IDLEAIRE TECHNOLOGIES CORPORATION SERIES C CONVERTIBLE PREFERRED STOCK AND COMMON STOCK SECURITIES PURCHASE AGREEMENT Dated as of May 12, 2005
Exhibit 10.1
IDLEAIRE TECHNOLOGIES CORPORATION
SERIES C CONVERTIBLE PREFERRED STOCK
AND COMMON STOCK
AND COMMON STOCK
Dated as of May 12, 2005
This SECURITIES PURCHASE AGREEMENT dated as of May 12, 2005 (this “Agreement”), by and
among IdleAire Technologies Corporation, a Delaware corporation (the “Company”), CTV Holdings,
Inc., a Nevada corporation (“CTVH”) and a wholly-owned subsidiary of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
Infrastructure Development Company, Inc., a Delaware corporation (“PBIDC”), and PB
Constructors Inc., a Delaware corporation and an affiliate of PBIDC (“PB Constructors”). PB
Constructors and CTVH are each sometimes referred to individually herein as a “Purchaser” and
collectively as the “Purchasers”.
W I T N E S S E T H:
WHEREAS, (i) the Company desires to issue and sell to CTVH, and CTVH desires to purchase from
the Company for cash shares of Series C Preferred Stock (as such term is defined in Section 1.1(a)
below); (ii) PB Constructors desires to grant to the Company the option, but not the obligation, to
issue to PB Constructors, and PB Constructors is willing to acquire and accept from the Company,
shares of Series C Preferred Stock in consideration for certain services rendered to the Company by
PB Constructors pursuant to the PMSA (as such term is defined herein); and (iii) the Company
desires to grant to PB Constructors the option, but not the obligation, to purchase shares of
Common Stock (as such term is defined in Section 1.2(b) below), all on the terms set forth in this
Agreement; and
WHEREAS, certain terms used in this Agreement are defined in Section 10.1 hereof.
NOW, THEREFORE, in consideration of the promises and mutual covenants and agreements
hereinafter contained, the parties hereto hereby agree as follows:
1. Sale and Purchase of Securities.
1.1. Sale and Purchase of Securities by CTVH.
(a) Initial Cash Investment by CTVH. Simultaneously with the execution and delivery
of this Agreement, the Company shall sell, assign, deliver and convey to CTVH, and CTVH shall
purchase from the Company, 400,000 shares of Series C Convertible Preferred Stock, par value $.001
per share (“Series C Preferred Stock”) of the Company, for a purchase price of $5.00 per
share, or an aggregate purchase price of $2,000,000 in cash (the “Purchase Price”). The
Purchase Price shall consist of a credit of the $1,000,000 investment prepayment made to the
Company by PBIDC pursuant to the Memorandum of Understanding dated May 6, 2004, between the Company
and PBIDC, as amended and supplemented to date, and $1,000,000 in cash to be delivered by CTVH to
the Company as set forth in Section 2.2. The closing of the issue and sale of securities pursuant
to this Section 1.1(a) is referred to herein as the “Initial Closing”
(b) Additional Cash Investments by CTVH. For each $10,000,000 in the aggregate of any
combination of (A) cash proceeds received by the Company from and after
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September 1, 2004 from either the (i) issuance of indebtedness for borrowed money or (ii)
issuances of equity securities (which may, but need not consist of, shares of Series C Preferred
Stock) to parties other than CTVH or any of its Affiliates, plus (B)(i) 50% of the amount of grants
(“Grants”) awarded to the Company by United States federal, state or local government
authorities to encourage the installation of technologies such as the Company’s advanced truck-stop
electrification technology, which Grants have been fully documented and (ii) 25% of the amount of
such Grants which have been awarded but not fully documented, CTVH shall purchase 200,000 shares of
Series C Preferred Stock for a purchase price of $5.00 per share in cash. In accordance with
Section 2.3 hereof, CTVH shall have the obligation to purchase shares up to a total of 600,000
shares of Series C Preferred Stock pursuant to this Section 1.1(b) and such obligation shall
continue until the earlier to occur of (i) the aggregate amounts received or derived by the Company
from the sources described in clauses (A) and (B) of the immediately preceding sentence (the
“Additional Funded Amounts”) from and after September 1, 2004 being greater than or equal
to $30,000,000 or (ii) August 31, 2005. The closing of each issue and sale of securities pursuant
to this Section 1.1(b) is referred to herein as an “Additional Cash Investment Closing.”
For the avoidance of doubt, if the Additional Funded Amounts are greater than $10,000,000 prior to
any applicable Additional Cash Investment Closing, then the amounts greater than $10,000,000 can be
carried forward to any calculation in connection with the next Additional Cash Investment Closing,
if any. The parties agree that in the event that the Additional Funded Amounts are greater than
$20,000,000 but less than $30,000,000 as of August 31, 2005, then CTVH shall purchase a prorated
amount of the 200,000 shares of Series C Preferred Stock for a purchase price of $5.00 per share in
cash.
1.2. Additional Issuances to PB Constructors.
(a) Additional Issuances for Services Rendered. The Company shall have the one-time
option, but not the obligation, exercisable in writing (the “Additional Issuance Notice”)
to PB Constructors not later than 30 days after the first to occur of (i) the time that PB
Constructors invoices the Company for an aggregate of more than $1,500,000 in services as the
Agreed Expenditure Limit under Contract One dated November 23, 2004, between the Company and PB
Constructors, entered into under the PMSA (“Contract One”) and (ii) the date of the
termination of Contract One or the PMSA, to require PB Constructors to accept shares of Series C
Preferred Stock, valued for this purpose at $5.00 per share, in payment of the amount owed by the
Company to PB Constructors under Contract One, up to a maximum of 300,000 shares of Series C
Preferred Stock (i.e., $1,500,000) in lieu of cash. For the avoidance of doubt, if the Company
exercises this option it shall have the right, subject to the above limitations, to pay PB
Constructors in any combination of shares of Series C Preferred Stock and cash as the Company
desires, provided that the Additional Issuance Notice shall set forth the number of shares of
Series C Preferred Stock to be purchased by PB Constructors. To the extent that the Company issues
to PB Constructors fewer than 300,000 shares of Series C Preferred Stock ($1,500,000 aggregate
value) in consideration for services under Contract One, PB Constructors and the Company may agree
in writing that the Company may pay for additional services provided by PB Constructors to the
Company in additional shares of Series C Preferred Stock equal to the excess, of any, of 300,000
over the number of shares of Series C Preferred Stock issued in consideration for services under
Contract One. The closing of each issuance of securities pursuant to this Section 1.2(a) is
referred to herein as a “Compensatory Shares Closing.”
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(b) Optional Issuances. On a quarterly basis, until the Optional Issuance Termination
Date, PB Constructors shall have the one-time option, but not the obligation, exercisable in
writing not earlier than 60 days nor later than 90 days after the end of each applicable quarter
(the “Election Period”), to acquire from the Company, and if PB Constructors exercises such
option within the Election Period, the Company shall issue to PB Constructors, a number of
additional shares of common stock of the Company, par value $.001 per share, (the “Common
Stock”) equal to (a) the amount of PB Constructors’ invoiced construction management fee of
$500 per travel center space during the applicable quarter (the “Management Fee”) divided
by (b) the then prevailing Fair Market Value. The purchase price per share shall be equal to the
then prevailing Fair Market Value. The Company shall deliver written notice to PB Constructors as
to the amount of the Management Fee not later than 30 days after the end of the applicable quarter.
If PB Constructors fails to make an election within the Election Period, then, unless the PMSA
otherwise provides, the Company shall pay the Management Fee applicable to that quarter in cash. On
a cumulative basis, the total value of the shares of Common Stock that will be the subject of the
quarterly options shall not exceed the lesser of (i) $30,000,000 or (ii) 30% of the Management Fee
delivered over the term of the PMSA. Any decision by PB Constructors to purchase shares of Common
Stock shall be in PB Constructors’ sole discretion. Each quarterly option will be exercisable in
whole or in part but will not carry over from quarter to quarter. The closing of each issuance of
securities pursuant to this Section 1.2(b) is referred to herein as a “Optional Shares
Closing.” Each issuance and sale of securities pursuant to this Section 1.2(b) is referred to
herein as a “Optional Shares Issuance.” Notwithstanding anything to the contrary in this
Agreement, PB Constructors shall not have the right to exercise foregoing option in connection with
any quarter in which it or any of its Affiliates is in material breach of the PMSA or any
agreements executed in connection therewith.
1.3. Antidilution. To the extent not already provided for in the Certificate of
Designation (as defined herein), in the event that the Company shall effect a subdivision,
combination reclassification or consolidation of the Series C Preferred Stock or Common Stock
(including without limitation by the payment of dividends in shares of Series C Preferred Stock or
Common Stock) into a greater or lesser number of shares of Series C Preferred Stock or Common
Stock, then, in any such case, the purchase price payable for shares of Series C Preferred Stock or
Common Stock under this Agreement shall be appropriately adjusted to give effect to such dividend,
subdivision, combination, reclassification or consolidation.
2. Closing Dates; Payment of Purchase Price.
2.1. Closing Dates.
(a) The Initial Closing shall take place simultaneously with the execution and delivery of
this Agreement (the date hereof being the “Initial Closing Date”).
(b) Each Additional Cash Investment Closing shall take place not later than 5 Business Days
following the delivery by the Company to CTVH of the Officer’s Certificate described in Section
9.2(a) hereof.
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(c) Each Compensatory Shares Closing shall take place not later than 10 Business Days
following the delivery by the Company to PB Constructors of an Additional Issuance Notice pursuant
to Section 1.2(a).
(d) Each Optional Shares Closing shall take place not later than 10 Business Days after the
delivery by PB Constructors of a written notice of exercise of its option pursuant to Section
1.2(b).
(e) The closing of the purchase and sale of shares of Common Stock pursuant to the exercise of
the Put Right pursuant to Section 8.1, or the exercise of the Call Right pursuant to Section 8.2,
shall take place on a date mutually agreed upon by the Company and the applicable Purchaser, within
the time limits set forth in Sections 8.1 or 8.2, as applicable.
(f) Unless otherwise agreed, all closings pursuant to this Agreement shall take place at the
executive offices of the Company in Knoxville, Tennessee.
2.2. Deliveries at Closings. At each closing, the parties shall deliver the documents
applicable to such closing set forth in Section 9. Unless otherwise agreed, all payments required
to be made pursuant to this Agreement shall be made by wire transfer of immediately available funds
to an account of the recipient of such payment designated by such recipient in writing.
3. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchasers that:
3.1. Organization and Good Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware and has full
corporate power and authority to own, lease and operate its properties and assets and to carry on
its business as now conducted and as it is proposed to be conducted. The Company is duly qualified
or authorized to do business as a foreign corporation and is in good standing under the laws of
each jurisdiction in which the conduct of its business or the ownership of its properties or assets
requires such qualification or authorization.
3.2. Subsidiaries. The Company has no subsidiaries.
3.3. Authorization of Agreement; Enforceability. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and each other agreement,
document, instrument and certificate to be executed by the Company in connection with the
consummation of the transactions contemplated by this Agreement (the “Transaction Documents”), and
to perform fully its obligations hereunder and thereunder. The execution, delivery and performance
by the Company of this Agreement and the Transaction Documents have been duly authorized by all
necessary corporate action on the part of the Company and its stockholders. This Agreement and
each of the Transaction Documents have been duly and validly executed and delivered by the Company
and (assuming the due authorization, execution and delivery thereof by the Purchaser), this
Agreement and each of the Transaction Documents constitute the legal, valid and binding obligations
of the Company enforceable against the Company and in accordance with their respective terms,
subject to applicable bankruptcy,
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insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
3.4. Consents of Third Parties. None of the execution and delivery by the Company of
this Agreement and the Transaction Documents, the consummation of the transactions contemplated
hereby or thereby, or compliance by the Company with any of the provisions hereof or thereof will
(a) conflict with, or result in the breach of, any provision of the certificate of incorporation or
by-laws of the Company, (b) conflict with, violate, result in the breach or termination of, or
constitute a default or give rise to any right of termination or acceleration or right to increase
the obligations or otherwise modify the terms thereof under any Contract, Permit or Order to which
the Company is a party or by which the Company or any of its properties or assets is bound; (c)
constitute a violation of any Law applicable to the Company; or (d) result in the creation of any
Lien upon the properties or assets of the Company. Other than those which have been obtained or
made, no consent, waiver, approval, Order, Permit or authorization of, or declaration or filing
with, or notification to, any Person or Governmental Body is required on the part of the Company in
connection with the execution and delivery of this Agreement or the Transaction Documents, or the
compliance by the Company with any of the provisions hereof or thereof.
3.5. Capitalization; Authorization of Securities.
(a) As of the date of this Agreement, (i) 110,000,000 shares of Common Stock are authorized
and 48,148,968 shares are issued and outstanding; (ii) 17,171,488 shares of Series A Convertible
Preferred Stock the Company (the “Series A Preferred Stock”) are issued and outstanding;
(iii) 12,566,775 shares of Series B Convertible Preferred Stock of the Company (the “Series B
Preferred Stock”) are issued and outstanding; (iv) 980,200 shares of Series C Preferred Stock
are issued and outstanding (the “Series C Preferred Stock”, together with the Series A
Preferred Stock and Series B Preferred Stock, the “Preferred Stock”); (v) 3,835,112 shares
of Common Stock are reserved for issuance pursuant to employee stock options granted pursuant to
the Company’s stock option plans; and (vi) 29,738,263 shares of Common Stock are reserved for
issuance upon the exercise of any outstanding options of the Company or for issuance upon
conversion of the outstanding Preferred Stock. After giving effect to the Initial Closing, there
will be a total of 10,000,000 shares of Series C Preferred Stock issued and outstanding. The
Company has no shares of Common Stock held in treasury. All shares of Series C Preferred Stock
issued to CTVH at the Initial Closing will be validly issued and outstanding, fully paid and
non-assessable. All shares of Series C Preferred Stock to CTVH at each Additional Cash Investment
Closing, when issued against payment therefor, will be validly issued and outstanding, fully paid
and non-assessable. All shares of Series C Preferred Stock issued to PB Constructors at each
Compensatory Shares Closing, when issued in accordance with Section 1.2(a), will be validly issued
and outstanding, fully paid and non-assessable. All shares of Common Stock issued to CTVH at each
Optional Shares Closing, when issued against payment therefor in accordance with Section 1.2(b),
will be validly issued and outstanding, fully paid and non-assessable.
(b) All of the outstanding shares of capital stock have been duly authorized, validly issued,
and are fully paid and non-assessable. The issuance and delivery of the Common
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Stock to be delivered upon conversion of the issued and outstanding Preferred Stock in
accordance with the terms of the Preferred Stock have been duly authorized by all requisite action
of the Company, and, when issued, sold, and delivered in accordance with this Agreement, will be
validly issued and outstanding, fully paid, and non-assessable, with no personal liability
attaching to the ownership thereof. Except as set forth on Schedule 3.5(b), there are no
existing subscriptions, options, warrants, agreements, calls, commitments, trusts (voting or
otherwise), pledge agreements, buy/sell agreements, exchangeable or convertible securities,
preemptive rights, right so first refusal, encumbrances or other rights of any kind whatsoever
granting any interest in or the right to purchase or otherwise acquire any interest in, at any
time, any securities of the Company.
3.6. Financial Statements. The Company has provided to the Purchaser prior to the
Initial Closing Date copies of the (a) audited balance sheet of the Company as of December 31,
2003, the audited statements of income and retained earnings of the Company as of December 31,
2003, and statements of cash flows of the Company as of December 31, 2003 (the “Audited
Financial Statements”), (b) unaudited balance sheets of the Company as of March 31, 2004, June
30, 2004, September 30, 2004, December 31, 2004, the unaudited statements of income and retained
earnings of the Company for the fiscal year ended December 31, 2004 and statements of cash flows of
the Company for the fiscal year ended December 31, 2004, (c) unaudited forecasts of the Company for
2005, including the statement of income and retained earnings, and the statement of cash flows of
the Company ((items (b) and (c) shall be referred to as the “Unaudited Financial
Statements”, and together with the Audited Financial Statements, the “Financial
Statements”). Each of the Financial Statements was prepared in good faith by the Company, is
complete and correct in all material respects, has been prepared in accordance with GAAP and in
conformity with the practices consistently applied by the Company and presents fairly the financial
position, results of operations and cash flows of the Company as of the dates and for the periods
indicated.
3.7. No Undisclosed Liabilities. Except as may be set forth on Schedule 3.7,
the Company has no material liabilities (whether accrued, absolute, contingent or otherwise, and
whether due or to become due or asserted or unasserted), except (a) obligations incurred in the
ordinary course of business; (b) liabilities provided for in the Financial Statements (other than
liabilities which, in accordance with GAAP, need not be disclosed); (c) liabilities (other than
accounts payable) incurred since the date of the Unaudited Financial Statements, in the ordinary
course of business consistent with past practice, the sum of which is, in the aggregate, no greater
than $50,000; and (d) accounts payable in excess of those shown on the Financial Statements,
incurred in the ordinary course of business consistent with past practice, the sum of which is, in
the aggregate, not greater than $100,000.
3.8. Absence of Certain Developments.
(a) Except as set forth on Schedule 3.8(a), the general nature of the business of the
Company is described in the Confidential Private Placing Memorandum dated November, 2004 of the
Company (the “Offering Memorandum”), which previously has been delivered to the Purchaser.
The financial projections contained in the Offering Memorandum are based on and reflect facts that
management of the Company believes still exist and assumptions that
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management of the Company believes are still reasonable, as of the date of this Agreement, but
of which the Company cannot and does not assure or guarantee the attainment in any manner.
(b) Except as set forth on Schedule 3.8(b) and since the date of the Unaudited
Financial Statements:
(i) there has not been any Material Adverse Change;
(ii) there has not been any declaration, setting a record date, setting aside or authorizing
the payment of, any dividend or other distribution in respect of any shares of capital stock of the
Company or any repurchase, redemption or other acquisition by the Company, of any of the
outstanding shares of capital stock or other securities of, or other ownership interest in, the
Company;
(iii) there has not been any transfer, issue, sale or other disposition by the Company of any
shares of capital stock or other securities of the Company or any grant of options, warrants, calls
or other rights to purchase or otherwise acquire shares of such capital stock or such other
securities;
(iv) there has not been any damage, destruction or loss, whether or not covered by insurance,
with respect to the property or assets of the Company having a replacement cost of more than
$50,000 for any single loss or $250,000 for all such losses;
(v) the Company has not incurred any debts, obligations or liabilities, whether due or to
become due, except current liabilities incurred in the usual and ordinary course of business, none
of which current liabilities (individually or in the aggregate) materially and adversely affects
the business, assets, liabilities, prospects, properties, results of operations or condition
(financial or otherwise) of the Company;
(vi) the Company has not encountered any labor difficulties or labor union organizing
activities;
(vii) the Company has not made any change in the accounting principles, methods or practices
followed by it or depreciation or amortization policies or rates theretofore adopted;
(viii) the Company has not disclosed to any Person any material trade secrets except for
disclosures made to Persons subject to valid and enforceable confidentiality agreements; or
(ix) to the Company’s knowledge, suffered or experienced any change in the relationship or
course of dealings between the Company and any of its suppliers or customers which supply goods or
services to the Company or purchase goods or services from the Company, which has had or is likely
to have a material adverse effect on the business, assets, liabilities, prospects, properties,
results of operations or condition (financial or otherwise) of the Company.
(c) No Default or Event of Default has occurred and is continuing.
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3.9. Taxes. The Company has filed all Tax returns (including statements of estimated
Taxes owed) required to be filed within the applicable periods (subject to extensions) for such
filings and has paid all Taxes required to be paid, and has established adequate reserves (net of
estimated Tax payments already made) for the payment of all Taxes payable in respect of the period
subsequent to the last periods covered by such returns. No deficiencies for any Tax are currently
assessed against the Company, and no Tax returns of the Company have ever been audited, and, to the
knowledge of the Company there is no such audit pending or contemplated. There is no Tax lien,
whether imposed by any federal, state or local taxing authority, outstanding against the assets,
properties or business of the Company.
3.10. Intangible Property. Schedule 3.10 hereto sets forth a true and
complete list of all filed patents, patent applications, registered trademarks, trademark
applications, registered copyrights, and copyright applications of the Company. To the best of the
knowledge of the Company, it owns or possesses or, if it does not own or possess, it has the right
to use, copy, modify, create derivative works based upon and incorporate into Company products and
processes and make, have made, sell and offer for sale, whether through ownership, licensing or
otherwise, Company products and processes incorporating all patents, patent applications,
trademarks, trademark applications, service marks, service ▇▇▇▇ applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets and know how (collectively,
“Intellectual Property”) necessary to the conduct of its business as conducted and as
proposed to be conducted. To the best of the knowledge of the Company, the Company has not
infringed on or misappropriated any right of a third party and no claim is pending or, to the
knowledge of the Company threatened to the effect that the operations of the Company infringe upon
or conflict with the asserted rights of any other Person under any Intellectual Property, and the
Company does not know of any basis for any such claim (whether or not pending or threatened). No
claim is pending or, to the knowledge of the Company threatened to the effect that any such
Intellectual Property owned or licensed by the Company, or which the Company otherwise has the
right to use, is invalid or unenforceable by the Company, and the Company do not know of any basis
for any such claim (whether or not pending or threatened).
3.11. Litigation. Except as described in the Offering Memorandum, there are no Legal
Proceedings pending or, to the knowledge of the Company threatened that question the validity of
this Agreement or the Transaction Documents or any action taken or to be taken by the Company in
connection with the consummation of the transactions contemplated hereby or thereby. There are no
Legal Proceedings pending or, to the knowledge of the Company threatened against or affecting the
Company or any properties or assets of the Company, at law or in equity, and there is no reasonable
basis for any other such Legal Proceeding. There is no outstanding or, to the knowledge of the
Company threatened Order of any Governmental Body against, affecting or naming the Company or
affecting any of its properties or assets.
3.12. Compliance with Laws; Permits.
(a) The Company is in compliance with all material Laws and material Orders promulgated by any
Governmental Body applicable to the Company or to the conduct of the business or operations of the
Company or the use of its properties (including any leased properties) and assets. The Company has
not received any notices of violation or alleged violation of any such Law or Order by any
Governmental Body.
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(b) The Company has all Permits necessary for the conduct of its business where the failure to
have such Permits could result in a Material Adverse Change. Such Permits have been validly
issued, and the Company has complied in all material respects with all conditions of such Permits
applicable to it. No default or violation, or event that with the lapse of time or giving of
notice or both would become a default or violation, has occurred in the due observance of any such
Permit. All such Permits are in full force and effect without further consent or approval of any
Person. The Company has not received any notice from any source to the effect that there is
lacking any such material Permit required in connection with the current operations of the Company.
3.13. Environmental Matters. (a) The operations of the Company have been and, as of
the Initial Closing Date, will be in compliance with all Environmental Laws; (b) the Company has
obtained, currently maintains and, as of the Initial Closing Date, will have all Environmental
Permits necessary for its operations; all such Environmental Permits are and, as of the Initial
Closing Date, will be, in effect; there are no Legal Proceedings pending or, to the knowledge of
the Company threatened to revoke any such Environmental Permits; the Company is, and as of the
Initial Closing Date will be in compliance with such Environmental Permits; and the Company has not
received any notice from any source to the effect that there is lacking any Environmental Permit
required in connection with the current use or operation of any real property lease; (c) the
Company is not subject to any pending Legal Proceeding alleging the violation of any Environmental
Law or Environmental Permit; (d) the Company has not received (nor, to the knowledge of the Company
has there been issued) any written communication, whether from a Governmental Body, citizens’
group, Employee or any other Person, that alleges that the Company is not in compliance with any
Environmental Law or Environmental Permit; (e) the Company has not caused or permitted any
Hazardous Materials to remain or be disposed of, either on or under real property legally or
beneficially owned or operated by the Company or on or under any real property not permitted to
accept, store or dispose of such Hazardous Materials; (f) the Company does not have any liabilities
with respect to Hazardous Materials, and no facts or circumstances exist which, in the aggregate,
could give rise to liabilities with respect to Hazardous Materials; (g) none of the operations of
the Company involves the generation, transportation, treatment, storage or disposal of hazardous
waste or subject waste, as defined under 40 C.F.R. Parts 260-270 (in effect as of the date of this
Agreement); and (h) there is not now on or in any property of the Company (A) any underground
storage tanks or surface tanks, dikes or impoundments, (B) any asbestos-containing materials or (C)
any polychlorinated biphenyls.
3.14. Labor Relations. The Company is not bound by or subject to any written or oral,
express or implied, commitment or arrangement with any labor union, and no labor union has
requested or, to the best knowledge of the Company, has sought to represent any of the employees,
representatives or agents of the Company. The Company has not violated any applicable Laws
relating to employment and employment practices, labor, terms and conditions of employment, wages
and hours, or nondiscrimination in employment, except where the failure to be in compliance would
not, individually or in the aggregate, cause a Material Adverse Change. There has been, no labor
strike, dispute, slow-down, work stoppage or other labor difficulty actually pending or, to the
knowledge of the Company, threatened against or involving the Company.
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3.15. Employee Benefits. Except as set forth on Schedule 3.15, the Company has no
employee benefit plans, written or oral, severance pay plan, sick pay plan, stock purchase plan,
stock option plan, fringe benefit plan, incentive plan, bonus plan, cafeteria or flexible spending
account plan and any deferred compensation agreement covering any present or former employee of the
Company which is, or at any time during the six-year period preceding the date hereof was sponsored
or maintained by the Company or other organization employee benefit plans (the “Employee
Benefit Plans”). The Employee Benefit Plans, to the extent applicable, have been operated at
all times in material compliance with the Health Insurance Portability and Accountability Act of
1996 and the continuation coverage provisions described in Code Section 4980B, ERISA Section 601
through 608, and any similar provisions under applicable state law.
3.16. Title to Property; Assets. The Company has good and marketable title to all of
the assets and properties which it purports to own and with respect to the assets and properties
leased, the Company holds valid and subsisting leasehold interests therein, free and clear of any
mortgages, judgments, claims, liens, security interests, pledges or other encumbrances of any kind
or character which, considered together, do not materially impair the Company’s ability to operate
such properties and assets in the ordinary course of its business.
3.17. Investment Company Act. The Company is not, nor is it directly or indirectly
controlled by or acting on behalf of, any Person that is an investment company within the meaning
of the Investment Company Act of 1940, as amended.
3.18. Transactions with Affiliates. The Company has not made any payment to, or
received any payment from, or made or received any investment in, or entered into any transaction
with, any Affiliate, including without limitation, the purchase, sale or exchange of property or
the rendering of any service, where the amount involved is material to the business of the Company.
3.19. Disclosure; Survival. This Agreement and the schedules and exhibits attached
hereto, the Financial Statements and the Offering Memorandum do not contain any untrue statement of
material fact and do not fail to state a material fact necessary in order to make the statements
contained herein and therein not misleading. All representations, warranties, covenants and
agreements set forth in this Agreement or in any writing or certificate delivered in connection
with this Agreement shall survive the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby and shall not be affected by any examination made for or on
behalf of the Purchaser, the knowledge of the Purchaser, or the acceptance by the Purchaser of any
certificate or opinion.
3.20. Insurance. There is in full force and effect one or more policies of insurance
issued by insurers of recognized responsibility, insuring the Company and its properties and
business against such losses and risks, and in such amounts, as are customary in the case of
corporations of established reputation engaged in the same or similar business and similarly
situated. The Company has not been refused any insurance coverage sought or applied for, and the
Company have no reason to believe that the Company will be unable to renew its existing insurance
coverage as and when the same shall expire upon terms at least as favorable as those currently in
effect, other than possible increases in premiums that do not result from any act or omission of
the Company. Except as disclosed on Schedule 3.20, the Company is not in
10
default with respect to any provision contained in any insurance policy, and the Company has
not failed to give any notice or present any currently existing claims under any insurance policy
in due and timely fashion.
3.21. Condition of Properties. All facilities, machinery, equipment, fixtures,
vehicles and other properties owned, leased or used by the Company are in good operating condition
and repair, are reasonably fit and usable for the purposes for which they are being used, are
adequate and sufficient for the Company’s business and conform in all material respects with all
applicable Laws.
3.22. Securities Laws. The offer, issuance and sale of the Series C Preferred Stock
and the Common Stock pursuant to this Agreement are and will be (i) exempt from the registration
and prospectus delivery requirements of the Securities Act, (ii) have been registered or qualified
(or are exempt from registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws, and (iii) accomplished in conformity with all
other federal and applicable state securities laws, rules and regulations.
3.23. Books and Records. The minute books for the period covering the last three
years prior to the date of this Agreement and stock ownership records and other books and records
(the “Books and Records”) of the Company are complete and correct in all material respects.
3.24. No Brokers or Finders. Neither the Company nor any of its respective agents has
incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or
agents’ commissions or other similar payment in connection with the transactions contemplated by
this Agreement or the Transaction Documents.
3.25. Registration Rights. Other than as disclosed in the Offering Memorandum or
granted under this Agreement, the Company has not agreed to register under the Securities Act any
of its authorized or outstanding securities.
4. Representations and Warranties of the Purchasers.
Each Purchaser, severally and not jointly, hereby represents and warrants to the Company that:
4.1. Capacity; Authorization. The Purchaser has all legal power and authority to
enter into this Agreement and to carry out its obligations hereunder. Assuming due execution and
delivery by the Company of this Agreement, this Agreement will constitute a legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
4.2. Investment Purposes. (a) The Purchaser is acquiring shares of the Series C
Preferred Stock and the Common Stock, as the case may be, it has agreed to purchase for investment
purposes only, for its own account, and not as nominee or agent for any other Person,
11
and not with a view to, or for resale in connection with, any distribution thereof within the
meaning of the Securities Act, (b) it has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of its investment, (c) its principal
place of business is as shown on the signature page to this Agreement, and (d) the Company has made
available to it the opportunity to ask questions and to receive answers, and to obtain information
necessary to evaluate the merits and risks of this investment.
4.3. Accredited Investor. The Purchaser is an “accredited investor” within the
meaning of Rule 501 of Regulation D under the Securities Act. The Purchaser has provided the
Company with a completed investor questionnaire which is incorporated herein.
5. Further Agreements of the Parties.
5.1. Reservations of Shares. (a) For so long as the shares of the Series C Preferred
Stock are convertible, the Company shall reserve that number of shares of Common Stock issuable
upon conversion of the Series C Preferred Stock, which shares shall not be subject to any
preemptive or other similar rights.
(b) For so long as the option to purchase shares of Common Stock pursuant to Section 1.2(b)
remains exercisable, the Company shall reserve that number of shares of Common Stock issuable upon
the exercise of such option.
5.2. Director. From and after the time that the total investment in equity securities
of the Company by the Purchasers pursuant to the transactions described herein, or otherwise, is
equal to or exceeds a total of 1,300,000 shares of Common Stock, assuming the conversion of all
Preferred Stock held by them into Common Stock (and, subject to the terms hereof, so long as the
Purchasers continue to hold at least 1,300,000 shares of Common Stock, assuming the conversion of
all Preferred Stock held by them into Common Stock), the Purchasers shall have the right to
designate one person (the “Purchaser Designee”) to become a director of the Company
and of any committee of the Board of Directors of the Company (“Board”) exercising the
authority of the whole Board (such as the executive committee). The Company shall nominate such
person for elections as a director at each meeting of stockholders of the Company at which
directors are to be elected. If, for any reason, the Purchaser Designee is not elected by the
stockholders as a director, the Board shall take all action necessary to cause the Purchaser
Designee to be elected a director by increasing the number of directors who shall constitute the
whole Board and electing the Purchaser Designee to the vacancy thereby created; provided that the
Board shall only be obligated to increase the number of directors one time. Notwithstanding
anything to the contrary herein, the Company shall have the right to exclude the Purchaser Designee
from any meeting while the Company’s contracts, transactions or relationship with the Purchasers or
their Affiliates are being discussed and shall not be required to provide the Purchaser Designee
with any information regarding the Company’s contracts, transactions or relationship with the
Purchasers and their Affiliates.
5.3. Access to Information. The Purchasers shall be entitled, provided that the
Purchasers’ total investment in Company equity securities exceeds 1,250,000 shares of Common Stock,
assuming the conversion of all Preferred Stock held by them into Common Stock (and, subject to the
terms hereof, so long as the Purchasers continue to hold at least 1,250,000 shares
12
of Common Stock, assuming the conversion of all Preferred Stock held by them into Common
Stock) upon reasonable notice, to make such investigation of the properties, business and
operations of the Company and such examination of the books, records and financial condition of the
Company as they reasonably request and to make extracts and copies of such books and records. Any
such investigation and examination shall be conducted during regular business hours and under
reasonable circumstances without material interference with the Company’s normal business
operations, and the Company and its Representatives shall cooperate fully therein. In order that a
Purchaser entitled to rights described in the previous two sentences may have full opportunity to
make such physical, business, accounting and legal review, examination of the affairs of the
Company and investigation as may be reasonably requested, the Company shall cause its
Representatives to cooperate fully with the Purchaser in connection with such review and
examination; provided that the Company shall not incur any material expense related thereto.
Notwithstanding anything to the contrary in this Agreement, (a) the Company shall have the right
not to disclose to the Purchasers, information which is believed in good faith to be protected by
the attorney-client privilege, and (b) the Company shall not be required to respond, and the
Purchasers shall not make any request under this Agreement, in connection with any litigation or
possible litigation by and between/among the Company on the one hand and one or more Purchasers or
Purchaser Affiliates on the other hand.
5.4. Delivery of Financial Reports. As long as the Purchasers hold any shares of
Series C Preferred Stock or Common Stock, if the Company is not required to file periodic
reports with the Securities and Exchange Commission, then, not later than 45 days after the end of
each fiscal quarter, the Company shall prepare and deliver to the Purchasers (a) deployment
forecasts, (b) statement of operating expenses, and (c) an unaudited quarterly income statement
and, to the extent reasonably available, an unaudited balance sheet. The Company shall also
deliver to Purchasers audited annual financial statements not later than 180 days after the end of
the Company’s fiscal year.
5.5. Confidentiality. Except as may be required by applicable law, neither the
Company nor the Purchasers nor any of their respective Affiliates shall at any time divulge,
disclose, disseminate, announce or release any information to any Person concerning this Agreement,
the Transaction Documents or the transactions contemplated hereby or thereby without first
obtaining the prior written consent of the other parties hereto; provided, however, that the
Purchasers shall be entitled to disclose information with respect to their investment in the
Company on any reports any such Purchaser furnishes to its investors or as otherwise required by
Law. Additionally, the Purchasers acknowledge that as stockholders, they will receive certain
information regarding the business of the Company, which information may be confidential or
proprietary to the Company, and neither Purchaser nor any of its Affiliates shall at any time
divulge, disclose, disseminate, announce or release any information to any Person which is
confidential or proprietary to the Company, except to its advisors or as otherwise required by Law.
5.6. Other Actions. The Company and the Purchasers agree to execute and deliver such
other documents and take such other actions as the other parties may reasonably request for the
purpose of carrying out the intent of this Agreement and the Transaction Documents. The Purchasers
shall use reasonable efforts, at no cost to itself, to cooperate in the Company’s efforts to
undertake a public offering of its stock.
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5.7. Financial Statements. The Company shall furnish to the Purchasers, as soon as
reasonably practicable, any financial statements of the Company that have been provided to the
common stockholders.
5.8. Amendment. This Agreement shall not be amended, either directly or indirectly,
in any manner that would alter or change the rights of the Purchasers that the Purchasers possess
in common with all other holders of Series C Preferred Stock without the consent of holders in
excess of 50% of the outstanding shares of Series C Preferred Stock, including Common Stock issued
on the conversion of the shares of Series C Preferred Stock. This Agreement shall not be amended,
either directly or indirectly, in any manner that would alter or change the rights of the
Purchasers that the Purchasers possess individually (including, by way of example and not of
limitation, the rights of the Purchasers under Sections 1.1, 1.2, 5.1(b), 5.2, 5.3, 5.4, 8 and 9)
without the consent of the Purchasers. For the purposes of this Agreement (a) the parties agree
that rights of the Purchasers will be deemed to “in common with all other holders of Series C
Preferred Stock” if the rights of the Purchasers are substantially similar to those set forth in
the Company’s “standard form” Series C Convertible Preferred Stock Securities Purchase Agreement, a
copy of which has been provided to the Purchasers, and (b) the only right of the Purchasers under
Section 7 hereof that is not substantially similar is the right to receive reimbursement of
Registration Expenses.
5.9. Termination of Certain Rights. Notwithstanding anything set forth herein, the
parties agree that the following rights of Purchasers and/or obligations of the Company shall
terminate on the date of the conversion of the Series C Preferred Stock as a class into Common
Stock: (i) the right of Purchasers to acquire Series C Preferred Stock, and (ii) those under
Sections 5.2, 5.3, 5.4, 5.7, 8.1 and 8.2.
6. Transfer Restrictions, Etc.
6.1. Transfer Restrictions.
(a) Each Purchaser understands and agrees that the shares of Series C Preferred Stock and, to
the extent applicable, shares of Common Stock issued pursuant to this Agreement, have not been
registered under the Securities Act, and that accordingly they will not be fully transferable
except as permitted under various exemptions contained in the Securities Act, or upon satisfaction
of the registration and prospectus delivery requirements of the Securities Act. Each Purchaser
acknowledges that it must bear the economic risk of the shares of Series C Preferred Stock and the
shares of Common Stock for an indefinite period of time, and to the Company’s obligation to effect
the registration of the Registrable Securities under the Securities Act in accordance with Section
7 of this Agreement) since they have not been registered under the Securities Act and therefore
cannot be sold unless they are subsequently registered or an exemption from registration is
available. So long as such transfer is in compliance with all applicable Laws, each Purchaser may
transfer some or all of the shares of Series C Preferred Stock or Common Stock, or both, held by
such Purchaser to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ Inc. or any wholly-owned subsidiary of ▇▇▇▇▇▇▇ Brinckerhoff
Inc., without the consent of the Company.
14
(b) Each Purchaser agrees with the Company that the certificates evidencing the shares of
Series C Preferred Stock and the shares of Common Stock will bear the following legend:
“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR THE SECURITIES
ARE SOLD AND TRANSFERRED IN A TRANSACTION THAT IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.”
(c) The legend endorsed on the certificates pursuant to Section 6.1(b) hereof shall be removed
and the Company shall issue a certificate without such legend to the holder thereof at such time as
the securities evidenced thereby cease to be restricted securities upon the earliest to occur of:
(i) a registration statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) the securities shall have been sold to the public pursuant
to Rule 144 (or any successor provision) under the Securities Act, and (iii) such securities may be
sold by the holder without restriction or registration under Rule 144(k) under the Securities Act
(or any successor provision).
7. Registration Rights.
7.1. Demand Registrations.
(a) Requests for Registration. Subject at all times to the right of holders of the
Prior Registrable Securities in the registration of such shares, the Purchasers may at any time
after the earlier of three years from the last sale of Series C Preferred Stock or the six-month
period following a Qualifying IPO, request registration (“Registration”) under the
Securities Act of all or part of its Registrable Securities on Form S-2 or S-3 or any similar
short-form of registration (“Short-Form Registration”) having an aggregate offering price
to the public of not less than $100,000,000 net of underwriting costs and commissions, the Company
will use its commercially reasonable efforts to cause such shares to be registered subject to
customary market hold back provisions, provided the Purchasers together with another stockholder or
stockholders requesting such Registration are then holding not less than a majority of holders of
the outstanding shares of Series C Preferred Stock, including common stock issued on the conversion
of the shares of Series C Preferred Stock. Each request for a Demand Registration shall specify
the number of Registrable Securities requested to be registered and the proposed underwriter.
Within 10 days after receipt of any such request, the Company will give written notice of such
requested registration to all other holders (if any) of Registrable Securities and, subject to
Section 7.1(c) below, will include in such registration of all Registrable Securities with respect
to which the Company has received written requests for inclusion therein within 15 days after the
receipt of the Company’s notice. All registrations requested pursuant to this Section 7.1(a) are
referred to herein as “Demand Registrations.”
15
(b) Registrations. Subject to the requirements of Section 7.1(a) above, the
Purchasers will be entitled to request unlimited Short-Form Registrations (if available to the
Company and subject to customary limitations), provided that the aggregate offering value of the
Registrable Securities requested to be registered in any Short-Form Registration must equal at
least $10,000,000, and the Company shall bear all reasonable Registration Expenses (as defined in
Section 7.6 hereof) of the Purchasers (up to a maximum of $25,000 in connection with each
Short-Form Registration) and may request only two Short-Form Registrations in any 12-month period.
(c) Priority in Demand Registrations. The exercise of the rights of the Purchasers
under this Section 7 are at all times subject to the rights of the holders of the Prior Registrable
Securities regarding registration thereof. The Company will not include in any Demand Registration
any securities which are not Registrable Securities without the prior written consent of the
holders of a majority of the Registrable Securities included in such registration. At the
discretion of the Company, the Demand Registration shall be managed by an underwriter. If a Demand
Registration is an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if permitted hereunder,
other securities requested to be included in such offering, exceeds the number of Registrable
Securities, and other securities, if any, which can be sold under this Section 7 without adversely
affecting the marketability of the offering (the “Offering Quantity”), then the Company
will include in such registration securities in the following priority:
(i) first, all Registrable Securities requested to be included by the holders thereof, and if
the number of such holder’s securities requested to be included exceeds the Offering Quantity, then
the Company shall include only each such requesting holder’s pro rata share of the available
Offering Quantity based on the amount of Registrable Securities requested to be sold for the
account of each such holder; and
(ii) second, the securities proposed to be sold for the account of the Company; and
(iii) third, to the extent (and only to the extent) that the Offering Quantity exceeds the
aggregate amount of securities to be sold pursuant to (i) and (ii) above, the Company will include
in such registration any other securities to be included in the offering.
Any Persons other than holders of Registrable Securities who participate in Demand Registrations
which are not at the Company’s expense must pay their share of the Registration Expenses as
provided in Section 7.6 hereof.
(d) Restrictions on Demand Registrations. The Company will not be obligated to effect
any Demand Registration: (i) within 150 days after the effective date of a previous Demand
Registration. Company shall be entitled to postpone the filing or effectiveness of any
registration statement otherwise required to be prepared and filed by it pursuant to Section 7.1(a)
for a reasonable period of time (but not exceeding 180 days) if the Company determines, in its
reasonable judgment, that such registration and offering, or such offers and sales, would
materially and adversely interfere with any material financing, acquisition, corporate
reorganization or other material transaction involving the Company or any of its Affiliates or
16
would require the Company to disclose material non-public information; provided, however, that
the Company shall use all reasonable efforts to minimize the period of such postponement and may
not utilize this right more than once in any twelve-month period; (ii) during the 180 day period
commencing with the date of the Company’s Qualifying IPO, or (iii) within 180 days after the
effective date of any pervious Demand Registration or (iv) if the Company delivers notice to
holders of Registrable Securities within 30 days of any Registration request of its intent to file
a Qualifying IPO of shares of common stock pursuant to an effective registration statement under
the Securities Act of 1933 within 90 days. The Company shall promptly give the requesting
Purchasers written notice of such determination, containing a general statement of the reasons for
such postponement and an approximation of the anticipated delay. If the Company shall so postpone
the filing of a registration statement, the requesting Purchasers shall have the right to withdraw
the request for registration by giving written notice to the Company within 60 days (or within the
period of postponement if such period is less than 60 days) after receipt of the notice of
postponement in the event of such withdrawal, such request shall not be deemed a request for
registration pursuant to Section 7.1(a) hereof.
(e) Other Registration Rights. Except as provided in this Agreement and such rights
that are junior and subordinate to the rights of the Purchasers, the Company will not grant to any
Persons the right to request the Company to register any equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities, without the prior
written consent of the Purchaser, together with another Purchaser or Purchasers then holding in
excess of 50% of the outstanding shares of Series C Preferred Stock, including common stock issued
on the conversion of the shares of Series C Preferred Stock.
(f) Transfer or Assignment of Registration Rights. The rights to cause the Company to
register securities granted to the Purchasers by the Company under this Section 7.1 may be
transferred or assigned by the Purchasers to: (i) any partner or retired partner of the Purchasers
which is a partnership, (ii) any family member or trust for the benefit of the Purchasers, or (iii)
any transferee who acquires at least 5,000,000 shares of Registrable Securities; provided however,
the Company is given written notice thereof.
(g) Suspension of Registration Rights. Upon written notice to the Purchaser, the
Company shall have the right to suspend any request for Registration indefinitely until Purchaser
or Purchasers then holding in excess of 50% of the outstanding shares of Series C Preferred Stock
requesting Registration, including common stock issued on the conversion of the shares of Series C
Preferred Stock, choose a representative with respect to the coordination of any required
Registration and notify the Company of the same in writing, and, subject at all times to the terms
of this Agreement, the determination of such representative shall be binding on all Purchasers as
to matters involving Registration, including but limited to matters involving Indemnification under
Section 7.7.
7.2. Piggyback Registrations.
(a) Right to Piggyback. Subject at all times to the right of holders of the Prior
Registrable Securities in the registration of such shares, the Purchaser shall be entitled to
“piggy back” registration (“Piggyback Registration”) rights on all registrations of the
Company (other than the registration of the Company’s Qualifying IPO and registrations on Form S-4
or Form S-8 or
17
successor forms) or on any Demand Registrations of any other investor subject to the right,
however, of the Company and its underwriters to reduce the number of shares proposed to be
registered in view of market conditions. No stockholder of the Company shall be granted Piggyback
Registration rights which would reduce the number of shares includable by the holders entitled to
Piggyback Registration rights in such registration without the consent of the holders of in excess
of 50% of the securities covered by the registration rights agreement.
(b) Piggyback Expenses. The Registration Expenses of the holders of Registrable
Securities will be paid by the Company in all Piggyback Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is an underwritten
primary registration on behalf of the Company, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included on a secondary
basis in such registration exceeds the number which can be sold in such offering without adversely
affecting the marketability of such primary or secondary offering (the “Company Offering
Quantity”), the Company will include in such registration securities in the following priority:
(i) first, the Company will include the securities the Company proposes to sell; and
(ii) second, the Company will include all Registrable Securities requested to be included by
any holders thereof, and if the number of such holders’ securities requested to be included exceeds
the Company Offering Quantity, then the Company shall include only each such requesting holder’s
pro rata share of the Company Offering Quantity (remaining after sales by the Company), based on
the amount of securities held by such holder.
7.3. Holdback Agreements. If requested by the Company, no Purchaser will sell or
otherwise dispose of its shares for a specified period (but not exceeding 180 days) following the
effective date of the Company’s Qualifying IPO; provided that all officers and directors are
similarly bound.
7.4. Registration Procedures. Whenever the Purchaser has requested that any
Registrable Securities be registered pursuant to this Agreement, the Company will use its best
efforts to effect the registration and the sale of such Registrable Securities in accordance with
the intended method of disposition thereof, and pursuant thereto the Company will as expeditiously
as possible:
(a) prepare and within 60 days (or 45 days with respect to any Short-Form Registration) after
the end of the period within which requests for registration may be given to the Company file with
the Securities and Exchange Commission a registration statement with respect to such Registrable
Securities and thereafter use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company will furnish to the counsel selected by the holders of a majority
of the Registrable Securities initiating such registration statement copies of all such documents
proposed to be filed, which documents will be subject to review of such counsel);
18
(b) prepare and file with the Securities and Exchange Commission such amendments and
supplements to such registration statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective for a period of either (i) not less than
180 days (subject to extension pursuant to Section 7.8 (b)) or, if such registration statement
relates to an underwritten offering, such longer period as in the opinion of counsel for the
underwriters a prospectus is required by law to be delivered in connection with sales of
Registrable Securities by an underwriter or dealer or (ii) such shorter period as will terminate
when all of the securities covered by such registration statement have been disposed of in
accordance with the intended methods of disposition by the seller or sellers thereof set forth in
such registration statement (but in any event not before the expiration of any longer period
required under the Securities Act), and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration statement until such time
as all of such securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus) and such other documents as such
seller may reasonably request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable Securities under such other
securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and
all other acts and things which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller
(provided that the Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general service of process
in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening of any event (a
“Changing Event”) as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading in the light of the circumstances under which they were made,
and, at the request of any such seller, the Company will as soon as possible prepare and furnish to
such seller (a “Correction Event”) a reasonable number of copies of a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
(f) cause all such Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed and, if not so listed, to be listed on the
NASD automated quotation system;
19
(g) provide a transfer agent and registrar for all such Registrable Securities not later than
the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting agreements in customary form)
and take all such other actions as the holders of a majority of the Registrable Securities being
sold or the underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(i) make available for inspection by any seller of Registrable Securities, any underwriter
participating in any disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause the Company’s
officers, directors, Employees and independent accountants to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) otherwise use its best efforts to comply with all applicable rules and regulations of the
Securities and Exchange Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least twelve months
beginning with the first day of the Company’s first full calendar quarter after the effective date
of the registration statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order suspending the effectiveness of a
registration statement, or of any order suspending or preventing the use of any related prospectus
or suspending the qualification of any securities included in such registration statement for sale
in any jurisdiction, the Company will use its reasonable best efforts promptly to obtain the
withdrawal of such order;
(l) use its best efforts to obtain one or more comfort letters, dated the effective date of
such registration statement (and, if such registration includes a public offering, dated the date
of the closing under the underwriting agreement), signed by the Company’s independent public
accountants in customary form and covering such matters of the type customarily covered by comfort
letters as the holders of a majority of the Registrable Securities being sold reasonably request;
and
(m) use its best efforts to provide a legal opinion of the Company’s outside counsel, dated
the effective date of such registration statement (and, if such registration includes a public
offering, dated the date of the closing under the underwriting agreement), with respect to the
registration statement, each amendment and supplement thereto, the prospectus included therein
(including the preliminary prospectus) and such other documents relating thereto in customary form
and covering such matters of the type customarily covered by legal opinions of such nature.
The Company may require each seller of Registrable Securities as to which any registration is
being effected to furnish the Company such information regarding such seller and
20
the distribution of such securities as the Company may from time to time reasonably request in
writing.
7.5. Term of Registration Rights. The term of Registration Rights shall be the lesser
of two years after a Qualifying IPO or date after which the Purchaser may dispose of all of its
shares under Rule 144 within a 90 day period.
7.6. Registration Expenses.
(a) All expenses incident to the Company’s performance of or compliance with the registration
rights provided for under this Agreement, including, without limitation, all registration and
filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and commissions, which
will be paid by the sellers of Registrable Securities) and other Persons retained by the Company
(all such expenses being herein called “Registration Expenses”), will be borne by the
Company, and the Company will also pay its internal expenses (including, without limitation, all
salaries and expenses of its Employees performing legal or accounting duties), the expense of any
annual audit or quarterly review, the expense of any liability insurance and the expenses and fees
for listing the securities to be registered on each securities exchange on which similar securities
issued by the Company are then listed or on the NASD automated quotation system.
(b) To the extent Registration Expenses are not required to be paid by the Company, each
holder of Registrable Securities included in any registration hereunder will pay those Registration
Expenses allocable to the registration of such holder’s Registrable Securities so included, and any
Registration Expenses not so allocable will be borne by all sellers of Registrable Securities
included in such registration in proportion to the aggregate selling price of the securities to be
so registered (other than an opinion as to the authority of such holder to take any action in
connection with such registration).
7.7. Indemnification.
(a) The Company agrees to indemnify and hold harmless, to the extent permitted by law, the
Purchaser against any Losses, joint or several, to which the Purchaser may become subject under
the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue or
alleged untrue statement of material fact contained in any registration statement, prospectus or
preliminary prospectus or any amendment or supplement thereto or in any application or (ii) any
omission or alleged omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will reimburse the Purchaser for any legal
or any other expenses incurred by them in connection with investigating or defending any such Loss,
action or proceeding; provided, however, that the Company shall not be liable in any such
circumstance to the extent that any such Loss (or action or proceeding in respect thereof) arises
out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged
omission, made in such registration statement, any such prospectus or preliminary prospectus or any
amendment or supplement thereto or in any
21
application, in reliance upon, and in conformity with, written information prepared and
furnished to the Company by the Purchaser expressly for use therein or by the Purchaser’s failure
to deliver a copy of the registration statement or prospectus or any amendments or supplements
thereto after the Company has furnished the Purchaser with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company will indemnify such underwriters,
their officers and directors and each Person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with respect to the indemnification of the
Purchaser.
(b) In connection with any registration statement in which the Purchaser is participating, the
Purchaser will furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration statement or prospectus and,
to the extent permitted by law, the Purchaser will indemnify and hold harmless the Company, its
directors and officers and each other Person who controls the Company (within the meaning of the
Securities Act) against any Losses, joint or several, to which the Company, its directors and
officers and each other controlling Person may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon (i) the purchase or sale of Registrable Securities
during any period beginning upon a Changing Event (as defined in Section 7.4(e)) and ending on a
Correction Event (as defined in Section 7.4(e)), provided the Purchaser received proper written
notice of such Changing Event pursuant to Section 7.4(e), (ii) any untrue or alleged untrue
statement of material fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment or supplement thereto or in any application, or (iii) any omission or
alleged omission of a material fact required to be stated therein or necessary to make the
statements therein not misleading, but, with respect to clauses (ii) and (iii) above, only to the
extent that such untrue statement or omission is made in such registration statement, any such
prospectus or preliminary prospectus or any amendment or supplement thereto or in any application,
in reliance upon and in conformity with written information prepared and furnished to the Company
by the Purchaser expressly for use therein, and the Purchaser will reimburse the Company and each
such director, officer and controlling Person for any legal or any other expenses incurred by them
in connection with investigating or defending any such Loss, action or proceeding; provided,
however, that the obligation to indemnify will be individual to the Purchaser and will be limited
to the net amount of proceeds received by the Purchaser from the sale of Registrable Securities
pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks indemnification (provided that
the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder
to the extent such failure has not materially prejudiced the indemnifying party) and (ii) unless in
such indemnified party’s reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to the indemnified party. Such
indemnifying party shall not, however, enter into any settlement with a party without obtaining an
unconditional release of each indemnified party by such party with respect to any and all claims
against each indemnified party. If such defense is assumed, the indemnifying party will not be
subject to any liability for any settlement made by
22
the indemnified party without its consent (but such consent will not be unreasonably
withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a
claim will not be obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such indemnified party
and any other of such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of the indemnified party or any officer,
director or controlling Person of such indemnified party and will survive the transfer of
securities. The Company also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company’s indemnification is
unavailable for any reason.
7.8. Participation in Underwritten Registrations.
(a) No Person may participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person’s securities on the basis provided in any underwriting
arrangements approved by the Person or Persons entitled hereunder to approve such arrangements
(including, without limitation, pursuant to the terms of any over-allotment or “green shoe” option
requested by the managing underwriter(s), provided that the Purchaser will not be required to sell
more than the number of Registrable Securities that such holder has requested the Company to
include in any registration) and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably required under the
terms of such underwriting arrangements.
(b) Each Person that is participating in any registration hereunder agrees that, upon receipt
of any notice from the Company of the happening of any event of the kind described in Section
7.4(e) above, such Person will forthwith discontinue the disposition of its Registrable Securities
pursuant to the registration statement until such Person’s receipt of the copies of a supplemented
or amended prospectus as contemplated by such Section 7.4(e). In the event the Company shall give
any such notice, the applicable time period mentioned in Section 7.4(b) during which a Registration
Statement is to remain effective shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to this paragraph to and including the
date when each seller of a Registrable Security covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by Section 7.4(e).
7.9. Current Public Information. At all times after the Company has filed a
registration statement with the Securities and Exchange Commission pursuant to the requirements of
either the Securities Act or the Securities Exchange Act, the Company will file all reports
required to be filed by it under the Securities Act and the Securities Exchange Act and the rules
and regulations adopted by the Securities and Exchange Commission thereunder, and will use
commercially reasonable best efforts to take such further action as the Purchaser may reasonably
request, all to the extent required to enable the Purchaser to sell Registrable Securities pursuant
to Rule 144 adopted by the Securities and Exchange Commission under the Securities
23
Act (as such rule may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission.
7.10. Adjustment Affecting Registrable Securities. Except as otherwise provided
herein, the Company will not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the Purchaser to include such
Registrable Securities in a registration undertaken pursuant to this Agreement or which would
adversely affect the marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of shares).
8. Put Right and Call Right.
8.1. Put Right. If the PMSA is terminated for any reason other than “for Cause” as
provided in the PMSA at any time, PB Constructors (or its assignee) shall have the option, but not
the obligation, exercisable not later than 180 days after such termination, to sell and the Company
shall have the obligation to purchase from such Purchaser the shares of Common Stock issued to the
Purchaser pursuant to the Optional Shares Issuances for the greater of the applicable price(s) at
which such shares were issued or the Fair Market Value (the “Put Right”). The closing of
the purchase of the shares by the Company pursuant to the exercise by such Purchaser of the Put
Right shall take place not later than 270 days following the exercise by such Purchaser of the Put
Right.
8.2. Call Right. If the PMSA is terminated for any reason other than “for Cause” as
provided in the PMSA at any time, the Company shall have the option, but not the obligation,
exercisable not later than 180 days after such termination, to require PB Constructors (or its
assignee) to sell to the Company and the Company shall have the right to purchase from such
Purchaser, the shares of Common Stock issued to the Purchaser pursuant to the Optional Shares
Issuances for the greater of the applicable price(s) at which such shares were issued or the Fair
Market Value (the “Call Right”). The closing of the purchase of the shares by the Company
pursuant to the exercise by the Company of its Call Right shall take place not later than 60 days
following the exercise by the Company of its Call Right.
9. Deliveries at Closings.
9.1. Initial Closing.
(a) At the Initial Closing, the Company is delivering or causing to be delivered to CTVH the
following:
(i) a certificate or certificates representing the share of Series C Preferred Stock being
purchased by CTVH, registered in the name of CTVH;
(ii) any and all consents, waivers, approvals or authorizations, with or by any Governmental
Body or any other Person required for the valid execution of this Agreement and the transactions
contemplated hereby;
24
(iii) a copy of the Certificate of Incorporation of the Company, including all amendments
thereto, certified as of a date not earlier than 7 days prior to the date of the Initial Closing by
the Secretary of State of Delaware;
(iv) a copy of the By-Laws of the Company, as amended to date, certified by the Secretary of
the Company;
(v) the Certificate of Designation, substantially in the form of Exhibit A hereto (the
“Certificate of Designation”), certified by the Secretary of State of the State of
Delaware, together with a certificate of the Secretary or an Assistant Secretary of the Company
stating that the Company has not adopted or filed any other document designating terms, relative
rights or preferences of the Series C Preferred Stock;
(vi) copies of any registrations, qualifications, permits and approvals required under
applicable state securities laws that are required to be obtained prior to the lawful execution,
delivery and performance of this Agreement in connection with the offer, sale, issuance and
delivery of the Series C Preferred Stock at the Initial Closing to the Purchasers;
(vii) copies of resolutions of the Board, certified by the Secretary of the Company,
authorizing and approving the execution, delivery and performance of this Agreement and the
Transaction Documents and the performance of the Certificate of Designation and all other documents
and instruments to be delivered pursuant hereto and thereto;
(viii) a certificate of incumbency executed by the Secretary of the Company certifying the
names, titles and signatures of the officers authorized to execute this Agreement and all
certificates executed in connection herewith and further certifying that the certificate of
incorporation and by-laws of the Company delivered to CTVH has been validly adopted and have not
been amended or modified, except to the extent provided in the Certificate of Designation; and
(ix) such additional supporting documentation and other information with respect to the
transactions contemplated hereby as CTVH or its counsel may reasonably request.
(b) At the Initial Closing, CTVH is delivering or causing the Purchase Price to be delivered
to the Company.
(c) At the Initial Closing, PB Constructors and the Company are executing and delivering an
amendment to the PMSA substantially in the form of Exhibit B attached hereto.
9.2. Additional Cash Investment Closings.
(a) As a condition to the obligation of CTVH to purchase shares of Series C Preferred Stock at
an Additional Cash Investment Closing, the Company shall deliver or cause to be delivered to CTVH,
a certificate delivered by the Company’s Chief Executive Officer and Chief Financial Officer
stating that the total of cash proceeds received by the Company and portion of Grants awarded to
the Company (determined in accordance with Section 1.1(b)
25
hereof) since September 1, 2004 or the date set forth in the most recent certificate delivered
to CTVH in accordance with this sentence, as applicable, and setting forth, (A) for each individual
receipt of cash proceeds, the amount of cash proceeds received, the nature of the investment, and
the date on which the cash proceeds were received, the identity of the investor or lender making
the loan or investment, and accompanied by copies of material documents relating to such loan or
investments and (B) for each individual Grant, the amount of such Grant, the portion of such Grant
being included in the $10,000,000 amount covered by such certificate, the date on which such Grant
was made, accompanied by the material documents relating to such Grant that support the inclusion
of the portion of the amount of such Grant in the $10,000,000 amount covered by such certificate
(the “Officers’ Certificate”).
(b) At each Additional Cash Investment Closing, the Company will deliver or cause to be
delivered a certificate or certificates representing the shares of Series C Preferred Stock being
purchased by CTVH, registered in the name of CTVH.
(c) At each Additional Cash Investment Closing, the Company will deliver a certificate
executed by its Chief Executive Officer and Chief Financial Officer, that (A) no Default or Event
of Default has occurred and is continuing and (B) no Material Adverse Change has occurred and is
continuing.
(d) At each Additional Cash Investment Closing, CTVH shall pay the purchase price for the
shares of Series C Preferred Stock being purchased.
(e) At each Additional Cash Investment Closing, any person or entity purchasing shares of
Series C Preferred Stock shall fully complete and execute the investor questionnaire in the form
attached hereto as Exhibit C.
9.3. Compensatory Shares Closing. At each Compensatory Shares Closing:
(a) the Company will deliver or cause to be delivered a certificate or certificates
representing the shares of Series C Preferred Stock being issued to PB Constructors pursuant to
Section 1.2(a), registered in the name of PB Constructors and upon such delivery the applicable
amounts owed to PB Constructors by the company shall be deemed paid in full.
(b) the Company will deliver a certificate, executed by its Chief Executive Officer and Chief
Financial Officer, that (A) no Default or Event of Default has occurred and is continuing and (B)
no Material Adverse Change has occurred and is continuing.
(c) any person or entity purchasing shares of Series C Preferred Stock shall fully complete
and execute the investor questionnaire in the form attached hereto as Exhibit C.
9.4. Optional Shares Closing. At each Optional Shares Closing:
(a) the Company will deliver or cause to be delivered a certificate representing the shares of
Common Stock being issued and sold at such Optional Shares Closing, registered in the name of PB
Constructors; and
26
(b) the Company will deliver a certificate, executed by its Chief Executive Officer and Chief
Financial Officer, that (A) no Default or Event of Default has occurred and is continuing and (B)
no Material Adverse Change has occurred and is continuing.
(c) PB Constructors shall pay the purchase price for the shares of Common Stock being
purchased at such Optional Shares Closing.
(d) any person or entity purchasing shares of Common Stock shall fully complete and execute
the investor questionnaire in the form attached hereto as Exhibit C.
9.5. Closings of Sales Pursuant to Exercise of Put Right or Call Right. At the
closing of the sale and purchase of shares of Common Stock pursuant to the exercise of the Put
Right or the Call Right, as applicable:
(a) the seller of the shares being sold at such closing shall deliver or cause to be delivered
the certificate or certificates representing such shares of Common Stock, accompanied by stock
powers duly endorsed in blank; and
(b) the Company will pay the purchase price for the shares of Common Stock.
9.6. No Other Conditions. Except as expressly set forth in this Agreement, there
shall be no additional conditions to any of the closings described herein.
10. Miscellaneous.
10.1. Certain Definitions.
“Affiliate” of any Person means any Person that directly or indirectly controls, or is under
common control with, or is controlled by, such Person. As used in this definition, “control”
(including with its correlative meanings, “controlled by” and “under common control with”) shall
mean the possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise).
“Business Day” means a day that is not a Saturday, a Sunday or a day on which banks in the
City of New York, New York and Knoxville, Tennessee, are authorized or obligated by law or
executive order to close.
“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
“Contract” means any contract, agreement, indenture, note, bond, loan, instrument, lease,
conditional sale contract, mortgage, license, franchise, insurance policy, commitment or other
arrangement or agreement, whether written or oral.
“Default” means any event or circumstance which, with the giving of notice, the lapse of time
or both would (if not cured or remedial during such time) constitute an Event of Default.
27
“Employee” means any current, former, or retired Employee, office consultant, independent
contractor, agent, officer or director of the Company.
“Environmental Law” means any Law concerning Releases into any part of the natural
environment, or activities that might result in damage to the natural environment, or any Law that
is concerned in whole or in part with the natural environment and with protecting or improving the
quality of the natural environment and protecting public and employee health and safety and
includes, but is not limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act (“CERCLA”) (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the
Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (33 U.S.C. § 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. § 2601 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. § 136 et seq.) and the Occupational Safety and Health Act (“OSHA”) (29
U.S.C. § 651 et seq.), as such laws have been amended or supplemented, and the regulations
promulgated pursuant thereto, and any and all analogous state or local statutes, and the
regulations promulgated pursuant thereto, and any and all treaties, conventions and environmental
public and employee health and safety statutes and regulations or analogous requirements of
non-United States jurisdictions in which the Company conducts any business.
“Environmental Permit” means any Permit, variance, registration, or permission required under
any applicable Environmental Laws.
“Event of Default” means (i) the failure by the Company to make any payment in respect of any
indebtedness for borrowed money, or any contract involving liability on the part of the Company of
$1 million or more) (“Material Contract”) when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure continues after the applicable
grace period, if any, specified in the relevant document on the date of such failure, (ii) fails to
perform or observe any other condition or covenant, or any other event shall occur or condition
exist, under any agreement or instrument relating to such indebtedness or Material Contract, and
such failure continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure if the effect of such failure, event or condition is
to cause, or to permit the holder or holder of such indebtedness or the other party to such
Material Contract to cause such indebtedness or the obligation under such Material Contract to be
due and payable prior to the stated maturity or scheduled payment date; (iii) the failure of the
Company generally to pay, or the admission by the Company in writing its inability to pay, its
debts as they come due, subject to applicable grace periods, if any, whether at stated maturity or
otherwise; (iv) voluntary or involuntary commencement of any case, action or Legal Proceeding with
respect to the Company before any court or Governmental Body relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, demolition, winding-up or relief of debtors
that has not been dismissed within 90 days; (v) the making by the Company of any general assignment
for the benefit of creditors or other similar arrangements in respect of its creditors generally,
including under the United States Bankruptcy Code; or (vi) the entry against the Company of one or
more non-interlocutory judgments, orders, decrees or arbitration awards involving in the aggregate
liability (to the extent not covered by independent third-party insurance or to which no dispute as
to coverage exists) of $1,000,000 or more, or which can be
28
reasonably expected to result in a Material Adverse Change, which in either case has not been
paid within 30 days after entry.
“Fair Market Value” means (i) if a public trading market for the Common Stock exists, the
average closing price of the Common Stock on the national securities exchange or national market
system on which the Common Stock is listed, or (ii) if no public trading market for the Common
Stock exists, then the value per share fixed by the Company’s stockholders at the Company’s most
recent annual meeting of stockholders.
“GAAP” means generally accepted accounting principles, as in effect in the United States.
“Governmental Body” means any government or governmental or regulatory body thereof, or
political subdivision thereof, whether federal, state, local or foreign, or any agency,
instrumentality or authority thereof, or any court or arbitrator (public or private).
“Hazardous Materials” means any substance, material or waste which is regulated by any local,
state or federal Governmental Body in the jurisdiction in which the Company conducts business, or
the United States, including, without limitation, any material or substance which is defined as a
“hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste” or
“restricted hazardous waste,” “subject waste,” “contaminant,” “toxic waste” or “toxic substance”
under any provision of Environmental Law, including but not limited to, petroleum products,
asbestos, radon and polychlorinated biphenyls.
“Law” means any federal, state, local or foreign law (including common law), statute, code,
ordinance, rule, regulation or other requirement or guideline.
“Legal Proceeding” means any judicial, administrative or arbitral actions, suits, proceedings
(public or private), claims or governmental proceedings.
“Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind,
including, without limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof and the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction and including any lien or charge arising by statute or
other law.
“Material Adverse Change” means any material adverse change in the business, assets,
liabilities, prospects, properties, results of operations or condition (financial or otherwise) of
the Company, in the aggregate.
“Optional Issuance Termination Date” means the first to occur of (a) the termination of the
PMSA for any reason, (b) seven years after the date of this Agreement and (c) two years after a
Qualifying IPO.
“Order” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration
award.
29
“Permits” means any approvals, authorizations, consents, licenses, permits or certificates by
or of any Governmental Body.
“Person” means any individual, corporation, partnership, firm, joint venture, association,
joint-stock company, trust, unincorporated organization, Governmental Body or other entity.
“PMSA” means the agreement between the Company and PB Constructors, dated November 23, 2004.
“Prior Registrable Securities” means (i) any shares of Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock of the Company, (ii) any shares of Common Stock issued or
issuable upon conversion thereof, (iii) any other shares of Common Stock held by the holders of
shares described above and (iv) any shares of Common Stock issued or issuable directly or
indirectly with respect to the securities referred to in clauses (i), (ii) or (iii) by way of stock
dividend or stock split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
“Qualifying IPO” means a firm commitment underwritten initial public offering of shares of
Common Stock pursuant to an effective registration statement under the Securities Act, as then in
effect (or any comparable statement under any similar federal statute then in force or effect),
which raises gross proceeds to the Company of at least $50.0 million and that implies a market
capitalization for the Company of at least $250 million.
The term “register” means to register under the Securities Act and applicable state securities
laws for the purpose of effecting a public sale of securities.
“Registrable Securities” means (i) any shares of Series C Preferred Stock, (ii) any shares of
Common Stock issued or issuable upon conversion of the Series C Preferred Stock, (iii) any other
shares of Common Stock held by the Purchasers, and (iv) any shares of Common Stock issued or
issuable directly or indirectly with respect to the securities referred to in clauses (i), (ii) or
(iii) by way of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any particular shares
constituting Registrable Securities, such shares will cease to be Registrable Securities when they
have been (x) effectively registered under the Securities Act and disposed of in accordance with a
registration statement covering them or (y) sold to the public pursuant to Rule 144 (or by similar
provision under the Securities Act).
“Release” means any release, spill, effluent, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching, or migration into the indoor or outdoor environment, or
into or out of any property owned, operated or leased by the Company (or any subsidiary), including
the movement of any Hazardous Material or other substance through or in the air, soil, surface
water, groundwater or property.
“Representatives” of a Person means its officers, Employees, agents, legal advisors and
accountants.
“Securities Act” means the Securities Act of 1933, as amended.
30
“Securities and Exchange Commission” means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Taxes” means any federal, state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
10.2. Expenses. Each party shall pay its own other out-of-pocket expenses and all
stamp and other Taxes which may be payable by it in respect of the execution and delivery of this
Agreement, the Transaction Documents, or the issuance, delivery or acquisition of the shares of
Series C Preferred Stock and the shares of Common Stock.
10.3. Specific Performance. Each of the parties hereto acknowledges and agrees that
the breach of this Agreement would cause irreparable damage to the other parties hereto and that
the other parties hereto will not have an adequate remedy at law. Therefore, the obligations of
each of the parties hereto under this Agreement shall be enforceable by a decree of specific
performance issued by any court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith. Such remedies shall, however, be cumulative and
not exclusive and shall be in addition to any other remedies which any party may have under this
Agreement or otherwise.
10.4. Further Assurances. The Company and the Purchasers each agree to execute and
deliver such other documents or agreements as may be necessary or desirable for the implementation
of this Agreement and the consummation of the transactions contemplated hereby.
10.5. Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any
federal or state court located within the City of New York, New York over any dispute arising out
of or relating to this Agreement or any of the transactions contemplated hereby and each party
hereby irrevocably agrees that all claims in respect of such dispute or any suit, action or
proceeding related thereto may be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may
now or hereafter have to the laying of venue of any such dispute brought in such court or any
defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto
agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
31
(b) Each of the parties hereto hereby consents to process being served by any party to this
Agreement in any suit, action or proceeding by the mailing of a copy thereof in accordance with the
provisions of Section 10.9 hereof.
10.6. Entire Agreement; Amendments and Waivers. This Agreement (including the
schedules and exhibits hereto) represents the entire understanding and agreement among the parties
hereto with respect to the subject matter hereof and can be amended, supplemented or changed, and
any provision hereof can be waived, only by written instrument making specific reference to this
Agreement signed by the parties hereto. No action taken pursuant to this Agreement, including
without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a further or continuing waiver of such breach or as
a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and
no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of such right, power or remedy by such party preclude any
other or further exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.
10.7. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to the principles of conflict of laws
thereunder which would specify the application of the law of another jurisdiction. Should any
provision of this Agreement require judicial interpretation, Company and Purchasers hereby agree
and stipulate that the Court interpreting or considering the same shall not apply the presumption
that the terms hereof shall be more strictly construed against a party by reason of an rule or
conclusion that a document should be a construed more strictly against the party who itself or
through its agent prepared the same, it being agreed that all parties hereto have either
participated in the preparation of this Agreement or have had full opportunity to consult legal
counsel of its choice before the execution of this Agreement.
10.8. Table of Contents; Headings; Interpretive Matters. The table of contents and
section headings of this Agreement are for reference purposes only and are to be given no effect in
the construction or interpretation of this Agreement. No provision of this Agreement will be
interpreted in favor of, or against, any of the parties hereto by reason of the extent to which any
such party or its counsel participated in the drafting thereof or by reason of the extent to which
any such provision is inconsistent with any prior draft hereof or thereof
10.9. Notices. All notices and other communications under this Agreement shall be in
writing and shall be deemed given when (a)(i) delivered personally or by nationally respectable
overnight delivery service (including Federal Express, DHL and other similar services), or (ii)
sent by facsimile transmissions on the date of the facsimile provided the sender can and does
provide evidence of successful transmission of the facsimile before 5:00 p.m. (in the receiving
party’s time zone) and sends a copy of such facsimile by overnight delivery service, or (iii)
mailed by certified mail, return receipt requested, and (b) addressed to the parties at the
following addresses (or to such other address as a party may have specified by notice given to the
other party pursuant to this provision):
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If to the Company, to:
IdleAire Technologies Corporation
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, VP and General Counsel
Telephone:
Facsimile:
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, VP and General Counsel
Telephone:
Facsimile:
With a copy (which shall by itself not constitute notice) to:
Holland & Knight LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone:
Facsimile:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone:
Facsimile:
If to a Purchaser:
CTV Holdings, Inc. or PB Constructors Inc. (as applicable)
c/o Parsons Brinckerhoff Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
c/o Parsons Brinckerhoff Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to (which shall not by itself constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇ & Priest LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All notices sent by facsimile transmission and received after 5:00 p.m. on a
particular day shall be deemed given on the following day.
All notices are effective upon receipt or upon refusal if properly delivered.
10.10. Severability. If any provision of this Agreement is invalid or unenforceable,
the balance of this Agreement shall remain in effect.
33
10.11. Binding Effect; Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and permitted assigns. Nothing in this
Agreement shall create or be deemed to create any third-party beneficiary rights in any person or
entity not a party to this Agreement except as provided below. In addition, and whether or not any
express assignment has been made, the provisions of this Agreement which are for the benefit of the
Purchasers as a purchaser or holder of shares of Series C Preferred Stock (or any securities
pursuant to which such shares of Series C Preferred Stock may be converted or exercised into) or
Common Stock, as applicable, are also for the benefit of and enforceable by, any subsequent holder
of such shares of Series C Preferred Stock. Upon any assignment, the references in this Agreement
to the Purchasers shall also apply to any such assignee unless the context otherwise requires. The
Purchaser may assign their respective rights under this Agreement or delegate their respective
duties under this Agreement to ▇▇▇▇▇▇▇ Brinckerhoff Inc. or any wholly-owned subsidiary of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ Inc., without the consent of the Company. If any Purchaser assigns any rights
hereunder it shall remain liable for any related obligations.
10.12. Exculpation Among Purchasers. Each Purchaser acknowledges that it is not
relying upon any other Purchaser in making its decision to invest in the Company. Each Purchaser
agrees that the other Purchaser or its Affiliates, including but not limited to officers,
directors, partners, agents, or employees of such other Purchaser, shall be liable to any other
Purchaser for any action heretofore or hereafter taken, or omitted to be taken, by any of them in
connection with Series C Preferred Stock or the Common Stock into which the shares of Series C
Preferred Stock are convertible.
10.13. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
34
IN WITNESS WHEREOF, the parties hereto have executed, or have caused this Agreement to be
executed, by their respective officers thereunto duly authorized, as of the date first written
above.
| IDLEAIRE TECHNOLOGIES | ||||||
| CORPORATION as the Company | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
(Purchasers’ signatures are on a separate page following this page.)
35
SIGNATURE PAGE
to
SERIES C CONVERTIBLE PREFERRED STOCK
AND COMMON STOCK
| PURCHASERS: | ||||||
| CTV HOLDINGS, INC. | ||||||
| By: | /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |||||
| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | ||||||
| Title: President | ||||||
| PB CONSTRUCTORS INC. | ||||||
| By: | /s/ ▇▇▇▇ Fabio | |||||
| Name: ▇▇▇▇ Fabio | ||||||
| Title: Treasurer | ||||||
36