an earlier date (in which
case such representations and warranties were true and correct as of such
earlier date);
(d) Resolutions of the Company. A true and complete copy,
certified by the Secretary of the Company of the resolutions duly and validly
adopted by the Board of Directors of the Company evidencing its authorization of
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(e) Incumbency Certificate of the Company. A certificate of the
Secretary of the Company certifying the names and signatures of the officers of
the Company authorized to sign this Agreement and the other documents to be
delivered hereunder on behalf of the Company; and
(f) Concurrent Transactions. A copy of each of the following
documents relating to the Concurrent Transactions, each executed by the Company:
(i) the Registration Rights Agreement, (ii) the Warrants, and (iii) the
Employment Agreement.
Section 6.4 Conditions Precedent to the Parties' Obligations to Close. The
obligations of each of the Parties to consummate the transactions contemplated
hereby are subject to the satisfaction or, in each Party's sole discretion,
waiver on or before the Closing of each of the following conditions:
27
(a) Deliveries. Receipt by the appropriate Parties of the items
enumerated in Sections 6.2 and 6.3 hereof;
(b) No Amounts Owed to Critical Owners. Neither Critical Investors
nor Critical Advisors shall be indebted to any of the Critical Owners;
(c) Amendment to Management Agreement. The Management Agreement
shall be amended as specified in Section 6.11(e) hereof and a fully executed
copy of such agreement shall be provided to the Company;
(d) No Adverse Change. Since the date of the Interim Financial
Statements of the Company, Critical Investors, Critical Advisors and each of the
Funds, there shall have been no Material Adverse Effect on the financial
condition or prospects of any of such Parties; and
(e) No Proceeding or Litigation. No action, proceeding or
litigation shall have been commenced or threatened by any Governmental Authority
seeking to restrain or materially alter the transactions contemplated hereby
which, in the reasonable good faith determination of the Company and each of the
Critical Owners, is likely to render it impossible or unlawful, or otherwise
render inadvisable the Parties' intent, to consummate the transactions
contemplated hereby or any of the Concurrent Transactions.
ARTICLE VII
COVENANTS OF THE CRITICAL OWNERS
Each of the Critical Owners, jointly and severally, covenants with the
Company as follows:
Section 7.1 Compliance with Law. Each of the Critical Owner's trading
activities with respect to the Shares and the Warrant Shares will be in
compliance with all applicable state and federal securities laws, rules and
regulations, the rules and regulations of the Principal Market on which the
Shares and the Warrant Shares are listed, and the provisions of each agreement
or instrument entered into by or issued to each Critical Owner in connection
with the transactions contemplated by this Agreement.
Section 7.2 Liquidation of the Membership Interests of Xxxx Xxxxx. By the
Closing, the Critical Owners shall have liquidated all of the Membership
Interests of Xxxx Xxxxx in each of Critical Investments and Critical Advisors
and shall provide the Company with the affidavit of Xxxx Xxxxx that he has
received full and complete payment for such Membership Interests.
Section 7.3 Relocation of the Offices of Critical Investments and Critical
Advisors. As soon as practicable after the Closing of the transactions
contemplated hereby, each of the Critical Owners shall assist the Company in
relocating the offices of Critical Investments and Critical Advisors to the New
York City office of the Company.
28
Section 7.4 Board of Directors. The Critical Owners shall have taken such
action as is necessary to have the Boards of Directors of each of Critical
Investments and Critical Advisors comprised of Xxxxxxxx Xxxxxxx, Xxxxxx Xxxxxx
and two nominees of the Company, through December 31, 2002. Until December 31,
2002, in the event Xxxxxx Xxxxxx resigns from his employment with the Company
under the Employment Agreement or Xxxxxx Xxxxxx'x employment is terminated "for
cause" (as such term is defined in the Employment Agreement), another person
designated by Xxxxxxxx Xxxxxxx and reasonably acceptable to the Company shall
replace Xxxxxx Xxxxxx on the Boards of Directors of Critical Investments and
Critical Advisors. Until December 31, 2002, in the event Xxxxxxxx Xxxxxxx
determines that, in her reasonable judgment, she cannot be associated with
Critical Investments and Critical Advisors, another person designated by
Xxxxxxxx Xxxxxxx and reasonably acceptable to the Company shall replace Xxxxxxxx
Xxxxxxx on the Boards of Directors of Critical Investments and Critical
Advisors.
Section 7.5 No Short Sales of the Registrable Securities. So long as a
Critical Owner beneficially owns Registrable Securities registered under the
Registration Statement which have not been sold, such Critical Owner and his or
her Affiliates shall not engage in any short sales or third party short sales of
the Shares or the Warrant Shares in violation of Regulation M promulgated under
the Exchange Act, or hold a similar "put equivalent position" with respect to
the Shares or the Warrant Shares (as defined in Rule 16a-1 under the Exchange
Act); provided, however, (a) that a Critical Owner's sale of Common Stock which
the Critical Owner owned prior to such registration and which were acquired
outside of this Agreement shall not be deemed a short sale under this Agreement
and (b) that a Critical Owner's sale of Warrant Shares during any such period
after the Critical Owner's delivery to the Company of a notice of exercise of
the Warrant together with full payment therefor but prior to the Critical
Owner's receipt of the Warrant Shares to be issued pursuant to the exercise of
the Warrant shall not be deemed a short sale under this Agreement.
ARTICLE VIII
COVENANTS OF XXXXXXXX XXXXXXX
Section 8.1 Continued Association with the Company. Xxxxxxxx Xxxxxxx
shall cause Xxxxxxx Strategic Consulting ("WSC") to continue to evaluate
investment opportunities for both the public and private portion of the holdings
of the Funds on terms mutually agreeable to Xxxxxxx and the Funds. Absent
extraordinary circumstances, Xxxxxxxx Xxxxxxx shall remain associated with the
Funds through at least December 31, 2002 on such terms and conditions as are
mutually agreeable to Xxxxxxxx Xxxxxxx and the Company. The Company understands
and agrees that Xxxxxx Xxxxxxx shall discontinue all affiliation with the Funds
upon the Closing.
29
ARTICLE IX
COVENANTS OF XXXXXX
Section 9.1 Continued Association with the Company. Subsequent to the Closing,
Xxxxxx shall continue to evaluate candidates for both the public and private
portion of the holdings of the Funds. Absent extraordinary circumstances, Xxxxxx
shall remain associated with the Funds through at least December 31, 2002 on
such terms and conditions as are mutually agreeable to Xxxxxx and the Company,
under the terms of the Employment Agreement.
ARTICLE X
COVENANTS OF THE COMPANY
Section 10.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect, and the Company shall
comply in all material respects with the terms thereof and shall use best
efforts to timely prepare and file the Registration Statement.
Section 10.2. Reservation of Common Stock. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to issue the Warrant Shares pursuant to any exercise of the
Warrants. The number of shares so reserved from time to time, as theretofore
increased or reduced as hereinafter provided, may be reduced by the number of
shares actually delivered pursuant to any exercise of the Warrants and the
number of shares so reserved shall be increased or decreased to reflect
potential increases or decreases in the Common Stock that the Company may
thereafter be obligated to issue by reason of adjustments to the Warrants.
Section 10.3. Listing of Common Stock. The Company hereby agrees to maintain the
listing of the Common Stock on a Principal Market, and as soon as reasonably
practicable following the Closing to list the Shares and the Warrant Shares on
the Principal Market. The Company further agrees, if the Company applies to have
the Common Stock traded on any other Principal Market, it will include in such
application the Shares and the Warrant Shares, and will take such other action
as is necessary or desirable in the opinion of the Investors to cause the Shares
and Warrant Shares to be listed on such other Principal Market as promptly as
possible. The Company will take all action to continue the listing and trading
of its Common Stock on a Principal Market (including, without limitation,
maintaining sufficient net tangible assets) and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the Principal Market and shall provide Investors with copies of any
correspondence to or from such Principal Market which questions or threatens
delisting of the Common Stock, within three (3) Trading Days of the Company's
receipt thereof, until the Investors have disposed of all of their Registrable
Securities.
30
Section 10.4. Exchange Act Registration. The Company will cause its Common Stock
to continue to be registered under Section 12(b) or (g) of the Exchange Act,
will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act until the Investors have
disposed of all of their Registrable Securities.
Section 10.5. Legends. The certificates evidencing the Registrable Securities
shall be free of legends, except as set forth in Article XIII.
Section 10.6. Corporate Existence; Conflicting Agreements. The Company will take
all steps necessary to preserve and continue the corporate existence of the
Company. The Company shall not enter into any agreement, the terms of which
agreement would restrict or impair the right or ability of the Company to
perform any of its obligations under this Agreement or any of the other
agreements attached as exhibits hereto.
Section 10.7. Consolidation; Merger. The Company shall not, at any time after
the date hereof, effect any merger or consolidation of the Company with or into,
or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Critical Owners such shares of
stock and/or securities as the Critical Owners are entitled to receive pursuant
to this Agreement and the Warrants.
Section 10.8. Issuance of Common Stock and Warrant Shares. The sale of the
Shares and the Warrants and the issuance of the Warrant Shares pursuant to
exercise of the Warrants shall be made in accordance with the provisions and
requirements of Section 4(2), 4(6) or Regulation D promulgated under the
Securities Act and any applicable state securities law. The Company shall make
any necessary SEC and Blue Sky filings required to be made by the Company in
connection with the sale of the Securities to the Critical Owners as required by
all applicable laws, and shall provide a copy thereof to the Critical Owners
promptly after such filing.
Section 10.9. Compensation of Xxxxxx. The Company shall pay Xxxxxx 8% of EBITDA
after the first U.S.$100,000 for Critical Investments and Critical Advisors
based on such firms' share of all earnings of the Funds for each of the calendar
years ended 2001 and 2002. Such payment shall be made by the Company to Xxxxxx
by no later than April 1 of each succeeding calendar year.
Section 10.10. Compensation of Xxxxxxxx Xxxxxxx. The Company shall pay Xxxxxxxx
Xxxxxxx 32% of EBITDA after the first U.S.$100,000 for Critical Investments and
Critical Advisors based on such firms' share of all earnings of the Funds for
each of the calendar years ended 2001 and 2002. Such payment shall be made by
the Company to Xxxxxxxx Xxxxxxx by no later than April 1 of each succeeding
calendar year.
Section 10.11 Compensation to WSC. Subsequent to the Closing, and upon such
terms and conditions as are mutually agreeable to the Company and WSC, the
Company shall pay
31
compensation to WSC for any referrals that result in compensation paid to the
Company or its Affiliates for services resulting from the closing of any
transactions in which the Company or its Affiliates are involved.
Section 10.12 Compensation to Xxxxxx. Subsequent to the Closing, the Company
shall pay Xxxxxx a fee of ten percent (10%) for all referrals made by Xxxxxx
(outside of directly Fund-related activities) that result in compensation paid
to the Company or its Affiliates in connection with completed transactions in
which the Company or its Affiliates are involved. Such payments to Xxxxxx shall
be made in the same form of consideration which is received by the Company or
its Affiliates.
Section 10.13 Additional Synergies with WSC. Subsequent to the Closing, the
Company shall seek, on a best efforts basis, to develop other synergies through
its various business lines with WSC, which efforts shall include, but not
necessarily be limited to, the following:
(a) Refer clients of the Company to WSC from the Company's web
site, and provide WSC with a position on the Company's web site which is
mutually agreeable to WSC and the Company; and
(b) Continue paying to WSC a monthly fee of U.S.$1,000 through
December 31, 2002; provided, however, that Xxxxxxxx Xxxxxxx remains associated
with WSC and each of the Funds. Such monthly fee shall be adjusted to a market
rate mechanism which is agreeable to the Company and Xxxxxxxx Xxxxxxx after the
Funds are more mature.
Section 10.14 Marketing of the Funds. The Company shall market the Funds, on a
reasonable efforts basis, to individuals and institutions. Such marketing effort
shall include the Company conducting a private placement for the Funds, with the
ultimate goal of attempting to build the Funds to a base of U.S.$40 million in
assets by December 31, 2002. Any reference to Xxxxxxxx Xxxxxxx'x association
with the Funds in connection with the marketing of the Funds shall be approved
in advance by Xxxxxxxx Xxxxxxx. The Company's efforts to sell equity interest in
the Funds shall include an institutional marketing effort, a retail marketing
effort to high-net worth individuals through the Company's affiliated brokers
and to accredited investors (as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act) through the Company's web site.
Section 10.15 No Securities or NASD Registration. The Company shall not require
or request, nor shall it take any action that would result in Xxxxx Xxxxxxx or
WSC having to register as an investment advisor or a registered representative
or a broker-dealer under any applicable securities laws or rule or regulation
and shall notify Xxxxxxxx Xxxxxxx if any request or payment or other action
would otherwise require such registration. In the event any payment hereunder or
other action of the Company can only be made or taken if Xxxxxxxx Xxxxxxx is so
registered, the Company shall notify Xxxxxxxx Xxxxxxx in advance of making such
payment or taking such action and shall modify the form of such payment or the
form of such action so that the economic benefits to Xxxxxxxx Xxxxxxx are the
same but so that KathleenWallman shall not be required to so register. Neither
Xxxxxxxx Xxxxxxx nor the Company know of any provision in this Agreement that
would require Xxxxxxxx Xxxxxxx or WSC to so register.
32
ARTICLE XI
TRADE NAME OF THE FUNDS
Section 11.1 Trade Name. The Funds will continue to operate under the "Critical
Infrastructure Funds" trade name with a subtitle of "a vFinance Company." The
trade name of the Funds may only be altered by mutual written agreement of the
Critical Owners and the Company. However, the Company shall have the right to
change the name of either Critical Investments or Critical Advisors.
ARTICLE XII
SURVIVAL; INDEMNIFICATION
Section 12.1. Survival. The representations, warranties and covenants made by
each of the Company and the Critical Owners in this Agreement, the annexes,
schedules and exhibits hereto and in each instrument, agreement and certificate
entered into and delivered by them pursuant to this Agreement, shall survive the
Closing and the consummation of the transactions contemplated hereby and the
representations and warranties will continue for a period of two years from the
date hereof. In the event of a breach or violation of any of such
representations, warranties or covenants, the Party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement, irrespective of any investigation made by or on behalf of
such Party on or prior to the Closing Date.
Section 12.2. Indemnity.
(a) The Company shall indemnify and hold harmless each of the
Critical Owners (collectively, the "Owner Indemnitees") from and against any and
all Damages, and shall reimburse each of the Critical Owners for all reasonable
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by each of the Critical Owners and
to the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact or breach of
any of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to this Agreement;
(ii) any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, the annexes, schedules or exhibits hereto
or any instrument, agreement or certificate entered into or delivered
by the Company pursuant to this Agreement; or
33
(iii) any action instituted against the Critical Owners, or
any of them, by any stockholder of the Company who is not an Affiliate
of a Critical Owner, with respect to any of the transactions
contemplated by this Agreement.
The Company's maximum indemnification under this Section 12.2 shall be limited
to the compensation received under Section 2.2 of this Agreement.
(b) Each of the Critical Owners, jointly and severally, shall
indemnify and hold harmless the Company, its Affiliates and their respective
present and former officers, directors, shareholders, employees, partners and
members (collectively, the "Company Indemnitees"), from and against any and all
Damages, and shall reimburse the Company Indemnitees for all reasonable
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by the Company Indemnitees and to
the extent arising out of or in connection with (i) any misrepresentation,
omission of fact, or breach of any of the Critical Owners' representations or
warranties contained in this Agreement, the annexes, schedules or exhibits
hereto or any instrument, agreement or certificate entered into or delivered by
the Investor pursuant to this Agreement; (ii) any failure by a Critical Owner to
perform in any material respect any of its covenants, agreements, undertakings
or obligations set forth in this Agreement, the annexes, schedules or exhibits
hereto or any instrument, agreement or certificate entered into or delivered by
a Critical Owner pursuant to this Agreement; or (iii) any action instituted
against the Company Indemnitees, or any of them, by any holder of an equity
interest in Critical Investors, Critical Advisors, Critical Infrastructure LP,
Critical Infrastructure Ltd., or Critical Infrastructure (BVI) who is not an
Affiliate of the Company with respect to any of the transactions contemplated by
this Agreement. The Critical Owners' maximum indemnification is limited to the
compensation received under Section 2.2 of this Agreement.
Section 12.3. Notice. Promptly after receipt by a Party hereto seeking
indemnification pursuant to Section 12.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party from whom indemnification pursuant to Section
12.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve it from any
liability that he, she or it otherwise may have to the Indemnified Party, except
to the extent that the Indemnifying Party is actually prejudiced by such
omission or delay. The Indemnified Party shall furnish to the Indemnifying Party
such information (in reasonable detail) as the Indemnified Party may have with
respect to such Claim (including copies of any summons, complaint or other
pleading which may have been served on him, her or it and any written claim,
demand, invoice, billing or other document evidencing or asserting the same). In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the
34
Indemnified Party, potentially differing interests between such parties in the
conduct of the defense of such Claim, or if there may be legal defenses
available to the Indemnified Party that are in addition to or disparate from
those available to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to the Indemnified
Party within a reasonable period of time after notice of the commencement of
such Claim. If the Indemnified Party employs separate legal counsel in
circumstances other than as described in clauses (x), (y) or (z) hereinabove,
the fees, costs and expenses of such legal counsel shall be borne exclusively by
the Indemnified Party. Except as provided hereinabove, the Indemnifying Party
shall not, in connection with any Claim in the same jurisdiction, be liable for
the fees and expenses of more than one firm of legal counsel for the Indemnified
Party (together with appropriate local counsel). The Indemnifying Party shall
not, without the prior written consent of the Indemnified Party (which consent
shall not unreasonably be withheld), settle or compromise any Claim or consent
to the entry of any judgment that does not include an unconditional release of
all Indemnified Parties from all liabilities with respect to such Claim or
judgment.
Section 12.4. Direct Claims. In the event one Party should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association as set forth in
Article XV. Judgment upon any award rendered by any arbitrators may be entered
in any court having competent jurisdiction thereof.
ARTICLE XIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 13.1. Due Diligence Review. Subject to Section 13.2 hereof, the Company
shall make available for inspection and review by each of the Critical Owners,
advisors to and representatives of the Critical Owners (who may or may not be
affiliated with the Critical Owners and who are reasonably acceptable to the
Company), any underwriter participating in any disposition of the Registrable
Securities on behalf of the Critical Owners pursuant to the Registration
Statement, any such registration statement or amendment or supplement thereto or
any blue sky, Nasdaq or other filing, all SEC Documents and other filings with
the SEC, and all other publicly available corporate documents and properties of
the Company as may be reasonably necessary for the purpose of such review, and
cause the Company's officers, directors and employees to supply all such
publicly available information reasonably requested by the Critical Owners or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Critical Owners and
such representatives, advisors and underwriters and their respective accountants
and attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
35
Section 13.2. Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose material non-public information
to the Critical Owners, advisors to or representatives of the Critical Owners
unless prior to disclosure of such information the Company identifies such
information as being non-public information and provides the Critical Owners,
such advisors and representatives with the opportunity to accept or refuse to
accept such non-public information for review. The Company may, as a condition
to disclosing any non-public information hereunder, require the Critical Owners'
advisors and representatives to enter into a confidentiality agreement in form
and content reasonably satisfactory to the Company and the Critical Owners.
(b) Nothing herein shall require the Company to disclose material
non-public information to the Critical Owners or their advisors or
representatives after the consummation of the transactions contemplated hereby.
Notwithstanding anything herein to the contrary, the Company shall, as
hereinabove provided, promptly notify the advisors and representatives of the
Critical Owners and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 13.2 shall be construed to mean that such persons or entities
(other than Critical Owners that have not given written consent prior to
disclosure of such information as set forth in Section 13.2(a)) may not obtain
non-public information in the course of conducting due diligence in accordance
with the terms of this Agreement and nothing herein shall prevent any such
persons or entities from notifying the Company of their opinion that based on
such due diligence by such persons or entities, that the Registration Statement
contains an untrue statement of a material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
ARTICLE XIV
LEGENDS; TRANSFER AGENT INSTRUCTIONS
Section 14.1. Legends. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend or equivalent
(the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS.
36
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH REGISTRATION.
Section 14.2. No Other Legend or Stock Transfer Restrictions. No legend other
than the one specified in Section 14.1 has been or shall be placed on the share
certificates representing the Registrable Securities and no instructions or
"stop transfer orders," "stock transfer restrictions," or other restrictions
have been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Article XIV.
Section 14.3. Critical Owners' Compliance. Nothing in this Article shall affect
in any way each Critical Owner's obligations to comply with all applicable
securities laws upon resale of the Common Stock.
ARTICLE XV
CHOICE OF LAW; ARBITRATION
Section 15.1. Governing Law/Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
shall be submitted to arbitration under the American Arbitration Association
(the "AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York unless the matter at issue is the corporation,
partnership or limited liability company law of the company's state of
organization, in which event the corporation law of such jurisdiction shall
govern such issue. To the extent practical, decisions of the Board of
Arbitration shall be rendered no more than thirty (30) calendar days following
commencement of proceedings with respect thereto. The Board of Arbitration shall
cause its written decision to be delivered to all parties involved in the
dispute. Any decision made by the Board of Arbitration (either prior to or after
the expiration of such thirty (30) calendar day period) shall be final, binding
and conclusive on the parties to the dispute, and entitled to be enforced to the
fullest extent permitted by law and entered in any court of competent
jurisdiction. The Board of Arbitration shall be authorized and is hereby
directed to enter a default judgment against any party failing to participate in
any proceeding hereunder within the time periods set forth in the AAA rules. The
non-prevailing party to any arbitration (as determined by the Board of
Arbitration) shall pay the expenses of the prevailing party, including
reasonable attorney's fees in connection with such arbitration. The
37
Board of Arbitration shall also rule on the payment of expenses of arbitration.
Any party shall be entitled to obtain injunctive relief from a court in any case
where such relief is available.
ARTICLE XVI
NOTICES
Section 16.1. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) hand delivered, (ii) deposited
in the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice
or other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the first business day
following the date of sending by reputable courier service, fully prepaid,
addressed to such address, or (c) upon actual receipt of such mailing, if
mailed. The addresses for such communications shall be:
If to the Company: xXxxxxxx.xxx, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telephone: 000.000.0000
Facsimile: 561.981.3969
With a copy to (shall not constitute Xxxxxx X. Xxxxxxx, P.A.
notice): Xxxxxxx & Xxxxxx, LLP
000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xx. Xxxxxxxxxx, XX 00000-0000
Telephone: 000.000.0000
Facsimile: 954.351.7175
If to Critical Owners: Xxxxxxxx Xxxxxxx
0000 Xxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Xxxxxx Xxxxxxx
0000 Xxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
38
If to: Xxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx #000
Xxx Xxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
With a copy to: Xxxxxx Xxxxxxxx, Esq.
(shall not constitute notice) Legal Counsel to the Funds
Akin Gump Xxxxxx Xxxxx & Xxxx. L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 214-969-4343
Either Party hereto may from time to time change his, her or its address or
facsimile number for notices under this Section 16.1 by giving written notice of
such changed address or facsimile number to the other party hereto as provided
in this Section 16.1.
ARTICLE XVII
MISCELLANEOUS
Section 17.1. Counterparts, Facsimiles and Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the Parties and shall be deemed to be an original instrument which shall
be enforceable against the Parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all Parties.
Section 17.2. Entire Agreement. This Agreement, the agreements attached as
Exhibits hereto, which include, but are not limited to the Warrants and the
Registration Rights Agreement, set forth the entire agreement and understanding
of the parties relating to the subject matter hereof and supersedes all prior
and contemporaneous agreements, negotiations and understandings between the
parties, both oral and written relating to the subject matter hereof. The terms
and conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
Section 17.3. Assignment. This Agreement and the rights and duties hereunder may
not be assigned or assumed by operation of law or otherwise without the express
prior written consent of the other Parties hereto (which consent may be granted
or withheld in the sole discretion of such other Parties, as applicable.
Notwithstanding anything contained herein to the contrary, a
39
merger or consolidation of the Company with a third party or a sale of all or
substantially all of the assets of the Company to a third party shall not be
deemed an assignment which shall require the consent of the Critical Owners.
Section 17.4. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party.
Section 17.5. Headings. The descriptive headings used in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 17.6. Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Shares or Warrants or any Warrant
Shares and (ii) in the case of any such loss, theft or destruction of such
certificate, upon delivery of an indemnity agreement or security reasonably
satisfactory in form to the Company (which shall not include the positing of any
bond) or (iii) in the case of any such mutilation, on surrender and cancellation
of such certificate, the Company at its expense will execute and deliver, in
lieu thereof, a new certificate of like tenor.
Section 17.7. Fees and Expenses. Each of the Company and the Critical Owners
shall pay his, her and its own expenses incident to the performance of its
obligations hereunder.
Section 16.8. Brokerage. Each of the Parties hereto represents that he, she or
it has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other Party.
The Company on the one hand, and the Critical Owners, on the other hand, shall
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 17.9. Public Announcements. Except as required by Law, no Party to this
Agreement shall make, or cause to be made, any press release or public
announcement in respect to this Agreement or the transactions contemplated
hereby or otherwise communicate with any news media without the prior written
consent of the other Party, which shall not be unreasonably withheld now delayed
by more than two Business Days from their receipt of such proposed release or
public announcement. Except to the extent prohibited by applicable Law, the
Party shall cooperate as to the timing and contents of any such press release or
public announcement.
40
IN WITNESS WHEREOF, the Company, Xxxxxxxx Xxxxxxx, Xxxxxx Xxxxxxx and
Xxxxxx Xxxxxx have caused this Agreement to be duly executed as the date first
written above.
XXXXXXXX.XXX, INC.
By: /s/ Xxxxxxx Xxxxxxx
-------------------------
Name: Xxxxxxx Xxxxxxx
Title: Chief Executive Officer and President
/s/ Xxxxxxxx Xxxxxxx
----------------------------
XXXXXXXX XXXXXXX
/s/ Xxxxxx Xxxxxxx
----------------------------
XXXXXX XXXXXXX
/s/ Xxxxxx X. Xxxxxx
----------------------------
XXXXXX XXXXXX
41
SCHEDULE 3.4
NONE
42
SCHEDULE 3.5
NONE
43
SCHEDULE 3.11(A)
NONE
44
SCHEDULE 3.11(B)
NONE
45
SCHEDULE 3.12.
NONE
46
SCHEDULE 4.2.
LIMITED PARTNERS AND SEPARATE ACCOUNTS
Xxxxxxx X. Xxxxx
0000 Xxxxxxxxxx Xxxxx
Xxxx Xxxxx, XX 00000-0000
Account balance: $98,234
Xxxxxxxx Xxxxxx
000 Xxxx 00xx Xxxxxx, Xxx 0X
Xxx Xxxx, XX 00000
Account balance: $98,591
Xxxxxx X. Xxxxxxx, Esq.
0000 Xxxxxxx Xx. XX
Xxxxxxxxxx, XX 00000
Account balance: $55,470
Xxxxxx X. Xxxxxxx
0000 Xxxxxx Xxxxx Xx.
Xxxxxxxxx, XX 00000
Account balance: $55,470
Xxxxxxx X. Xxxxxxxx
Xxxxxxx Communications Corp II
000 Xxxxxx Xxxxxx
Xxxxxxx Xxxx, XX 00000
Account balance: $85,811
Xxxxx Xxxxx
for the account of Xx. Xxxxxx X. Xxxxxxxx, M.D.
FHC Health Systems Inc.
000 Xxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000
Account balance: $203,631
Xxxxxx X. Xxxxxx
00 X. 00xx Xx., Xxx. 0X
Xxx Xxxx, XX 00000
Account balance: $10,926
Xxxxxx Xxxxx
for the Account of Xxxxxx X. Xxxxx Employees Retirement Plan
000 Xxxx Xxxxxx, #0X
Xxx Xxxx, XX 00000
Account balance: $46,950
Xxxxx X. Xxxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxxx, XX 00000
Account balance: $57,556
Xxxxxxx X. Xxxxxx
000 X. 00xx Xx., Xxx. 0X
Xxx Xxxx, XX 00000
Account balance: $49,296
47
Xxxxx X. Xxxxxx, Xx.
Trustee of the Xxxxx Xxxxxxxxxx Hormel Revocable Living Trust
00 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Account balance: $492,958
Xxxxxxx Xxxxxx
000 Xxxxxxxx Xxx., #000
Xxxxxxx, XX 00000
Account balance: $22,457
Xxxxxx X.X. Xxxxxxxx
000 Xxxx 00xx Xx., Xxx. 0X
Xxx Xxxx, XX 00000
Account balance: $142,560
Xxxxxx X. Xxxxxx, Esq.
0000 Xxxxx Xxxxxx Xx. XX
Xxxxxxxxxx, XX 00000
Account balance: $49,187
Xxxxxxx X. Xxxxx, P.T., Inc.
00 Xxxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Account balance: $287,690
Xxxxx Xxxxxxxx
TTEE Xxxxx Xxxxxxxx Living Trust DTD 7/19/2000
000 Xxxxxx Xx., #0000
Xxxx Xxxx, XX 00000
Account balance: $277,350
Xxxxxx Xxxxxxxxxx
0000 00xx Xxxxxxx XX
Xxxxxxxxxx, XX 00000
Account balance: $98,592
Xxxxxxx Xxxxx
c/o Shapiro&Lobel, For Beau Productions Inc. Profit Sharing Plan
000 Xxxx 00xx Xx.
Xxx Xxxx, XX 00000
Account balance: $84,063
Xxxxxx X. Xxxxx and Xxxxx X. Divolk
0000 Xxxxxxxxxx Xx. XX
Xxxxxxxxxx, XX 00000
Account balance: $43,260
Xxxxxxx Xxxxx
000 Xxxxxxx Xx.
Xxx Xxxxxxxxx, XX 00000
Account balance: $55,470
Xxxxxxx Xxxxx
00 X. 0xx Xx.
Xxx Xxxx, XX 00000
Account balance: $62,600
Xxxxxxx Xxxxx XXX
00 X. 0xx Xx.
Xxx Xxxx, XX 00000
Account balance: $41,163
48
Xxx Xxxxxxx
Xxxxxxx Capital Management
0000 Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Account balance: $12,521
Xxxxxx X. Xxxxxx
c/o Xxx Xxxxxx Associates
00000 0xx Xx. Xxxx
Xxxxxx, XX 00000
Account balance: $55,470
Xxxx X. Xxxxx
0000 Xxxxxxxxxxx Xxxxxx XX, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Account balance: $97,888
Xxxxx Xxxxxxxxxx
0000 Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Account balance: $12,521
Xxxxx Xxxxxxx
000 00xx Xx. XX, Xxxxx 000
Xxxxxxxxxx, XX 00000
Account balance: $38,261
Xxxxx Xxxxxxx, Esq.
Attn: Xxxxxx Xxxxxx, City National Bank of San Diego, as trustee for the Xxxxx
Xxxxxxx Trust
000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxxx, XX 00000
Account balance: $59,429
Xxxxx X. Xxxxxx, Esq.
000 Xxxx Xxx Xxxxxx, Xxx 0X
Xxx Xxxx, XX 00000
Account balance: $57,556
Xxxxxxx Xxxxx
Attn: Xxxxxx Xxxxxx, City National Bank of San Diego, as trustee for the Xxxxx
Xxxxxxx Trust
000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxxx, XX 00000
Account balance: $38,261
Xxxxxxxxxxx Xxxxxx
00 Xxxx Xxxxxx, Xxx. 0X
Xxx Xxxx, XX 00000
Account balance: $85,812
Xxxxxxx X. Xxxxxx
0000 Xxxxx Xxxxx Xxxxx
Xxxxxxxx Xxxxx, XX 00000
Account balance: $129,779
Xxxxx Xxxxxx
0000 Xxxxxx x Xxx Xxxxxx
Xxxxx Xxxx, XX 00000
Account balance: $191,307
49
Xxxxxx Xxxxxx
000 XX 00xx Xx.
Xxxxx, XX 00000
Account balance: $230,222
Xxxxxxxx Xxxxxxx & Xxxxxx Xxxxxxx
0000 Xxxxx Xxxx
Xxxxx Xxxxx, XX 00000-0000
Account balance: $167,511
Xxxx Xxxxxx
000 Xxx Xx.
Xxxxxx, XX 00000
Account balance: $11,511
Zurich Capital Markets / Zurich HFR Master Hedge Fund Index Ltd.
Attn: Xxxxx Xxxx
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Separately managed account: $594,589
50
SCHEDULE 4.4
None
51
SCHEDULE 4.6.
ASSETS
PLANT, PROPERTY & EQUIPMENT
2 end tables
1 small conference table
1 large conference table
3 medium lobby chairs
10 black regular chairs
2 large upholstered chairs
2 large wooden display shelves
6 double-drawer plastic filing cabinets
4 quadruple-drawer metal filing cabinets
Sofa/Loveseat
8 large L-shaped workstation desks
8 executive chairs
6 large plants with pots
Sentry 1160 safe box
8 GE 3-line phones: Model # 0-0000X XXX
Sharp UX-355L fax machine
Brother HL-1240 laser printer
Compaq C31000 color printer / copier
HP LaserJet 1100 printer
Sony Vaio PCGSR7K with CD-ROM and floppy drive
Dell Dimension XPS T700r personal computer with 17" Dell Trinitron Monitor p780
Dell Dimension XPS T600r personal computer with 19" Dell Trinitron Monitor
52
Dell OptiPlex GX100 personal computer with 17" Dell Monitor X000x
Xxxxxx Xxx Xxxxx
X.X. TRUST COMPANY CHECKING ACCOUNTS:
00-0000-0 Critical Infrastructure Fund, L.P. current balance [$5,000]
00-0000-0 Critical Advisors LLC, current balance [$4,000]
00-0000-0 Critical Investments LLC, current balance [$3,000]
BANK OF AMERICA PRIME BROKERAGE ACCOUNTS:
00000000-Critical Infrastructure Fd LP Contribution Acct
31314199-Critical Infrastructure (BVI) LP
31314200-Critical Infrastructure (BVI) LP Hot Issue Acct
31314204-Zurich HFR Master Hedge Fund Index Ltd
31314209-Zurich HFR Master Hedge Fund Index Ltd Hot Issue Acct
OTHER SECURITIES AND/OR TRADING ACCOUNTS:
------------------------------ ----------------- --------------- ---------------
FIRM REP PHONE Account #
------------------------------ ----------------- --------------- ---------------
Bear Xxxxxxx Xxxx Xxxxxxxxx 272-3469 2205900794
------------------------------ ----------------- --------------- ---------------
CSFB DLJ Xxxxx Xxxxxx (000) 000-0000 REXGR
------------------------------ ----------------- --------------- ---------------
Deutche Bank Xxxx Xxxxxxx (000) 000-0000 2547751095062
------------------------------ ----------------- --------------- ---------------
Xxxxxxxx Xxxxxxxx Xxxxxx Xxxxxx X. Xxxxx (000) 000-0000 7502838191
------------------------------ ----------------- --------------- ---------------
ING Barings Xxx Xxxxxx 409-7900 48326952
------------------------------ ----------------- --------------- ---------------
XX Xxxxxx /Xxxxxxxxx & Xxxxx Xxx Xxxxxxx (000) 000-0000 H107009193
------------------------------ ----------------- --------------- ---------------
Lazard Freres Xxxx Xxxxxx 632-6773 52300084
------------------------------ ----------------- --------------- ---------------
Xxxxxx Brothers Xxxx Xxxxx (000) 000-0000 8365084196631
------------------------------ ----------------- --------------- ---------------
Xxxxxxx Xxxxx Xxxxx Xxxxxxx 236-7859 61M06709
------------------------------ ----------------- --------------- ---------------
Xxxxxx Xxxxxxx Xxxx Xxxxxx Xxxxx Xxxxxxxx 762-6085 11522440
------------------------------ ----------------- --------------- ---------------
PaineWebber/UBS Warburg Xxx Xxxxx (000) 000-0000 UQ18478
------------------------------ ----------------- --------------- ---------------
Prudential Xxxxx Xxxxxxxxx 418-0425 ASG943525
------------------------------ ----------------- --------------- ---------------
Xxxxxxx Xxxxx Barney Xxx Xxxxxx 307-2923 0629050311
------------------------------ ----------------- --------------- ---------------
XX Xxxxx 4472999
------------------------------ ----------------- --------------- ---------------
53
SCHEDULE 4.9(A)
OPEN CONTRACTS, PAYABLES AND LIABILITIES
Bloomberg Terminal, contract through June 21, 2002, $5,325 quarterly, prepaid
through September 30, 2001
Value Line Ratings & Reports, Selection & Opinion: $895 annually, prepaid
through March 2002
Xxxxxxxx.xxx Stock Analysis service: $100 annually, prepaid through May 2002
Pitney Xxxxx postage meter: $106.99 quarterly plus postage, cancelable
SpeakEasy digital subscriber line: $207.07 monthly, cancelable
Time Warner business cable: $52.50 monthly, cancelable
Lease: $2,750 monthly, expired in April 2001, currently on monthly renewal
54
SCHEDULE 4.11.
NONE
55
SCHEDULE 4.12(A)
NONE
56
SCHEDULE 4.12(B)
NONE
57
SCHEDULE 5.12
A former employee, a Xx. Xxxxxx, filed a complaint on or about May 1,
2001 alleging breach of contract against the Company. On or about July 13, 2001,
the Company filed its' answer asserting certain affirmative defenses and
counterclaims against Xx. Xxxxxx. The Company intends to vigorously defend
against all of the allegations made by Xx. Xxxxxx and to prosecute its'
counterclaims.
58
SCHEDULE 5.16(A)
NONE
59
SCHEDULE 5.16(B)
NONE
60
