1
EXHIBIT 10.20.1
================================================================================
STOCK PURCHASE AGREEMENT
DATED AS OF OCTOBER 12, 2000
BY AND BETWEEN
PROBEX CORP.
AND
UNITED INFRASTRUCTURE COMPANY, LLC
================================================================================
2
TABLE OF CONTENTS
PAGE
1. PURCHASE AND SALE OF COMMON STOCK.......................................................................1
(a) Purchase of Common Stock.......................................................................1
(b) Form of Payment................................................................................2
(c) Adjustment.....................................................................................2
(d) Closing Date...................................................................................2
2. INVESTOR'S REPRESENTATIONS AND WARRANTIES...............................................................2
(a) Investment Purpose.............................................................................2
(b) Accredited Investor Status.....................................................................2
(c) Reliance on Exemptions.........................................................................2
(d) Information....................................................................................3
(e) Governmental Review............................................................................3
(f) Transfer or Resale.............................................................................3
(g) Legends........................................................................................3
(h) Authorization; Enforcement.....................................................................4
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................................4
(a) Organization and Qualification.................................................................4
(b) Authorization; Enforcement.....................................................................5
(c) Capitalization.................................................................................5
(d) Issuance of Shares.............................................................................6
(e) No Conflicts...................................................................................7
(f) SEC Documents; Financial Statements............................................................8
(g) Undisclosed Liabilities........................................................................8
(h) Absence of Certain Changes.....................................................................8
(i) Absence of Litigation..........................................................................8
(j) Suppliers and Customers........................................................................9
(k) Intellectual Property..........................................................................9
(l) No Materially Adverse Contracts, Etc..........................................................10
(m) Tax Status....................................................................................10
(n) Certain Transactions..........................................................................11
i
3
PAGE
(o) Disclosure....................................................................................11
(p) Acknowledgment Regarding Investor's Purchase of Common Shares.................................11
(q) No Integrated Offering........................................................................12
(r) No Brokers....................................................................................12
(s) Permits; Compliance...........................................................................12
(t) Environmental Matters.........................................................................12
(u) Title to Property.............................................................................13
(v) Insurance.....................................................................................13
(w) Internal Accounting Controls..................................................................13
(x) Labor Relations...............................................................................14
(y) Foreign Corrupt Practices.....................................................................14
(z) Benefit Plans.................................................................................14
(aa) No Manipulation of Stock......................................................................14
(bb) Accountants...................................................................................14
(cc) Contracts.....................................................................................15
(dd) Solvency......................................................................................15
(ee) Investment Company............................................................................15
(ff) Intentionally Omitted.........................................................................15
(gg) Proprietary Information and Inventions Agreements.............................................15
4. COVENANTS..............................................................................................15
(a) Commercially Reasonable Efforts...............................................................15
(b) Form D; Blue Sky Laws.........................................................................15
(c) Reporting Status..............................................................................16
(d) Use of Proceeds...............................................................................16
(e) Intentionally Omitted.........................................................................16
(f) Financial Information.........................................................................16
(g) Listing.......................................................................................16
(h) Corporate Existence...........................................................................16
(i) Business......................................................................................17
(j) Intentionally Omitted.........................................................................17
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.........................................................17
(a) Delivery of Agreements........................................................................17
ii
4
PAGE
(b) Payment of Purchase Price.....................................................................17
(c) Intentionally Omitted.........................................................................17
(d) No Litigation.................................................................................17
6. CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE........................................................17
(a) Delivery of Agreements........................................................................17
(b) Delivery of Common Stock Certificates.........................................................17
(c) Intentionally Omitted.........................................................................17
(d) Intentionally Omitted.........................................................................17
(e) No Litigation.................................................................................18
(f) Common Stock Trading..........................................................................18
(g) Opinion of Counsel............................................................................18
(h) Intentionally Omitted.........................................................................18
(i) Blue Sky Law Filings..........................................................................18
(j) Certificate of the Company's Transfer Agent...................................................18
(k) Other Documents and Opinions..................................................................18
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION.................................18
(a) Survival of Representations, Warranties and Covenants.........................................18
(b) Indemnification...............................................................................18
(c) Claims for Indemnification; Defense of Indemnified Claims.....................................19
8. GOVERNING LAW; MISCELLANEOUS...........................................................................20
(a) Governing Law.................................................................................20
(b) Counterparts; Signatures by Facsimile.........................................................20
(c) Headings......................................................................................20
(d) Severability..................................................................................20
(e) Specific Performance..........................................................................20
(f) Entire Agreement; Amendments..................................................................20
(g) Notices.......................................................................................20
(h) Successors and Assigns........................................................................22
(i) Third Party Beneficiaries.....................................................................22
(j) Publicity.....................................................................................22
(k) Further Assurances............................................................................22
iii
5
PAGE
(l) Limited Recourse..............................................................................22
(m) Waiver........................................................................................22
(n) No Strict Construction........................................................................23
iv
6
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of October 12,
2000, by and between Probex Corp., a Delaware corporation, with headquarters
located at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and
United Infrastructure Company, LLC, a Delaware limited liability
company("Investor").
WHEREAS, the Company and Investor are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act").
WHEREAS, the Company has authorized the issuance and sale the shares of
common stock, par value $.001 per share (the "Common Stock"), of the Company,
upon the terms and conditions set forth herein.
WHEREAS, Investor wishes to purchase, upon the terms and conditions
stated in this Agreement, Five Hundred Thousand (500,000) shares of Common
Stock.
WHEREAS, contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as Exhibit A (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and Investor hereby agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK.
(a) Purchase of Common Stock. The Company shall issue and sell
to Investor and Investor agrees to purchase from the Company Five Hundred
Thousand (500,000) shares of Common Stock (the "Common Shares"), subject to
adjustment, for the aggregate purchase price (the "Purchase Price") of One
Million Dollars ($1,000,000.00) with a purchase price per Common Share of $2.00
(the "Price Per Share"). In addition, the Company acknowledges that it has
already received One Million Five Hundred Thousand Dollars ($1,500,000) which is
evidenced by a convertible promissory note, dated August 30, 2000 (the
"Promissory Note"), payable to General Conference Corporation of Seventh-day
Adventists (the "General Conference"). The Promissory Note is mandatorily
convertible if the Company completes an offering of Common Stock aggregating
Thirteen Million Five Hundred Thousand Dollars ($13,500,000) at a price per
share of $2.00 by October 31, 2000. In the event the Company does not receive
aggregate proceeds of Thirteen Million Five Hundred Thousand Dollars
($13,500,000) by October 31, 2000, the Company may require the General
Conference to convert at a price per share equal to the lesser of (x) 90% of the
average of the closing price for the ten trading days preceding the notice of
conversion or (y) $2.00.
7
(b) Form of Payment. On the Closing Date (as defined below),
(i) Investor shall pay the Purchase Price for the Common Shares to be issued and
sold to it at the Closing by wire transfer of immediately available funds to the
Company, in accordance with the Company's written wiring instructions, against
delivery of duly executed certificates representing the number of Common Shares
which Investor is purchasing and (ii) the Company shall deliver such
certificates duly executed on behalf of the Company, to Investor or, if so
designated by Investor, in the name of a nominee designated by Investor, against
delivery of the Purchase Price.
(c) Adjustment. If within forty-five (45) days following the
Closing Date, the Company shall issue shares of Common Stock pursuant to a
public offering or a private placement in an aggregate amount of $500,000 or
more, and the issuance price (the "Issuance Price") of such Common Stock is less
than the Price Per Share, then the number of Common Shares issued to Investor
hereunder shall be adjusted (and the Company shall after the occurrence of any
event requiring such adjustment notify Investor of the adjustment) and
additional Common Shares (the "Additional Common Shares") shall be issued to
Investor so the aggregate Common Shares issued to Investor is equal to the
amount of the Purchase Price divided by the Issuance Price (rounded up or down,
as applicable, to the nearest whole Common Share).
(d) Closing Date. The completion of the purchase and sale of
the Common Shares shall occur on October 12, 2000 (the "Closing Date") or such
other date as the Company and Investor shall agree. The Closing Date shall
follow the satisfaction or waiver of all conditions or obligations of Investor
and the Company and the conditions set forth in Section 5 and 6.
2. INVESTOR'S REPRESENTATIONS AND WARRANTIES. Investor represents and
warrants to the Company that:
(a) Investment Purpose. As of the date hereof, Investor is
purchasing the Common Shares set forth herein for its own account for investment
only and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the Securities Act.
(b) Accredited Investor Status. Investor is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act.
(c) Reliance on Exemptions. Investor understands that the
Common Shares are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of Investor to
acquire the Common Shares.
2
8
(d) Information. Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Common Stock
which have been requested by Investor or its advisors. Investor and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Investor or any of its advisors or representatives shall modify,
amend or affect Investor's right to rely on the Company's representations and
warranties contained in Section 3. Investor understands that its investment in
the Common Shares involves a significant degree of risk.
(e) Governmental Review. Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Common Shares.
(f) Transfer or Resale. Investor understands that (i) except
as provided in the Registration Rights Agreement, the Common Shares have not
been and are not being registered under the Securities Act or any applicable
state securities laws, and may not be transferred unless (a) subsequently
included in an effective registration statement thereunder, (b) Investor shall
have delivered to the Company an opinion of counsel (which opinion shall be
reasonably acceptable to the Company) to the effect that the Common Shares to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration, (c) sold or transferred to an "affiliate" (as defined in Rule
144 promulgated under the Securities Act (or a successor rule) ("Rule 144")) or
(d) sold pursuant to Rule 144; (ii) any sale of such Common Shares made in
reliance on Rule 144 may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of such Common Shares
under circumstances in which the seller (or the person through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the
Securities Act) may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Common Shares under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder (in each case,
other than pursuant to the Registration Rights Agreement). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Common Shares
may be pledged as collateral in connection with a bona fide margin account or
other lending arrangement.
(g) Legends. Investor understands that until such time as the
Common Shares have been registered under the Securities Act as contemplated by
the Registration Rights Agreement, the Common Shares shall bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such Common Shares):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be
sold, hypothecated, transferred or assigned in the absence of
an effective
3
9
registration statement for the securities under said Act, or
an opinion of counsel, in form, substance and scope reasonably
acceptable to the Company, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said
Act. Notwithstanding the foregoing, this security may be
pledged in connection with a bona fide margin account."
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Common Shares upon which
it is stamped, if, unless otherwise required by applicable state securities
laws, (a) such Common Shares are registered for sale under an effective
registration statement filed under the Securities Act and disposed of in a bona
fide sale, or (b) such holder provides the Company with an opinion of counsel,
in form, substance and scope reasonably acceptable to the Company, to the effect
that a public sale or transfer of such Common Shares may be made without
registration under the Securities Act and such sale or transfer is effected or
(c) such holder provides the Company with reasonable assurances that such Common
Shares can be sold pursuant to Rule 144 under the Securities Act (or a successor
rule thereto) without any restriction as to the number of Common Shares acquired
as of a particular date that can then be immediately sold. Investor agrees to
sell all Common Shares, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any (including any amendment to any of the foregoing).
(h) Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of Investor and are valid and binding agreements of
Investor enforceable in accordance with their terms.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as (1)
otherwise described in the Company's Schedule 14A, Form 10-SB, current reports
on Form 8-K and regular reports on Form 10-QSB and 10-KSB as filed (including
any amendment(s) to any of the foregoing) by the Company with the SEC in 2000
(the "SEC Documents"), (2) otherwise described in the Company's press releases
since December 31, 1999 (including the documents incorporated by reference
therein, the "Company Information"), and (3) disclosed in the disclosure
schedule to this Agreement (the "Disclosure Schedule") which qualifies the
following representations and warranties in their entirety, the Company hereby
represents and warrants to and covenants with Investor, as follows:
(a) Organization and Qualification. The Company and each of
its Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as
described in the SEC Documents as and where now owned, leased, used, operated
and conducted. The Company does not have an equity investment in any other
person other than the Subsidiaries (as defined below) listed in Schedule 3(a).
The Company and each of its Subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every
4
10
jurisdiction in which its ownership or use of property or the nature of the
business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on the
business, operations, assets, financial condition or prospects of the Company or
any of its Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be entered into in
connection herewith. "Subsidiaries" means any corporation or other organization,
whether incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest.
(b) Authorization; Enforcement. (i) The Company has all
requisite corporate power to enter into and perform this Agreement and the
Registration Rights Agreement and to consummate the transactions contemplated
hereby and thereby and to issue the Common Shares, in accordance with the terms
hereof, (ii) the execution and delivery of this Agreement and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by the Company's Board
of Directors and no further consent or authorization of the Company, its Board
of Directors, or its stockholders is required, (iii) this Agreement has been
duly executed and delivered, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Registration Rights Agreement, each
of such instruments will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms.
(c) Capitalization. As of September 21, 2000, the authorized
capital stock of the Company consists of (a) One Hundred Million (100,000,000)
shares of Common Stock, of which 25,461,716 shares were outstanding, all of
which are duly authorized, validly issued, fully paid and nonassessable; and (b)
Ten Million (10,000,000) shares of Preferred Stock, $.001 par value (the
"Preferred Stock"), of which 550,000 shares have been designated as Series A 10%
Cumulative Convertible Preferred, 535,000 of which are outstanding and are duly
authorized, validly issued, fully paid and nonassessable. From September 21,
2000 until the Closing Date, there has been (x) no material increase in the
number of shares of Common Stock outstanding (except for shares issued upon
exercise of options and warrants outstanding on the date hereof or options or
similar rights granted subsequent to the date of this Agreement pursuant to the
Company's stock option plans in effect on the date of this Agreement) and (y) no
issuance of shares of Preferred Stock of the Company. Schedule 3(c) of the
Disclosure Schedule discloses all outstanding options or warrants for the
purchase of, or other rights to purchase or subscribe for, or securities
convertible into or exchangeable for, or otherwise entitling the holder to
acquire, Common Stock or other capital stock of the Company, or any contracts or
commitments to issue or sell Common Stock or other capital stock of the Company
or any such options, warrants, rights or other securities; and from September
21, 2000 until the Closing Date, there has been no material change in the amount
or terms of any of the foregoing except for (i) the grant of options to purchase
shares of Common Stock pursuant to the Company's stock option plans in effect on
the date of this Agreement and (ii) the conversion of convertible securities
outstanding on the date hereof. The Company has duly reserved from its
authorized and unissued shares of Common Stock the full number of shares
required for (a) all options, warrants, convertible securities, exchangeable
securities, and other rights to acquire shares of Common Stock which are
5
11
outstanding and (b) all shares of Common Stock and options and other rights to
acquire shares of Common Stock which may be issued or granted under the stock
option and similar plans which have been adopted by the Company or any
Subsidiary; and, immediately following the Closing on the Closing Date, after
giving effect to any antidilution or similar adjustment arising by reason of
issuance of the Common Shares, the total number of shares of Common Stock
reserved and required to be reserved from the authorized and unissued shares of
Common Stock for purposes of all such options, warrants, convertible securities,
puts, other rights and stock option and similar plans will be 13,425,937 shares
of Common Stock. Each outstanding class or series of securities for which any
such antidilution adjustment will occur is identified on Schedule 3(c) attached
hereto, together with the amount of such antidilution adjustment for each such
class or series. The outstanding shares of Common Stock and outstanding options,
warrants and other securities entitling the holders to purchase or otherwise
acquire Common Stock have been duly authorized and validly issued. None of the
outstanding shares of Common Stock or options, warrants and other such
securities has been issued in violation of the preemptive rights of any
securityholder of the Company. The offers and sales of the outstanding shares of
Common Stock and options, warrants and other rights to acquire Common Stock were
at all relevant times either registered under the Securities Act and applicable
state securities laws or exempt from such requirements. Except as set forth on
Schedule 3(c), there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Common Stock to which the Company is a
party. Except as set forth on Schedule 3(c), no holder of any of the Company's
securities has any rights, "demand," "piggy-back" or otherwise, to have such
securities registered by reason of the Company's intention to file, filing or
effectiveness of the registration statement on Form SB-2, Form S-1 or Form S-3,
if applicable, registering the Common Shares for resale (the "Registration
Statement"). The Company has furnished to Investor true and correct copies of
the Company's Certificate of Incorporation as in effect on the date hereof
("Certificate of Incorporation"), the Company's By-laws, as in effect on the
date hereof (the "By-laws"), and the terms of all securities convertible into or
exercisable for Common Stock of the Company and the material rights of the
holders thereof in respect thereto.
(d) Issuance of Shares. On the Closing Date the Common Shares
will be duly authorized, validly issued, fully paid and non-assessable, free and
clear of all liens and encumbrances, and will not subject the holder thereof to
personal liability by reason of being such holder. There are no preemptive or
similar rights of any stockholder of the Company or any other person to acquire
any of the Common Shares. The Common Stock is listed for trading on the American
Stock Exchange ("AMEX") and (1) the Company and the Common Stock meet the
criteria for continued listing and trading on the AMEX; (2) the Company has not
been notified since January 1, 1996 by the National Association of Securities
Dealers, Inc. (the "NASD") or the AMEX of any failure or potential failure to
meet the criteria for continued listing and trading on the AMEX; (3) no
suspension of trading in the Common Stock is in effect and (4) the Company does
not reasonably anticipate that the Common Stock will be delisted by the AMEX in
the foreseeable future. The Company knows of no reason that the Common Stock
will not be eligible for listing on the AMEX.
6
12
(e) No Conflicts. Except as set forth in Schedule 3(e), the
execution, delivery and performance of this Agreement and the Registration
Rights Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (i) conflict with or
result in a violation of any provision of the Certificate of Incorporation or
By-laws or (ii) violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse of time or
both could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any Subsidiary is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations) applicable to the Company or
any Subsidiary or by which any property or asset of the Company or any
Subsidiary is bound or affected, except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect. Neither
the Company nor any Subsidiary is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the Company
nor any Subsidiary is in default, and no event has occurred which with notice or
lapse of time or both could put the Company or any Subsidiary in default, under,
and neither the Company nor any Subsidiary has taken any action or failed to
take an action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture instrument to which
the Company or any Subsidiary is a party or by which any property or assets of
the Company or any Subsidiary is bound or affected, except for possible defaults
as would not, individually or in the aggregate, have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as required under the
Securities Act and any applicable state securities laws, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
regulatory agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
7
13
(f) SEC Documents; Financial Statements.
(i) The Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and any other material reports or
documents required to be filed with the SEC. The Company has delivered to
Investor true and complete copies of the SEC Documents. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein,
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(ii) As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles ("GAAP"), consistently applied, during the periods
involved (except (1) as may be otherwise indicated in such financial statements
or the notes thereto, or (2) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary statements)
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). The unaudited pro forma combined financial statements filed with
the SEC comply in all material respects with the requirements of Article 11 of
Regulation S-X under the Securities Act.
(g) Undisclosed Liabilities. Except as set forth in the
financial statements of the Company included in the SEC Documents and Schedule
3(g), the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to September
30, 1999 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under GAAP to be reflected in such
financial statements, which, individually or in the aggregate, are not material
to the financial condition or operating results of the Company.
(h) Absence of Certain Changes. Since September 30, 1999,
there has been no material adverse change in the business, condition (financial
or otherwise), operations or prospects of the Company and the Subsidiaries,
taken as a whole.
(i) Absence of Litigation. Except as disclosed in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body or governmental agency pending or
threatened against the Company or any Subsidiary, in any such case wherein an
unfavorable decision, ruling or finding is reasonably likely and would
8
14
reasonably be expected to have a Material Adverse Effect. Except as set forth on
Schedule 3(i), the Company does not have pending before the SEC any request for
confidential treatment of information and to the best of the Company's knowledge
no such request will be made by the Company prior to the time the Registration
Statement relating to the Common Shares which is contemplated by Section 2(a) of
the Registration Rights Agreement is first ordered effective by the SEC and
there is not pending or contemplated, and there has been no, investigation by
the SEC involving the Company or any current or former director or officer of
the Company. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
(j) Suppliers and Customers.
(i) Each of the Company and each Subsidiary has
adequate sources of supply for its business as currently conducted and as
proposed to be conducted. Each has good relationships with all of its material
sources of supply of goods and services and each does not anticipate any
material problem with any such material sources of supply.
(ii) Neither the Company nor any Subsidiary has any
knowledge that the customer base of the Company and/or any Subsidiary might
materially decrease.
(k) Intellectual Property.
(i) Except as set forth on Schedule 3(k)(i), the
Company and each of its Subsidiaries has ownership or license or legal right to
use all patent, copyright, trade secret, trademark, customer lists, designs,
manufacturing or other processes, computer software, systems, data compilation,
research results or other proprietary rights used in the business of the Company
and each of its Subsidiaries and material to the Company and each of its
Subsidiaries (collectively, "Intellectual Property") other than Intellectual
Property generally available on commercial terms from other sources. Except as
set forth on Schedule 3(k)(i), all of such patents, trademarks and registered
copyrights have been duly registered in, filed in or issued by the United States
Patent and Trademark Office, the United States Register of Copyrights or the
corresponding offices of other jurisdictions and have been maintained and
renewed in accordance with all applicable provisions of law and administrative
regulations in the United States and all such jurisdictions.
(ii) All material licenses or other material
agreements under which (i) the Company and each of its Subsidiaries is granted
rights in Intellectual Property, other than Intellectual Property generally
available on commercial terms from other sources, and (ii) the Company has
granted rights to others in Intellectual Property owned or licensed by the
Company, are in full force and effect and there is no material default by the
Company and each of its Subsidiaries thereto.
(iii) The Company and each of its Subsidiaries
believes it has taken all steps required in accordance with sound business
practice and business judgment to establish and
9
15
preserve its ownership of all material copyright, trade secret and other
proprietary rights with respect to its products and technology.
(iv) The present business, activities and products of
the Company and each of its Subsidiaries do not infringe any intellectual
property of any other person, except where such infringement would not have a
Material Adverse Effect on the Company and each of its Subsidiaries. Except as
described in the Company's SEC Documents, no proceeding charging the Company or
any Subsidiary with infringement of any adversely held Intellectual Property has
been filed. There exists no unexpired patent or patent application which
includes claims that would be infringed by or otherwise have a Material Adverse
Effect on the Company or any Subsidiary. Neither the Company nor any Subsidiary
is making unauthorized use of any confidential information or trade secrets of
any person. Neither the Company nor any of its employees have any agreements or
arrangements with any persons other than the Company related to confidential
information or trade secrets of such persons or restricting any such employee's
engagement in business activities of any nature. The activities of the Company
or any of its employees on behalf of the Company do not violate any such
agreements or arrangements known to the Company which any such employees have
with other persons, if any.
(v) No proceedings have been instituted or are
pending which challenge the rights of the Company in respect to the Company's
right to the use of the Intellectual Property. The Company has the right to use,
free and clear of material claims or rights of other persons, all of its
customer lists, designs, computer software, systems, data compilations, and
other information that are required for its products or its business as
presently conducted.
(l) No Materially Adverse Contracts, Etc. To the knowledge of
the Company, neither the Company nor any Subsidiary is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or is expected in
the future to have a Material Adverse Effect. Neither the Company nor any
Subsidiary is a party to any contract or agreement which, in the judgment of the
Company's officers, has or is expected to have a Material Adverse Effect.
(m) Tax Status. The Company and each of its Subsidiaries has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company or any Subsidiary know of no basis for any such claim.
10
16
(n) Certain Transactions. Except as set forth in the SEC
Documents and except for arm's length transactions pursuant to which the Company
or any Subsidiary makes payments in the ordinary course of business upon terms
no less favorable than the Company or any Subsidiary could obtain from third
parties and other than the grant of stock options disclosed in the SEC
Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
(o) Disclosure. All material facts regarding the business of
the Company or condition of the Company have been disclosed to Investor in or in
connection with this Agreement, including in the Private Placement Memorandum,
dated August, 2000 (the "Private Placement Memorandum") to extent known on the
date thereof. No representation or warranty contained in this Agreement, and no
statement contained in the SEC Documents, Company Information or in any
certificate, list or other writing furnished to Investor pursuant to any
provision of this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. The Private Placement Memorandum, as of the date thereof, did not
contain any untrue statement of material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, misleading. No event or circumstance has occurred or
exists with respect to the Company or any Subsidiary or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purposes that the Company's reports filed under the Exchange
Act are being incorporated into an effective registration statement filed by the
Company under the Securities Act). The projections contained in the Private
Placement Memorandum are mathematically accurate, and are based on reasonable
assumptions as of the date thereof. The projections, assumptions and expressions
of opinion in the Private Placement Memorandum were made in good faith.
(p) Acknowledgment Regarding Investor's Purchase of Common
Shares. The Company acknowledges and agrees that Investor is acting solely in
the capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that Investor
is not acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by Investor or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to Investor's purchase of the Common
Shares. The Company further represents to Investor that the Company's decision
to enter into this Agreement has been based solely on the independent evaluation
of the Company and its representatives.
11
17
(q) No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
Securities Act of the issuance of the Common Shares to Investor. The issuance of
the Common Shares to Investor will not be integrated with any other issuance of
the Company's securities (past, current or future) which requires stockholder
approval under the rules of the AMEX.
(r) No Brokers. The Company has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby, except for dealings with whose commissions and fees will be paid for by
the Company.
(s) Permits; Compliance. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "Company
Permits"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any Subsidiary is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since September 30,
1999, neither the Company nor any Subsidiary has received any notification with
respect to possible conflicts, defaults or violations of applicable laws, except
for notices relating to possible conflicts, defaults or violations, which
conflicts, defaults or violations would not have a Material Adverse Effect.
(t) Environmental Matters.
(i) Except as set forth in the SEC Documents, there
are, with respect to the Company or any Subsidiary or any predecessor of the
Company, no past or present violations of Environmental Laws (as defined below),
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
or similar federal, state, local or foreign laws and neither the Company nor any
Subsidiary has received any notice with respect to any of the foregoing, nor is
any action pending or, to the Company's knowledge, threatened in connection with
any of the foregoing. The term "Environmental Laws" means all federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport
12
18
or handling of Hazardous Materials, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions judgments, licenses, notices or
notice letters, orders, permits, plans or regulations issued, entered,
promulgated or approved thereunder.
(ii) Other than those that are or were stored, used
or disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by the
Company or any Subsidiary, and no Hazardous Materials were released on or about
any real property previously owned, leased or used by the Company or any
Subsidiary during the period the property was owned, leased or used by the
Company or any Subsidiary, except in the normal course of the Company's or any
Subsidiary's business.
(iii) Except as set forth in the SEC Documents, there
are no underground storage tanks on or under any real property owned, leased or
used by the Company or any Subsidiary that are not in compliance with applicable
law.
(u) Title to Property. Except as set forth in Schedule 3(g),
the Company and its Subsidiaries have good and marketable title in fee simple to
all real property and good and marketable title to all personal property owned
by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all liens, encumbrances and defects such as would
not have a Material Adverse Effect. Any real property and facilities held under
lease by the Company and its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as would not have a
Material Adverse Effect. Neither the Company nor any Subsidiary has received
notice of any material violation of any applicable law, ordinance, regulation,
order or requirement relating to its owned or leased properties.
(v) Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
(w) Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
13
19
(x) Labor Relations. No material labor problem exists or is
imminent with respect to any of the employees of the Company or any Subsidiary.
Neither the Company nor any Subsidiary has any knowledge as to any intentions of
any key employee to leave the employ of the Company or any of its Subsidiary.
(y) Foreign Corrupt Practices. Neither the Company, nor any
Subsidiary, nor any director, officer, agent, employee or other person acting on
behalf of the Company or any Subsidiary has, in the course of his actions for,
or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the United States Foreign Corrupt Practices Act
of 1977, as amended; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
(z) Benefit Plans. Each Benefit Plan (as defined below) which
is intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), has either received a determination letter from
the Internal Revenue Service to the effect that such Plan (as defined below) is
so qualified or is a standardized prototype plan which relies on an opinion
letter issued to the sponsor of such prototype. No Benefit Plan (i) is a
"defined benefit plan" within the meaning of Section 414(j) of the Code, (ii) is
a multiemployer plan within the meaning of Section 3(37) of ERISA, or (iii)
provided health benefit or life insurance coverage beyond the termination of an
employee's employment, except as required by Part 6 of Subtitle B of Title I of
ERISA or Section 4980B of the Code. For purposes hereof: "Benefit Plan" means
each Plan pursuant to which the Company or any Subsidiary maintains, contributes
to, or has any liability in respect of current or former employees, agents,
directors, or independent contractors or any beneficiaries or dependents of any
such current or former employees agents, directors, or independent contractors;
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder; and "Plan" means any
bonus, incentive compensation, deferred compensation, pension, profit sharing,
retirement, stock purchase, stock option, stock ownership, stock appreciation
rights, phantom stock, leave of absence, layoff, vacation, day or dependent
care, legal services, cafeteria, life, health, accident, disability, workmen's
compensation or other insurance, severance, separation or other employee benefit
plan, practice, policy or arrangement of any kind, whether written or oral, or
whether for the benefit of a single individual or more than one individual
including, but not limited to, any "employee benefit plan" within the meaning of
Section 3(3) of ERISA.
(aa) No Manipulation of Stock. The Company has not taken and
will not, in violation of applicable law, take, any action designed to or that
might reasonably be expected to cause or result in unlawful manipulation of the
price of the Common Stock to facilitate the sale or resale of the Common Shares.
(bb) Accountants. ▇.▇. ▇▇▇▇▇▇ & Associates, who expressed
their opinion with respect to the financial statements in the Form 10-SB, and
any amendment thereto, and ▇▇▇▇▇
▇▇
▇▇
& Young LLP, who expressed their opinion with respect to the financial
statements in the Form 8-K/A (filed with the SEC on July 17, 2000), are
independent accountants as required by the Securities Act and the rules and
regulations promulgated thereunder.
(cc) Contracts. The contracts described in the SEC Documents
or incorporated by reference therein which have not expired per their terms are
in full force and effect on the date hereof, and neither the Company nor, to the
Company's knowledge, any other party to such contracts is in breach of or
default under any of such contracts which would have a Material Adverse Effect.
(dd) Solvency. The Company (both before and after giving
effect to the transactions contemplated by this Agreement) is solvent (i.e., its
assets have a fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute and matured)
and currently the Company has no information that would lead it to reasonably
conclude that the Company would not have, nor does it intend to take any action
that would impair, its ability to pay its debts from time to time incurred in
connection therewith as such debts mature. The Company did not receive a
qualified opinion from its auditors with respect to its most recent fiscal year
end and does not anticipate or know of any basis upon which its auditors might
issue a qualified opinion in respect of its current fiscal year.
(ee) Investment Company. The Company is not, and after giving
effect to the offer and sale of the Common Shares and the application of the
proceeds thereof will not be, an "investment company" or an "affiliated person"
of, or "promoter" or "principal underwriter" for an investment company, within
the meaning of the Investment Company Act of 1940, as amended.
(ff) Intentionally Omitted.
(gg) Proprietary Information and Inventions Agreements. Each
technical and engineering employee and each consultant of the Company has
executed a Confidentiality and Invention Assignment Agreement. The Company is
not aware that any of the Company's employees, officers or consultants are in
violation of the terms thereof.
4. COVENANTS.
(a) Commercially Reasonable Efforts. The parties shall use
their commercially reasonable efforts to satisfy timely each of the conditions
described in Section 5 and 6 of this Agreement.
(b) Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Common Shares as required under Regulation D and to provide
a copy thereof to Investor promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Common Shares for
15
21
sale to Investor at the Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification).
(c) Reporting Status. The Company's Common Stock is registered
under Section 12(b) of the Exchange Act. Until such time as Investor may sell
its shares under Rule 144, so long as Investor beneficially owns any of the
Common Shares, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.
(d) Use of Proceeds. The Company will use the proceeds
realized from the sale of the Common Shares to fund acquisitions, future
development opportunities and for working capital purposes. None of such
proceeds will be used, directly or indirectly to make any loan to or investment
in any other person.
(e) Intentionally Omitted.
(f) Financial Information. The Company agrees to send the
following reports to Investor: (i) within ten (10) days after the filing with
the SEC, a copy of its Annual Report on Form 10-K, its Quarterly Reports on Form
10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after release,
copies of all press releases issued by the Company or any Subsidiary; and (iii)
contemporaneously with the making available or giving to the stockholders of the
Company, copies of any notices or other information the Company makes available
or gives to such stockholders.
(g) Listing. The Company shall promptly secure the listing of
the Common Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Common Shares. The Company
will obtain and maintain the listing and trading of its Common Stock on the AMEX
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and such exchanges, as
applicable. The Company shall promptly provide to Investor copies of any notices
it receives from the AMEX or NASD and any other exchanges or quotation systems
on which the Common Stock is then listed or quoted regarding the continued
eligibility of the Common Stock for listing or quotation on such exchanges and
quotation systems.
(h) Corporate Existence. So long as Investor beneficially owns
any Common Shares, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except in the event
of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose
16
22
Common Stock is listed for trading on Nasdaq National Market, Nasdaq SmallCap,
the New York Stock Exchange or the AMEX.
(i) Business. The Company shall continue in the core lines of
business contemplated in the Private Placement Memorandum until two (2) years
from the Closing Date.
(j) Intentionally Omitted.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Common Shares to Investor at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions thereto, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
(a) Delivery of Agreements. Investor shall have executed this
Agreement, the Registration Rights Agreement and delivered the same to the
Company.
(b) Payment of Purchase Price. Investor shall have delivered
the Purchase Price in accordance with Section 1(a) above.
(c) Intentionally Omitted.
(d) No Litigation. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
6. CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE. The obligation of
Investor to purchase the Common Shares at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for Investor's sole benefit and
may be waived by Investor at any time in its sole discretion:
(a) Delivery of Agreements. The Company shall have executed
this Agreement and the Registration Rights Agreement and delivered the same to
Investor.
(b) Delivery of Common Stock Certificates. The Company shall
have delivered to Investor duly executed certificate(s) (in such denominations
as Investor shall request) representing the Common Shares in accordance with
Section 1(a) above.
(c) Intentionally Omitted.
(d) Intentionally Omitted.
17
23
(e) No Litigation. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
(f) Common Stock Trading. Trading in the Common Stock on the
AMEX shall not have been suspended by the SEC or the AMEX.
(g) Opinion of Counsel. Investor shall have received an
opinion of the Company's counsel, dated as of the Closing Date, in form and
substance reasonably satisfactory to Investor.
(h) Intentionally Omitted.
(i) Blue Sky Law Filings. The Company shall have delivered
evidence of the qualification of the Common Shares under applicable state
securities or "blue sky" laws of the United States.
(j) Certificate of the Company's Transfer Agent. The Company
shall have delivered a certificate of the transfer agent of the Company which
sets forth the number of outstanding securities of the Company as of October 10,
2000.
(k) Other Documents and Opinions. Investor shall have received
such other documents and certificates, in form and substance reasonably
satisfactory to Investor and its counsel, relating to matters incident to the
transactions contemplated hereby as Investor may reasonably request.
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
INDEMNIFICATION.
(a) Survival of Representations, Warranties and Covenants. The
representations, warranties, covenants and agreements of the Company and
Investor contained in this Agreement, the Registration Rights Agreement or in
any document or certificate delivered pursuant hereto or thereto or in
connection herewith shall survive the Closing Date, and shall continue in effect
until the Company's Form 10-K (or Form 10-KSB, if applicable) for the fiscal
year ended September 30, 2001 is filed with the SEC. All statements contained in
any certificate or other document delivered by or on behalf of the Company
pursuant hereto shall constitute representations and warranties by the Company
hereunder.
(b) Indemnification. The Company agrees to indemnify and hold
Investor harmless from and against, and will pay to Investor (including their
affiliates and their respective officers, directors, agents, attorneys,
employees and representatives) the full amount of any loss,
18
24
damage, liability, penalties or expense (including amounts paid in settlement
and reasonable attorneys' fees and expenses) to Investor resulting either
directly or indirectly from any breach of the representations, warranties,
covenants or agreements of the Company contained in this Agreement, or in the
Registration Rights Agreement or any other document or certificate delivered
pursuant hereto or thereto or in connection herewith or therewith.
(c) Claims for Indemnification; Defense of Indemnified Claims.
(i) For purposes of this Section, the party entitled
to indemnification shall be known as the "Indemnified Party" and the party
required to indemnify shall be known as the "Indemnifying Party." In the event
that the Indemnifying Party shall be obligated to the Indemnified Party pursuant
to this Section 7 or in the event that a suit, action, investigation, claim or
proceeding is begun, made or instituted as a result of which the Indemnifying
Party may become obligated to the Indemnified Party hereunder, the Indemnified
Party shall give prompt written notice to the Indemnifying Party of the
occurrence of such event, specifying the basis for such claim or demand, and the
amount or estimated amount thereof to the extent then determinable (which
estimate shall not be conclusive of the final amount of such claim or demand);
provided, however, that the failure to give such notice shall not constitute a
waiver of the right to indemnification hereunder unless the Indemnifying Party
is actually prejudiced in a material respect thereby. The Indemnifying Party
agrees to defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding at the Indemnifying Party's own cost and
expense with counsel of its own choice, who shall be, however, reasonably
acceptable to the Indemnified Party. The Indemnifying Party may not make any
compromise or settlement without the prior written consent of the Indemnified
Party (which will not be unreasonably withheld or delayed) and the Indemnified
Party shall receive a full and unconditional release reasonably satisfactory to
it pursuant to such compromise or settlement. The Indemnified Party shall have
the right but not the obligation to participate at its own expense in the
defense thereof by counsel of its own choice. If requested by the Indemnifying
Party, the Indemnified Party shall (at the Indemnifying Party's expense) (i)
cooperate with the Indemnifying Party and its counsel in contesting any claim or
demand which the Indemnifying Party defends, (ii) provide the Indemnifying Party
with reasonable access during normal business hours to its books and records to
the extent they relate to the condition or operation of the Business and are
requested by the Indemnifying Party to perform its indemnification obligations
hereunder, and to make copies of such books and records, and (iii) make
personnel available to assist in locating any books and records relating to the
Business or whose assistance, participation or testimony is reasonably required
in anticipation of, preparation for or the prosecution and defense of, any claim
subject to this Section 7. In the event that the Indemnifying Party fails timely
to defend, contest or otherwise protect the Indemnified Party against any such
suit, action, investigation, claim or proceeding, the Indemnified Party shall
have the right to defend, contest or otherwise protect the Indemnified Party
against the same and may make any reasonable compromise or settlement thereof
and recover the entire cost thereof from the Indemnifying Party including
without limitation, reasonable attorneys' fees, disbursements and all amounts
paid as a result of such suit, action, investigation, claim or proceeding or
compromise or settlement thereof.
19
25
8. GOVERNING LAW; MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Texas without regard to
the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States federal courts located in Dallas,
Texas with respect to any dispute arising under this Agreement, the agreements
entered into in connection herewith or the transactions contemplated hereby or
thereby.
(b) Counterparts; Signatures by Facsimile. This Agreement may
be executed in two or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
(c) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) Severability. 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.
(e) Specific Performance. The parties agree that irreparable
damage will result in the event that this Agreement is not specifically
enforced, and the parties agree that any damages available at law for a breach
of this Agreement would not be an adequate remedy. Therefore, the provisions
hereof and the obligations of the parties hereunder shall be enforceable in a
court of equity, or other tribunal with jurisdiction, by a decree of specific
performance, and appropriate injunctive relief may be applied for and granted in
connection therewith. Such remedies and all other remedies provided for in this
Agreement shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which a party may have under this Agreement or
otherwise.
(f) Entire Agreement; Amendments. This Agreement and the
agreements, instruments, exhibits and schedules referenced herein, contain the
entire understanding of the parties with respect to the matters covered herein
and therein and, except as specifically set forth herein or therein, neither the
Company nor Investor makes any representation, warranty, covenant or undertaking
with respect to such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be charged
with enforcement.
(g) Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered
20
26
personally or by courier (including a recognized overnight delivery service) or
by facsimile and shall be effective five (5) days after being placed in the
mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Probex Corp.
One Galleria Tower
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Jenkens & ▇▇▇▇▇▇▇▇▇
a professional corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Investor:
United Infrastructure Company, LLC
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Operating Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ Enterprises Holdings, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Each party shall provide notice to the other party of any change in
address.
21
27
(h) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor Investor shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), Investor may assign its
rights hereunder to any person that purchases Common Shares in a private
transaction from Investor or to any of its "affiliates," as that term is defined
under the Exchange Act, without the consent of the Company.
(i) Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(j) Publicity. The Company shall have the right to review a
reasonable period of time before issuance of any press releases, SEC, AMEX, or
NASD filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of Investor, to make any press release or SEC, AMEX,
or NASD filings with respect to such transactions as is required by applicable
law and regulations (although Investor shall be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).
(k) Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Limited Recourse. Notwithstanding anything in this
Agreement, the Registration Rights Agreement or any other document, agreement or
instrument contemplated hereby or thereby to the contrary, the obligations of
Investor hereunder and under the Registration Rights Agreement shall be without
recourse to any partner, affiliate of Investor or their respective partners, or
any other respective officers, directors, employees or agents and shall be
limited to the assets of Investor.
(m) Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by law or otherwise afforded, will be cumulative
and not alternative.
22
28
(n) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23
29
IN WITNESS WHEREOF, Investor and the Company have caused this
Agreement to be duly executed as of the date first above written.
PROBEX CORP.
By: /s/ D. YALE SAGE
----------------------------------
Name: D. Yale Sage
Title: Vice President
UNITED INFRASTRUCTURE COMPANY, LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Authorized Person
[SCHEDULES INTENTIONALLY OMITTED]