Exhibit 10.83
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT is made as
of the __ day of March, 2004, by and among INSCI Corp., a Delaware corporation
(the "Company"), Selway Partners, LLC, ("Selway") and CIP Capital L.P. ("CIP",
and with Selway, the "Investors").
IN CONSIDERATION OF THE MUTUAL PROMISES HEREINAFTER SET FORTH, THE
PARTIES HERETO, EACH INTENDING TO BE LEGALLY BOUND HEREBY, AGREE AS FOLLOWS:
1. PURCHASE AND SALE.
1.1 SALE AND ISSUANCE OF SERIES C CONVERTIBLE PREFERRED STOCK.
(a) The Company shall adopt and file with the
Secretary of State of Delaware, on or before the Closing (as defined below), an
amendment to the Company's certificate of designation in the form attached
hereto as Exhibit A (the "Amended Designation").
(b) Subject to the terms and conditions of this
Agreement, the Investors agree to purchase, and the Company agrees to sell and
issue to the Investors, 831,726 shares of the Company's Series C Convertible
Preferred Stock, par value $0.01 per share (the "Series C Preferred Stock"). As
consideration for the Securities, the Investors shall exchange for surrender to
the Company the Amended and Restated Convertible Subordinated Debentures dated
November 30, 2002 in the total principal amount of $2,200,000 (collectively, the
"Debentures"), the outstanding total amount of which, including accrued
interest, is One Million Six Hundred Thirteen Thousand Two Hundred Sixteen
Dollars (USD$1,613,216) as of the date hereof. The rights, privileges and
preferences of the Series C Preferred Stock shall be as stated in the Amended
Designation. As used herein, the term "Securities" means the shares of Series C
Preferred Stock to be issued and sold hereunder.
1.2 CLOSING. The initial purchase, sale and issuance of the
Securities shall take place at the offices of ▇▇▇▇ ▇▇▇▇▇ LLP, Centre Square
West, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇ at 10:00 a.m.
on March 31, 2004, or at such other place and time as the Company and the
Investors mutually agree upon (which time is designated as the "Closing"). At
the Closing:
(a) The Company shall deliver to Selway, a
certificate representing 415,863 shares of the Securities;
(b) The Company shall deliver to CIP, a certificate
representing 415,863 shares of the Securities.
(c) Selway shall surrender the Debenture made in
favor of Selway to the Company for cancellation;
(d) CIP shall surrender the Debenture made in favor
of CIP to the Company for cancellation.
2. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY. The Company
hereby represents and warrants to the Investors that, except as set forth on the
Disclosure Schedule attached hereto as Schedule A (the "Disclosure Schedule"),
which exceptions shall be deemed to be representations and warranties as if made
hereunder, and except with respect to certain subsidiaries which are inactive as
set forth on the Disclosure Schedule:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the state of its formation and has all
requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted. Each of the Company and its
subsidiaries is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on its assets, properties, financial condition, operating
results, prospects or business (as such business is presently conducted and as
it is proposed to be conducted).
2.2 SEC REPORTS; FINANCIAL STATEMENTS. The Company's Common
Stock, $0..10 par value per share (the "Common Stock") is registered under
Section 12(b) or (g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Company is in compliance with its reporting and filing
obligations under the Exchange Act. The Company has made available to the
Investors (a) its annual reports to stockholders and its Annual Reports on Form
10-KSB for its last two fiscal years and (b) all of its Quarterly Reports on
Form 10-QSB and each other report, registration statement or definitive proxy
statement filed with the Securities and Exchange Commission (the "SEC") since
the beginning of such two fiscal years (collectively, the "SEC Reports"). The
SEC Reports do not (as of their respective dates) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The audited and
unaudited financial statements of the Company included in the SEC Reports (the
"Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as stated in such
Financial Statements or the notes thereto) and fairly present the financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the results of their operations and changes in financial position
for the periods then ended. Since the end of the most recent accounting period
for which an SEC Report has been filed, there has been no material adverse
change in the assets, properties, financial condition, operating results,
prospects or business (as such business is presently conducted and as it is
proposed to be conducted) of the Company and its subsidiaries taken together,
and there is no existing condition, event or series of events which reasonably
would be expected to have a material adverse effect on the assets, properties,
financial condition, operating results, prospects or business (as such business
is presently conducted and as it is proposed to be conducted) of the Company and
its subsidiaries taken together, or the ability of the Company to perform its
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obligations under this Agreement or (i) the Amended and Restated Registration
Rights Agreement by and among the Company, SCP Private Equity Partners II, L.P.
("SCP") and CSSMK LLC ("CSSMK"), dated September 4, 2003 (the "Registration
Rights Agreement"); or (ii) the Stockholders Agreement by and among the Company,
SCP and CSSMK (the "Stockholders Agreement") dated December 31, 2003, an
amendment to such agreement to be executed and delivered in connection herewith
in the form attached hereto as Exhibit B ("Amendment to Stockholders
Agreement").
2.3 CAPITALIZATION AND VOTING RIGHTS
(a) As of the date hereof, the authorized capital of
the Company is as set forth in Section 2.3 of the Disclosure Schedule. All of
the issued and outstanding shares of capital stock of the Company are owned as
set forth in Section 2.3 of the Disclosure Schedule. The capitalization of the
Company on a fully-diluted basis is as set forth on Section 2.3 of the
Disclosure Schedule.
(b) All outstanding shares of capital stock of the
Company's subsidiaries are owned beneficially and of record by the Company, free
and clear of any liens, security interests, encumbrances, charges or other
adverse claims ("Liens"). The Company and its subsidiaries do not presently own
or control, directly or indirectly, any interest in any other corporation,
association or other business entity. Neither the Company nor its subsidiaries
are participants in any joint venture, partnership, or similar arrangement.
(c) All outstanding shares of capital stock of the
Company and its subsidiaries have been duly and validly authorized and issued,
are fully paid and nonassessable and were issued in accordance with the
registration or qualification provisions of the Securities Act of 1933, as
amended (the "Securities Act"), and any relevant state securities laws or
pursuant to valid exemptions therefrom.
(d) There are no outstanding options, warrants,
rights (including conversion or preemptive rights) or agreements for the
purchase or acquisition from the Company or any of its subsidiaries of any
shares of their capital stock, except as provided in Section 2.3 of the
Disclosure Schedule.
2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery by the Company of this Agreement, the
Amendment to the Stockholders Agreement, the performance of all obligations of
the Company hereunder and thereunder, and the authorization, issuance (or
reservation for issuance) and delivery of the Securities and the Common Stock
issuable upon conversion of the Securities (the "Conversion Shares"), has been
taken, and this Agreement, and the Amendment of the Stockholders Agreement
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, and (b) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
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2.5 STOCKHOLDER APPROVAL. Except for SCP and CSSMK, approval
by the stockholders of the Company is not required for the authorization,
execution and delivery of this Agreement and the Amendment to the Stockholders
Agreement, the performance of all obligations of the Company hereunder and
thereunder, and the authorization, issuance (or reservation for issuance) and
delivery of the Securities and the Conversion Shares.
2.6 VALID ISSUANCE OF STOCK. The Securities, when issued, sold
and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Registration Rights
Agreement, the Stockholders Agreement and under applicable state and federal
securities laws. The Conversion Shares purchased under this Agreement have been
duly and validly reserved for issuance and, upon issuance in accordance with the
terms of the Designation, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Registration Rights
Agreement, the Stockholders Agreement and under applicable state and federal
securities laws.
2.7 GOVERNMENTAL CONSENTS. Other than those that have been
duly obtained or filings which are required under applicable securities laws,
which filings, if any, will be made within the applicable periods required by
such laws, and other than the filing of the Amended Designation, no consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any local, state or federal
governmental authority, on the part of the Company is required in connection
with the consummation of the transactions contemplated by this Agreement and the
Amendment to the Stockholders Agreement.
2.8 OFFERING. Subject in part to the truth and accuracy of the
Investors' representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Securities as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act and applicable state
securities laws, and neither the Company nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption. The issuance of the Conversion Shares upon conversion of the
Securities will be exempt from the registration requirement of the Securities
Act and applicable state securities laws.
2.9 COMPLIANCE WITH CERTAIN MATTERS. Neither the Company nor
any of its subsidiaries is in violation or default under or in breach of any
provision of its Certificate of Incorporation, Certificate of Designation,
bylaws or other organizational document, any contract, covenant, agreement,
instrument, document or Order to which it is a party or by which it is bound or
any statute, law, rule or regulation applicable to it. The execution, delivery
and performance of this Agreement and the Amendment to the Stockholders
Agreement and the consummation of the transactions contemplated hereby and
thereby will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, contract, covenant, agreement, instrument,
document, Order, statute, law, rule or regulation or an event that results in
the creation of any Liens upon any assets of the Company or any of its
subsidiaries or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization, or approval
applicable to the Company or any of its subsidiaries, their business or
operations or any of their assets or properties.
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2.10 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to the best of the Company's knowledge, currently
threatened against the Company or any of its subsidiaries that questions the
validity of this Agreement or the Amendment to the Stockholders Agreement or the
right of the Company to enter into such agreements, or to consummate the
transactions contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any material adverse changes in the assets,
properties, financial condition, operating results, prospects or business of the
Company or any of its subsidiaries (as such business is presently conducted and
as it is proposed to be conducted), or any change in the current equity
ownership of the Company or any of its subsidiaries, except as otherwise
disclosed in the SEC Reports. The foregoing includes, without limitation,
actions, suits, proceedings or investigations pending or, to the best of the
Company's knowledge, threatened involving the prior employment of any of the
Company's or any of its subsidiaries' employees or consultants, their use in
connection with the Company's or any of its subsidiaries' business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers.
Neither the Company nor any of its subsidiaries is a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
any administrative or governmental agency, authority or instrumentality
("Order"). There is no action, suit, proceeding or investigation by the Company
or any of its subsidiaries currently pending or that the Company or any of its
subsidiaries intends to initiate, except as otherwise disclosed in the SEC
Reports.
2.11 NONDISCLOSURE AND INVENTIONS AGREEMENTS. Each employee,
officer and consultant of the Company or any of its subsidiaries has executed a
Nondisclosure and Inventions Agreement in the form attached hereto as Exhibit C.
The Company, after reasonable investigation, is not aware that any of the
Company's or its subsidiaries' employees, officers or consultants are in
violation of the agreements specified in this Section 2.11, and the Company and
its subsidiaries will use their best efforts to prevent any such violation.
2.12 PATENTS AND TRADEMARKS. The Disclosure Schedule contains
a complete and accurate list of all (a) patented or registered Intellectual
Property Rights (as defined below) owned or used by the Company or any of its
subsidiaries, (b) pending patent applications and applications for registrations
of other Intellectual Property Rights filed by the Company or any its
subsidiaries and (c) unregistered trade names and corporate names owned or used
by the Company or any of its subsidiaries. The Disclosure Schedule also contains
a complete and accurate list of all licenses and other rights granted by the
Company or any of its subsidiaries to any third party with respect to any
Intellectual Property Rights and all licenses and other rights granted by any
third party to the Company or any of its subsidiaries with respect to any
Intellectual Property Rights, in each case identifying the subject Intellectual
Property Rights but not including licenses arising from the purchase of standard
"off the shelf" products. The Company or a subsidiary of the Company owns all
right, title and interest in and to all of the Intellectual Property Rights
listed on the Disclosure Schedule free and clear of all Liens, except as
otherwise disclosed in the SEC Reports. The Company or a subsidiary of the
Company owns all right, title and interest to, or has the right to use pursuant
to a valid license, all Intellectual Property Rights, as they currently exist,
necessary for the operation of the business of the Company and its subsidiaries
as presently conducted and as presently proposed to be conducted, free and clear
of all Liens, except as otherwise disclosed in the SEC Reports. The Company and
its subsidiaries have taken all necessary and desirable actions to maintain and
protect the Intellectual Property Rights that each of them own. To the best of
the Company's knowledge, the owners of any Intellectual Property Rights licensed
to the Company or any of its subsidiaries have taken all necessary and desirable
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actions to maintain and protect the Intellectual Property Rights that are
subject to such licenses. There have been no claims made against the Company or
any of its subsidiaries asserting the invalidity, misuse or unenforceability of
any of such Intellectual Property Rights, and to the best of the Company's
knowledge, there are no valid grounds for the same. Neither the Company nor any
of its subsidiaries has received any notices of, and the Company is not aware of
any facts which indicate a likelihood of, any infringement or misappropriation
by, or conflict with, any third party with respect to such Intellectual Property
Rights (including, without limitation, any demand or request that the Company or
any of its subsidiaries license any rights from a third party). To the best of
the Company's knowledge, the conduct of the Company's and each of its
subsidiaries' business has not infringed, misappropriated or conflicted with and
does not infringe, misappropriate or conflict with any Intellectual Property
Rights of others, nor to the best of the Company's knowledge would any future
conduct as presently contemplated infringe, misappropriate or conflict with any
Intellectual Property Rights of others. To the best of the Company's knowledge,
the Intellectual Property Rights owned by or licensed to the Company or any of
its subsidiaries have not been infringed upon, or misappropriated by or conflict
with others. The transactions contemplated by this Agreement will have no
material adverse effect on the Company's or any of its subsidiaries' right,
title and interest in and to the Intellectual Property Rights listed on the
Disclosure Schedule. To the best of the Company's knowledge, none of the
Company's nor any of its subsidiaries' employees is obligated under any
contract, covenant, agreement, instrument or commitment or subject to any Order
that would interfere with the use of his or her best efforts to promote the
interests of the Company or any of its subsidiaries or that would conflict with
the Company's or any of its subsidiaries' business as presently conducted and to
the best of the Company's belief as presently proposed to be conducted. Neither
the execution of this Agreement nor the transactions contemplated by this
Agreement nor the carrying on of the Company's or each of its subsidiaries'
business by the employees of the Company and each of its subsidiaries, nor the
conduct of the Company's or each of its subsidiaries' business as presently
conducted or presently proposed to be conducted, will, to the best of the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant, agreement or instrument under which any of such employees is now
obligated. For purposes of this Agreement, "Intellectual Property Rights" means
all (i) patents, patent applications, patent disclosures and inventions, (ii)
trademarks, service marks, trade dress, trade names, logos and corporate names
and registrations and applications for registration thereof together with all of
the goodwill associated therewith, (iii) copyrights (registered and
unregistered) and copyrightable works and registrations and applications for
registration thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data, data bases and documentation
thereof, (vi) trade secrets and other confidential information (including,
without limitation, ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, financial and marketing plans and customer and supplier lists and
information), (vii) other intellectual property rights and (viii) copies and
tangible embodiments thereof (in whatever form or medium).
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2.13 AGREEMENTS; ACTION.
(a) The SEC Reports list all material agreements,
understandings, instruments and contracts, whether written or oral, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective assets and properties are bound.
(b) There are no agreements, understandings or
proposed transactions between the Company or any of its subsidiaries and any of
their respective officers, directors, affiliates or any affiliate thereof,
except as otherwise disclosed in the SEC Reports.
(c) Except as otherwise disclosed in the SEC Reports,
there are no agreements, understandings, instruments, contracts, proposed
transactions or Orders to which the Company or any of its subsidiaries is a
party or by which it is bound that may involve (i) obligations (contingent or
otherwise) of, or payments to, the Company or any of its subsidiaries in excess
of $50,000, (ii) the license of any patent, copyright, trade secret
or other proprietary right to or from the Company or any of its subsidiaries,
other than licenses arising from the purchase of "off the shelf" or other
standard products, (iii) provisions restricting or affecting the development,
manufacture or distribution of the Company's or any of its subsidiaries'
products or services, (iv) a warranty with respect to its services rendered or
its products sold or leased other than in the ordinary course of business, or
(v) indemnification by the Company or any of its subsidiaries with respect to
infringements of proprietary rights.
(d) Neither the Company nor any of its subsidiaries
has (i) declared or paid any dividends or authorized or made any distribution
upon or with respect to any class or series of its capital stock, (ii) incurred
any material indebtedness for money borrowed or any other liabilities, (iii)
made any material loans or advances to any person, other than advances for
travel expenses and other customary employment-related advances made in the
ordinary course of business, or (iv) sold, exchanged or otherwise disposed of
any material amount of its assets or rights, other than the sale of its
inventory in the ordinary course of business, except as otherwise disclosed in
the SEC Reports.
(e) For the purposes of subsections (c) and (d)
above, all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.
(f) All of the contracts, agreements and instruments
set forth on the Disclosure Schedule pursuant to this Section 2.13 are valid,
binding and enforceable in accordance with their respective terms and there has
been no material change to or amendment to a material contract, covenant,
agreement or instrument by which the Company or any of its subsidiaries or any
of their respective assets or properties is bound or subject. Each of the
Company and each of its subsidiaries has performed all material obligations
required to be performed by it and is not in material default under or in
material breach of nor in receipt of any claim of default or breach under any
contract, covenant, agreement or instrument and neither the Company nor any of
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its subsidiaries have any present expectation or intention of not fully
performing all such obligations. No event has occurred which with the passage of
time or the giving of notice or both would result in a material default, breach
or event of noncompliance by the Company or any of its subsidiaries under any
contract, covenant, agreement or instrument. None of the Company nor any of its
subsidiaries has knowledge of any breach or anticipated breach by the other
parties to any contract, covenant, agreement or instrument, except as otherwise
disclosed in the SEC Reports.
(g) Neither the Company nor any of its subsidiaries
is a party to or is bound by any contract, covenant, agreement or instrument or
subject to any restriction under its charter, bylaws or other organizational
document that materially adversely affects its assets, properties, financial
condition, operating results, prospects or business (as such business is
presently conducted and as it is proposed to be conducted).
2.14 RELATED-PARTY TRANSACTIONS. No employee, consultant,
officer, or director of the Company or any of its subsidiaries, or member of his
or her immediate family is indebted to the Company or any of its the
subsidiaries, nor is the Company or any of its subsidiaries indebted (or
committed to make loans or extend or guarantee credit) to any of them except for
compensation, wages and benefits and travel and customary expenses. Except for
employment agreements, benefit plans, insurance policies and similar matters, no
employee, consultant, officer, or director of the Company or any of its
subsidiaries, or member of his or her immediate family is directly or indirectly
interested in any material contract, covenant, agreement or instrument with the
Company or any of its subsidiaries, except as otherwise disclosed in the SEC
Reports.
2.15 PERMITS. Each of the Company and each of its subsidiaries
has all franchises, permits, licenses and any similar authority necessary for
the conduct of its business as now being conducted by it, the lack of which
could materially and adversely affect its assets, properties, financial
condition, operating results, prospects or business (as such business is
presently conducted and as it is proposed to be conducted), and the Company
believes that each of the Company and each of its subsidiaries can obtain,
without undue burden or expense, any similar authority for the conduct of its
business as planned to be conducted. Neither the Company nor any of its
subsidiaries is in default in any material respect under any of such franchises,
permits, licenses or other similar authority, except as otherwise disclosed in
the SEC Reports.
2.16 ENVIRONMENTAL AND SAFETY LAWS. To the Company's
knowledge, neither the Company nor any of its subsidiaries is in violation of
any applicable statute, law, rule or regulation relating to the environment or
occupational health and safety, and to the Company's knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law, rule or regulation.
2.17 MANUFACTURING AND MARKETING RIGHTS. Except in the
ordinary course of business, neither the Company nor any of its subsidiaries has
granted rights to manufacture, produce, assemble, license, market, or sell its
products to any other person and is not bound by any agreement that affects its
exclusive right to develop, manufacture, assemble, distribute, market or sell
its products.
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2.18 DISCLOSURE. The Company has fully provided the Investors
with all the information that the Investors have requested for deciding whether
to purchase the Securities and to consummate the transactions contemplated by
this Agreement. To the best of the Company's knowledge, none of this Agreement,
the Amended and Restated Registration Rights Agreement, any other statements or
certificates made or delivered in connection herewith or therewith or any other
information supplied by the Company with respect to the transactions
contemplated hereby, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements herein or therein not
misleading.
2.19 REGISTRATION RIGHTS. The Company or its subsidiaries has
granted or agreed to grant the registration rights set forth in the Registration
Rights Agreement.
2.20 CORPORATE DOCUMENTS. The Company's Certificate of
Incorporation, Certificate of Designation and bylaws and each of its
subsidiaries' charter, bylaws and other organization documents are in the form
previously provided to the Investors.
2.21 TITLE TO PROPERTY AND ASSETS. Each of the Company and
each of its subsidiaries owns its property and assets free and clear of all
Liens, except such Liens that arise in the ordinary course of business and do
not materially impair its ownership or use of such property or assets. With
respect to the property and assets it leases, each of the Company and each of
its subsidiaries is in compliance with such leases and holds a valid leasehold
interest free and clear of any Liens.
2.22 TAX RETURNS, PAYMENTS AND ELECTIONS. Each of the Company
and each of its subsidiaries have filed all tax returns and reports or have
filed the necessary extensions as required by law. These returns and reports are
true and correct in all material respects. Each of the Company and each of its
subsidiaries has paid all taxes and other assessments due, except those
contested by it in good faith that are listed in the Disclosure Schedule.
2.23 INSURANCE. Each of the Company and each of its
subsidiaries has in full force and effect or will obtain in a reasonable amount
of time after the Closing, fire and casualty insurance policies, with extended
coverage in amounts customary for companies similarly situated. Each of the
Company and each of its subsidiaries has in full force and effect or will obtain
in a reasonable amount of time after the Closing a quote for products liability
and errors and omissions insurance in amounts customary for companies similarly
situated. The parties will use reasonable business judgment in determining
whether to effectuate such policies. Each of the Company and each of its
subsidiaries shall have or will obtain in a reasonable amount of time after the
Closing, directors' and officers' insurance in amounts consistent with past
practice; provided that in no event shall the Company carry less than an
aggregate of $1,000,000 in directors' and officers' insurance coverage for the
entire Board.
2.24 MINUTE BOOKS. The minute books of the Company and each of
its subsidiaries made available to the Investors contain a complete summary of
all meetings of directors and stockholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
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2.25 LABOR AGREEMENTS AND ACTIONS. Neither the Company nor any
of its subsidiaries is bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or oral, express or implied,
contract, covenant, agreement, instrument, commitment or arrangement with any
labor union, and no labor union has requested or, to the Company's knowledge,
requested or sought to represent any of its employees, consultants,
representatives or agents. There is no strike or other labor dispute involving
the Company or any of its subsidiaries pending, or to the Company's knowledge,
threatened, that could have a material adverse effect on the assets, properties,
financial condition, operating results, prospects or business of the Company or
any of its subsidiaries (as such business is presently conducted and as it is
proposed to be conducted), nor is the Company aware of any labor organization
activity involving the employees or consultants of the Company or any of its
subsidiaries. The Company is not aware that any officer or key employee or key
consultant, or that any group of key employees or key consultants, intends to
terminate their employment or consulting relationship with the Company or any of
its subsidiaries, nor does the Company or any of its subsidiaries have a present
intention to terminate the employment or consulting relationship of any of the
foregoing nor has there been any material change in any compensation arrangement
or agreement with any employee or consultant. With the exception of those
officers and employees that have executed employment contracts with the Company
or any subsidiary of the Company as listed in the Disclosure Schedule, the
employment of each officer and employee of the Company and each of its
subsidiaries is terminable at the will of the Company or a subsidiary of the
Company, as applicable, and without any required severance payment. The
consulting relationship of each consultant of the Company or any of its
subsidiaries is terminable at the will of the Company or a subsidiary of the
Company, as applicable, and without any required severance payment. To the
knowledge of the Company, each of the Company and each of its subsidiaries have
complied in all material respects with all applicable local, state and federal
equal employment opportunity and other laws related to employment.
2.26 DAMAGE; LOSS. Neither the Company nor any of its
subsidiaries has experienced any damage, destruction or loss, whether or not
covered by insurance, that would materially and adversely affect the assets,
properties, financial condition, operating results, prospects or business of the
Company (as such business is presently conducted and as it is proposed to be
conducted).
2.27 LIENS. There has not been any satisfaction or discharge
of any Lien or payment of any obligation by the Company or any of its
subsidiaries, except in the ordinary course of business and that is material to
its assets, properties, financial condition, operating results or business (as
such business is presently conducted and as it is proposed to be conducted).
2.28 REAL PROPERTY HOLDING COMPANY. Neither the Company nor
any of its subsidiaries is a real property holding company within the meaning of
Section 897 of the Internal Revenue Code of 1986, as amended.
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3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. The Investors
hereby represent and warrant to the Company that:
3.1 AUTHORIZATION. The Investors have full power and authority
to enter into this Agreement and the Amendment to the Stockholders Agreement,
and each of them constitutes the valid and legally binding obligation of the
Investors enforceable against the Investors in accordance with its terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally; and (b) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Securities are
being acquired for investment for the Investor's own account, not as a nominee
or agent, and not with a view to the resale or distribution of any part thereof
or the Conversion Shares, and the Investors has no present intention of selling,
granting any participation in, or otherwise distributing the same. The Investors
do not have any contract, covenant, agreement, undertaking or arrangement with
any person to sell, transfer or grant participations to such person or to any
third person, with respect to any of the Securities or the Conversion Shares.
3.3 DISCLOSURE OF INFORMATION. The Investors have received all
the information they consider necessary or appropriate for deciding whether to
purchase the Securities. The Investors further represent that they have had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Securities and the business,
properties, prospects and financial condition of the Company. The foregoing,
however, does not limit or modify the representations and warranties in Section
2 of this Agreement or the right of the Investors to rely thereon.
3.4 INVESTMENT EXPERIENCE. The Investors are investors in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
The Investors also represent they have not been organized for the purpose of
acquiring the Securities.
3.5 ACCREDITED INVESTOR. The Investors are "accredited
investors" within the meaning of Rule 501 of Regulation D promulgated under the
Securities Act, as presently in effect.
3.6 RESTRICTED SECURITIES. The Investors understand that the
Securities they are purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Securities Act, only in certain limited circumstances. In
this connection, the Investors represent that they are familiar with Rule 144
promulgated under the Securities Act, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act.
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3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, the Investors further agree not to
make any disposition of all or any portion of the Securities or the Conversion
Shares unless and until the transferee has agreed in writing for the benefit of
the Company to be bound by this Section 3 and the applicable provisions of the
Registration Rights Agreement and Stockholders Agreement, and:
(a) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(b) Such Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition and, if
requested by the Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company that such disposition
will not require registration of such shares under the Act. It is agreed that
the Company will not require opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances or unless required by a transfer
agent.
Notwithstanding the provisions of subsections (a) and (b) above, no such
registration statement or opinion of counsel shall be necessary for a transfer
by an Investor that is a partnership to a partner of such partnership or a
retired partner of such partnership who retires after the date hereof, or to the
estate of any such partner or retired partner or the transfer by gift, will or
intestate succession of any partner to his or her spouse or to the siblings,
lineal descendants or ancestors of such partner or his or her spouse, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he or she were an original Investor hereunder.
3.8 LEGENDS. It is understood that the certificates evidencing
the Securities and the Conversion Shares, may bear one or all of the following
legends:
(a) "These securities have not been registered under
the Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the issuer thereof that such registration is not required or
unless sold pursuant to Rule 144 of such Act."
(b) Any legend required by the securities laws of any
applicable jurisdictions.
(c) Any legend required by the Registration Rights
Agreement, the Stockholders Agreement or other applicable agreement.
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
the Investors under Sections 1.1 and 1.2 of this Agreement are subject to the
fulfillment on or before the Closing of each of the conditions hereinafter set
forth.
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4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing Date,
unless another date is specified therein.
4.2 PERFORMANCE. The Company shall have performed and complied
in all material respects with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by it on or before the Closing.
4.3 COMPLIANCE CERTIFICATE. An executive officer of the
Company shall deliver to the Investors at the Closing a certificate on behalf of
the Company, stating that the conditions specified in Sections 4.1 and 4.2 have
been fulfilled.
4.4 SECRETARY'S CERTIFICATE. The Investors shall have received
a certificate or certificates, dated the Closing Date and signed by the
corporate secretary of the Company (or other authorized officer or
representative of the Company), certifying the truth and correctness of attached
copies of the Company's Certificate of Incorporation and Certificate of
Designation, and all amendments thereto, the Company's bylaws, and all
amendments thereto, and resolutions of the Board approving the Company entering
into this Agreement and the consummation of the transactions contemplated hereby
and certifying as to the incumbency of the officers authorized to execute this
Agreement, Amendment to the Stockholders Agreement, the Amended Designation and
other related documents and agreements.
4.5 QUALIFICATIONS. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Securities and the other transactions contemplated by this Agreement
shall be duly obtained and effective as of the Closing.
4.6 PROCEEDINGS AND DOCUMENTS. All corporate approvals,
stockholder approvals and other proceedings in connection with the transactions
contemplated at the Closing and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Investors and their
counsel, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request.
4.7 STOCK CERTIFICATE. The Company shall have delivered to the
Investors executed certificates representing the Securities.
4.8 LEGAL OPINION. The Investors shall have received an
opinion of counsel to the Company, in the form attached hereto as Exhibit D.
4.9 DESIGNATION. The Company shall have adopted and filed with
the Secretary of State of Delaware the Amended Designation.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to the Investors under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by the
Investors:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investors contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing Date.
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5.2 PERFORMANCE. The Investors shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
5.3 DELIVERY OF DEBENTURES. The Investors shall have delivered
to the Company the Debentures at the Closing pursuant to Section 1.2.
5.4 QUALIFICATIONS. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Securities and the other transactions contemplated by this Agreement
shall be duly obtained and effective as of the Closing.
6. MISCELLANEOUS.
6.1 SURVIVAL OF WARRANTIES. The warranties, representations
and covenants of the Company and the Investors contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing.
6.2 USE OF PROCEEDS. The Company shall use the proceeds from
the sale of the Securities to the Investors hereunder for general corporate
purposes.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any Securities or any Conversion Shares). Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
6.4 GOVERNING LAW. The construction, validity and
interpretation of this Agreement will be governed by the internal laws of the
State of Delaware without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
6.5 COUNTERPARTS. This Agreement may be executed 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.
6.6 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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6.7 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
commercial overnight courier (with confirmation of receipt) or sent via
facsimile (with confirmation of receipt), (a) in case of the Company, to the
Company at Two Westborough Business Park, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (Fax: (▇▇▇) ▇▇▇-▇▇▇▇), Attn: President, with a copy to
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; (b) in the case of
Selway, Selway Partners LLC, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, (Fax: (201)
▇▇▇-▇▇▇▇), Attention: Chief Executive Officer (or at such other address for a
party as shall be specified by like notice), with a copy to ▇▇▇▇ ▇▇▇▇▇ LLP,
Centre Square West, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇
(Fax: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇; and (c) in the case of CIP,
CIP Capital L.P., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (or at such
other address for a party as shall be specified by like notice) with a copy to
▇▇▇▇ ▇▇▇▇▇ LLP, Centre Square West, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇-▇▇▇▇ (Fax: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇.
Notice given by facsimile shall be confirmed by appropriate
answer back and shall be effective upon actual receipt if received during the
recipient's normal business hours, or at the beginning of the recipient's next
business day after receipt if not received during the recipient's normal
business hours. All notices by facsimile shall be confirmed promptly after
transmission in writing by certified mail or personal delivery. Any party may
change any address to which notice is to be given to it by giving notice as
provided above of such change of address.
6.8 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction.
6.9 EXPENSES. Irrespective of whether the Closing is effected,
the Company shall pay all costs and expenses incurred by the Investors with
respect to the negotiation, execution, delivery and performance of this
Agreement and any schedules or exhibits hereto; provided that the Company shall
not be obligated to reimburse the Investors for legal fees in excess of $5,000..
6.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities at the time outstanding, any
securities into or for which such Securities are convertible or exchangeable,
each future holder of all such securities, and the Company.
6.11 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
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6.12 PUBLICITY. Neither the Company nor the Investors shall
take any action, or permit any of its employees, consultants, officers,
directors or stockholders to take any action, which may result in the public
disclosure of the transactions effected hereby or the identity of the Investor,
except pursuant to the Company's filing obligations under applicable securities
laws or unless otherwise required by law. Other than with respect to filing
obligations under applicable securities laws, if the Company determines that it
is required by law to disclose these transactions or the identity of the
Investor, it shall, at a reasonable time before making any such disclosure,
consult with the Investors regarding such disclosure.
6.13 ENTIRE AGREEMENT. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have executed this Series C
Convertible Preferred Stock Purchase Agreement as of the date first above
written.
COMPANY:
INSCI CORP.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President, Chief Executive Officer,
Chief Financial Officer and Secretary
INVESTORS:
SELWAY PARTNERS, LLC
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
CIP CAPITAL, L.P.
By: CIP Capital Management, Inc.,
its General Partner
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
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SCHEDULE A
DISCLOSURE SCHEDULE
-17-
EXHIBIT A
AMENDMENT TO CERTIFICATE OF DESIGNATION
[ATTACHED]
-18-
EXHIBIT B
AMENDMENT TO STOCKHOLDERS AGREEMENT
[ATTACHED]
-19-
EXHIBIT C
FORM OF NONDISCLOSURE AGREEMENT
[ATTACHED]
-20-
EXHIBIT D
OPINION OF COUNSEL
[ATTACHED)
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