SECOND RESTRUCTURING AGREEMENT AND
AMENDMENT NO. 6 TO NOTE PURCHASE AGREEMENT
Second Restructuring Agreement and Amendment No. 6 to Note Purchase
Agreement, dated as of November 6, 2007 (this "AMENDMENT"), by and between
GenuTec Business Solutions, Inc., a Delaware corporation (the "COMPANY"),
Technology Investment Capital Corp., a Maryland corporation, as Purchaser
("TICC") and Collateral Agent (the "COLLATERAL AGENT") (TICC and its successors,
assigns and transferees are sometimes referred to herein collectively as the
"PURCHASERS"), and SeaView Mezzanine Fund LP, a Delaware limited partnership
("SEAVIEW"). Capitalized terms used herein without definition shall have the
respective meanings ascribed to them in the Note Purchase Agreement.
R E C I T A L S
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A. Pursuant to the Note Purchase Agreement dated as of September 16, 2005
among the Company, the Collateral Agent, the Purchasers and SeaView, as amended
by Amendment No. 1 thereto dated as of October 24, 2005, Amendment No. 2 thereto
dated as of July 21, 2006, Amendment No. 3 thereto dated as of September 29,
2006, the Restructuring Agreement and Amendment No. 4 dated as of February 27,
2007, and Amendment No. 5 thereto dated as of June 28, 2007 (as so amended, and
as from time to time hereafter further amended, modified or restated in
accordance with the terms thereof, the "NOTE PURCHASE AGREEMENT"), the Company
has issued and sold to TICC and SeaView its Senior Secured Notes Due 2010 in the
aggregate principal amount of $22,000,000, of which the Existing TICC Note and
the Additional Notes, in the aggregate principal amount of $17,000,000 (plus
accrued PIK Interest), remain outstanding (collectively, the "TICC NOTES").
B. Numerous Events of Default have occurred and are continuing, including
without limitation the failure to meet the requirements of the financial
covenants set forth in Sections 11.1, 11.2, 11.3, 11.4 and 11.5 of the Note
Purchase Agreement (collectively, the "EXISTING DEFAULTS").
C. The Company has requested that TICC waive the Existing Defaults and
engage in a restructuring of the debt and equity securities of the Company as
set forth in this Amendment (the "SECOND RESTRUCTURING"), which shall include,
among other things, (i) the cancellation of $13,500,000 of the principal amount
of the TICC Notes and unpaid interest (including, without limitation, PIK
Interest) in the amount of $1,739,437 accrued on the TICC Notes to the Second
Restructuring Date (as hereinafter defined), in exchange for issuance to TICC of
152,394 shares of a new series of convertible preferred stock of the Company, to
be designated the Series C Convertible Preferred Stock, par value $.0001 per
share, (ii) agreement by TICC to waive the accrual and payment of all interest
due on the remaining principal of the TICC Notes from the Second Restructuring
Date until the second anniversary thereof, (iii) certain other amendments to the
terms, provisions and conditions of the Note Purchase Agreement, all as
hereinafter provided, and (iv) the issuance by the Company to SeaView of 51,508
shares of a new series of convertible preferred stock of the Company, to be
designated the Series D Convertible Preferred Stock, par value $.0001 per share,
in exchange for the cancellation and retirement of all shares of Series B
Convertible Preferred Stock of the Company now held by SeaView. In consideration
of the Company's agreement to effectuate the Second Restructuring, subject to
certain conditions, TICC has agreed to waive the Existing Defaults and to
perform its obligations with respect to the Restructuring, all as more fully set
forth in this Amendment.
NOW, THEREFORE, in consideration of the terms and conditions contained
herein and of other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. AMENDMENTS TO SECTION 1.1 OF THE NOTE PURCHASE AGREEMENT.
(a) Section 1.1 of the Note Purchase Agreement is hereby amended by
adding thereto the following new definitions in the appropriate alphabetical
order:
""PAYMENT DATE" has the meaning specified in Section 2.1(b)."
""SECOND RESTRUCTURING" means the transactions contemplated by the
Sixth Amendment."
""SECOND RESTRUCTURING DATE" means the date (not later than
November 6, 2007) on which all of the conditions set forth in Section
21 of the Sixth Amendment shall have been satisfied, or waived in
writing by the Purchasers, and the Sixth Amendment shall become
effective in accordance with its terms."
""SIXTH AMENDMENT" means that certain Second Restructuring
Agreement and Amendment No. 6 to Note Purchase Agreement, dated as of
November 6, 2007, among the Company, the Collateral Agent and the
Purchasers."
(b) The definition of the term "APPLICABLE INTEREST RATE" set forth in
Section 1.1 of the Note Purchase Agreement is hereby deleted and the following
new definition of that term is hereby inserted in lieu thereof:
"APPLICABLE INTEREST RATE" means (a) with respect to the period
from and including the Second Restructuring Date to but not including
the second anniversary of such date, the rate of zero percent (0%) per
annum, and (b) with respect to any period on or after the second
anniversary of the Second Restructuring Date, the rate of ten percent
(10%) per annum."
(c) The definition of the term "MATURITY DATE" set forth in Section
1.1 of the Note Purchase Agreement is hereby deleted and the following new
definition of that term is hereby inserted in lieu thereof:
""MATURITY DATE" means October 30, 2014."
2. AMENDMENT TO SECTION 2.1(a) OF THE NOTE PURCHASE AGREEMENT. Section
2.1(a) of the Note Purchase Agreement is hereby amended and restated to read in
full as follows:
"(a) THE NOTES. The Company has duly authorized the issuance and
sale of its Senior Secured Notes in the aggregate principal amount of
$3,500,000 (such Notes, and any other notes of the same tenor from
time to time issued in substitution or exchange for any thereof, being
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herein collectively called the "NOTES" and each individually a
"NOTE"). Each Note shall be duly executed by the Company, shall be
dated the date of issue thereof and shall be substantially in the form
of EXHIBIT A to this Agreement."
3. AMENDMENT TO SECTION 2.1(b) OF THE NOTE PURCHASE AGREEMENT. Section
2.1(b) of the Note Purchase Agreement is hereby amended and restated to read in
full as follows:
"(b) INTEREST. From and after the Second Restructuring Date, each
Note shall bear interest at the Applicable Interest Rate, payable in
cash (i) monthly in arrears on the last Business Day of each month
(each a "PAYMENT DATE"), (ii) upon each optional or mandatory
prepayment of any or all of the principal amount thereof (with respect
to the principal amount so prepaid), and (iii) at maturity (whether at
stated maturity, or by acceleration or otherwise)."
4. AMENDMENT TO SECTION 3.1(a) OF THE NOTE PURCHASE AGREEMENT. Section
3.1(a) of the Note Purchase Agreement is hereby amended and restated to read in
full as follows:
"(a) The principal amount of the Notes shall be paid in equal
monthly installments, each in the amount of $58,333.33, on each
Payment Date commencing with the Payment Date occurring on the last
Business Day of November, 2009. Optional prepayments of the principal
amount of the Notes made pursuant to Section 3.2 and mandatory
prepayments of the principal amount of the Notes made pursuant to
Section 3.1(b) shall be applied to the scheduled payments of principal
due under this Section 3.1(a) in the inverse order of the maturity
thereof. The entire remaining unpaid principal amount of the Notes (if
any) shall be paid in full on the Maturity Date, together with all
unpaid accrued interest thereon and all other amounts owing under this
Agreement, the Notes or the other Note Documents."
5. AMENDMENT TO SECTION 3.1(b) OF THE NOTE PURCHASE AGREEMENT. Section
3.1(b) of the Note Purchase Agreement is hereby amended by deleting the word
"or" occurring at the end of clause (iii) thereof, adding the word "or" at the
end of clause (iv) thereof, and adding a new clause (v) immediately following
clause (iv) thereof, as follows:
"(v) the receipt of any amount in payment of, or by execution upon
assets in connection with, any final judgment in favor of the Company
or any Subsidiary of the Company in any litigation commenced or
prosecuted by the Company or such Subsidiary, or the receipt of any
amount pursuant to or in connection with any settlement of such
litigation,"
6. DELETION OF SECTION 11.2 OF THE NOTE PURCHASE AGREEMENT. Section 11.2
of the Note Purchase Agreement is hereby deleted in its entirety and there is
inserted in lieu thereof the following:
"Section 11.2. [Reserved]"
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7. DELETION OF SECTION 11.3 OF THE NOTE PURCHASE AGREEMENT. Section 11.3
of the Note Purchase Agreement is hereby deleted in its entirety and there is
inserted in lieu thereof the following:
"Section 11.3. [Reserved]"
8. AMENDMENT TO SECTION 11.4 OF THE NOTE PURCHASE AGREEMENT. Section 11.4
of the Note Purchase Agreement is hereby amended and restated in its entirety to
read in full as follows:
"Section 11.4. MAINTENANCE OF MINIMUM CONSOLIDATED EBITDA. As of
the end of each fiscal quarter of the Company commencing with the
fiscal quarter ending December 31, 2009, the Company shall maintain
Consolidated EBITDA of not less than $1,750,000 for the period of four
consecutive fiscal quarters of the Company ending with such respective
fiscal quarter."
9. AMENDMENT TO SECTION 11.5 OF THE NOTE PURCHASE AGREEMENT. Section 11.5
of the Note Purchase Agreement is hereby amended and restated in its entirety
to read in full as follows:
"Section 11.5. MAINTENANCE OF MINIMUM CONSOLIDATED REVENUES. As of
the end of each fiscal quarter of the Company commencing with the
fiscal quarter ending December 31, 2009, the Company shall maintain
Consolidated Revenues of not less than $12,000,000 for the period of
four consecutive fiscal quarters of the Company ending with such
respective fiscal quarter."
10. AMENDMENT TO SECTION 11.6 OF THE NOTE PURCHASE AGREEMENT. Section 11.6
of the Note Purchase Agreement is hereby amended and restated to read in full as
follows:
"Section 11.6. MAINTENANCE OF MINIMUM CASH AMOUNT. The aggregate
amount of Cash on hand (net of any overdrafts on Deposit Accounts) of
the Company and its Subsidiaries as of the close of business on the
last day of any fiscal quarter (commencing with the fiscal quarter
ending December 31, 2009) will not be less than $250,000."
11. AMENDMENT TO FORM OF NOTE. EXHIBIT A to the Note Purchase Agreement is
hereby amended and restated to read in full as set forth in EXHIBIT A to this
Amendment.
12. AMENDMENT TO PLEDGE AND SECURITY AGREEMENT. The Security Agreement is
hereby amended by adding the following to SCHEDULE B thereto:
"All commercial tort claims now or hereafter asserted by or on behalf of
the Company or its predecessor in that certain action entitled GENUTEC
BUSINESS SOLUTIONS, INC. VS. ▇▇▇▇▇▇▇ ▇▇▇▇ ET AL., No. 07CC07918, filed in
the Superior Court of the State of California for the County of Orange,
Central Justice Center, or otherwise arising out of or in connection with
the matters asserted by the Company in the complaint filed in such action."
13. EXCHANGE OF NOTES FOR SERIES C PREFERRED STOCK; RESTATEMENT OF
REMAINING NOTES. On or prior to the Second Restructuring Date,
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(a) the Board shall adopt and approve, and shall cause to be filed
with the Secretary of State of the State of Delaware, a Certificate of
Designations in the form attached as Exhibit B-1 to this Amendment (the "SERIES
C CERTIFICATE OF DESIGNATIONS"), and shall take all other action necessary to
create a new series of the Preferred Stock, par value $.0001 per share, of the
Company, which series shall be designated the Series C Convertible Preferred
Stock (the "SERIES C PREFERRED STOCK"), shall consist of 180,000 authorized
shares, and shall have the preferences, limitations and relative rights set
forth in the Series C Certificate of Designations,
(b) the Board shall duly authorize and approve the issuance to TICC of
152,394 shares of Series C Preferred Stock (the "TICC SERIES C SHARES") in
exchange for cancellation of $13,500,000 principal amount of the TICC Notes and
all unpaid interest thereon (including without limitation PIK Interest) accrued
through the Second Restructuring Date,
(c) subject to satisfaction of the conditions set forth in Section 21
of this Amendment, the Company shall issue the TICC Series C Shares to TICC in
exchange for the cancellation of $13,500,000 principal amount of the TICC Notes
and all unpaid interest on the TICC Notes (including without limitation PIK
Interest) accrued through the Second Restructuring Date, it being agreed herein
that the amount of such interest accrued to the Second Restructuring Date is
$1,739,437, and
(d) upon completion of the exchange described in the foregoing
clause (c), the TICC Notes in the remaining principal amount of $3,500,000 shall
be amended and restated in their entirety as a single Note in such principal
amount substantially in the form set forth as EXHIBIT A to this Amendment (the
"AMENDED AND RESTATED NOTE").
14. EXCHANGE OF SHARES OF SERIES B PREFERRED STOCK FOR SHARES OF SERIES D
PREFERRED STOCK. On or prior to the Second Restructuring Date,
(a) the Board shall adopt and approve, and shall cause to be filed
with the Secretary of State of the State of Delaware, a Certificate of
Designations in the form attached as EXHIBIT B-2 to this Amendment (the "SERIES
D CERTIFICATE OF DESIGNATIONS"), and shall take all other action necessary to
create a new series of the Preferred Stock, par value $.0001 per share, of the
Company, which series shall be designated the Series D Convertible Preferred
Stock, par value $.0001 per share (the "SERIES D PREFERRED STOCK"), shall
consist of 60,000 authorized shares, and shall have the preferences, limitations
and relative rights set forth in the Series D Certificate of Designations,
(b) the Board shall duly authorize and approve the issuance to SeaView
of 51,508 shares of Series D Preferred Stock (the "SEAVIEW SERIES D SHARES") in
exchange for all of the 51,508 shares of Series B Convertible Preferred Stock,
par value $.0001 per share, of the Company (the "SERIES B PREFERRED STOCK") now
held by SeaView,
(c) subject to satisfaction of the conditions set forth in Section 21
of this Amendment, the Company shall issue the SeaView Series D Shares to
SeaView in exchange for transfer to the Company of all of the shares of Series B
Preferred Stock held by SeaView, which shares shall thereupon be cancelled and
retired. The parties hereto hereby agree that the provisions of the Preferred
Stock Purchase Agreement dated as of February 27, 2007 between the Company and
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SeaView shall continue in effect and shall apply to the SeaView Series D Shares
as though the SeaView Series D Shares were shares of Series B Preferred Stock
referred to therein, except that Sections 2.4 and 3 thereof are hereby
terminated and shall not apply to the SeaView Series D Shares.
15. Closing of Second Restructuring.
(a) The closing of the transactions contemplated by this Amendment
shall take place at the offices of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., New York time
on the Second Restructuring Date.
(b) On the Second Restructuring Date, subject to the conditions
specified in Section 21:
(i) TICC will assign (without recourse) and deliver to the Company
the TICC Notes (to the extent of $13,500,000 of the outstanding
principal amount thereof and all accrued interest on the TICC Notes,
including without limitation PIK Interest), which shall thereupon be
cancelled and retired, and the Company will issue and deliver to TICC
in exchange therefor stock certificates representing the TICC Series C
Shares;
(ii) TICC will assign (without recourse) and deliver to the
Company the TICC Notes (to the extent of the remaining $3,500,000 of
the outstanding principal amount thereof), which shall thereupon be
cancelled and retired, and the Company will execute and issue to TICC
in exchange therefor the Amended and Restated Note, in the principal
amount of $3,500,000 and dated the Second Restructuring Date;
(iii) the expenses of TICC incurred through the Second
Restructuring Date and required to be reimbursed by the Company
pursuant to Section 23 hereof shall be paid in full by the Company;
and
(iv) SeaView will assign (without recourse) and deliver to the
Company 51,508 shares of Series B Preferred Stock, constituting all of
the shares of Series B Preferred Stock held by it, accompanied by
appropriate stock powers duly executed by SeaView, which shares shall
thereupon be cancelled and retired, and the Company will issue and
deliver to SeaView in exchange therefor the SeaView Series D Shares.
16. REGISTRATION RIGHTS. The Purchasers and the Company shall have the
respective rights and obligations set forth in EXHIBIT C hereto with respect to
registrations of the Company 's securities under the Securities Act.
17. OTHER POST-RESTRUCTURING OBLIGATIONS. Commencing at the earliest
practicable date following the Second Restructuring Date, the Company will take
all necessary or appropriate actions (a) to effect a 1-for-1000 (or such other
ratio as may be determined by the Board of Directors) reverse stock split that
will have the effect of reducing the number of outstanding shares of common
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stock and the number of common stockholders of record of the Company, (b) to
amend the Company's Certificate of Incorporation as provided in the Certificate
of Amendment, in the form attached as EXHIBIT D to this Amendment (the
"CERTIFICATE OF AMENDMENT"), for the purposes of effecting such reverse stock
split, and (c) to prepare and file a Schedule 14C with the SEC in connection
with the Certificate of Amendment. The Company will deliver written notice to
the Collateral Agent of the taking of each of the foregoing actions within five
Business Days after the completion thereof.
18. WAIVER OF EXISTING DEFAULTS AND CONSENT. In consideration of the
representations, warranties, covenants and agreements herein set forth,
effective on and as of the Second Restructuring Date, the Purchasers hereby
irrevocably waive the Existing Defaults. The Purchasers also hereby irrevocably
consent to the taking by the Company of all actions required or expressly
permitted to be taken by it under the provisions of this Amendment and agree
that none of such actions shall constitute a Default or Event of Default.
19. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to the Purchasers that:
(a) Immediately following the Second Restructuring Date and after
giving effect to the waivers of the Existing Defaults set forth in this
Amendment, no Default or Event of Default will have occurred and be continuing.
(b) The execution, delivery and performance by the Company of this
Amendment are within its corporate powers and have been duly authorized by all
necessary corporate action on the part of the Board. This Amendment has been
duly executed and delivered by the Company and is the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally and by general principles of equity.
(c) Neither the execution and delivery by the Company of this
Amendment, nor the fulfillment of or compliance with the terms and provisions
hereof, will conflict with, or result in a breach or violation of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation of any Lien on any properties or assets of the Company pursuant to, the
Organizational Documents of the Company or any contract, agreement, mortgage,
indenture, lease or instrument to which the Company is a party or by which it is
bound or to which any of its assets are subject, or any statute, ordinance, law,
rule, regulation, order, writ, judgment, injunction, decree or award to which
the Company or any of its assets are subject.
(d) No consent, approval or authorization of or declaration,
registration or filing with any Governmental Authority or any nongovernmental
Person, including, without limitation, any creditor or stockholder of the
Company is required in connection with the execution or delivery by the Company
of this Amendment or the performance by the Company of its obligations
hereunder, or as a condition to the legality, validity or enforceability of this
Amendment or any provision hereof.
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(e) The authorized Equity Interests of the Company consist of
100,000,000 shares of Company Common Stock and 10,000,000 shares of Company
Preferred Stock, including 60,000 shares of Series D Preferred Stock and 180,000
shares of Series C Preferred Stock. Set forth in SCHEDULE 19 is a true and
complete list of the holders of five percent (5%) or more of the outstanding
shares of Company Common Stock and of all of the Company Preferred Stock, and
the aggregate numbers of outstanding shares of Company Common Stock, Options,
Convertible Securities and other Call Securities (each as defined below). All of
the issued and outstanding shares of Company Common Stock and Company Preferred
Stock are validly issued, fully paid and non-assessable. Except as set forth in
SCHEDULE 19, there are no outstanding (i) options, warrants or rights to
subscribe for or purchase, or agreements (contingent or otherwise) providing for
the issuance of, or calls, commitments or claims of any character relating to,
any shares of Company Common Stock or Company Preferred Stock ("OPTIONS"), (ii)
securities (including debt securities and equity securities) that are or by
their terms may become convertible into or exchangeable for any shares of
Company Common Stock or Company Preferred Stock ("CONVERTIBLE SECURITIES"), or
(iii) options, warrants or rights to subscribe for or purchase, or agreements
(contingent or otherwise) providing for the issuance of, or calls, commitments
or claims of any character relating to, any Convertible Securities (together
with Options and Convertible Securities, "CALL SECURITIES"). Except as set forth
in SCHEDULE 19, none of the authorized Equity Interests of the Company
constitutes Redeemable Stock, and the Company has no obligation, whether
mandatory or at the option of any other Person, at any time to redeem or
repurchase any shares of Company Common Stock or Company Preferred Stock or any
Call Securities, pursuant to the terms of the Company's Organizational Documents
or by contract or otherwise.
(f) Subject to completion of the transactions referred to in Section
17 hereof, the shares of Company Common Stock issuable upon conversion of the
Series C Preferred Stock and the Series D Preferred Stock have been duly and
validly reserved for issuance upon such exercise and, when issued and delivered
against payment therefor as provided therein, will be duly authorized, validly
issued, fully paid and non-assessable and subject to no Liens in respect of the
issuance thereof.
(g) None of the Company or its representatives has taken or will take
any action which would subject the issuance or sale of any of the Series C
Preferred Stock or the Series D Preferred Stock to the provisions of Section 5
of the Securities Act or violate the provisions of any securities or Blue Sky
laws of any applicable jurisdiction.
20. REPRESENTATIONS OF THE PURCHASERS AND SEAVIEW. Each of TICC and
SeaView represents to the Company that (a) it is an "accredited investor,"
within the meaning of Rule 501 promulgated by the SEC under the Securities Act,
and (b) it is acquiring the shares of Series C Preferred Stock or Series D
Preferred Stock (as the case may be) to be issued to it hereunder for its own
account, for investment, and not with a view to or for sale in connection with
any distribution thereof in violation of the registration provisions of the
Securities Act or the rules and regulations promulgated thereunder.
21. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. Notwithstanding anything to
the contrary set forth in this Amendment, the terms and provisions of this
Amendment shall not become or be effective until the date (the "SECOND
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RESTRUCTURING DATE") on which all of the following conditions shall be fulfilled
or waived in writing by TICC:
a. All documentation of the transactions contemplated hereby shall be
satisfactory to TICC in form and substance in its sole discretion.
TICC shall have received such certificates, legal opinions and
other closing documents as it shall reasonably request.
b. The representations and warranties set forth in Section 19 of this
Amendment shall be true on and as of the Second Restructuring Date
as though made on and as of the Second Restructuring Date, and the
Company shall have performed all obligations required to have been
performed by it on or prior to the Second Restructuring Date
pursuant to this Amendment.
c. There shall not be pending or, to the knowledge of the Company,
threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting any of the
Company or its Subsidiaries which seeks to enjoin or restrain any
of the transactions contemplated herein or which the Purchasers
believe in good faith is likely to have a Material Adverse Effect.
d. All necessary consents, approvals and authorizations of, and
declarations, registrations and filings with, Governmental
Authorities and nongovernmental Persons required in order to
consummate the transactions contemplated herein shall have been
obtained or made and shall be in full force and effect.
e. The Company shall have executed, issued and delivered to TICC the
Amended and Restated Note and stock certificates representing the
TICC Series C Shares against TICC's delivery to the Company of the
TICC Notes accompanied by appropriate bond powers duly executed by
TICC.
f. The Company shall have delivered stock certificates representing
the SeaView Series D Shares to SeaView against SeaView's delivery
to the Company of stock certificates representing the shares of
Series B Preferred Stock held by it accompanied by appropriate
stock powers duly executed by SeaView.
g. TICC, SeaView and the Company shall have executed and delivered a
Stockholders Agreement in the form set forth in Exhibit E to this
Amendment.
h. The Restructuring Date shall occur on or before November 6, 2007.
22. EFFECT OF AMENDMENT; NO NOVATION. It is hereby agreed that, except as
specifically provided herein, this Amendment does not in any way affect or
impair the terms, conditions and other provisions of the Note Purchase
Agreement, or the obligations of the Company thereunder, and all terms,
conditions and other provisions of the Note Purchase Agreement and the other
Note Documents shall remain in full force and effect except to the extent
specifically amended, modified or waived pursuant to the provisions of this
Amendment. It is further agreed that the Security Agreement, as hereby amended,
and the Subsidiary Guarantee shall continue in full force and effect and shall
secure and guarantee all Obligations now existing or hereafter arising under the
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Note Purchase Agreement and the Notes after giving effect to this Amendment and
the Restructuring. It is further specifically agreed that this Amendment shall
not be deemed or considered to operate as a novation of the outstanding Notes,
the Note Purchase Agreement or the other Note Documents.
23. PAYMENT OF EXPENSES. The Company agrees to pay all costs and expenses
incurred by the Purchasers in connection with the negotiation, preparation,
execution and delivery of this Amendment and the consummation of the Second
Restructuring, including, without limitation, the reasonable fees and
disbursements of the Purchasers' legal counsel incurred in connection herewith.
24. INDEMNIFICATION. In consideration of the execution and delivery of this
Amendment by the Purchasers and the Collateral Agent, the Company hereby agrees
to defend, indemnify, exonerate and hold harmless each Purchaser and the
Collateral Agent and each of the officers, directors, stockholders, partners,
members, managers, Affiliates, trustees, employees and agents of each Purchaser
and the Collateral Agent (herein collectively called the "INDEMNITEES") from and
against any and all liabilities, obligations, losses, damages, claims, actions,
suits, proceedings, judgments, costs and expenses, including legal fees and
other expenses incurred in the investigation, defense, appeal and settlement of
claims, actions, suits and proceedings (herein collectively called the
"INDEMNIFIED LIABILITIES"), incurred by the Indemnitees or any of them arising
out of or resulting from any act or failure to act by the Company or any of its
Subsidiaries or their respective officers, directors, employees, agents,
representatives or Affiliates relating to this Amendment, the issuance of the
TICC Series C Shares or the transactions contemplated hereby or thereby, or the
performance by the Company of its obligations hereunder or thereunder except for
any such Indemnified Liabilities which are finally judicially determined to have
resulted from the Indemnitee's gross negligence, willful misconduct or willful
breach of this Amendment, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. The
obligations of the Company under this Section 24 shall survive the closing of
the transactions contemplated hereby and the enforcement of any provision
hereof.
25. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken
together shall be deemed to constitute one and the same instrument. Delivery of
an executed counterpart of a signature page of this Amendment by telecopy or
other electronic means shall be effective as delivery of a manually executed
counterpart of this Amendment. Delivery of manually executed counterparts of
this Amendment shall immediately follow delivery by telecopy or other electronic
means, but the failure to so deliver a manually executed counterpart shall not
affect the validity, enforceability, or binding effect hereof.
26. ENTIRE AGREEMENT. This Amendment embodies the entire agreement and
understanding with regard to the subject matter hereof among the Purchasers, the
Collateral Agent and the Company, and supersedes all prior agreements and
understandings (oral or written) relating to such subject matter.
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27. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
[Signatures on next page]
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first written above.
COMPANY:
-------
GENUTEC BUSINESS SOLUTIONS, INC.
/s/ ▇▇▇ ▇. ▇▇▇, ▇▇.
By: -------------------------------
Name: ▇▇▇ ▇. ▇▇▇, ▇▇.
Title: President and CEO
SUBSIDIARY GUARANTORS:
---------------------
GENUTEC MARKETING, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇, ▇▇.
-----------------------------
Name: ▇▇▇ ▇. ▇▇▇, ▇▇.
Title: President
SMART ACQUISITION, LLC
/s/ ▇▇▇ ▇. ▇▇▇, ▇▇.
By: ----------------------------
Name: ▇▇▇ ▇. ▇▇▇, ▇▇.
Title: President
PURCHASER:
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TECHNOLOGY INVESTMENT CAPITAL CORP., as
Collateral Agent and Purchaser
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
By: ---------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
SEAVIEW:
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SEAVIEW MEZZANINE FUND LP
By: SeaView GP, LLC, its general partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Member
EXHIBIT A
FORM OF SENIOR SECURTED NOTE
----------------------------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY
LAW, AND MAY NOT BE SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION,
THEREUNDER.
GENUTEC BUSINESS SOLUTIONS, INC.
Senior Secured Note Due 2014
No. _____ New York, New York
$____________ ____________, 20__
GENUTEC BUSINESS SOLUTIONS, INC., a Delaware corporation (the "COMPANY"),
for value received, hereby promises to pay to:
[NAME OF HOLDER]
or registered assigns
on the 30th day of October, 2014
the principal amount of
________________ DOLLARS ($____________)
and to pay interest from the date hereof on the principal amount from time to
time remaining unpaid hereon from the date hereof at a rate per annum equal,
during any period, to the Applicable Interest Rate for such period, payable in
cash monthly in arrears on the last Business Day of each month (commencing with
the first such date occurring after the date of issuance of this Note).
Interest accrued on the principal amount of this Note shall also be due and
payable upon each prepayment of any or all of the principal amount hereof (with
respect to the principal amount so prepaid), and at maturity (whether at stated
maturity, or by acceleration or otherwise). Notwithstanding the foregoing, the
Company agrees that, upon the occurrence and during the continuance of an Event
of Default, this Note shall bear interest at a rate per annum equal to the Post-
Default Rate on the unpaid principal amount hereof and, to the extent permitted
by applicable law, on any overdue interest, until the same shall be paid, such
interest to be payable in cash on demand. Interest on this Note shall be
calculated on the basis of a year of 360 days, in each case for the actual
number of days occurring in the period for which such interest is payable.
Payments of principal, prepayment charges (if any) hereof and interest hereon
and all other amounts payable hereunder or under the Purchase Agreement referred
to below shall be made in Dollars in immediately available funds, in accordance
with the provisions of Section 3.4(a) of the Purchase Agreement described below,
without deduction, set-off or counterclaim, not later than 2:00 p.m. (New York
time) on the date on which such payment shall be due, and any payment made after
such time on such due date shall be deemed to have been made on the next
succeeding Business Day.
This Note is one of the Senior Secured Notes Due 2014 of the Company in the
aggregate principal amount of $3,500,000, issued under and pursuant to the terms
and provisions of the Note Purchase Agreement dated as of September 16, 2005,
among the Company, Technology Investment Capital Corp., a Maryland corporation,
as Collateral Agent, and the Purchasers named in Schedule I thereto, as from
time to time amended, modified or supplemented (the "PURCHASE AGREEMENT"), and
this Note and the holder hereof are entitled equally and ratably with the
holders of all other Notes outstanding under the Purchase Agreement to all the
benefits provided for thereby or referred to therein, to which Purchase
Agreement reference is hereby made for a statement thereof. Capitalized terms
used herein without definition shall have the respective meanings ascribed to
them in the Purchase Agreement.
This Note is secured by, and are entitled equally and ratably to the
benefits of, the Subsidiary Guarantee and the Security Documents, all in the
manner and to the extent more fully provided therein.
This Note may be declared or otherwise become due prior to its expressed
maturity date, all in the events, on the terms and in the manner and amounts
provided in the Purchase Agreement.
The principal amount of the Notes is payable in installments, may be
required to be prepaid in whole or in part, and is subject to prepayment at the
option of the Company, all on the dates, on the terms and conditions and in the
amounts set forth in the Purchase Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal executive office of the Company
accompanied (if required by the Company) by a written instrument of transfer
duly executed by the registered holder of this Note or its attorney duly
authorized in writing. Payment of or on account of principal, prepayment charge,
if any, and interest on this Note shall be made only to or upon the order in
writing of the registered holder.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
GENUTEC BUSINESS SOLUTIONS, INC.
By: _______________________
Name:
Title:
- 2 -
EXHIBIT B-1
FORM OF CERTIFICATE OF DESIGNATIONS RELATING TO SERIES C CONVERTIBLE
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PREFERRED STOCK
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EXHIBIT B-2
Form of Certificate of Designations Relating to Series D Convertible
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Preferred Stock
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EXHIBIT C
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REGISTRATION RIGHTS
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1. DEFINITIONS. As used in this EXHIBIT C, the following terms shall have
the following meanings:
"COMMON STOCK" means Class A voting common stock, par value $0.0001
per share, of the Company.
"INVESTOR STOCKHOLDERS" means Stockholders of the Company who are at
any relevant time holders of share of Series C Preferred Stock issued pursuant
to the Second Restructuring Agreement and Amendment No. 6 to Note Purchase
Agreement (the "RESTRUCTURING AGREEMENT").
"PRO RATA" means, with respect to the Registrable Securities held by a
Stockholder to be excluded from an underwritten public offering as provided in
this Exhibit C, the number which bears the same proportion to the total number
of shares of Common Stock to be excluded as the aggregate number of shares of
Registrable Securities held by such Stockholder bears to the aggregate number of
shares of Common Stock held by all Stockholders participating in such offering
whose shares are to be excluded.
"REGISTRABLE SECURITIES" means, collectively, (i) Common Stock of the
Company, including without limitation Common Stock issued or issuable upon
conversion of Series C Preferred Stock issued pursuant to the Restructuring
Agreement, and (ii) Common Stock issued or issuable by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise with respect to
Registrable Securities. Registrable Securities shall cease to be Registrable
Securities when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (ii) such securities shall have been sold pursuant to Rule 144 (or
any successor provision) under the Securities Act or (iii) such securities shall
have been otherwise transferred, new certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require the registration or
qualification of such securities under the Securities Act or any similar state
law then in effect.
"REGISTRATION EXPENSES" means all expenses incident to the Company's
performance of or compliance with this EXHIBIT C and the completion of
transactions relating thereto including, without limitation, all registration
and filing fees, all fees and expenses of complying with securities or blue sky
laws, all printing expenses, the fees and disbursements of the Company's
independent public accountants, including the expenses of any special audits,
reviews, compilations or other reports or information required by or incident to
such performance and compliance, and the reasonable fees or expenses of counsel
for the Company and of one special counsel to represent the holders on whose
behalf Registrable Securities are being registered, but excluding (i) any
allocation of the Company or selling Stockholder personnel or other general
overhead expenses of the Company or of any selling Stockholder or other expenses
for the preparation of financial statements or other data normally prepared by
the Company in the ordinary course of its business, which shall be borne by the
party incurring the expense in all cases, and (ii) any underwriting discounts
and commissions with respect to such Registrable Securities, which shall be
borne by the holder on whose behalf such Registrable Securities are being
registered.
"SECOND RESTRUCTURING DATE" means October __, 2007.
"STOCKHOLDER" means a holder of Common Stock or Series C Preferred
Stock.
Unless otherwise defined herein, capitalized terms used in this Exhibit C have
the meanings assigned to them in the Restructuring Agreement.
2. Registration on Request. (a) Upon the written request of Investor
Stockholders holding a majority of the Registrable Securities held by all
Investor Stockholders, requesting that the Company effect the registration under
the Securities Act of all or part of the Registrable Securities held by such
Investor Stockholders (the "REQUESTING STOCKHOLDERS") and specifying the
intended method or methods of disposition of such Registrable Securities, the
Company will thereupon use its commercially reasonable best efforts to effect,
at the earliest possible date, the registration, under the Securities Act,
subject to Section 2(e), of the Registrable Securities which the Company has
been so requested to register by such Requesting Stockholders, for disposition
as stated in such request, to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities to be so registered, PROVIDED that (A) if the Company shall have
previously effected a registration of which notice has been given to all
Investor Stockholders holding Registrable Securities pursuant to Section 3, in
which all Investor Stockholders wishing to do so were permitted to sell all
Registrable Securities they desired to sell, the Company shall not be required
to effect a registration pursuant to this Section 2 until a period of 120 days
shall have elapsed from the effective date of the most recent such previous
registration, (B) the Company shall not be obligated to effect more than two (2)
such registrations requested by the Investor Stockholders pursuant to this
Section 2(a) (with the exception of S-3 registrations described in Section 2(b)
herein), and (C) each such request must include Registrable Securities having an
offering price of at least $2,000,000 in the aggregate. Each registration
requested pursuant to this Section 2 shall be (i) effected by the filing of a
registration statement on Form S-1 or Form S-3 (or any other form which the
Company is qualified to use), and (ii) if the Company is qualified and if agreed
to in writing by the Requesting Stockholders, filed pursuant to Rule 415 under
the Securities Act (or equivalent rule then in effect).
(b) The Investor Stockholders will be entitled to unlimited S-3
registrations; PROVIDED, HOWEVER, that each must include Registrable Securities
having an offering price of at least $1,000,000 in the aggregate and no more
than two such registrations shall be required in any twelve-month period.
(c) The Company will pay all Registration Expenses, including the cost
of one counsel for the selling stockholders, in connection with each
registration of Registrable Securities effected by the Company pursuant to this
- 2 -
Section 2, provided that the expenses of the first three S-3 registrations will
be borne by the Company, and thereafter all S-3 registration expenses will be
borne by the selling stockholders pro rata.
(d) The Company will not register securities for sale for the account
of any Person other than (i) the Company, and (ii) holders of Registrable
Securities. The Company will not grant to any Person the right to request a
registration of securities except pursuant to Section 2(a), or with the written
consent of Investor Stockholders holding a majority of the shares of Registrable
Securities held by all Investor Stockholders, and except to Persons that have
been granted such rights prior to the Second Restructuring Date. The Company may
grant incidental rights to participate in registrations comparable to those
granted in Section 3.
(e) If the registration so requested by the Requesting Stockholders
involves an underwritten offering of the securities so being registered, to be
distributed (on a firm commitment basis) by or through one or more underwriters
of recognized standing under underwriting terms appropriate for such a
transaction, and the managing underwriter of such underwritten offering shall
advise the Company in writing that, in its opinion, the distribution of all or a
specified portion of the Registrable Securities which the Requesting
Stockholders have requested to register under Section 2(a) and all other
Registrable Securities which other holders thereof have requested be included in
such offering pursuant to Section 3 will materially and adversely affect the
distribution of such securities by such underwriters (such opinion to state the
reasons therefor), then the Company will promptly furnish the Requesting
Stockholders a copy of the opinion of the managing underwriter, and will
register the shares of Common Stock which the Requesting Stockholders and all
such other holders of Registrable Securities have requested pursuant to Section
3 in an amount not to exceed the maximum number of shares that the managing
underwriter deems advisable. The Registrable Securities which the Requesting
Stockholders and all such other holders of Registrable Securities have requested
to be included in such offering that are to be excluded from such offering shall
be allocated first, among such other holders Pro Rata, and second, to the extent
of any Registrable Securities remaining to be excluded, among the Requesting
Stockholders Pro Rata.
(f) If requested by the underwriters for any underwritten offering of
Registrable Securities pursuant to a registration requested under this Section
2, the Company will enter into an underwriting agreement with such underwriters
for such offering, such agreement to contain such representations and warranties
by the Company and such other terms and provisions as are customarily contained
in underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities and contribution provisions to the effect and to
the extent provided in Section 6.
(g) If, at any time after requesting registration pursuant to
Section 2(a) and prior to the effective date of the registration statement filed
in connection with such registration request, the Requesting Stockholders shall
determine for any reason not to register such Registrable Securities, such
Requesting Stockholders may, at their election, give written notice of such
determination to the Company. The Company shall then be relieved of its
obligations to register any Registrable Securities in connection with such
Requesting Stockholders' registration request (but not its obligation to pay the
Registration Expenses in connection therewith as provided in Section 2(c)), and
such terminated registration shall be counted as a request for registration
- 3 -
pursuant to Section 2(a). If, however, the Requesting Stockholders pay the
Registration Expenses in connection therewith, the terminated registration shall
not be counted as a request for registration pursuant to Section 2(a).
(h) In connection with the first request for registration pursuant to
Section 2(a), the Company may, within fifteen (15) days after its receipt of
such request, give the Requesting Stockholders notice that it is the good faith
intention of the Company to register securities under the Securities Act for
sale for its own account. Thereafter, the provisions of Section 3 shall govern,
and the Requesting Stockholders' registration request under Section 2(a) shall
be deemed rescinded. The Requesting Stockholders shall again be entitled to
request such registration under Section 2(a), but not sooner than the earliest
of (i) one hundred and twenty (120) days after the effective date of the
Company's registration, (ii) the Company's determination (of which the Company
shall promptly notify the holders of Registrable Securities) not to proceed with
its registration of securities, and (iii) the Company's failure to use best
efforts to effect the registration of its securities.
(i) In connection with any request for registration pursuant to
Section 2(a), the Company may, on two occasions only, upon a good-faith
determination by the Company's Board of Directors that such a registration would
interfere with the completion of a proposed corporate transaction, notify the
Requesting Stockholder that it intends to defer such registration for up to one
hundred twenty (120) days. In such event the Requesting Stockholder may rescind
its registration request, and shall again be entitled to request such
registration under Section 2(a), but not sooner than the end of the period of
deferral determined by the Company.
3. INCIDENTAL REGISTRATIONS. (a) If, at any time, the Company proposes to
register any of its securities under the Securities Act (including without
limitation a registration on request of the Investor Stockholders pursuant to
Section 2 above), whether or not for sale for its own account, on a form and in
a manner which would permit registration of Registrable Securities for sale to
the public under the Securities Act, it will each such time give prompt written
notice to all holders of Registrable Securities of its intention to do so,
describing such securities and specifying the form and manner and the other
relevant facts involved in such proposed registration, and upon the written
request of any such holder delivered to the Company within thirty (30) days
after the giving of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holders of Registrable
Securities, to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) of the Registrable Securities so
to be registered, provided that:
(i) if, at any time after giving such written notice of its
intention to register any of its securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
register such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable
Securities and thereupon shall be relieved of its obligation to
register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration
Expenses in connection therewith as provided in Section 3(b)), without
- 4 -
prejudice however to the rights of the Investor Stockholders to request
that such registration be effected as a registration under Section 2(a);
(ii) if the registration so proposed by the Company involves an
underwritten offering of the securities so being registered, whether
or not for sale for the account of the Company, to be distributed (on
a firm commitment basis) by or through one or more underwriters of
recognized standing under underwriting terms appropriate for such a
transaction, and the managing underwriter of such underwritten
offering shall advise the Company in writing that, in its opinion, the
distribution of all or a specified portion of the Registrable
Securities which the Stockholders have requested the Company to
register in accordance with this Section 3(a) concurrently with the
securities being distributed by such underwriters will materially and
adversely affect the distribution of such securities by such
underwriters (such opinion to state the reasons therefor), then the
Company will promptly furnish each such holder of Registrable
Securities with a copy of such opinion and may deny, by written notice
to each such holder accompanying such opinion, the registration of all
or a specified portion of such Registrable Securities (in case of a
denial as to a portion of such Registrable Securities, such portion to
be allocated Pro Rata among such holders), after giving effect to any
priorities with respect to registration of holders of Registrable
Securities under registration rights granted prior to the Second
Restructuring Date; and
(iii) the Company shall not be obligated to effect any
registration of Registrable Securities under this Section 3 incidental
to the registration of any of its securities in connection with
dividend reinvestment plans or stock option or other employee benefit
plans.
(b) The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 3.
4. REGISTRATION PROCEDURES. (a)If and whenever the Company is required to
use its commercially reasonable best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 2 or 3,
the Company will as expeditiously as possible:
(i) prepare and promptly file with the Commission a registration
statement with respect to such Registrable Securities (in any event,
use its best efforts to file such registration statement within ninety
(90) days after the end of the period within which requests for
registration may be delivered to the Company) and use its best efforts
to cause such registration statement to become effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities and other securities covered by such registration statement
until the earlier of such time as all of such Registrable Securities
and other securities have been disposed of in accordance with the
intended methods of disposition by the
- 5 -
seller or sellers thereof set forth in such registration statement or
the expiration of six (6) months after such registration statement
becomes effective;
(iii) furnish to each seller of such Registrable Securities,
without charge, such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents, as such seller may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under the securities or blue sky laws of such jurisdictions as each
seller (or in an underwritten offering, the managing underwriter)
shall reasonably request, and do any and all other acts and things
which may be necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of its Registrable
Securities covered by such registration statement, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in
any such jurisdiction, or to consent to general service of process in
any such jurisdiction;
(v) furnish to each seller of Registrable Securities by means of
such registration a signed counterpart, addressed to such seller, of
(A) an opinion of counsel for the Company, dated the effective date of
such registration statement (or, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement speaking both as of the effective date of the
registration statement and the date of the closing under the
underwriting agreement) and (B) a "cold comfort" letter dated the
effective date of such registration statement (and, if such
registration statement includes an underwritten public offering, dated
the date of the closing under the underwriting agreement) signed by
the independent public accountants who have certified the Company's
financial statements included in such registration statement, covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and, in
the case of the accountants' letter, such other financial matters, as
such seller may reasonably request;
(vi) immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, and at the request of any such seller prepare and furnish to
such seller a reasonable
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number of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers
of such Registrable Securities or other securities, such prospectus
shall not include an 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 not misleading in the light of the
circumstances then existing;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securities holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve (12) months, but not
more than eighteen (18) months, beginning with the first month of the
first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
(viii) use its best efforts to list such securities on the NASDAQ
and each securities exchange on which the Common Stock of the Company
is then listed, if such securities are not already so listed and if
such listing is then permitted under the rules of such exchange, and,
if necessary, provide a transfer agent and registrar for such
Registrable Securities not later than the effective date of such
registration statement.
The Company may require each such holder of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such holder and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
or by the Commission in connection therewith.
(b) If the Company at any time proposes to register any of its
securities under the Securities Act (other than pursuant to a request made under
Section 2), whether or not for sale for its own account, and such securities are
to be distributed by or through one or more underwriters, the Company will,
subject to Section 3(a)(ii), make reasonable efforts, if requested by any holder
of Registrable Securities who requests incidental registration of Registrable
Securities in connection therewith pursuant to Section 3, arrange for such
underwriters to include such Registrable Securities among those securities to be
distributed by or through such underwriters. The holders of Registrable
Securities on whose behalf Registrable Securities are to be distributed by such
underwriters shall be parties to any such underwriting agreement and the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters, shall also be made to and
for the benefit of such holders of Registrable Securities.
(c) Whenever a registration requested pursuant to Section 2 is for an
underwritten offering, the Company shall have the right to select the managing
underwriter to administer the offering, subject to the approval of the holders
of a majority of the Registrable Securities included in such registration, such
approval not to be unreasonably withheld or delayed. If the Company at any time
proposes to register any of its securities under the Securities Act for sale for
its own account and such securities are to be distributed by or through one or
more underwriters, the managing underwriter shall be selected by the Company.
- 7 -
(d) If any registration pursuant to Section 2 or 3 shall be in
connection with an underwritten public offering, each holder of Registrable
Securities agrees by acquisition of such Registrable Securities, if so required
by the managing underwriters, not to effect any public sale or distribution of
Registrable Securities (other than as part of such underwritten public offering)
within the period of time between fourteen (14) days prior to the effective date
of such registration statement and one hundred twenty (120) days after the
effective date of such registration statement.
5. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of
Registrable Securities on whose behalf such Registrable Securities are to be so
registered and their underwriters, if any, and their respective counsel and
accountants, the opportunity to review and comment upon such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the business
of the Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the reasonable
opinion of such holders and such underwriters or their respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
6. INDEMNIFICATION; CONTRIBUTION. (a) In the event of any registration of
any securities of the Company under the Securities Act, the Company will, and
hereby does, indemnify and hold harmless in the case of any registration
statement filed pursuant to Section 2 or 3, the holder of any Registrable
Securities covered by such registration statement, its directors and officers,
each officer and director of each underwriter, each other person who
participates as an underwriter in the offering or sale of such securities and
each other person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act against any losses, claims, damages,
liabilities and expenses, joint or several, to which such holder or any such
director or officer or participating or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings or investigations in respect
thereof) arise out of or are based upon (x) any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus (unless, with respect to the indemnification of the
officers and directors of each underwriter and each other person participating
as an underwriter, any such statement is corrected in a subsequent prospectus
and the underwriters are given the opportunity to circulate the corrected
prospectus to all persons receiving the preliminary prospectus), final
prospectus or summary prospectus included therein, or any amendment or
supplement thereto, or any document incorporated by reference therein, or (y)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(z) any violation by the Company of any securities laws, and the Company will
reimburse such holder and each such director, officer, participating person and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; PROVIDED, HOWEVER, that the Company shall not
be liable to any seller, director, officer, participating person or controlling
person in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
- 8 -
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company in an instrument executed by or under the direction of such seller,
director, officer, participating person or controlling person for use in the
preparation thereof, which information was specifically stated to be for use in
the registration statement, prospectus, offering circular or other document.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, officer,
participating person or controlling person and shall survive the transfer of
such securities by such seller. The Company shall agree to provide for
contribution relating to such indemnity as shall be reasonably requested by any
seller of Registrable Securities or the underwriters.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed pursuant to Section
2(a), that the Company shall have received an undertaking satisfactory to it
from the prospective sellers of such securities and their underwriters, to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 6) the Company, each director of the
Company, each officer of the Company who shall sign such registration statement
and each other person, if any, who controls the Company within the meaning of
the Securities Act, with respect to any statement in or omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus included therein, or any amendment or supplement thereto, but only if
such statement or omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such sellers or their underwriters specifically stating that it is for use in
the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement, and PROVIDED THAT (i)
the obligation to provide indemnification pursuant to this Section 6(b) shall be
several, and not joint and several, among such sellers and (ii) the liability of
each seller hereunder shall be limited to the proportion of any such loss,
claim, damage, liability or expense which is equal to the proportion that the
public offering price of the shares sold by such seller under such registration
statement bears to the total public offering price of all securities sold
thereunder, but not in any event to exceed the net proceeds received by such
seller from the sale of Registrable Securities covered by such registration
statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such sellers.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in the
preceding subdivisions of this Section 6, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; PROVIDED,
HOWEVER, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 6 except to the extent that the
indemnifying party's liabilities and obligations under this Section 6 are
increased as a result of such failure to give notice. In case any such action is
brought against an indemnified party, the indemnifying party shall be entitled
to participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
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party for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof unless (i) the indemnifying party
shall have failed to retain counsel for the indemnified party as aforesaid, (ii)
the indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (iii) representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other person represented by such counsel in such proceeding or the indemnified
party shall have reasonably concluded that there may be legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified party).
No indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation. The indemnifying party shall
not be liable for any settlement of any proceeding effected without the written
consent of such indemnifying party, such consent not to be unreasonably withheld
or delayed, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify each indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) Indemnification similar to that specified in this Section 6 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration or other
qualification of such Registrable Securities under any federal or state law or
regulation or governmental authority other than the Securities Act.
7. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration (but in no
way reducing the rights of the holders of such Registrable Securities) at all
times after 90 days after any registration statement covering a public offering
of securities of the Company under the Securities Act shall have become
effective, or at all times after the Common Stock of the Company shall initially
be registered pursuant to the requirements of Section 12 of the Exchange Act,
the Company agrees at its cost and expense to use its best efforts to:
(a) make and keep public information available, as those terms are
understood within Rule 144 under the Securities Act;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
(c) furnish to each holder of Registrable Securities, forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Registrable Stock without
registration; and
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(d) furnish to each Holder of Registrable Securities which is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act, promptly upon written request from such Holder, such information
as may be required under Rule 144A for delivery to any prospective purchaser of
any Registrable Securities in order to permit such holder to avail itself of the
benefits of the exemptions under the Securities Act afforded by such Rule.
8. "MARKET STAND-OFF" AGREEMENT. Each Investor Stockholder hereby agrees
that it will not, without the prior written consent of the managing underwriter,
during the period commencing on the date of the final prospectus relating to the
Company's initial public offering ("IPO") and ending on the date specified by
the Company and the managing underwriter (such period not to exceed one hundred
and eighty days) (i) lend, offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right, or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock held immediately before the
effective date of the registration statement for such offering or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of such securities, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or other securities, in cash, or otherwise. The
foregoing provisions of this SECTION 8 shall apply only to the IPO, shall not
apply to the sale of any shares to an underwriter pursuant to an underwriting
agreement, and shall be applicable to the Investor Stockholders only if all
officers, directors, and stockholders individually owning more than one percent
(1%) of the Company's outstanding Common Stock are subject to the same
restrictions. The underwriters in connection with such registration are intended
third-party beneficiaries of this SECTION 8 and shall have the right, power, and
authority to enforce the provisions hereof as though they were a party hereto.
Each Investor Stockholder further agrees to execute such agreements as may be
reasonably requested by the underwriters in connection with such registration
that are consistent with this SECTION 8 or that are necessary to give further
effect thereto. Any discretionary waiver or termination of the restrictions of
any or all of such agreements by the Company or the underwriters shall apply pro
rata to all Investor Stockholders subject to such agreements, based on the
number of shares subject to such agreements.
9. TRANSFER OF REGISTRATION RIGHTS. The registration rights granted to
THE Investor Stockholders in this EXHIBIT C may be transferred, but only to
(a) Affiliates of the Investor Stockholders, and (b) any transferee of Common
Stock that shall deliver to the Company a written instrument, in form and
substance satisfactory to the Company, by which such transferee agrees to be
bound by the terms of this EXHIBIT C.
10. TERMINATION OF REGISTRATION RIGHTS. The right of any Investor
Stockholder to request registration or inclusion of Registrable Securities in
any registration pursuant to SECTION 2 or SECTION 3 shall terminate when all of
such Holder's Registrable Securities could be sold without restriction under SEC
Rule 144(k).
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EXHIBIT D
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Form of Certificate of Amendment to Certificate of Incorporation
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EXHIBIT E
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Form of Stockholders Agreement
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