Exhibit 10.1
VELOCITYHSI, INC.
SERIES A CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
Dated as of April 23, 2001
TABLE OF CONTENTS
Page
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SECTION 1: PURCHASE AND SALE OF THE SERIES A PREFERRED STOCK.......................................... 1
1.1 Authorization to Sell the Series A Preferred Stock......................................... 1
1.2 Closings................................................................................... 1
1.3 Deliveries at Closings..................................................................... 1
1.4 Definitions................................................................................ 2
SECTION 2: REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................. 2
2.1 Organization and Qualification............................................................. 2
2.2 Due Authorization.......................................................................... 2
2.3 Subsidiaries............................................................................... 2
2.4 SEC Reports................................................................................ 2
2.5 Financial Statements....................................................................... 3
2.6 Actions Pending; Compliance with Laws...................................................... 3
2.7 Insurance.................................................................................. 3
2.8 Governmental Consents, etc................................................................. 3
2.9 Taxes...................................................................................... 3
2.10 Conflicting Agreements and Charter Provisions.............................................. 4
2.11 Capitalization............................................................................. 4
2.12 Issuance, Sale and Delivery of the Series A Preferred Stock................................ 4
2.13 Possession of Franchises, Licenses, Etc.................................................... 5
2.14 Environmental and Other Regulations........................................................ 5
2.15 Books and Records.......................................................................... 5
2.16 Transactions with Related Parties.......................................................... 5
2.17 Brokers.................................................................................... 5
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2.18 Accuracy of Information.................................................................... 5
2.19 Offering of Series A Preferred Stock....................................................... 5
SECTION 3: REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............................................ 6
3.1 Organization and Qualification............................................................. 6
3.2 Due Authorization.......................................................................... 6
3.3 Conflicting Agreements and Other Matters................................................... 6
3.4 Acquisition for Investment................................................................. 6
3.5 Brokers or Finders......................................................................... 7
3.6 Accredited Investor........................................................................ 7
3.7 Investment Experience; Economic Risk....................................................... 7
3.8 Disclosure of Information.................................................................. 7
SECTION 4: COVENANTS OF THE COMPANY................................................................... 7
4.1 Compliance with Laws....................................................................... 7
4.2 Insurance.................................................................................. 7
4.3 Payment of Taxes and Other Charges......................................................... 8
4.4 Financial Statements and Other Reports..................................................... 8
4.5 Lost, Stolen, Damaged and Destroyed Stock Certificates..................................... 8
4.6 Related Party Transactions................................................................. 9
4.7 Reservation of Shares...................................................................... 9
4.8 Notice of Limited Offering Exemption....................................................... 9
4.9 Further Rights............................................................................. 9
4.10 Notice of Breach........................................................................... 9
SECTION 5: COVENANTS OF THE PURCHASER................................................................. 9
5.1 Voting Rights.............................................................................. 9
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SECTION 6: RESTRICTIONS ON TRANSFER................................................................... 10
SECTION 7: CONDITIONS................................................................................. 10
7.1 Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby...... 10
7.2 Conditions to Purchaser's Obligations to Effect the Transactions Contemplated Hereby....... 11
7.3 Conditions to Company's Obligations to Effect the Transactions Contemplated Hereby......... 11
SECTION 8: INTERPRETATION............................................................................. 12
8.1 Definitions................................................................................ 12
8.2 Accounting Principles...................................................................... 13
SECTION 9: MISCELLANEOUS.............................................................................. 13
9.1 Severability............................................................................... 13
9.2 Specific Enforcement....................................................................... 13
9.3 Entire Agreement........................................................................... 14
9.4 Counterparts............................................................................... 14
9.5 Notices and other Communications........................................................... 14
9.6 Amendments................................................................................. 14
9.7 Cooperation................................................................................ 15
9.8 Successors and Assigns..................................................................... 15
9.9 Expenses and Remedies...................................................................... 15
9.10 Survival of Representations and Warranties................................................. 16
9.11 Transfer of Series A Preferred Stock....................................................... 16
9.12 Governing Law; Consent to Jurisdiction..................................................... 17
9.13 Publicity.................................................................................. 17
9.14 Signatures................................................................................. 17
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TABLE OF EXHIBITS
Exhibit A - Form of Investor's Rights Agreement
Exhibit B - Form of Certificate of Designation
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This Series A Convertible Preferred Stock Purchase Agreement, dated as of
April 23, 2001 (this "Agreement"), is made between VelocityHSI, Inc., a Delaware
corporation (the "Company") and Banc of America Mortgage Capital Corporation, a
North Carolina corporation (the "Purchaser").
WHEREAS, the Purchaser wishes to purchase from the Company, and the Company
wishes to sell to the Purchaser, an aggregate of 2,083,333 shares of the
Company's Series A Convertible Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock"), at an aggregate purchase price of $2,500,000.00.
WHEREAS, in connection with the purchase and sale of the Series A Preferred
Stock, the Purchaser, and the Company will enter into an Investor's Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
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"Investor's Rights Agreement").
WHEREAS, the Purchaser and the Company desire to provide for such purchase
and sale and to establish various rights and obligations in connection
therewith.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth and that certain Umbrella Resolution Agreement
being entered into concurrently herewith, the parties hereto agree as follows:
SECTION 1: Purchase And Sale of the Series A Preferred Stock.
1.1 Authorization to Sell the Series A Preferred Stock. Subject to the
terms and conditions of this Agreement, the Company has duly authorized the
issuance and sale of the Series A Preferred Stock.
1.2 Closings. The transactions contemplated hereby will take place on
April 23, 2001 (the "Closing") at the San Francisco offices of ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇, LLP at 11:00 a.m., or at such place, date and time as shall be
mutually agreed by the Company and the Purchaser (the "Closing Date").
1.3 Deliveries at Closings.
At the Closing:
(i) Each of the Company and the Purchaser shall execute and
deliver an Investor's Rights Agreement in the form of Exhibit A hereto;
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(ii) ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, counsel to the Company,
shall deliver to the Purchaser an opinion dated the Closing Date in a form
reasonably acceptable to the Purchaser;
(iii) the Company shall deliver to the Purchaser a stock
certificate representing the number of shares of Series A Preferred Stock
to be purchased by the Purchaser, as set forth under its signature on the
signature pages hereto, registered in the name of the Purchaser or its
designee or nominee; and
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(iv) the Purchaser shall pay to the Company, by wire transfer
of immediately available funds, the purchase price for the Series A
Preferred Stock being purchased by the Purchaser.
1.4 Definitions. Certain capitalized terms used in this Agreement are
defined in Section 8 hereof.
SECTION 2: Representations and Warranties of the Company.
The Company represents and warrants as follows, except as set forth on a
Schedule of Exceptions (the "Schedule of Exceptions") furnished to the Purchaser
prior to execution hereof and attached hereto as Schedule 1, identifying the
relevant subparagraph hereof, which exceptions shall be deemed to be part of the
representations and warranties as if made hereunder:
2.1 Organization and Qualification. The Company is a corporation duly
organized and existing in good standing under the laws of the jurisdiction in
which it is incorporated and has the power to own its respective property and to
carry on its respective business as now being conducted. The Company is duly
qualified as a foreign corporation to do business and in good standing in every
jurisdiction in which the nature of the respective business conducted or
property owned by it makes such qualification necessary and where the failure to
so qualify would have a material adverse effect on the Company.
2.2 Due Authorization. All corporate action on the part of the Company and
stockholders necessary for the authorization, execution and delivery of this
Agreement, the Investor's Rights Agreement and the Certificate of Designation,
and the issuance and sale of the Series A Preferred Stock by the Company and the
performance by the Company of all obligations of the Company under this
Agreement, the Investor's Rights Agreement and the Certificate of Designation
has been taken or will be taken prior to the Closing. This Agreement, and the
Investor's Rights Agreement have been duly executed and delivered by the Company
and constitute valid and binding agreements of the Company, enforceable in
accordance with their respective terms, except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The Company has furnished
to the Purchaser true and correct copies of the Company's Certificate of
Incorporation in conjunction with all amendments thereto and By-laws in
conjunction with all amendments thereto, each as in effect on the date of this
Agreement.
2.3 Subsidiaries. The Company does not presently own or control, directly
or indirectly, any interest in any other corporation, partnership, trust, joint
venture, association, or other entity.
2.4 SEC Reports. The Company has furnished the Purchaser copies of its
Annual Report on Form 10-K for the fiscal year ended December 31, 2000 filed
with the Securities and Exchange Commission (the "SEC") on April 16, 2001 (the
"Form 10-K"). To the Company's Knowledge, the Form 10-K did not, as of the date
of filing, contain any untrue statement of a
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material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
2.5 Financial Statements. To the extent so expressed in the Report of
Independent Auditors contained in the Form 10-K, the financial statements
(including any related schedules and/or notes) included in the Form 10-K have
been prepared in accordance with generally accepted accounting principles
consistently followed (except as indicated in the notes thereto) throughout the
periods involved and fairly present the consolidated financial condition,
results of operations, changes in stockholders' equity and cash flows of the
Company as of the dates thereof and for the periods ended on such dates (in each
case subject, as to interim statements, to changes resulting from year-end
adjustments, which in the aggregate will not be material in amount or effect).
Except as disclosed on Schedule 2.5, since December 31, 2000, the Company has
operated its business only in the ordinary course, consistent with past
practice, and no event has occurred that has or is reasonably likely to have a
material adverse effect on the business, financial condition, operations,
results of operations, assets, liabilities or prospects of the Company (a
"Material Adverse Effect"), other than changes disclosed or referred to in any
public filing of the Company or otherwise disclosed to senior representatives of
the Purchaser prior to the date of this Agreement.
2.6 Actions Pending; Compliance with Laws. Except as disclosed in theForm
10-K or as otherwise disclosed to senior representatives of the Purchaser, there
is no action, suit, proceeding or investigation pending or, to the Company's
Knowledge, currently threatened against the Company that questions the validity
or enforceability of, or seeks to enjoin or invalidate this Agreement, the
Investor's Rights Agreement or the Series A Preferred Stock or the right of the
Company to enter into such agreements or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in a material adverse effect on the Company. The Company is not
in default in any material respect with respect to any judgment, order, writ,
injunction, decree or award.
2.7 Insurance. All insurance policies of the Company are disclosed on
Schedule 2.7.
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2.8 Governmental Consents, etc. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for (i) the filing of the Certificate of
Designation with the Secretary of State of Delaware; (ii) any filings required
to effect any registration pursuant to the Investor's Rights Agreement; and
(iii) those filings under applicable state securities laws which have been made
or will be made by the Company within the required time periods.
2.9 Taxes. The Company has filed or, if on extension, will cause to be
filed all material tax returns which are required to be filed by them, and, to
the Company's Knowledge, all such tax returns are true, complete and correct in
all material respects. To the Company's Knowledge, the Company has paid or
caused to be paid all taxes that have become due, except taxes, the validity
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or amount of which is being contested in good faith by appropriate proceedings
and with respect to which adequate reserves have been set aside in accordance
with generally accepted accounting principles. To the Company's Knowledge, the
Company has paid or caused to be paid, or has established reserves in accordance
with generally accepted accounting principles that the Company reasonably
believes are adequate, for all federal income tax liabilities and state income
tax liabilities applicable to the Company.
2.10 Conflicting Agreements and Charter Provisions. None of (i) the
execution and delivery of this Agreement, and the Investor's Rights Agreement
and the issuance of the Series A Preferred Stock and (ii) the fulfillment of and
compliance with the terms and provisions hereof and thereof and of the Series A
Preferred Stock will conflict with or result in a breach of the terms,
conditions or provisions of, or give rise to a right of termination under, or
constitute a default under, or result in any violation of, (a) the Certificate
of Incorporation or By-laws of the Company or (b) to the Company's Knowledge,
any mortgage, material agreement, instrument, order, judgment, decree, statute,
law, rule or regulation to which the Company or any of its respective properties
is subject.
2.11 Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of: (a) 100,000,000 shares of Common Stock, par value
$0.01 per share (the "Common Stock"), of which 12,727,154 shares are
outstanding; (b) warrants to purchase 750,000 shares of Common Stock; (c)
options to purchase 798,504 shares of Common Stock and (d) 50,000,000 shares of
Preferred Stock, par value $.01 per share, of which no shares are outstanding,
as of the date hereof, and 2,083,333 shares designated as Series A Convertible
Preferred Stock will be issued and outstanding on the Closing Date after
consummation of the transactions contemplated hereby. All of the outstanding
options over Common Stock have been validly issued and all of the outstanding
shares of Common Stock have been validly issued and are fully paid and
nonassessable. No class of capital stock of the Company is entitled to
preemptive rights. Except for the options and warrants listed above, there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, securities or rights
convertible into, shares of any class of capital stock of the Company, or
contracts, commitments, understandings, or arrangements by which the Company is
bound to issue additional shares of its capital stock or options, warrants or
rights to purchase or acquire any shares of its capital stock. Since August 7,
2000, the Company has not changed the amount of its authorized capital stock or
subdivided or otherwise changed any shares of any class of its capital stock,
whether by way of reclassification, recapitalization, stock split or otherwise.
2.12 Issuance, Sale and Delivery of the Series A Preferred Stock. The
shares of Series A Preferred Stock being issued to the Purchaser at the Closing
are duly authorized and when issued and delivered in accordance herewith will
be, validly issued, fully paid and nonassessable. All of the shares of Common
Stock to be issued upon conversion of the Series A Preferred Stock, when issued
and delivered upon such conversion in accordance with the terms of the
Certificate of Designation, will be validly issued, fully paid and
nonassessable. The Company has sufficient authorized but unissued shares of
Common Stock to reserve and has reserved such number of shares of Common Stock
as is necessary for issuance upon conversion of the Series A Preferred Stock.
The issuance of the Series A Preferred Stock is not subject to any preemptive
rights or rights of first refusal.
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2.13 Possession of Franchises, Licenses, Etc. The Company possesses all
material franchises, certificates, licenses, permits and other authorizations
from governmental or regulatory authorities that are necessary in any material
respect to the Company for the ownership, maintenance and operation of its
respective properties and assets, and the Company is not in violation of any
thereof in any material respect.
2.14 Environmental and Other Regulations. To the Company's Knowledge, the
Company is in compliance with all applicable laws and regulations relating to
protection of the environment and human health. There are no claims, notices,
civil, criminal or administrative actions, suits, hearings, investigations,
inquiries or proceedings pending or, to the best Knowledge of the Company,
threatened against the Company that are based on or related to any environmental
matters, including any disposal of hazardous substances at any place, or the
failure to have any required environmental permits, and, to the Company's
Knowledge, there are no past or present conditions that are likely to give rise
to any liability or other obligations of the Company under any environmental
laws.
2.15 Books and Records. All the books, records and accounts of the Company
are in all material respects true and complete, and accurately present and
reflect in all material respects all of the transactions therein described.
2.16 Transactions with Related Parties. Schedule 2.16 sets forth a true
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and complete list of the amounts and other essential terms of any contract,
arrangement or transaction currently in effect or effected since the Company's
organization between the Company and any Related Party, other than (i)
arrangements for the payment of salary, including bonuses, for services rendered
to the Company in the ordinary course of business, (ii) other arrangements with
any such Person which in the aggregate do not involve more than $50,000 or (iii)
as previously disclosed in the Form 10-K or in any of the Company's reports or
registration statements filed with the Securities and Exchange Commission (the
"SEC").
2.17 Brokers. The Company has not engaged any finder, broker or investment
adviser, and has no obligation to pay any fees, in connection with the
transactions contemplated hereby.
2.18 Accuracy of Information. None of the representations and warranties
of the Company contained herein or, to the Company's Knowledge, the information,
documents or other materials (other than projections) which have been furnished
by the Company or any of its representatives to the Purchaser in connection with
the transactions contemplated by this Agreement contains any material
misstatement of fact, or omits any material fact necessary to make the
statements herein and therein, in light of the circumstances under which they
were made, not misleading. All of such representations, warranties and other
information are qualified by the information set forth in the Form 10K.
2.19 Offering of Series A Preferred Stock. Neither the Company nor any
Person acting on its behalf has taken or will take any action (including,
without limitation, any offering of any securities of the Company under
circumstances which would require the integration of such offering with the
offering of any of the Series A Preferred Stock under the Securities Act and the
rules and regulations of the Commission thereunder) which could reasonably be
expected
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to subject the offering, issuance or sale of any of the Series A Preferred Stock
to the registration requirements of Section 5 of the Securities Act. Based in
part upon the Purchaser's representations in Section 3 hereof, the offer, sale
and issuance of the shares of Series A Preferred Stock and the Common Stock
issuable upon conversion of such shares pursuant to the Agreement and the
related documents are exempt from the registration requirements of any
applicable state or federal securities laws, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
SECTION 3: Representations And Warranties of The Purchaser.
The Purchaser represents and warrants as follows:
3.1 Organization and Qualification. The Purchaser is (i) duly organized
and existing in good standing under the laws of the jurisdiction of its
formation and has the power to own its respective property and to carry on its
respective business as now being conducted and (ii) duly qualified to do
business and in good standing in every jurisdiction in which the nature of the
respective business conducted or property owned by it makes such qualification
necessary, except where the failure to so qualify would not prevent consummation
of the transactions contemplated hereby or have a material adverse effect on the
Purchaser's ability to perform its obligations hereunder.
3.2 Due Authorization. The Purchaser has all right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated hereby have been
duly authorized by all necessary action on behalf of the Purchaser. This
Agreement has been duly executed and delivered by the Purchaser and constitutes
a valid and binding agreement of the Purchaser enforceable in accordance with
its terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors, rights, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
3.3 Conflicting Agreements and Other Matters. Neither the execution and
delivery of this Agreement nor the performance by the Purchaser of its
obligations hereunder will, in any material manner, conflict with, result in a
breach of the terms, conditions or provisions of, constitute a default under, or
require any consent, approval or other action by or any notice to or filing with
any court or administrative or governmental body pursuant to, the organizational
documents or agreements of the Purchaser or any mortgage, agreement, instrument,
order, judgment, decree, statute, law, rule or regulation to which the Purchaser
or any of its respective properties are subject.
3.4 Acquisition for Investment. The Purchaser is acquiring the Series A
Preferred Stock being purchased by it for its own account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof, and the Purchaser has no present intention or plan to
effect any distribution thereof. The Purchaser acknowledges that the Series A
Preferred Stock has not been registered under the Securities Act and may be sold
or
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disposed of in the absence of such registration only pursuant to an exemption
from such registration.
3.5 Brokers or Finders. No agent, broker, investment banker or other firm
or Person, including any of the foregoing that is an Affiliate of the Purchaser,
is or will be entitled to any broker's fee or any other commission or similar
fee from the Purchaser in connection with any of the transactions contemplated
by this Agreement that the Company will be responsible for pursuant to Section
9.9.
3.6 Accredited Investor. The Purchaser is an "Accredited Investor" within
the meaning of Rule 501 promulgated under the Securities Act.
3.7 Investment Experience; Economic Risk. The Purchaser acknowledges that
it is able to fend for itself, can bear the economic risk of its investment
pursuant to this Agreement, and has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits and risks of the
investment in the Series A Preferred Stock. The Purchaser also represents it has
not been organized for the purpose of acquiring the Series A Preferred Stock.
3.8 Disclosure of Information. The Purchaser represents that it believes
that it has received all the information it considers necessary or appropriate
for deciding whether to purchase the Series A Preferred Stock. The Purchaser has
reviewed the Form 10-K and the Company's filings with the SEC and the Company's
public announcements regarding its business prospects, understands the
implications thereof and acknowledges that the circumstances and risks described
therein remain fully operative and in effect notwithstanding the investment
being made hereunder by the Purchaser. The Purchaser further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock and the business, properties, prospects and financial condition of the
Company.
SECTION 4: Covenants of the Company.
4.1 Compliance with Laws. The Company will comply in all material respects
with all applicable statutes, rules, regulations and orders of all governmental
authorities, with respect to the conduct of its business and the ownership of
its properties, including without limitation, those relating to protection of
the environment and human health, equal employment opportunity, employee safety,
ERISA and international trade laws and regulations, and apply for obtain and
maintain all permits necessary for the conduct of its business and the ownership
of its properties.
4.2 Insurance. The Company will maintain insurance with insurers believed
by the Company to be responsible for such insurance, in such amounts and of such
types as are, to the Company's Knowledge, customarily carried under similar
circumstances by companies engaged in the same or a similar business or having
similar properties similarly situated.
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4.3 Payment of Taxes and Other Charges. The Company will pay or discharge,
before the same shall become delinquent, all material taxes, assessments and
other governmental charges or levies imposed upon it or any of its properties or
income (including, without limitation, such as may arise under Sections 4062,
4063, or 4064 of ERISA or any similar provision of law), provided, however, that
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith pursuant to appropriate
proceedings.
4.4 Financial Statements and Other Reports.
(a) The Company will, as soon as practicable after the end of each
quarterly period (other than the last quarterly period) in each fiscal year,
furnish to the Purchaser statements of consolidated net income and cash flows
and a statement of changes in consolidated stockholders' equity of the Company
for the period from the beginning of the then current fiscal year to the end of
such quarterly period, and a consolidated balance sheet of the Company as of the
end of such quarterly period, setting forth in each case in comparative form
figures for the corresponding period or date in the preceding fiscal year, all
in reasonable detail and certified by an authorized financial officer of the
Company, subject to changes resulting from year-end adjustments; provided,
however, that delivery pursuant to clause (c) below of a copy of the Quarterly
Report on Form 10-Q of the Company for such quarterly period filed with the
Commission shall be deemed to satisfy the requirements of this clause (a);
(b) The Company will, as soon as practicable after the end of each
fiscal year, furnish to Purchaser statements of consolidated net income and cash
flows and a statement of changes in consolidated stockholders' equity of the
Company for such year, and a consolidated balance sheet of the Company as of the
end of such year, setting forth in each case in comparative form the
corresponding figures from the preceding fiscal year, all in reasonable detail
and examined and reported on by independent public accountants of recognized
national standing selected by the Company; provided, however, that delivery
pursuant to clause (c) below of a copy of the Annual Report on Form 10-K of the
Company for such fiscal year filed with the Commission shall be deemed to
satisfy the requirements of this clause (b) and;
(c) The Company will, promptly upon transmission thereof, furnish to
the Purchaser copies of all such financial statements, proxy statements, notices
and reports as it shall send to its stockholders.
4.5 Lost, Stolen, Damaged and Destroyed Stock Certificates. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificate for shares of Series A Preferred Stock (or any
certificate for the shares of Common Stock into which the Series A Preferred
Stock is convertible) and in the case of loss, theft or destruction, upon
delivery of an indemnity satisfactory to the Company (which, in the case of the
Purchaser, may be an undertaking by the Purchaser so to indemnify the Company),
or, in the case of mutilation, upon surrender and cancellation thereof, the
Company will issue a new certificate of like tenor for a number of shares of
Series A Preferred Stock (or, if applicable, shares of Common Stock into which
the Series A Preferred Stock is convertible) equal to the number of shares of
such stock represented by the certificate lost, stolen, destroyed or mutilated.
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4.6 Related Party Transactions. Any transaction between the Company and
an executive officer or director shall be approved by the Board of Directors,
including the approval of the disinterested directors, if any, on the Board of
Directors. In the event of an issuance of any equity security of the Company
after the date hereof to any person who is a Related Party as of the date
hereof, no liquidation preference shall be payable on such security in an amount
per share greater than the issue price per share of such security. The proceeds
from the sale of the Series A Preferred Stock pursuant to this Agreement shall
not be used to make any payments to BRE Properties, Inc., or any Affiliate
thereof (collectively, "BRE"), provided, however, that the obligations set forth
in this sentence only shall expire and cease to be of any effect as of the date
that is six months after the date of this Agreement.
4.7 Reservation of Shares. From and after the Closing Date, the Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock.
4.8 Notice of Limited Offering Exemption.
The Company shall have completed and executed a "Notice of Transaction
pursuant to Corp. Code 25102(f)" in form suitable for filing with the
Commissioner of Corporations of the State of California, with respect to the
shares of Series A Preferred Stock purchased by the Purchaser hereunder and the
shares of Common Stock issuable upon conversion of such shares.
4.9 Further Rights
In the event that either the Company or an Acquiring Entity (as defined in
the Certificate of Designation) affords any rights to any holder of Common
Stock, the Series A Preferred Stock, upon conversion as provided for in the
Certificate of Designation, shall be afforded rights on no less beneficial
terms.
4.10 Notice of Breach
As promptly as practicable, and in any event not later than ten Business
Days after senior management of the Company becomes aware of any breach by the
Company of any provision of this Agreement, including, without limitation, this
Article 4, the Company shall provide the Purchaser with written notice
specifying the nature of such breach and any actions proposed to be taken by the
Company to cure such breach.
SECTION 5: Covenants of the Purchaser
5.1 Voting Rights.
The Purchaser acknowledges that the shares of Series A Preferred Stock
purchased under this Agreement have no voting rights associated with them except
as expressly provided for under the Certificate of Designation. To the extent
that there are voting rights afforded to the Purchaser by operation of law, such
rights being in addition to those rights expressly provided for in the
Certificate of Designation, the Purchaser hereby waives such rights. To the
extent that
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any of the aforementioned rights may not be waived, Purchaser hereby agrees to
vote in favor of any transaction, approved by the Board of Directors, upon which
the Purchaser is entitled to vote.
SECTION 6: Restrictions on Transfer.
Neither the Purchaser nor any of its respective Affiliates shall, directly
or indirectly, sell, transfer, pledge, encumber or otherwise dispose of
(collectively, a "Transfer") any of the Series A Preferred Stock or Common Stock
received upon conversion of the Series A Preferred Stock, except for: (a)
Transfers to or between Affiliates who agree to be bound by the provisions of
this Agreement; (b) Transfers of Series A Preferred Stock or Common Stock
received upon conversion of the Series A Preferred Stock pursuant to the
exercise of the registration rights set forth in the Investor's Rights
Agreement; or (c) other Transfers that comply with the provisions of the
Securities Act (without thereby imposing any registration obligations on the
Company other than as set forth in the Investor's Rights Agreement). The
Company may require, in connection with any Transfer pursuant to the preceding
clause (c), an opinion of counsel to the Purchaser that such Transfer complies
with the provisions of the Securities Act.
SECTION 7: Conditions.
7.1 Conditions to Each Party's Obligations to Effect the Transactions
Contemplated Hereby. The respective obligations of each party to
effect the transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or decree by any court of competent jurisdiction which
prevents the consummation of the transactions contemplated hereby or imposes
material conditions with respect thereto shall have been issued and remain in
effect (each party agreeing to use its reasonable efforts to have any such
injunction, order or decree lifted).
(b) No action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or Federal government or
governmental agency which would prevent the consummation of the transactions
contemplated by this Agreement or imposes material conditions with respect
thereto.
(c) All consents and approvals of governmental entities legally
required for the consummation of the transactions contemplated by this Agreement
shall have been obtained and be in effect at the applicable Closing Date, except
those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect or materially
impair the ability of any party to this Agreement to consummate the transactions
contemplated by this Agreement.
(d) The offer and sale of the Shares to Purchaser pursuant to this
Agreement shall be exempt from the registration requirements of the Act, and the
registration and/or qualification requirements of all applicable state
securities laws
10
7.2 Conditions to Purchaser's Obligations to Effect the Transactions
Contemplated Hereby. The obligations of the Purchaser to effect the
transactions contemplated by this Agreement shall be subject to the fulfillment
at or prior to the applicable Closing Date of the following additional
conditions:
(a) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the applicable Closing Date, and the representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects (if not qualified by materiality) and true and correct (if so
qualified) on and as of the date of this Agreement and at and as of the
applicable Closing Date as if made at and as of the applicable Closing Date,
except to the extent that any such representation or warranty expressly relates
to another date (in which case, as of such date).
(b) The consent or approval of each third party whose consent or
approval shall be required in connection with the transactions contemplated
hereby shall have been obtained.
(c) Purchaser shall have received an opinion of ▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇, LLP, counsel to the Company, substantially in the form attached hereto
as Exhibit B.
---------
(d) The Company and the stockholders listed on the signature pages
thereto shall have executed and delivered the Investor's Rights Agreement
substantially in the form attached hereto as Exhibit A.
---------
(e) Since the date of this Agreement, there shall not have been any
change or events which have resulted or would in reasonable probability result
in a Material Adverse Effect.
(f) The Company shall have filed the Certificate of Designation
substantially in the form attached hereto as Exhibit C with the Delaware
---------
Secretary of State.
7.3 Conditions to Company's Obligations to Effect the Transactions
Contemplated Hereby. The obligations of the Company to effect the
transactions contemplated by this Agreement shall be subject to the fulfillment
at or prior to the applicable Closing Date of the following additional
conditions:
(a) The Purchaser shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all material respects
(if not qualified by materiality) and true and correct (if so qualified) on and
as of the date of this Agreement and at and as of the Closing Date as if made at
and as of the Closing Date, except to the extent that any such representation or
warranty expressly relates to another date (in which case, as of such date).
(b) The Purchaser shall have executed and delivered the Investor's
Rights Agreement substantially in the form attached hereto as Exhibit A.
---------
11
SECTION 8: Interpretation.
8.1 Definitions.
"Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
"beneficially own" with respect to any Series A Preferred Stock shall mean
having "beneficial ownership" of such Series A Preferred Stock (as determined
pursuant to Rule 13d-3 under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in writing.
"Board of Directors" shall mean the board of directors of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday, or a day
on which banking institutions in the State of California are authorized or
obligated by law or executive order to close.
"Certificate of Designation" shall mean the Certificate of Designation of
Series A Convertible Preferred Stock of the Company substantially in the form
attached hereto as Exhibit C.
---------
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consolidated" or "consolidated," when used with reference to any financial
term in this Agreement (but not when used with respect to any tax return or tax
liability), shall mean the aggregate for two or more Persons of the amounts
signified by such term for all such Persons, with inter-company items eliminated
and, with respect to earnings, after eliminating the portion of earnings
properly attributable to minority interests, if any, in the capital stock of any
such Person or attributable to shares of preferred stock of any such Person not
owned by any other such Person.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include reference to the comparable section, if any, of any such
successor Federal statute.
"Knowledge" of the Company, when modifying a representation or warranty,
means the Company has no actual knowledge that such representation or warranty
is not true and correct to the extent provided therein and that (i) the Company
has made appropriate inquiries of its executive officers and (ii) nothing has
come to the Company's attention in the course of such inquiries which would
cause the Company, in the exercise of due care, to believe that such
representation or warranty is not true and correct to the extent provided
therein; provided that the Company shall be deemed to have satisfied the
foregoing requirements by making appropriate inquiries of its executive
officers.
12
"Person" shall mean any individual, firm, corporation, partnership or other
entity, and shall include any successor (by merger or otherwise) of such entity.
"Related Party" shall mean any officer, director or beneficial holder
(including but not limited to BRE Properties, Inc.) of 5% or more of the
outstanding shares of capital stock of the Company or any Subsidiary, any
spouse, former spouse, child, parent, parent of a spouse, sibling or grandchild
of any such officer, director or beneficial holder of the Company or any
Subsidiary, and any Affiliate or Associate of any of the foregoing Persons.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power or the Voting Securities or equity interest is
owned, directly or indirectly, by such Person.
"Voting Securities" of any Person shall mean at any time shares of any
class of capital stock of such Person which are then entitled to vote generally
in the election of directors.
8.2 Accounting Principles.
The character or amount of any asset, liability, capital account or reserve
and of any item of income or expense required to be determined pursuant to this
Agreement, and any consolidation or other accounting computation required to be
made pursuant to this Agreement, and the construction of any definition in this
Agreement containing a financial term, shall be determined or made, as the case
may be, in accordance with generally accepted accounting principles, to the
extent applicable, unless such principles are inconsistent with the express
requirements of this Agreement.
SECTION 9: Miscellaneous.
9.1 Severability. If any term, provision, covenant or restriction of this
Agreement or any exhibit hereto is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement and such exhibits shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such which may be hereafter declared
invalid, void or unenforceable.
9.2 Specific Enforcement. Each of the Purchaser and the Company
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction to prevent breaches of the provisions
of this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state thereof having jurisdiction, this
being in addition to any other remedy to which they may be entitled at law or
equity.
13
9.3 Entire Agreement. This Agreement (including the documents referred to
herein or set forth in the exhibits hereto) contains the entire understanding of
the parties with respect to the transactions contemplated hereby.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.5 Notices and other Communications. All notices, consents, requests,
instructions, approvals, financial statements, proxy statements, reports and
other communications provided for herein shall be in writing and shall be
delivered personally, by facsimile or sent by prepaid overnight courier service,
to:
The Company: VelocityHSI, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile #: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇
Facsimile #: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
The Purchaser: At the address or facsimile number set forth on the
signature pages hereto.
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile #: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and P. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
9.6 Amendments. This Agreement may be amended as to the Purchaser and its
successors and assigns, and the Company may take any action herein prohibited,
or omit to perform any act required to be performed by it, if the Company shall
obtain (i) the written consent of the Purchaser and/or such successors and
assigns who are the registered holders of not less than a majority of the
outstanding shares of Series A Preferred Stock then held by the Purchaser and
its successors or assigns; provided, however, that without the consent of each
14
holder affected, however, no amendment or waiver may (with respect to any shares
of Series A Preferred Stock held by a nonconsenting holder of shares of Series A
Preferred Stock):
(a) reduce the aggregate number of shares of Series A Preferred Stock
whose holders must consent to an amendment or waiver of any provision of this
Agreement; or
(b) make any change in the foregoing amendment and waiver provisions.
This Agreement may not be waived, changed, modified, or discharged orally,
but only by an agreement in writing signed by the party or parties against whom
enforcement of any waiver, change, modification or discharge is sought or by
parties with the right to consent to such waiver, change, modification or
discharge on behalf of such party.
9.7 Cooperation. The Purchaser and the Company agree to take, or cause to
be taken, all such further or other actions as shall reasonably be necessary to
make effective and consummate the transactions contemplated by this Agreement.
9.8 Successors and Assigns. All covenants and agreements contained herein
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns. This Agreement and the rights and obligations therein
may not be assigned by Purchaser without the written consent of the Company
except to a parent corporation, a subsidiary or affiliate. This Agreement may
not be assigned by the Company without the written consent of Purchaser.
9.9 Expenses and Remedies.
(a) Irrespective of whether the Closing is effected, each party to
this Agreement shall pay all costs and expenses that it incurs with respect to
the negotiation, execution, delivery and performance of this Agreement and any
of the other documents associated with the consummation of the transactions
contemplated herein. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the Investor's Rights Agreement or the
Certificate of Designation, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
(b) The Company further agrees to indemnify and hold harmless the
Purchaser and the Purchaser's officers, directors, partners, employees, trustees
and agents, each Person who controls the Purchaser within the meaning of the
Securities Act or the Exchange Act, from and against any and all costs,
expenses, damages or other liabilities resulting from any breach of this
Agreement by the Company, including any legal, administrative or other
proceedings arising out of such breach (other than such costs, expenses, damages
or other liabilities resulting, directly or indirectly, from (i) the breach by
the Purchaser of any of its representations, warranties or other agreements
contained herein, (ii) the gross negligence or willful misconduct of the
Purchaser or any of its officers, directors, partners, employees or agents, or
any Person who controls the Purchaser within the meaning of the Securities Act
or the Exchange Act or (iii) an ERISA violation resulting from any action or
inaction by the Purchaser, other than an ERISA violation resulting from a breach
by the Company of this Agreement); provided, however, that, if and to the extent
that such indemnification is unenforceable for any reason, the Company shall
make
15
the maximum contribution to the payment and satisfaction of such indemnified
liability which shall be permissible under applicable laws.
(c) The indemnified party under this Section 9.9 will, promptly after
the receipt of notice of the commencement of any action against such indemnified
party in respect of which indemnity may be sought from the Company on account of
an indemnity agreement contained in this Section 9.9 notify the Company in
writing of the commencement thereof. The omission of any indemnified party so to
notify the Company of any such action shall not relieve the Company from any
liability which it may have to such indemnified party except to the extent the
Company shall have been prejudiced by the omission of such indemnified party so
to notify the Company, pursuant to this Section 9.9. In case any such action
shall be brought against any indemnified party and it shall notify the Company
of the commencement thereof, the Company shall be entitled to participate
therein and, to the extent that it may wish, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the Company to such indemnified party of its election so to assume the defense
thereof, the Company will not be liable to such indemnified party under this
Section 9.9 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof nor for any settlement
thereof entered into without the consent of the Company; provided, however, that
(i) if the Company shall elect not to assume the defense of such claim or action
or (ii) if the indemnified party reasonably determines (x) that there may be a
conflict between the positions of the Company and of the indemnified party in
defending such claim or action or (y) that there may be legal defenses available
to such indemnified party different from or in addition to those available to
the Company, then separate counsel for the indemnified party shall be entitled
to participate in and conduct the defense, in the case of (i) and (ii) (x), or
such different defenses, in the case of (ii)(y), and the Company shall be liable
for any reasonable legal or other expenses incurred by the indemnified party in
connection with any such defenses. The obligations of the Company to each
indemnified party hereunder shall be separate obligations, and the Company's
liability to any such indemnified party hereunder shall not be extinguished
solely because any other indemnified party is not entitled to indemnity
hereunder. The obligations of the Company under this Section 9.9 shall survive
the redemption or purchase by the Company of the shares of Series A Preferred
Stock purchased by any Purchaser, any transfer of the Series A Preferred Stock
by any Purchaser and the termination of this Agreement, the Series A Preferred
Stock, and any of the other documents executed in connection herewith.
9.10 Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith shall survive for two years from the Closing Date, regardless of any
investigation made by or on behalf of any party.
9.11 Transfer of Series A Preferred Stock. The Purchaser understands and
agrees that the Series A Preferred Stock has not been registered under the
Securities Act or the securities laws of any state and that they may be sold or
otherwise disposed of only in one or more transactions registered under the
Securities Act and, where applicable, such laws or transactions as to which an
exemption from the registration requirements of the Securities Act and, where
applicable, such laws is available. The Purchaser acknowledges that, except as
provided in the Investor's Rights Agreement, the Purchaser has no right to
require the Company
16
to register the Series A Preferred Stock. The Purchaser understands and agrees
that each certificate representing the Series A Preferred Stock shall bear
legends substantially in the form as follows:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act")
or the securities laws of any state and may not be sold or otherwise
disposed of except pursuant to an effective registration statement
under such Act and applicable state securities laws or an applicable
exemption to the registration requirements of such Act or such laws."
9.12 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of California
(as permitted by Section 1646.5 of the California Civil Code or any similar
successor provision) without giving effect to any choice of law rule that would
cause the application of the laws of any jurisdiction other than the internal
laws of the State of California to the rights and duties of the parties. Each of
the parties hereto hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of California and of the
United States of America, in each case located in the County of San Francisco,
for any action, proceeding or investigation in any court or before any
governmental authority ("litigation") arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to commence
any litigation relating thereto except in such courts), and further agrees that
service of any process, summons, notice or document by U.S. Registered Mail to
its respective address set forth in this Agreement shall be effective service of
process for any litigation brought against it in any such court. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any litigation arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of California or the
United States of America, in each case located in the County of San Francisco,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such litigation brought in any such
court has been brought in an inconvenient forum. Each of the parties irrevocably
and unconditionally waives, to the fullest extent permitted by applicable law,
any and all rights to trial by jury in connection with any litigation arising
out of or relating to this Agreement or the transactions contemplated hereby.
9.13 Publicity. Each of the parties hereto agrees that it will make no
statement regarding the transactions contemplated hereby without the prior
written consent of the other party hereto. Notwithstanding the foregoing, each
of the parties hereto may, in any public disclosure, press release or document
required to be filed by it with the Securities and Exchange Commission or other
regulatory bodies, make such statements with respect to the transactions
contemplated hereby as each may be advised is legally necessary upon advice of
its counsel (in which case, the disclosing party will use its reasonable
commercial efforts to advise and consult with the other party prior to making
the disclosure).
9.14 Signatures.
17
This Agreement shall be effective upon delivery of original signature pages or
facsimile copies thereof executed by each of the parties hereto.
18
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
agreement to be executed and delivered by their respective officers thereunto
duly authorized.
COMPANY
VELOCITYHSI, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and CEO
PURCHASER
BANC OF AMERICA MORTGAGE CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Vice President
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile #: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Number of Shares: 2,083,333
Purchase Price: $2,500,000
19