Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of October 23,
1998, between The Network Connection, Inc., a Georgia corporation
with principal executive offices located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, (the "Company"), and the undersigned
("Buyer").
W I T N E S S E T H:
WHEREAS, the Company borrowed $1,250,000 from Buyer
pursuant to a Promissory Note in such amount dated June 30, 1998
(the "Note");
WHEREAS, Section 2(c) of the Note permitted the Company
to deliver to Buyer on the Maturity Date (as defined in the
Note), an 8% convertible debenture (the "Debenture") and warrants
(the "Previous Warrants") in accordance with the terms of the
Escrow Documents (as defined in the Note);
WHEREAS, the Note is now past due;
WHEREAS, Buyer has not declared a default nor has the
Company delivered the Debenture and the Previous Warrants;
WHEREAS, in lieu of delivery of the Debenture and the
Previous Warrants by the Company, the Company and Buyer now wish
to permit the Company to deliver this Agreement, the Preferred
Stock (as defined) and the Warrants (as defined);
WHEREAS, Buyer desires to purchase from Company, and
the Company desires to issue and sell to the Buyer, upon the
terms and subject to the conditions of this Agreement, (i) 1,500
shares of Series B 8% Convertible Preferred Stock, $.01 par value
(the "Preferred Stock"), having the rights, preferences and
privileges set forth in the Articles of Amendment to the Articles
of Incorporation of the Company attached hereto as Annex I (the
"Amendment") and (ii) 100,000 warrants (the "Warrants") in the
form attached hereto as Annex II;
WHEREAS, upon the terms and subject to the conditions
set forth in the Amendment, the Preferred Stock is convertible
into shares of the Company's common stock, $.001 par value
("Common Stock");
WHEREAS, the Warrants upon the terms and subject to the
conditions in the Warrants, will for a period of five (5) years
be exercisable to purchase 100,000 shares of Common Stock;
NOW THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
I. PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS
A. Transaction. Buyer hereby agrees to purchase from the
Company, and the Company has offered and hereby agrees to issue
and sell to the Buyer in a transaction exempt from the
registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Securities Act"), the
Preferred Stock and the Warrants.
B. Purchase Price; Form of Payment. The purchase price for the
Preferred Stock and Warrants to be purchased by Buyer hereunder
shall be equal to $1,500,000, determined by aggregating principal
and accrued interest under the Note, along with a premium (the
"Premium") to the Company in consideration for the Buyer's
forbearance from earlier conversion of the Note in accordance
with the Escrow Documents (the "Purchase Price"). Buyer shall
pay the Purchase Price from the proceeds of the repayment of the
Note by the Company (including the Premium).
II. BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
Buyer represents and warrants to and covenants and
agrees with the Company as follows:
A. Buyer is purchasing the Preferred Stock, the Warrants, the
Common Stock issuable upon exercise of the Warrants (the "Warrant
Shares") and the shares of Common Stock issuable upon conversion
of the Preferred Stock (the "Conversion Shares" and, collectively
with the Preferred Stock, the Warrants and the Warrant Shares,
the "Securities") for its own account, for investment purposes
only and not with a view towards or in connection with the public
sale or distribution thereof in violation of the Securities Act.
B. Buyer is (i) an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act, (ii)
experienced in making investments of the kind contemplated by
this Agreement, (iii) capable, by reason of its business and
financial experience, of evaluating the relative merits and risks
of an investment in the Securities, and (iv) able to afford the
loss of its investment in the Securities.
C. Buyer understands that the Securities are being offered and
sold by the Company in reliance on an exemption from the
registration requirements of the Securities Act and equivalent
state securities and "blue sky" laws, and that the Company is
relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in
this Agreement to determine the availability of such exemption
and the eligibility of Buyer to purchase the Securities;
D. Buyer has been furnished with or provided access to all
materials relating to the business, financial position and
results of operations of the Company, and all other materials
requested by Buyer to enable it to make an informed investment
decision with respect to the Securities.
E. Buyer acknowledges that it has been furnished with copies of
the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997 and all other reports and documents
heretofore filed by the Company with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Act and
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), since December 31, 1997 (collectively the "Commission
Filings").
F. Buyer acknowledges that in making its decision to purchase
the Securities it has been given an opportunity to ask questions
of and to receive answers from the Company's executive officers,
directors and management personnel concerning the terms and
conditions of the private placement of the Securities by the
Company.
G. Buyer understands that the Securities have not been approved
or disapproved by the Commission or any state securities
commission and that the foregoing authorities have not reviewed
any documents or instruments in connection with the offer and
sale to it of the Securities and have not confirmed or determined
the adequacy or accuracy of any such documents or instruments.
H. This Agreement has been duly and validly authorized,
executed and delivered by Buyer and is a valid and binding
agreement of Buyer enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally.
I. Neither Buyer nor its affiliates nor any person acting on
its or their behalf has the intention of entering, or will enter
into, prior to the closing, any put option, short position or
other similar instrument or position with respect to the Common
Stock and neither Buyer nor any of its affiliates nor any person
acting on its or their behalf will use at any time shares of
Common Stock acquired pursuant to this Agreement to settle any
put option, short position or other similar instrument or
position that may have been entered into prior to the execution
of this Agreement.
III. COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. Capitalization. 1. The authorized capital stock of the
Company consists of 10,000,000 shares of Common Stock, of which
4,617,140 shares are outstanding on the date hereof and 2,500,000
shares of preferred stock, of which 90,000 shares are outstanding
on the date hereof which can be converted into a maximum of
300,001 shares of Common Stock (not including the payment of
dividends thereon in additional shares of Common Stock), subject
to anti-dilution and similar provisions. All of the issued and
outstanding shares of Common Stock and preferred stock have been
duly authorized and validly issued and are fully paid and non-
assessable. As of the date hereof, the Company has outstanding
stock options and warrants to purchase 1,118,828 shares of Common
Stock. The Conversion Shares and Warrant Shares have been duly
and validly authorized and reserved for issuance by the Company,
and when issued by the Company upon conversion of, or in lieu of
accrued dividends on, the Preferred Shares, on exercise of the
Warrants will be duly and validly issued, fully paid and non-
assessable and will not subject the holder thereof to personal
liability by reason of being such holder. There are no
preemptive, subscription, "call" or other similar rights to
acquire the Common Stock (including the Conversion Shares and
Warrant Shares) that have been issued or granted to any person,
except as disclosed on Schedule III.A.1. hereto or otherwise
previously disclosed in writing to Buyer.
2. The Company does not own or control, directly or indirectly,
any interest in any other corporation, partnership, limited
liability company, unincorporated business organization,
association, trust or other business entity.
B. Organization; Reporting Company Status. 1. The Company is
a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia and is duly
qualified as a foreign corporation in all jurisdictions in which
the failure to so qualify would have a material adverse effect on
the business, properties, prospects, condition (financial or
otherwise) or results of operations of the Company or on the
consummation of any of the transactions contemplated by this
Agreement (a "Material Adverse Effect").
2. The Company has registered the Common Stock pursuant to
Section 12 of the Exchange Act and has timely filed with the
Commission all reports and information required to be filed by it
pursuant to all reporting obligations under Section 13(a) or
15(d), as applicable, of the Exchange Act for the 12-month period
immediately preceding the date hereof. The Common Stock is
listed and traded on the NASDAQ SmallCap Stock Market ("NASDAQ")
and the Company has not received any notice regarding, and to its
knowledge there is no threat, of the termination or
discontinuance of the eligibility of the Common Stock for such
listing.
C. Authorized Shares. The Company has duly and validly
authorized and reserved for issuance shares of Common Stock
sufficient in number for the conversion, of the Preferred Stock
(assuming for purposes of this Section III.C. a Conversion Price
(as defined in the Amendment) of not greater than $1.83 and the
exercise of 100,000 Warrants. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock
of the issuance of the Preferred Stock and Warrant Shares upon
conversion of the Preferred Stock and exercise of the Warrants.
The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Preferred Stock and
Warrant Shares upon exercise of the Warrants in accordance with
this Agreement, the Preferred Stock and the Warrants is absolute
and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other
stockholders of the Company.
D. Authority; Validity and Enforceability. The Company has the
requisite corporate power and authority to enter into this
Agreement, the Amendment, the Registration Rights Agreement of
even date herewith between the Company and Buyer, a copy of which
is annexed hereto as Annex IV (the "Registration Rights
Agreement") and the Warrants and to perform all of its
obligations hereunder and thereunder (including the issuance,
sale and delivery to Buyer of the Securities). The execution,
delivery and performance by the Company of this Agreement, the
Amendment, the Warrants and the Registration Rights Agreement,
and the consummation by the Company of the transactions
contemplated hereby and thereby (the issuance of the Preferred
Stock, the Warrants and the issuance and reservation for issuance
of the Conversion Shares and Warrant Shares), has been duly
authorized by all necessary corporate action on the part of the
Company. Each of this Agreement, the Amendment, the Warrants and
the Registration Rights Agreement has been duly validly executed
and delivered by the Company and each instrument constitutes a
valid and binding obligation of the Company enforceable against
it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and
remedies generally. The Securities have been duly and validly
authorized for issuance by the Company and, when executed and
delivered by the Company, will be valid and binding obligations
of the Company enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally.
E. Non-contravention. The execution and delivery by the
Company of this Agreement, the Amendment, the Warrants and the
Registration Rights Agreement, the issuance of the Securities,
and the consummation by the Company of the other transactions
contemplated hereby and thereby, do not and will not conflict
with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default (or an event which, with
notice, lapse of time or both, would constitute a default) under
(i) the articles of incorporation or by-laws of the Company or
(ii) ,except for such conflict, breach or default which would not
have a Material Adverse Effect, any indenture, mortgage, deed of
trust or other material agreement or instrument to which the
Company is a party or by which its properties or assets are
bound, or any law, rule, regulation, decree, judgment or order of
any court or public or governmental authority having jurisdiction
over the Company or any of the Company's properties or assets.
F. Approvals. No authorization, approval or consent of any
court or public or governmental authority is required to be
obtained by the Company for the issuance and sale of the
Preferred Stock and the Warrants (and the Conversion Shares and
Warrant Shares) to Buyer as contemplated by this Agreement,
except such authorizations, approvals and consents that have been
obtained by the Company prior to the date hereof.
G. Commission Filings. None of the Commission Filings
contained at the time they were filed any untrue statement of a
material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were
made, not misleading.
H. Absence of Certain Changes. Except as disclosed on Schedule
III.A.1., Schedule III.H. or in the Financial Statements (as
defined in Section III.L. hereto, since the Balance Sheet Date
(as defined in Section III.L.), there has not occurred any
change, event or development in the business, financial
condition, prospects or results of operations of the Company, and
there has not existed any condition having or reasonably likely
to have, a Material Adverse Effect.
I. Full Disclosure. There is no fact known to the Company
(other than general economic or industry conditions known to the
public generally) that has not been fully disclosed in writing to
the Buyer that (i) reasonably would be expected to have a
Material Adverse Effect or (ii) reasonably would be expected to
materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement, the
Amendment, the Warrants or the Registration Rights Agreement.
J. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation pending or, to the Company's
knowledge, threatened, by or before any court or public or
governmental authority which, if determined adversely to the
Company, would have a Material Adverse Effect.
K. Absence of Events of Default. No "Event of Default" (as
defined in any agreement or instrument to which the Company is a
party) and no event which, with notice, lapse of time or both,
would constitute an Event of Default (as so defined), has
occurred and is continuing, which could have a Material Adverse
Effect.
L. Financial Statements; No Undisclosed Liabilities. The
Company has delivered to Buyer true and complete copies of its
audited balance sheet as at December 31, 1997 and the related
audited statements of operations and cash flows for the fiscal
years ended December 31, 1997 including the related notes and
schedules thereto as well as the same financial statements as of
and for the three and six month periods ended March 31, 1998 and
June 30, 1998, respectively (collectively, the "Financial
Statements"), and all management letters, if any, from the
Company's independent auditors relating to the dates and periods
covered by the Financial Statements. Each of the Financial
Statements is complete and correct in all material respects, has
been prepared in accordance with United States General Accepted
Accounting Principles ("GAAP") (subject, in the case of the
interim Financial Statements, to normal year end adjustments and
the absence of footnotes) and in conformity with the practices
consistently applied by the Company without modification of the
accounting principles used in the preparation thereof, and fairly
presents the financial position, results of operations and cash
flows of the Company as at the dates and for the periods
indicated. For purposes hereof, the audited balance sheet of the
Company as at December 31, 1997 is hereinafter referred to as the
"Balance Sheet" and December 31, 1997 is hereinafter referred to
as the "Balance Sheet Date". The Company has no indebtedness,
obligations or liabilities of any kind (whether accrued,
absolute, contingent or otherwise, and whether due or to become
due) that would have been required to be reflected in, reserved
against or otherwise described in the Balance Sheet or in the
notes thereto in accordance with GAAP, which was not fully
reflected in, reserved against or otherwise described in the
Balance Sheet or the notes thereto or was not incurred in the
ordinary course of business consistent with the Company's past
practices since the Balance Sheet Date.
M. Compliance with Laws; Permits. The Company is in compliance
with all laws, rules, regulations, codes, ordinances and statutes
(collectively "Laws") applicable to it or to the conduct of its
business, except for such non-compliance which would not have a
Material Adverse Effect. The Company possesses all permits,
approvals, authorizations, licenses, certificates and consents
from all public and governmental authorities which are necessary
to conduct its business, except for those the absence of which
would not have a Material Adverse Effect.
N. Related Party Transactions. Neither the Company nor any of
its officers, directors or "Affiliates" (as such term is defined
in Rule 12b-2 under the Exchange Act) has borrowed any moneys
from or has outstanding any indebtedness or other similar
obligations to the Company. Neither the Company nor any of its
officers, directors or Affiliates (i) owns any direct or indirect
interest constituting more than a one percent equity (or similar
profit participation) interest in, or controls or is a director,
officer, partner, member or employee of, or consultant to or
lender to or borrower from, or has the right to participate in
the profits of, any person or entity which is (x) a competitor,
supplier, customer, landlord, tenant, creditor or debtor of the
Company, (y) engaged in a business related to the business of the
Company , or (z) a participant in any transaction to which the
Company is a party (other than in the ordinary course of the
Company's business) or (ii) is a party to any contract,
agreement, commitment or other arrangement with the Company.
O. Insurance. The Company maintains property and casualty,
general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with
financially sound and reputable insurers that is adequate,
consistent with industry standards and the Company's historical
claims experience. The Company has not received notice from, and
has no knowledge of any threat by, any insurer (that has issued
any insurance policy to the Company) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any
insurance policy presently in force.
P. Securities Law Matters. Based, in part, upon the
representations and warranties of Buyer set forth in Section II
hereof, the offer and sale by the Company of the Securities is
exempt from (i) the registration and prospectus delivery
requirements of the Securities Act and the rules and regulations
of the Commission thereunder and (ii) the registration and/or
qualification provisions of all applicable state securities and
"blue sky" laws. Other than pursuant to an effective
registration statement under the Securities Act, the Company has
not issued, offered or sold Preferred Stock or any shares of
Common Stock (including for this purpose any securities of the
same or a similar class as the Preferred Stock or Common Stock,
or any securities convertible into or exchangeable or exercisable
for Preferred Stock or Common Stock or any such other securities)
within the six-month period next preceding the date hereof,
except as previously disclosed in writing to Buyer, and the
Company shall not directly or indirectly take, and shall not
permit any of its directors, officers or Affiliates directly or
indirectly to take, any action (including, without limitation,
any offering or sale to any person or entity of Preferred Stock
or shares of Common Stock), so as to make unavailable the
exemption from Securities Act registration being relied upon by
the Company for the offer and sale to Buyer of the Preferred
Stock (and the Conversion Shares) as contemplated by this
Agreement. No form of general solicitation or advertising has
been used or authorized by the Company or any of its officers,
directors or Affiliates in connection with the offer or sale of
the Preferred Stock (and the Conversion Shares) as contemplated
by this Agreement or any other agreement to which the Company is
a party.
Q. Environmental Matters.
1. The operations of the Company are in material compliance
with all applicable Environmental Laws and all permits issued
pursuant to Environmental Laws or otherwise;
2. to its knowledge, the Company has obtained or applied for
all material permits required under all applicable Environmental
Laws necessary to operate its business;
3. the Company is not the subject of any outstanding written
order of or agreement with any governmental authority or person
respecting (i) Environmental Laws, (ii) Remedial Action or (iii)
any Release or threatened Release of Hazardous Materials;
4. the Company has not received, since the Balance Sheet Date,
any written communication alleging that it may be in violation of
any Environmental Law or any permit issued pursuant to any
Environmental Law, or may have any liability under any
Environmental Law;
5. the Company does not have any current contingent liability
in connection with any Release of any Hazardous Materials into
the indoor or outdoor environment (whether on-site or off-site);
6. To the Company's knowledge, there are no investigations of
the business, operations, or currently or previously owned,
operated or leased property of the Company pending or threatened
which could lead to the imposition of any liability pursuant to
any Environmental Law;
7. there is not located at any of the properties of the Company
any (A) underground storage tanks, (B) asbestos-containing
material or (C) equipment containing polychlorinated biphenyls;
and,
8. the Company has provided to Buyer all environmentally
related audits, studies, reports, analyses, and results of
investigations that have been performed with respect to the
currently or previously owned, leased or operated properties of
the Company.
For purposes of this Section III.Q.:
"Environmental Law" means any foreign, federal, state
or local statute, regulation, ordinance, or rule of common law as
now or hereafter in effect in any way relating to the protection
of human health and safety or the environment including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. App. 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 (42 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 (29 U.S.C.
651 et seq.), and the regulations promulgated pursuant thereto.
"Hazardous Material" means any substance, material or
waste which is regulated by the United States, Canada or any of
its provinces, or any state or local governmental authority
including, without limitation, petroleum and its by-products,
asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material,"
"restricted hazardous waste," "industrial waste," "solid waste,"
"contaminant," "pollutant," "toxic waste" or toxic substance"
under any provision of any Environmental Law;
"Release" means any release, spill, filtration,
emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, or leaching into the indoor or outdoor
environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up,
remove, treat or in any other way address any Hazardous Material;
(y) prevent the Release of any Hazardous Material so it does not
endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
R. Labor Matters. The Company is not party to any labor or
collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of
the Company. No employees of the Company are represented by any
labor organization and none of such employees has made a pending
demand for recognition, and there are no representation
proceedings or petitions seeking a representation proceeding
presently pending or, to the Company's knowledge, threatened to
be brought or filed, with the National Labor Relations Board or
other labor relations tribunal. There is no organizing activity
involving the Company pending or to the Company's knowledge,
threatened by any labor organization or group of employees of the
Company. There are no (i) strikes, work stoppages, slowdowns,
lockouts or arbitrations or (ii) material grievances or other
labor disputes pending or, to the knowledge of the Company,
threatened against or involving the Company. There are no unfair
labor practice charges, grievances or complaints pending or, to
the knowledge of the Company, threatened by or on behalf of any
employee or group of employees of the Company.
S. ERISA Matters. The Company and its ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA
applicable to it. Neither the Company nor any ERISA Affiliate
maintains, contributes, maintained or contributed to a plan
subject to the provisions of Title IV of ERISA or Section 412 of
the Internal Revenue Code.
For purposes of this Section III.S.:
"ERISA" means the Employee Retirement Income Security
Act of 1974, or any successor statute, together with the final
regulations promulgated thereunder, as the same may be amended
from time to time.
"ERISA Affiliate" means any trade or business (whether
or not incorporated) that is a member of a group of which the
Company is a member and which is treated as a single employer
under 414 of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code").
T. Tax Matters. 1. The Company has filed all Tax Returns
which it is required to file under applicable Laws, except for
such Tax Returns in respect of which the failure to so file does
not and could not have a Material Adverse Effect; all such Tax
Returns are true and accurate in all material respects and have
been prepared in compliance with all applicable Laws; the Company
has paid all Taxes due and owing by it (whether or not such Taxes
are required to be shown on a Tax Return) and have withheld and
paid over to the appropriate taxing authorities all Taxes which
it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third parties; and since
the Balance Sheet Date, the charges, accruals and reserves for
Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are
adequate to cover any Tax liabilities of the Company if its
current tax year were treated as ending on the date hereof.
2. No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns that
such corporation is or may be subject to taxation by that
jurisdiction. There are no foreign, federal, state or local tax
audits or administrative or judicial proceedings pending or being
conducted with respect to the Company; no information related to
Tax matters has been requested by any foreign, federal, state or
local taxing authority; and, except as disclosed above, no
written notice indicating an intent to open an audit or other
review has been received by the Company from any foreign,
federal, state or local taxing authority. There are no material
unresolved questions or claims concerning the Company's Tax
liability. The Company (A) has not executed or entered into a
closing agreement pursuant to 7121 of the Internal Revenue Code
or any predecessor provision thereof or any similar provision of
state, local or foreign law; or (B) has not agreed to or is
required to make any adjustments pursuant to 481 (a) of the
Internal Revenue Code or any similar provision of state, local or
foreign law by reason of a change in accounting method initiated
by the Company or has any knowledge that the IRS has proposed any
such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting
permission for any changes in accounting methods that relate to
the business or operations of the Company. The Company has not
been a United States real property holding corporation within the
meaning of 897(c)(2) of the Internal Revenue Code during the
applicable period specified in 897(c)(1)(A)(ii) of the Internal
Revenue Code.
3. The Company has not made an election under 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes
of another person that is not a subsidiary of the Company under
(A) Treas. Reg. 1.1502-6 (or comparable provisions of state,
local or foreign law), (B) as a transferee or successor, (C) by
contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any
payments, is obligated to make payments or is a party to an
agreement that could obligate it to make any payments that would
not be deductible under 280G of the Internal Revenue Code.
For purposes of this Section III.T.:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local,
foreign, or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise, utility,
environmental, communications, real or personal property, capital
stock, license, payroll, wage or other withholding, employment,
social security, severance, stamp, occupation, alternative or add-
on minimum, estimated and other taxes of any kind whatsoever
(including, without limitation, deficiencies, penalties,
additions to tax, and interest attributable thereto) whether
disputed or not.
"Tax Return" means any return, information report or
filing with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.
U. Property. The Company has good and marketable title to all
real and personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company; and any real property and buildings held under lease by
the Company are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of
such property and buildings by the Company.
V. Intellectual Property. The Company owns or possesses
adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-
how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge
(collectively, "Intangibles") necessary for the conduct of its
business as now being conducted. To the best of the Company's
knowledge, the Company is not infringing upon or in conflict with
any right of any other person with respect to any Intangibles.
No claims have been asserted by any person to the ownership or
use of any Intangibles and the Company has no knowledge of any
basis for such claim.
W. Internal Controls and Procedures. The Company maintains
accurate books and records and internal accounting controls which
provide reasonable assurance that (i) all transactions to which
the Company is a party or by which its properties are bound are
executed with management's authorization; (ii) the reported
accountability of the Company's assets is compared with existing
assets at regular intervals; (iii) access to the Company's assets
is permitted only in accordance with management's authorization;
and (iv) all transactions to which the Company is a party or by
which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in
accordance with U.S. generally accepted accounting principles.
X. Payments and Contributions. Neither the Company nor any of
its directors, officers or, to its knowledge, other employees has
(i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect
unlawful payment of Company funds to any foreign or domestic
government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act
of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other similar payment to any
person with respect to Company matters.
Y. No Misrepresentation. No representation or warranty of the
Company contained in this Agreement, any schedule, annex or
exhibit hereto or any agreement, instrument or certificate
furnished by the Company to Buyer pursuant to this Agreement,
contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary
to make the statements therein, not misleading.
Z. Right of First Refusal. Other than a right of first refusal
which expired on September 11, 1998, granted to KA Investments
LDC under the terms of the Convertible Preferred Stock Purchase
Agreement, dated as of June 9,1998, the Company has not granted
any right of first refusal to any person with respect to the
issuance of Common Stock or securities convertible into Common
Stock.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. Restrictive Legend. Buyer acknowledges and agrees that,
upon issuance pursuant to this Agreement, the Securities (and any
shares of Common Stock issued in conversion of the Preferred
Stock or exercise of the Warrants) shall have endorsed thereon a
legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the Preferred Stock and
the Conversion Shares:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND ARE
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR SUCH
OTHER LAWS."
B. Filings. The Company shall make all necessary SEC and "blue
sky" filings required to be made by the Company in connection
with the sale of the Securities to the Buyer as required by all
applicable Laws, and shall provide a copy thereof to the Buyer
promptly after such filing.
C. Reporting Status. So long as the Buyer beneficially owns
any of the Securities, the Company shall use its best efforts to
file all reports required to be filed by it with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act.
D. Reserved.
E. Listing. Except to the extent the Company lists its Common
Stock on The New York Stock Exchange or the Nasdaq National
Market System, the Company shall use its best efforts to maintain
its listing of the Common Stock on the NASDAQ.
F. Reserved Conversion Shares. Subject to Section 6.11 of the
Amendment, the Company at all times from and after the date
hereof shall have a sufficient number of shares of Common Stock
duly and validly authorized and reserved for issuance to satisfy
the conversion, in full, of the Preferred Stock (assuming for
purposes of this Section IV.F., a Conversion Price of not greater
than $1.83) and upon the exercise of the Warrants. In the event
the Current Market Price (as defined in the Amendment) declines
to $1.75, the Company shall, within 10 days of the occurrence of
such event, authorize and reserve for issuance such additional
shares of Common Stock sufficient in number for the conversion,
in full, of the Preferred Stock, assuming for purposes of this
Section IV.F. a Conversion Price of not greater than $1.00 per
share, subject to Section 6.11 of the Amendment.
G. Right of First Refusal. If the Company should propose (the
"Proposal") to issue Common Stock or securities convertible into
Common Stock at a price less than the Current Market Price, or
debt at less than par value or having an effective annual
interest rate in excess of 9.9% (each a "Right of First Refusal
Security" and collectively, the "Right of First Refusal
Securities"), in each case on the date of issuance, during the
period ending nine months after the Closing Date (the "Right of
First Refusal Period"), the Company shall be obligated to offer
the Buyer on the terms set forth in the Proposal (the "Offer")
and the Buyer shall have the right, but not the obligation, to
accept such Offer on such terms. If during the Right of First
Refusal Period, the Company provides written notice to the Buyer
that it proposes to issue any Right of First Refusal Securities
on the terms set forth in the Proposal, then the Buyer shall have
ten (10) business days to accept or reject such Offer in writing.
If the Company fails to: (i) provide such written notice to the
Buyer of a Proposal during the Right of First Refusal Period,
(ii) offer the Buyer the opportunity to complete the transaction
as set forth in the Proposal, or (iii) enter into an agreement
with the Buyer, at such terms after the Buyer has accepted the
Offer, then the Company shall pay to the Buyer, as liquidated
damages, an amount in total equal to ten percent (10%) of the
amount paid to the Company for the Right of First Refusal
Securities. The foregoing Right of First Refusal is and shall be
senior in right to any other right of first refusal issued by the
Company to any other person. Notwithstanding the foregoing, the
Buyer shall have no rights under this paragraph 4.H. in respect
of Common Stock or any other securities of the Company issuable
(i) upon the exercise or conversion of options, warrants or other
rights to purchase securities of the Company outstanding as of
the date hereof, (ii) to officers, directors or employees of the
Company, (iii) as compensation to consultants and other
representatives of the Company, (iv) in connection with the
issuance of promissory notes in the aggregate amount of up to
$1,550,000 convertible into shares of Series C Convertible
Preferred Stock, so long as such promissory note and Series C
Convertible Preferred Stock are on terms no more favorable to the
payee of such note or the purchaser of such Series C Convertible
Preferred Stock than the terms of the Note or the Preferred Stock
to the Payee or the Buyer, respectively or (v) otherwise under
the Company's 1994 Stock Option Plan and Non-employee Director
Stock Option Plan.
V. TRANSFER AGENT INSTRUCTIONS.
A. The Company undertakes and agrees that no instruction other
than the instructions referred to in this Section V and customary
stop transfer instructions prior to the registration and sale of
the Common Stock pursuant to an effective Securities Act
registration statement will be given to its transfer agent for
the Common Stock and that the Common Stock issuable upon
conversion of the Preferred Stock and exercise of the Warrants
otherwise shall be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement,
the Registration Rights Agreement and applicable law. Nothing
contained in this Section V.A. shall affect in any way Buyer's
obligations and agreement to comply with all applicable
securities laws upon resale of such Common Stock. If, at any
time, Buyer provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of the
resale by Buyer of such Common Stock is not required under the
Securities Act and that the removal of restrictive legends is
permitted under applicable law, the Company shall permit the
transfer of such Common Stock and, promptly instruct the
Company's transfer agent to issue one or more certificates for
Common Stock without any restrictive legends endorsed thereon.
B. The Company shall permit Buyer to exercise its right to
convert the Preferred Stock by telecopying an executed and
completed Notice of Conversion to the Company. Each date on
which a Notice of Conversion is telecopied to and received by the
Company in accordance with the provisions hereof shall be deemed
a Conversion Date. The Company shall transmit the certificates
evidencing the shares of Common Stock issuable upon conversion of
any Preferred Stock (together with certificates evidencing any
Preferred Stock not being so converted) to Buyer via express
courier, by electronic transfer or otherwise, within five
business days after receipt by the Company of the Notice of
Conversion (the "Delivery Date"). Within 30 days after Buyer
delivers the Notice of Conversion to the Company, Buyer shall
deliver to the Company the Preferred Stock being converted.
Buyer shall indemnify the Company for any damages to third
parties as a result of a claim by such third party to ownership
of the Preferred Stock converted prior to receipt of the
Preferred Stock by the Company.
C. The Company shall permit Buyer to exercise its right to
purchase shares of Common Stock pursuant to exercise of the
Warrants in accordance with its applicable terms of the Warrants.
The last date that the Company may deliver shares of Common Stock
issuable upon any exercise of Warrants is referred to herein as
the "Warrant Delivery Date."
D. The Company understands that a delay in the issuance of the
shares of Common Stock issuable in lieu of cash dividends on the
Preferred Stock, upon the conversion of the Preferred Stock or
exercise of the Warrants beyond the applicable Interest Payment
Due Date (as defined in the Preferred Stock), Delivery Date or
Warrant Delivery Date could result in economic loss to Buyer. As
compensation to Buyer for such loss (and not as a penalty), the
Company agrees to pay to Buyer for late issuance of Common Stock
issuable in lieu of cash dividends on the Preferred Stock, upon
conversion of the Preferred Stock or exercise of the Warrants in
accordance with the following schedule (where "No. Business Days"
is defined as the number of business days beyond five (5) days
from the Interest Payment Due Date, the Delivery Date or the
Warrant Delivery Date, as applicable):
Compensation For Each 500
Shares of
Preferred Stock Not
Converted Timely or
500 Shares of Common Stock
Issuable In
Lieu of Cash Dividends or
Compensation
For Each 500 Shares of
No. Business Days Preferred Stock
Not Converted Timely or 500
Shares of
Common Stock Issuable In
Lieu of Cash
Dividends or Shares of
Common Stock
Issuable Upon Exercise of
Each 1,500
Warrants Not Issued
Timely
1 $25
2 $50
3 $75
4 $100
5 $125
6 $150
7 $175
8 $200
9 $225
10 $250
more than 10 $250 + 100 for each
Business Day Late beyond
10 days
The Company shall pay to Buyer the compensation described above
by the transfer of immediately available funds upon Buyer's
demand. Nothing herein shall limit Buyer's right to pursue
actual damages for the Company's failure to issue and deliver
Common Stock to Buyer (which actual damages shall be reduced by
the amount of any compensation paid by the Company as described
above in this Section V.D.), and in addition to any other
remedies which may be available to Buyer, in the event the
Company fails for any reason to effect delivery of such shares of
Common Stock within five business days after the relevant
Interest Payment Due Date, the Delivery Date or the Warrant
Delivery Date, as applicable, Buyer shall be entitled to rescind
the relevant Notice of Conversion or exercise of Warrants by
delivering a notice to such effect to the Company whereupon the
Company and Buyer shall each be restored to their respective
original positions immediately prior to delivery of such Notice
of Conversion on delivery.
VI. DELIVERY INSTRUCTIONS.
The Securities shall be delivered by the Company on a
"delivery-against-payment basis" at the Closing.
VII. CLOSING DATE.
The date and time of the issuance and sale of the
Preferred Shares (the "Closing Date") shall be the date hereof or
such other as shall be mutually agreed upon in writing. The
issuance and sale of the Securities shall occur on the Closing
Date at the offices of Weil, Gotshal & Manages LLP.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The Buyer understands that the Company's obligation to
sell the Securities on the Closing Date to Buyer pursuant to this
Agreement is conditioned upon:
A. Delivery by Buyer of the Note;
B. The accuracy in all material respects on the Closing Date of
the representations and warranties of Buyer contained in this
Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms,
speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the
performance by Buyer in all material respects on or before the
Closing Date of all covenants and agreements of Buyer required to
be performed by it pursuant to this Agreement on or before the
Closing Date;
C. There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental authority
restraining, enjoining or otherwise prohibiting any of the
transactions contemplated by this Agreement.
IX. CONDITIONS TO BUYER'S OBLIGATIONS.
The Company understands that Buyer's obligation to
purchase the Securities on the Closing Date pursuant to this
Agreement is conditioned upon:
A. Delivery by the Company of one or more certificates (I/N/O
Buyer) evidencing the Securities to be purchased by Buyer
pursuant to this Agreement;
B. The accuracy in all material respects on the Closing Date of
the representations and warranties of the Company contained in
this Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms,
speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the
performance by the Company in all material respects on or before
the Closing Date of all covenants and agreements of the Company
required to be performed by it pursuant to this Agreement on or
before the Closing Date;
C. Buyer having received an opinion of counsel for the Company,
dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer.
D. There not having occurred (i) any general suspension of
trading in, or limitation on prices listed for, the Common Stock
on the NASDAQ, (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United
States, (iii) the commencement of a war, armed hostilities or
other international or national calamity directly or indirectly
involving the United States or any of its territories,
protectorates or possessions, or (iv) in the case of the
foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof.
E. There not having occurred any event or development, and
there being in existence no condition, having or which reasonably
and forseeably would have a Material Adverse Effect.
F. The Company shall have delivered to Buyer reimbursement of
Buyer's out-of-pocket costs and expenses incurred in connection
with the transactions contemplated by the Note and this Agreement
(including the fees and disbursements of Buyer's legal counsel of
$50,000, of which $25,000 is being held in escrow by Weil,
Gotshal & ▇▇▇▇▇▇ LLP).
G. There shall not be in effect any Law or order, ruling,
judgment or writ of any court or public or governmental authority
restraining, enjoining or otherwise prohibiting any of the
transactions contemplated by this Agreement.
X. Reserved.
XI. SURVIVAL; INDEMNIFICATION.
A. The representations, warranties and covenants made by each
of the Company and Buyer in this Agreement, the annexes,
schedules and exhibits hereto and in each instrument, agreement
and certificate entered into and delivered by them pursuant to
this Agreement, shall survive the Closing and the consummation of
the transactions contemplated hereby. In the event of a breach
or violation of any of such representations, warranties or
covenants, the party to whom such representations, warranties or
covenants have been made shall have all rights and remedies for
such breach or violation available to it under the provisions of
this Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such
party on or prior to the Closing Date.
B. The Company hereby agrees to indemnify and hold harmless the
Buyer, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Buyer Indemnitees"),
from and against any and all losses, claims, damages, judgments,
penalties, liabilities and deficiencies (collectively, "Losses"),
and agrees to reimburse the Buyer Indemnitees for all out-of-
pocket expenses (including the reasonable fees and expenses of
legal counsel), in each case promptly as incurred by the Buyer
Indemnitees and to the extent arising out of or in connection
with:
1. any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by
the Company pursuant to this Agreement; or
2. any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or
obligations set forth in this Agreement, the annexes, schedules
or exhibits hereto or any instrument, agreement or certificate
entered into or delivered by the Company pursuant to this
Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Company Indemnitees"),
from and against any and all Losses, and agrees to reimburse the
Company Indemnitees for all out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case
promptly as incurred by the Company Indemnitees and to the extent
arising out of or in connection with:
1. any misrepresentation, omission of fact, or breach of any of
Buyer's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by
Buyer pursuant to this Agreement; or
2. any failure by Buyer to perform in any material respect any
of its covenants, agreements, undertakings or obligations set
forth in this Agreement or any instrument, certificate or
agreement entered into or delivered by Buyer pursuant to this
Agreement.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "Indemnified
Party") of written notice of any investigation, claim, proceeding
or other action in respect of which indemnification is being
sought (each, a "Claim"), the Indemnified Party promptly shall
notify the party against whom indemnification pursuant to this
Section XI is being sought (the "Indemnifying Party") of the
commencement thereof; but the omission to so notify the
Indemnifying Party shall not relieve it from any liability that
it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such
failure. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the
Indemnifying Party shall be entitled to assume the defense
thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have
the right to employ separate legal counsel (together with
appropriate local counsel) and to participate in the defense of
such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of-pocket costs and expenses of such separate legal
counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-
pocket costs and expenses, (y) the Indemnified Party and the
Indemnifying Party reasonably shall have concluded that
representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the
Indemnified Party, (i) potentially differing interests between
such parties in the conduct of the defense of such Claim, or (ii)
if there may be legal defenses available to the Indemnified Party
that are in addition to or disparate from those available to the
Indemnifying Party and which can not be presented by counsel to
the Indemnifying Party, or (z) the Indemnifying Party shall have
failed to employ legal counsel reasonably satisfactory to the
Indemnified Party within a reasonable period of time after notice
of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and
expenses of such legal counsel shall be borne exclusively by the
Indemnified Party. Except as provided above, the Indemnifying
Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than
one firm of legal counsel for the Indemnified Party (together
with appropriate local counsel). The Indemnifying Party shall
not, without the prior written consent of the Indemnified Party
(which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that
does not include an unconditional release of the Indemnified
Party from all liabilities with respect to such Claim or
judgment.
E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being
asserted by a third party, the Indemnified Party promptly shall
deliver notice of such claim to the Indemnifying Party. If the
Indemnified Party disputes the claim, such dispute shall be
resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in
accordance with the procedures and rules of the American
Arbitration Association. Judgment upon any award rendered by any
arbitrators may be entered in any court having competent
jurisdiction thereof.
XII. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard
to the conflicts of law principles of such state. Each of the
parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York
in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens,
to the bringing of any such proceeding in such jurisdictions. A
facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed
in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other
jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement.
This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter
hereof.
XIII. NOTICES. Except as may be otherwise provided herein,
any notice or other communication or delivery required or
permitted hereunder shall be in writing and shall be delivered
personally or sent by certified mail, postage prepaid, or by a
nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier
service, or, if mailed, three (3) days after the date of deposit
in the United States mails, as follows:
(1) if to the Company, to:
The Network Connection, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
Nixon, Hargrave, Devans & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(2) if to Buyer, to
THE SHAAR FUND LTD.,
c/o SHAAR ADVISORY SERVICES LTD.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
The Company or Buyer may change the foregoing address by notice
given pursuant to this Section XVIII.
XIV. CONFIDENTIALITY. Each of the Company and Buyer agrees to
keep confidential and not to disclose to or use for the benefit
of any third party the terms of this Agreement or any other
information which at any time is communicated by the other party
as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not
apply to information which, at the time of disclosure, is already
part of the public domain (except by breach of this Agreement)
and information which is required to be disclosed by law
(including, without limitation, pursuant to Item 10 of Rule 601
of Regulation S-K under the Securities Act and the Exchange Act).
XV. ASSIGNMENT. This Agreement shall not be assignable by
either of the parties hereto prior to the Closing without the
prior written consent of the other party, and any attempted
assignment contrary to the provisions hereby shall be null and
void; provided, however, that Buyer may assign its rights and
obligations hereunder, in whole or in part, to any affiliate of
Buyer who furnishes to the Company the representations and
warranties set forth in Section II hereof and otherwise agrees to
be bound by the terms of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have duly
executed and delivered this Agreement on the date first above
written.
THE NETWORK CONNECTION, INC.
By:______________________________
Name:
Title:
THE SHAAR FUND LTD.
By: ______________________________
Name:
Title: