TRIANGLE IMAGING GROUP, INC.
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SERIES D CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
JUNE 30, 1999
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TABLE OF CONTENTS
ARTICLE 1 AUTHORIZATION AND SALE OF SHARES..................................1
Section 1.1 Authorization................................................1
1.1.1 Series D Preferred Stock........................................1
Section 1.2 Purchase and Sale of Purchased Shares........................1
1.2.1 Purchased Shares................................................1
1.2.2 The Closing.....................................................1
1.2.3 Use of Proceeds.................................................1
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................2
Section 2.1 Business; Organization, Corporate Power and Authority, etc...2
Section 2.2 Validity.....................................................2
Section 2.3 Capitalization; Status of Capital Stock......................2
Section 2.4 Taxes........................................................3
Section 2.5 Litigation...................................................3
Section 2.6 No Violations................................................4
Section 2.7 Compliance with Other Instruments; None Burdensome...........4
2.7.1 Other Agreements................................................4
2.7.2 Other Agreements of Officers, etc...............................4
Section 2.8 Governmental Consents, etc...................................4
Section 2.9 Transactions with Affiliates.................................4
Section 2.10 Compliance with Law.........................................5
Section 2.11 Financial Statements........................................5
Section 2.12 Absence of Undisclosed Liabilities..........................5
Section 2.13 Absence of Certain Changes or Events........................5
Section 2.14 Material Contracts..........................................6
Section 2.15 Title to Assets.............................................8
Section 2.16 Compliance with Securities Laws.............................8
Section 2.17 Intellectual Property.......................................8
2.17.1 Intellectual Property Assets...................................8
2.17.2 Agreements.....................................................9
2.17.3 Know-How Necessary for the Business............................9
2.17.4 Patents........................................................9
2.17.5 Trademarks....................................................10
2.17.6 Copyrights....................................................10
2.17.7 Trade Secrets.................................................11
Section 2.18 Environment and Safety Laws................................11
Section 2.19 Minute Books...............................................11
Section 2.20 Bankruptcy.................................................11
Section 2.21 No Guaranties..............................................11
Section 2.22 Insurance..................................................11
Section 2.23 Manufacturing and Marketing Rights.........................11
Section 2.24 Returns, Complaints and Warranties.........................12
Section 2.25 Financial Solvency.........................................12
Section 2.26 Disclosure.................................................12
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF INVESTOR.......................13
Section 3.1 Validity....................................................13
Section 3.2 Investment Intent...........................................13
Section 3.3 Resale Restrictions.........................................13
Section 3.4 Diligence...................................................14
Section 3.5 Reliance....................................................15
Section 3.6 Status......................................................15
ARTICLE 4 CONDITIONS OF PURCHASE...........................................15
Section 4.1 Investor Condition..........................................15
4.1.1 Certificate of Company.........................................15
4.1.2 Opinion of Counsel.............................................15
4.1.3 Authorization; Consents........................................15
4.1.4 Articles of Incorporation......................................15
4.1.5 Investor Rights Agreement......................................16
4.1.6 Registration Rights Agreement..................................16
4.1.7 Stock Purchase Warrant.........................................16
4.1.8 Board of Directors...............................................
4.1.9 All Proceedings Satisfactory...................................16
4.1.10 Approvals.....................................................16
4.1.11 Payment of Fees...............................................16
Section 4.2 Company's Conditions........................................16
4.2.1 Certificate of Investor........................................16
4.2.2 Full Purchase Price............................................16
4.2.3 SBA Compliance.................................................16
ARTICLE 5 COVENANTS OF THE COMPANY.........................................16
Section 5.1 Financial Statements........................................17
Section 5.2 Conduct of Business.........................................17
Section 5.3 Public Announcements........................................17
Section 5.4 Insurance...................................................17
Section 5.5 Maintenance of Properties...................................17
Section 5.6 Affiliated Transactions.....................................17
Section 5.7 Inspection..................................................17
Section 5.8 Board of Directors Meetings.................................18
Section 5.9 Dividends...................................................18
Section 5.10 Loans and Advances.........................................18
Section 5.11 Indebtedness...............................................18
Section 5.12 "C"Corporation.............................................18
Section 5.13 Maintenance of Intellectual Property Assets................18
Section 5.14 Legal Opinion..............................................18
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ARTICLE 6 COVENANTS OF THE INVESTOR........................................19
Section 6.1 Right of First Offer........................................19
Section 6.1 Confidentiality.............................................19
ARTICLE 7 INDEMNIFICATION..................................................19
Section 7.1 Investor Indemnification....................................19
Section 7.2 Company Indemnification.....................................19
Section 7.3 Indemnification Generally...................................19
Section 7.4 Final Adjudication..........................................20
ARTICLE 8 MISCELLANEOUS....................................................20
Section 8.1 Broker's Fee................................................20
Section 8.2 SBA Compliance..............................................20
Section 8.3 Amendments And Waivers......................................20
Section 8.4 Survival of Covenants; Assignability of Rights..............21
Section 8.5 Governing Law/Enforcement...................................21
Section 8.6 Jurisdiction and Venue; Waiver of Jury Trial................21
Section 8.7 Section Headings............................................21
Section 8.8 Counterparts................................................21
Section 8.9 Notices and Demands.........................................21
Section 8.10 Severability...............................................22
Section 8.11 Definitions of Terms.......................................22
Section 8.12 Expenses...................................................23
Section 8.13 Entire Agreement...........................................24
EXHIBITS
Exhibit A.........Articles of Incorporation
Exhibit C.........Opinion of Counsel
Exhibit D.........Investor Rights Agreement
Exhibit E.........Registration Rights Agreement
Exhibit F.........Stock Purchase Warrant
DISCLOSURE SCHEDULE
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SERIES D CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
AGREEMENT made as of this 30th day of June, 1999, by and among TRIANGLE
IMAGING GROUP, INC. (the "Company"), a Florida corporation, with its current
principal place of business at ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, WATERSIDE CAPITAL CORPORATION (the "Investor"), and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, the Company's Chief Executive Officer and a principal shareholder (the
"Principal Shareholder").
ARTICLE 1
AUTHORIZATION AND SALE OF SHARES
SECTION 1.1. AUTHORIZATION .
1.1.1. SERIES D PREFERRED STOCK. The Company has
authorized the issuance and sale to the Investor of 700 shares (the "Purchased
Shares") of its authorized, but unissued shares of Series D Convertible
Preferred Stock (the "Series D Preferred Stock") having the designations, rights
and preferences and other terms and conditions as set forth in the Articles of
Amendment attached hereto as EXHIBIT A (the "Articles of Incorporation").
SECTION 1.2. PURCHASE AND SALE OF PURCHASED SHARES.
1.2.1. PURCHASED SHARES. On the terms and subject to
the conditions set forth in this Agreement, the Company will issue and sell to
the Investor, and the Investor will buy from the Company the Purchased Shares at
a price of $1,000 per share for an aggregate purchase price of $700,000.
1.2.2. THE CLOSING. The purchase and sale shall take
place at a closing (the "Closing") to be held at the office of Williams, Mullen,
▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
at 4:00 p.m. on June 30, 1999, or on such other date and at such time as may be
mutually agreed upon by the Company and the Investor, (the "Closing Date"). At
the Closing, the Company will deliver to the Investor a certificate for the
Purchased Shares against delivery to the Company of a receipt of a wire
transfer, or of a certified check in payment of the full purchase price
therefor.
1.2.3. USE OF PROCEEDS. The Company shall use the
proceeds from the sale of the Purchased Shares for the purpose of paying
Williams, Mullen, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ the $23,000 of outstanding legal fees due them
by the Company, to retire certain existing debt and for general working capital
purposes, but only to the extent permitted by the rules and regulations
promulgated from time to time by the Small Business Administration (the "SBA").
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Investor to enter into this Agreement, except as
set forth in the Disclosure Schedule attached hereto, the Company represents and
warrants that:
SECTION 2.1. BUSINESS; ORGANIZATION, CORPORATE POWER AND AUTHORITY,
ETC. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida and has full corporate power and
authority to own and hold its properties and to carry on its business as
presently conducted. The Company is duly licensed or qualified and in good
standing as a foreign corporation authorized to do business in all jurisdictions
in which the character of property owned or leased, or the nature of the
activities conducted by it, makes such licensing or qualification necessary,
except where the failure to so qualify would not have a material adverse effect
on the business, prospects, assets or condition, financial or otherwise, or
operations of the Company and each subsidiary of the Company taken as a whole
("Material Adverse Effect"). Except as set forth in Section 2.1 of the
Disclosure Schedule, the Company has no Subsidiaries and does not own of record
or beneficially any shares of capital stock or securities convertible into
capital stock of, or any other proprietary interest in, any Person.
SECTION 2.2. VALIDITY. The Company has all necessary power and
authority, and has taken all action required to execute, deliver and perform
this Agreement, the Investor Rights Agreement referred to in Section 4.1.5
hereof (the "Investor Rights Agreement"), the Registration Rights Agreement
referred to in Section 4.1.6 hereof (the "Registration Rights Agreement") the
Stock Purchase Warrant referred to in Section 4.1.7 hereof (the "Stock Purchase
Warrant"), and to issue, sell and deliver the Purchased Shares. This Agreement,
the Purchased Shares, the Investor Rights Agreement, the Registration Rights
Agreement, the Stock Purchase Warrant and all other documents and instruments
executed by the Company pursuant hereto when delivered, are and will be duly
authorized, valid and binding obligations of the Company, enforceable against
the Company, in accordance with their respective terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors; equitable principles limiting rights to specific performance; and, with
respect to the enforceability of the provisions set forth in the Registration
Rights Agreement, applicable federal securities law. Upon the issuance, sale and
delivery of the Purchased Shares in accordance with the terms hereof, the
Purchased Shares will be validly issued, fully paid and non-assessable and will
be free and clear of all liens, charges, restrictions, claims and encumbrances
of any kind, subject to restrictions on transfer under federal and state
securities laws, this Agreement, the Investor Rights Agreement and the Company's
Articles of Incorporation.
SECTION 2.3. CAPITALIZATION; STATUS OF CAPITAL STOCK. The Company
has, or before the Closing will have, a total authorized capitalization
consisting of (i) 50,000,000 shares of Common Stock ("Common Stock"), of which
13,654,402 shares are issued and outstanding and (ii) 1,000,000 shares of
Preferred Stock ("Preferred Stock") of which 1,500 shares of Series C Preferred
Stock is issued and outstanding and of which 700 shares will be designated
Series D Preferred Stock. On the date hereof, without giving effect to the
transactions contemplated hereby, no shares of Preferred Stock are issued or
outstanding other than the 1,500 shares of Series C Preferred Stock. All of the
issued and outstanding shares of common stock have been duly authorized and
validly issued, are fully paid, and non-assessable, and were issued in
compliance with all applicable state and federal securities laws. Except as set
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forth in Section 2.3 of the Disclosure Schedule, the Company has no options or
rights to purchase shares of its capital stock, or securities convertible into
shares of its capital stock, authorized, issued or outstanding, nor is the
Company obligated in any manner to issue shares of its capital stock or
securities convertible into or evidencing any right to acquire shares of its
capital stock, or to distribute to holders of any of its capital stock any
evidence of indebtedness or assets; (b) no Person has any preemptive right,
right of first refusal or similar right to acquire additional shares of capital
stock in connection with the sale and purchase of the Purchased Shares pursuant
to this Agreement or otherwise; (c) there are no restrictions on the transfer of
the shares of capital stock of the Company, other than those imposed by relevant
state and federal securities laws or the Company's Articles of Incorporation
(other than those contained in the Investor Rights Agreement); (d) no Person has
any right to cause the Company to effect the registration under the Securities
Act of 1933, as amended (the "1933 Act"), of any shares of capital stock or any
other securities (including debt securities) of the Company (other than those
contained in the Registration Rights Agreement or in that certain registration
rights agreement by and between the Company and the Investor dated October 15,
1998); (e) the Company has no obligation (other than that contained in that
certain Series C Preferred Stock Purchase Agreement by and between the Company
and the Investor dated October 15, 1998) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein, or to pay any
dividend or make any other distribution in respect thereto; and (f) there are no
voting trusts, stockholders' agreements, or proxies relating to any securities
of the Company. The Company has heretofore delivered to the Investor true and
correct copies of its Articles of Incorporation and Bylaws, each as amended and
in effect on the date hereof and certified by the Company's Secretary.
SECTION 2.4. TAXES. The Company is a "C" corporation. The Company
has a fiscal year end of December 31 and has accurately prepared, to the best of
its knowledge, and timely filed, or has made provision for the timely filing of,
all federal, state and other tax returns that are required to be filed by it and
has paid or made provision for the payment of all taxes that have become due
pursuant to such returns and, to the best of the Company's knowledge, all other
taxes, assessments and governmental charges which have become due and payable,
including, without limitation, all taxes which the Company is obligated to
withhold from amounts owing to employees, creditors and third parties. No
deficiency assessment with respect to or proposed adjustment of the Company's
federal, state, or other taxes is pending or threatened in writing. There is no
tax lien, whether imposed by any Federal, state, or other taxing authority,
outstanding against the assets, properties or business of the Company. Neither
the Company nor any of its stockholders has ever filed a consent pursuant to
Section 341(f) of the Code, relating to collapsible corporations.
SECTION 2.5. LITIGATION. There is no action, suit, proceeding or
investigation pending or threatened in writing against or affecting the Company
which might result, either in any case or in the aggregate, in or have a
Material Adverse Effect, or which questions the validity of, or hinders the
enforceability or performance of this Agreement, the Investor Rights Agreement,
the Registration Rights Agreement, the Stock Purchase Warrant or the Purchased
Shares, or any action taken or to be taken pursuant hereto; nor, to the best of
the Company's knowledge, has there occurred any event or does there exist any
condition on the basis of which any litigation, proceeding or investigation
might properly be instituted which may have a Material Adverse Effect. The
Company is not in default with respect to any order, writ, injunction, decree,
ruling or decision of any court, commission, board or other government agency
that might result in or have, either in any case or in the aggregate, a Material
Adverse Effect.
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SECTION 2.6. NO VIOLATIONS. The execution, delivery and performance
of this Agreement, the Investor Rights Agreement, the Registration Rights
Agreement, the Stock Purchase Warrant and any documents or instruments
delivered, executed and performed in connection therewith, the consummation of
the transactions contemplated hereby (including the issuance, sale and delivery
of the Purchased Shares), and compliance with the provisions hereof, will not
violate any provision of law, the Articles of Incorporation or Bylaws, as
amended, of the Company, any order of any court or other agency of government or
indenture, agreement or other instrument to which the Company is bound, or
conflict with, result in the breach of or constitute (with due notice or lapse
of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company in each case which would have a Material
Adverse Effect.
SECTION 2.7. COMPLIANCE WITH OTHER INSTRUMENTS; NONE BURDENSOME.
2.7.1. OTHER AGREEMENTS. The Company is not a party
to or bound by any agreement, contract or commitment or subject to any charter,
bylaw or other corporate restriction, which has a Material Adverse Effect, or
which in the future has a reasonable possibility (so far as the Company can
reasonably foresee, assuming, in the case of any contract, agreement or
commitment, that it is performed in accordance with its terms by all parties
thereto) of having a Material Adverse Effect.
2.7.2. OTHER AGREEMENTS OF OFFICERS, ETC. To the best
of the Company's knowledge, no officer or Key Employee of the Company is a party
to or bound by any agreement, contract or commitment, or subject to any
restriction, which has a Material Adverse Effect, or which in the future has a
reasonable possibility (so far as the Company can reasonably foresee) of having
a Material Adverse Effect or question the right of any such Person to
participate in the affairs of the Company. To the best of the Company's
knowledge, no Key Employee of the Company has any present intention of
terminating his or her employment with the Company, and the Company has no
present intention of terminating any such employment.
SECTION 2.8. GOVERNMENTAL CONSENTS, ETC. No consents, approvals or
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any federal, state or local governmental authority on the part
of the Company are required as a condition precedent to the valid execution and
delivery of this Agreement, the Investor Rights Agreement, the Registration
Rights Agreement, the Stock Purchase Warrant or the valid offer, issue, sale and
delivery of the Purchased Shares.
SECTION 2.9. TRANSACTIONS WITH AFFILIATES. There are no loans,
leases or other continuing transactions between the Company and any director or
officer of the Company, or any member of such director's or officer's immediate
family, or any Person controlled by them, or such directors or officers or their
immediate families.
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SECTION 2.10. COMPLIANCE WITH LAW. The Company is currently in
compliance in all material respects with all federal and state laws, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services and has obtained all material licenses, permits,
approvals and authorizations necessary or required to conduct its business and
affairs as previously and currently conducted and as the Company intends to
conduct it in the future.
SECTION 2.11. FINANCIAL STATEMENTS. The Company has delivered to the
Investor its Form 10-QSB filed with the U.S. Securities and Exchange Commission,
for the quarter ending March 31, 1999 and the related statements of operations,
retained earnings and statement of cash flows for the year then ended, and the
unaudited balance sheet and unaudited statement of operations for the period
ending April 31, 1999, copies of which financial statements are contained in
Section 2.11 of the Disclosure Schedule (the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") which have been applied on a consistent basis
throughout the periods indicated. The Financial Statements fairly present the
financial condition and operating results of the Company as of the dates and
during the periods indicated therein, are correct and complete in all material
respects, and are consistent with the books and records of the Company (which
books and records are correct and complete in all material respects), subject to
(in the case of the unaudited statements) normal recurring year-end audit
adjustments which are neither individually nor in the aggregate material.
SECTION 2.12. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set
forth on the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to March 31, 1998 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under GAAP to be reflected in the Financial Statements, which, in both
cases, individually or in the aggregate, are not material to the financial
condition or operating results of the Company.
SECTION 2.13. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31,
1998, there has not been:
2.13.1. any change in the consolidated assets,
liabilities, prospects, condition (financial or otherwise), affairs, earnings,
business, or operations of the Company from that reflected in the balance sheet
as of March 31, 1998, referred to in Section 2.11 above;
2.13.2. any materially adverse change in the
contingent obligations of the Company by way of guaranty or any assurance of
performance or payment, endorsement, indemnity, warranty or otherwise, except
changes in the ordinary course of business which have not been, either in any
case or in the aggregate, materially adverse;
2.13.3. any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the properties of
the Company, taken as whole;
2.13.4. any waiver by the Company of a valuable right
or of a material debt owed to it;
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2.13.5. any loans made by the Company to the Company's
employees, officers or directors other than advances of expenses made in the
ordinary course of business or in connection with employee stock purchases;
2.13.6. any declaration or payment of any dividend or
other distribution of the assets of the Company or any direct or indirect
redemption, purchase or acquisition of any of the Company's securities;
2.13.7. any labor organization activity or labor
unrest;
2.13.8. any material increase in the compensation of
any of the Company's Key Employees, officers or directors;
2.13.9. any resignation or termination of employment
of any officer or Key Employee of the Company;
2.13.10. any agreement entered into by the Company to
do any of the foregoing matters covered by Sections 2.13.1 through 2.13.9; or
2.13.11. any other event or condition of any character
which has had a Material Adverse Effect (given in light of the disclosure
contained in the Financial Statements and the Company's Business Plan).
SECTION 2.14. MATERIAL CONTRACTS. Except for this Agreement, the
Investor Rights Agreement, the Registration Rights Agreement, the Stock Purchase
Warrant and the contracts of the Company set forth in Section 2.14 of the
Disclosure Schedule (collectively, the "Contracts"), the Company is not a party
to or otherwise bound by any written or oral:
2.14.1. contract or series of contracts with the same
Person for the purchase of machinery, equipment, goods or services, or the
furnishing of services, which contracts require the future expenditure by the
Company of more than $25,000;
2.14.2. contract with any labor union (and, to the
best of the Company's knowledge, no organizational effort is being made with
respect to any of their employees);
2.14.3. contract or other commitment with any supplier
containing any provision permitting any party other than the Company to
renegotiate the price or other terms, or containing any pay-back or other
similar provision, upon the occurrence of a failure by the Company to meet its
obligations under the contract when due or the occurrence of any other event;
2.14.4. contract for the future purchase of fixed
assets or for the future purchase of materials, supplies or equipment in excess
of the greater of $10,000 or its normal operating requirements;
2.14.5. contract for the employment of any Key
Employee, officer or other person on a full-time or consulting basis, which is
not terminable on notice without cost or liability to the Company, except normal
severance arrangements and accrued vacation pay;
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2.14.6. bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or other plan, contract
or understanding pursuant to which benefits are provided to any employee of the
Company (other than group insurance plans applicable to employees generally);
2.14.7. agreement or indenture relating to the
borrowing of money or to the mortgaging or pledging of, or otherwise placing a
lien or security interest on, any asset of the Company or any agreement or
instrument evidencing any guaranty by the Company of payment or performance by
any other Person;
2.14.8. voting trust or agreement, stockholders'
agreement, pledge agreement, buy-sell agreement or first refusal or preemptive
rights agreement relating to any securities of the Company other than the
Investor Rights Agreement and that certain investor rights agreement by and
between the Company and Investor dated October 15, 1998;
2.14.9. agreement or obligation (contingent or
otherwise) to issue, sell or otherwise distribute or to repurchase or otherwise
acquire or retire any shares of its capital stock or any of its other equity
securities;
2.14.10. agreement under which the Company has
advanced or agreed to advance money, or under which the Company has agreed to
lease any property as lessee or lessor for annual lease payments in excess of
$5,000;
2.14.11. agreement under which the Company has granted
any person any registration rights, other than the Registration Rights Agreement
and that certain registration rights agreement by and between the Company and
Investor dated October 15, 1998;
2.14.12. any agreement under which the Company has
limited or restricted its right to compete with any Person in any respect;
2.14.13. contract or other commitment involving more
than $5,000, and not in the ordinary course of the Company's business;
2.14.14. agreement providing for disposition of the
business, assets or shares of the Company, agreement of merger or consolidation
to which the Company is a party or letter of intent with respect to the
foregoing; or
2.14.15. agreement or letter of intent with respect to
the acquisition of the business, assets or shares of any other Person.
The Company has supplied to or made available for review by counsel to
the Investor copies of all of the Contracts to which it is a party that counsel
has requested in writing. The Company, and each other party thereto, have in all
material respects performed all material obligations required to be performed by
such Persons to date under the Contracts, have received no written notice of
default and are not in default under any of the Contracts, unless such default
or failure to perform would not have a Material Adverse Effect. The Company is
in compliance in all material respects with the terms and provisions of its
Articles of Incorporation and Bylaws, as amended and in effect on the date
hereof.
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SECTION 2.15. TITLE TO ASSETS. With the exception of those of its
properties which are under lease, the Company has good title to, all of its
properties and assets and, except as set forth in Section 2.15 of the Disclosure
Schedule, there are no liens or other security interests outstanding against any
of these properties and assets. The term "properties" as used herein shall
include all property of whatever nature used by the Company in the conduct of
its business. All leases pursuant to which the Company leases real or personal
property are in good standing and are valid and effective in accordance with
their respective terms and there exists no default on the part of the Company or
other occurrence or condition which could result in a default or termination
thereof.
SECTION 2.16. COMPLIANCE WITH SECURITIES LAWS. Based in part on the
representations of the Investor set forth in Section 3 below, the Company has
complied with all applicable United States federal and state securities laws in
connection with the offer, issuance and sale of the Purchased Shares concurrent
with the closing of this transaction. The Company has not either directly or
through any agent, offered any securities to, or otherwise approached,
negotiated or communicated in respect of any securities with, any Person so as
thereby to require that the offer or sale of the Purchased Shares be registered
pursuant to the provisions of Section 5 of the 1933 Act or the registration or
qualification provisions of the blue sky laws of any state. Based in part on the
representations of the Investor set forth in Section 3 below, the offer, sale
and issuance of the Purchased Shares in conformity with the terms of this
Agreement are exempt from the registration requirements of Section 5 of the 1933
Act and all applicable state securities laws.
SECTION 2.17. INTELLECTUAL PROPERTY.
2.17.1. INTELLECTUAL PROPERTY ASSETS. For purposes of
this Agreement, the term "Intellectual Property Assets" includes:
2.17.1.1. the name Triangle Imaging Group,
Inc., all fictional business names, trading names, registered and unregistered
trademarks, service marks, and applications (collectively, "Marks");
2.17.1.2. all patents, patent applications,
and inventions and discoveries that may be patentable (collectively, "Patents");
2.17.1.3. all copyrights in both published
works and unpublished works (collectively, "Copyrights");
2.17.1.4. all rights in mask works
(collectively, "rights in Mask Works");
2.17.1.5. all know-how, trade secrets,
confidential information, customer lists, software, technical information, data,
process technology, plans, drawings, and blue prints (collectively, "Trade
Secrets"); owned, used, or licensed by the Company as licensee or licensor.
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2.17.2. AGREEMENTS. Section 2.17.2 of the Disclosure
Schedule contains a complete and accurate list and summary description of all
contracts or agreements relating to the Intellectual Property Assets to which
the Company is a party or by which the Company is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for commonly
available software programs with a value of less than $10,000 under which the
Company is the licensee. There are no outstanding and, to the Company's and the
Principal Shareholder's knowledge, no threatened disputes or disagreements with
respect to any such agreement.
2.17.3. KNOW-HOW NECESSARY FOR THE BUSINESS.
2.17.3.1. The Company is the owner of all right,
title, and interest in and to each of the Intellectual Property Assets necessary
for the operation of the Company's business as it is currently conducted or as
reflected in the Business Plan given to the Investor free and clear of all
liens, security interests, charges, encumbrances, equities, and other adverse
claims, and has the right to use without payment to a third party all of the
Intellectual Property Assets.
2.17.3.2. To the knowledge of the Company and
the Principal Shareholder, no employee of the Company has entered into any
contract or agreement that restricts or limits in any way the scope or type of
work in which the employee may be engaged or requires the employee to transfer,
assign, or disclose information concerning his work to anyone other than the
Company.
2.17.4. PATENTS.
2.17.4.1. Section 2.17.4 of the Disclosure
Schedule contains a complete and accurate list and summary description of all
Patents. The Company is the owner of all right, title, and interest in and to
each of the Patents, free and clear of all liens, security interests, charges,
encumbrances, entities, and other adverse claims.
2.17.4.2. All of the issued Patents are
currently in compliance with formal legal requirements (including payment of
filing, examination, and maintenance fees and proofs of working or use), are
valid and enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within 90 days after the Closing Date.
2.17.4.3. No Patent has been or is now involved
in any interference, reissue, reexamination, or opposition proceeding. To the
Company's and the Principal Shareholder's knowledge, there is no potentially
interfering patent or patent application of any third party.
2.17.4.4. No Patent is infringed or has been
challenged or threatened in any way. None of the products manufactured and sold,
nor any process or know-how used, by the Company infringes or is alleged to
infringe any patent or other proprietary right of any other Person.
2.17.4.5. All products made, used, sold under
the Patents have been marked with the property patent notice.
9
2.17.5. TRADEMARKS.
2.17.5.1. Section 2.17.5 of the Disclosure
Schedule contains a complete and accurate list and summary description of all
Marks. The Company is the owner of all right, title, and interest in and to each
of the Marks, free and clear of all liens, security interests, charges,
encumbrances, requires, and other adverse claims.
2.17.5.2. All Marks that have been registered
with the United States Patent and Trademark Office (which are listed on Section
2.17.5 of the Disclosure Schedule) are currently in compliance with all formal
legal requirements (including the timely post registration filing of affidavits
of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fee or taxes or actions
falling due within 90 days after the Closing Date.
2.17.5.3. No ▇▇▇▇ has been or is now involved in
any opposition, invalidation, or cancellation nor, to the Company's and the
Principal Shareholder's knowledge, is any such action threatened with respect to
any of the Marks.
2.17.5.4. To the Company's and the Principal
Shareholder's knowledge, there is no potentially interfering trademark or
trademark application of any third party.
2.17.5.5. To the Company's and the Principal
Shareholder's knowledge, no ▇▇▇▇ is infringed or has been challenged or
threatened in anyway. None of the Marks used by the Company infringes or is
alleged to infringe any trade name, trademark, or service ▇▇▇▇ of any third
party.
2.17.6. COPYRIGHTS.
2.17.6.1. Section 2.17.6 of the Disclosure
Schedule contains a complete and accurate list and summary description of all
Copyrights which are material to the conduct of the Company's business. The
Company is the owner of all right, title, and interest in and to each of the
Copyrights, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
2.17.6.2. All the Copyrights which are material
to the conduct of the Company's business have been registered and are currently
in compliance with formal legal requirements, are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date.
2.17.6.3. No Copyrights which are material to
the conduct of the Company's business are infringed or, to the Company's or the
Principal Shareholder's knowledge, nor have any such Copyrights been challenged
or threatened in any way. None of the subject matter of any of the Copyrights
which are material to the conduct of the Company's business infringes or is
alleged to infringe any copyright of any third party or is a derivative work
based on the work of a third party.
2.17.6.4. All works encompassed by the
Copyrights which are material to the conduct of the Company's business have been
marked with the property copyright notice.
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2.17.7. TRADE SECRETS.
2.17.7.1. With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any individual.
2.17.7.2. The Company has taken reasonable
precautions calculated to protect the secrecy, confidentiality, and value of its
Trade Secrets.
2.17.7.3. The Company has good title and an
absolute (but not necessarily exclusive) right to use the Trade Secrets. The
Trade Secrets are not part of the public knowledge or literature, and, to the
Company's knowledge, have not been used, divulged, or appropriated either for
the benefit of any person or to the detriment of the Company. No Trade Secret is
subject to any adverse claim or has been challenged or threatened in any way.
SECTION 2.18. ENVIRONMENT AND SAFETY LAWS. To the knowledge of the
Company and having received no notice to the contrary, the Company is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety and no material expenditures are
or will be required in order to comply with any such existing or pending
statute, law or regulation.
SECTION 2.19. MINUTE BOOKS. The copy of the minute book of the Company
provided to the Investor's counsel contains (a) minutes of all meetings of
directors and all actions by written consent without a meeting by the directors
since the date of incorporation (and accurately reflects all actions by the
directors and any committee of the directors and stockholders with respect to
all transactions referred to in such minutes in all material respects), and (b)
a complete and correct copy of the Company's Articles of Incorporation, Bylaws,
and stock transfer ledger.
SECTION 2.20. BANKRUPTCY. The Company is not bankrupt or insolvent, nor
is it a party to any current or threatened bankruptcy, insolvency or similar
proceeding.
SECTION 2.21. NO GUARANTIES. The Company has not guaranteed the
obligations or liabilities of any other person, firm or corporation.
SECTION 2.22. INSURANCE. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace fully any of its
properties that might be damaged or destroyed. The Company has in full force and
effect products liability and errors and omissions insurance with coverage
limits as set forth in Schedule 2.22. Section 2.22 of the Disclosure Schedule
sets forth with respect to each insurance policy (i) the name of the insurance
carrier, and (ii) a description of the coverage.
SECTION 2.23. MANUFACTURING AND MARKETING RIGHTS. The Company has
neither granted rights to manufacture, produce, assemble, license, market, or
sell its products to any other Person nor has the Company derived its rights to
manufacture, produce, assemble, license, market or sell its products from any
other Person and, except as set forth on such schedule, is not bound by any
agreement that affects the Company's right to develop, manufacture, assemble,
distribute, market, or sell its products.
11
SECTION 2.24. RETURNS, COMPLAINTS AND WARRANTIES. The Company has
received no customer complaints concerning alleged defects in its products (or
the design thereof) that, if true, would have a Material Adverse Effect. The
Company extends to its customers only those limited warranties set forth on
Section 2.24 of the Disclosure Schedule. The Company's limited warranty
obligations have never exceeded in any material amount the accruals the Company
makes for such obligations.
SECTION 2.25. FINANCIAL SOLVENCY. The Company is not entering into the
arrangements contemplated by this Agreement and the other documents contemplated
by this Agreement with actual intent to hinder, delay or defraud either present
or future creditors. On and as of the date hereof on a pro forma basis after
giving effect to the transactions contemplated by this Agreement:
2.25.1. The present fair salable value of the assets
of the Company (on a going concern basis) will exceed the probable liability of
the Company on its debts (including its contingent obligations);
2.25.2. The Company has not incurred, nor does it
intend to or believe that it will incur, debts (including contingent
obligations) beyond its ability to pay such debts as such debts mature (taking
into account the timing and amounts of cash to be received from any source, and
of amounts to be payable on or in respect of debts); and the amount of cash
available to the Company after taking into account all other anticipated uses of
funds is anticipated to be sufficient to pay all such amounts on or in respect
of debts, when such amounts are required to be paid; and
2.25.3. The Company will have sufficient capital with
which to conduct its present and proposed business and the property of the
Company does not constitute unreasonably small capital with which to conduct its
current business at present levels of operations.
For purposes of this Section 2.25, "debt" means any liability on a (i)
right to payment whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured; or (ii) right to an equitable remedy
for breach of performance if such breach gives rise to a payment, whether or not
such a right to an equitable remedy is reduced to judgment, fixed, contingent,
unmatured, disputed, undisputed, secured, or unsecured.
SECTION 2.26. DISCLOSURE.
2.26.1. Neither this Agreement, the Financial
Statements, the Company's public filings, the Business Plan, nor any
certificate, list, exhibit or written statement furnished by the Company to the
Investor or its counsel in connection herewith contains any untrue statement of
a material fact or, when read together, omits to state any material fact
necessary in order to make the statements contained therein not misleading to a
reasonable person in the light of the circumstances under which they are or were
made. There exists no fact or circumstances which has a Material Adverse Effect,
or which in the future has a reasonable possibility of having a Material Adverse
Effect, as the Company's business is presented currently and as it is presented
to be conducted in the future in the Business Plan, which has not been reflected
in the Financial Statements or as set forth in this Agreement or the Exhibits
and Disclosure Schedule hereto or fully disclosed in a written statement or
certificate furnished to the Investor by the Company pursuant to this Agreement.
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2.26.2. The projections contained in the Business Plan
or which have otherwise been delivered to the Investor for each of the fiscal
years ended December 31, 1999, and 2000, copies of which are contained in the
Disclosure Schedule of the Company have been prepared in good faith by the
principal financial officer of the Company using reasonable financial planning
assumptions which are disclosed in sufficient detail. The Company has no reason
to believe that such projections are incorrect or misleading in any material
respect. No representation is made as to whether the forecasted results will in
fact be realized; the Company's actual results in the future can be expected,
notwithstanding the accuracy of the representations contained in the preceding
two sentences, to vary from those forecasted, and such variations may be
material.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INVESTOR
In order to induce the Company and the Principal Shareholder to enter
into this Agreement, the Investor represents and warrants to the Company and the
Principal Shareholder that:
SECTION 3.1. VALIDITY. This Agreement, the Investor Rights Agreement,
the Registration Rights Agreement, the Stock Purchase Warrant and all other
documents and instruments executed by the Investor pursuant hereto, have each
been duly executed and delivered by the Investor and each is a legal, valid and
binding obligation of the Investor enforceable against the Investor in
accordance with its terms. All consents, approvals or authorizations of any
Person, and all qualifications, designations, declarations or filings with any
governmental authority, on the part of the Investor required as a condition
precedent to the valid execution and delivery of this Agreement, the Investor
Rights Agreement, the Registration Rights Agreement and the Stock Purchase
Warrant shall have been obtained or completed by the Investor prior to, and be
effective as of, the Closing.
SECTION 3.2. INVESTMENT INTENT. The Investor is acquiring the Purchased
Shares and the Stock Purchase Warrant for its own account, for investment, and
not with a view to any "distribution" thereof within the meaning of the 1933 Act
nor with any present intention of distributing or selling the same, or the
shares obtained upon conversion or exercise thereof, as the case may be; and,
except as contemplated by this Agreement, the Investor Rights Agreement, the
Registration Rights Agreement and the Stock Purchase Warrant and all the
documents and instruments executed by the Investor pursuant hereto, the Investor
has no present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof. The officers
of the Company have made available to the Investor any and all written
information which it has requested and have answered to the Investor's
satisfaction, all inquiries made by the Investor; the Investor has adequate net
worth and means of providing for its current needs and contingencies and to
sustain a complete loss of its investment in the Company. Nothing contained in
this Section 3.2 shall be construed as a waiver of any rights the Investor may
have under this Agreement or otherwise.
SECTION 3.3. RESALE RESTRICTIONS. The Investor understands that because
the Purchased Shares, the Stock Purchase Warrant, the shares of Common Stock
underlying the Stock Purchase Warrant (the "Warrant Stock"), and the shares
receivable upon conversion of the Purchased Shares (the "Conversion Stock") have
not been registered under the 1933 Act or any applicable state securities laws,
it cannot dispose of any or all of the Purchased Shares, the Stock Purchase
Warrant, Warrant Stock, or Conversion Stock unless the Purchased Shares, the
Stock Purchase Warrant, the Warrant Stock, or Conversion Stock are subsequently
registered under the 1933 Act and applicable state securities laws or exemptions
from such registration are available. The Investor acknowledges and understands
that, except as provided in the Registration Rights Agreement, it has no
independent right to require the Company to register the Purchased Shares, the
13
Stock Purchase Warrant, Warrant Stock, or the Conversion Stock under the 1933
Act or any state securities law. The Investor understands that the Company may,
as a condition to the transfer of any of the Purchased Shares, the Stock
Purchase Warrant, Warrant Stock, or the Conversion Stock require that the
request for transfer be accompanied by opinion of counsel the identity of which
is deemed reasonably acceptable to the Company, in form and substance
satisfactory to the Company, to the effect that the proposed transfer does not
result in violation of the 1933 Act and applicable state securities laws, unless
such transfer is covered by an effective registration statement under the 1933
Act and applicable state securities laws. The Investor understands that each
Warrant certificate representing the Warrant Shares and the Purchased Shares
will bear both of the following legends or ones substantially similar thereto
and that each certificate representing the Warrant Stock and the Conversion
Stock will bear the first of the following legends:
These securities have not been registered
under the Securities Act of 1933 or under any
state securities laws. These securities have
been acquired for investment and not with a
view to distribution or resale, and may not
be sold, mortgaged, pledged, hypothecated or
otherwise transferred without an effective
registration statement for such shares under
the Securities Act of 1933 and any applicable
state securities act(s), or an opinion of
counsel for the corporation that registration
is not required under such acts.
The securities represented by this
certificate are subject to the terms and
conditions of an Investor Rights Agreement
dated as of June 30, 1999. A copy of such
agreement is on file at the principal
executive offices of Triangle Imaging Group,
Inc., which will furnish copies of such
agreement to the holder of this certificate
upon request and without charge.
SECTION 3.4. DILIGENCE. The Investor has carefully reviewed the
representations concerning the Company contained in this Agreement and all
scheduled exceptions thereto, has read the Business Plan, has made detailed
inquiry concerning the Company, its business and its personnel, including all of
the securities filings the Company has publicly filed with the Securities and
Exchange Commission in 1998 and 1999, and is knowledgeable and experienced in
the making of venture capital investments, is able to bear the economic risk of
loss of its investment in the Company, has been granted the opportunity to make
a thorough investigation of the affairs of the Company, and has availed itself
of such opportunity to the extent it has deemed necessary, either directly or
through its authorized representative.
14
SECTION 3.5. RELIANCE. The Investor has been advised that the Purchased
Shares delivered hereunder have not been and are not being registered under the
1933 Act and that the Company in issuing the Purchased Shares is relying upon,
and will rely upon, among other things, the representations and warranties of
the Investor contained in this Section 3 in concluding that each such issuance
is a "private offering" and does not require compliance with the registration
provisions of the 1933 Act.
SECTION 3.6. STATUS. The Investor is an "accredited investor" as that
term is defined in Rule 501 of Regulation D under the 1933 Act.
ARTICLE 4
CONDITIONS OF PURCHASE
SECTION 4.1. INVESTOR CONDITION. The Investor's obligation to purchase
and pay for the Purchased Shares hereunder shall be subject to compliance, or
the waiver in writing by the Investor of compliance, by the Company and the
Principal Shareholder in all material respects with their agreements herein
contained and to the fulfillment on or before and at the Closing of the
following conditions:
4.1.1. CERTIFICATE OF COMPANY. The representations and
warranties of the Company contained in this Agreement, including but not limited
to the representations and warranties made in Section 2 shall be true and
correct in all material respects with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date; the
Company shall not have suffered an event resulting in a Material Adverse Effect
prior to the Closing; the conditions hereafter specified in this Article 4 shall
have been satisfied and the Investor shall have received a duly executed
certificate of the Chief Executive Officer of the Company, dated as of the
Closing Date, certifying such matters.
4.1.2. OPINION OF COUNSEL. The Investor shall have
received from legal counsel to the Company experienced in matters of Florida
corporate law, their opinion, dated the Closing Date, substantially in the form
attached as EXHIBIT C.
4.1.3. AUTHORIZATION; CONSENTS. The Board of Directors
and stockholders of the Company, to the extent necessary, shall have duly
adopted resolutions in form satisfactory to the Investor authorizing the Company
to consummate the transactions contemplated hereby to which it is a party in
accordance with the terms hereof, and the Investor shall have received a duly
executed certificate of the Secretary or an Assistant Secretary of the Company
dated the Closing Date setting forth a copy of such resolutions and such other
matters as may be requested by the Investor. The Company shall have obtained any
and all other consents, permits and waivers and made all filings necessary or
appropriate for consummation of the transactions contemplated by this Agreement.
4.1.4. ARTICLES OF INCORPORATION. The Articles of
Incorporation of the Company shall read as set forth in the Secretary's
certificate.
15
4.1.5. INVESTOR RIGHTS AGREEMENT. The Company, the
Investor and the Principal Shareholder shall have executed and delivered a
Investor Rights Agreement, substantially in the form of EXHIBIT D.
4.1.6. REGISTRATION RIGHTS AGREEMENT. The Company and
the Investor shall have executed and delivered a Registration Rights Agreement,
substantially in the form of EXHIBIT E.
4.1.7. STOCK PURCHASE WARRANT. The Company and the
Investor shall have executed and delivered a Stock Purchase Warrant,
substantially in the form of EXHIBIT F.
4.1.8. ALL PROCEEDINGS SATISFACTORY. All corporate and
other proceedings taken prior to or at the Closing in connection with the
transactions contemplated by this Agreement, and all documents and evidences
incident thereto, shall be reasonably satisfactory in form and substance to the
Investor and the Investor shall receive such copies thereof and other materials
(certified, if requested) as they may reasonably request in connection
therewith.
4.1.9. APPROVALS. If necessary, the Company shall have
received the requisite approvals of the securities commissioners of the
Commonwealth of Virginia and the State of Florida and such approvals shall be in
full force and effect on the closing date.
4.1.10. PAYMENT OF FEES. The Company shall have paid
from the proceeds of the sale of the Preferred Stock a closing/professional fee
of $35,000 to the Investor, as well as the fees and disbursements of Williams,
Mullen, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel to the Investor and SBA counsel.
SECTION 4.2. COMPANY'S CONDITIONS. The Company's obligation to issue
and sell the Purchased Shares hereunder shall be subject to compliance by the
Investor in all material respects with its agreements herein contained and to
the fulfillment on or before and at the Closing of the following conditions:
4.2.1. CERTIFICATE OF INVESTOR. The representations
and warranties of the Investor contained in this Agreement, including but not
limited to the representations and warranties made in Section 6, shall be true
and correct in all material respects with the same force and effect as those
such representations and warranties had been made on and as of the Closing Date.
4.2.2. FULL PURCHASE PRICE. The Investor shall have
delivered the entire amount of $700,000 in exchange for the Purchased Shares as
provided in this Agreement less the fees and expenses set forth in Section
4.1.10 and 1.2.3.
4.2.3. SBA COMPLIANCE. The terms and conditions of
this Agreement shall be in compliance with all statutes and regulations
governing the Investor as a small business investment company.
16
ARTICLE 5
COVENANTS OF THE COMPANY
Until none of the Purchased Shares are held by the Investor or its
Permitted Transferees, the Company shall comply with the following covenants:
SECTION 5.1. FINANCIAL STATEMENTS. The Company shall maintain a system
of accounts in accordance with generally accepted accounting principles, keep
full and complete financial records and furnish to the Investor on behalf of the
Investor the following reports: (i) no later than 120 days after the end of the
Company's fiscal year-end, audited Financial Statements certified by independent
public accountants of recognized standing (which shall be one of the five
largest independent public accounting firms in the United States, or such other
independent public accountants of recognized national or regional standing as
may be approved by the Investor, such approval not to be unreasonably withheld),
prepared in accordance with generally accepted accounting principles and
practices consistently applied; (ii) by the end of the second week after each
calendar quarter, its internally prepared Financial Statements which shall each
be prepared in a manner consistent with those prepared in the prior quarters.
SECTION 5.2. CONDUCT OF BUSINESS. The Company shall continue to engage
principally in the business described in its public securities filings and the
Business Plan The Company will keep in full force and effect its corporate
existence and will comply in all material respects with all applicable laws and
regulations in the conduct of its business.
SECTION 5.3. PUBLIC ANNOUNCEMENTS. The Company will deliver a copy of
any press release that refers in any way to the Investor prior to distribution
and to allow the Investor a reasonable period of time to provide comments on the
contents of the release. The Company shall promptly deliver to the Investor two
copies of any press releases within five business days after the publication of
such release or filing of such press release or form.
SECTION 5.4. INSURANCE. The Company shall keep its insurable properties
insured by financially sound and reputable insurers against the perils of
liability, casualty, fire and extended coverage in amounts of coverage at least
equal to those customarily maintained by companies in the same or a similar
business of similar size. The Company shall also maintain with such insurers
insurance against other hazards and risks and liability to persons and property,
to the extent and in the manner customary for corporations engaged in the same
or a similar business of similar size.
SECTION 5.5. MAINTENANCE OF PROPERTIES. The Company will maintain all
properties used or useful in the conduct of its business in good repair, working
order and condition as necessary to permit such business to be properly and
advantageously conducted in accordance with its Business Plan.
SECTION 5.6. AFFILIATED TRANSACTIONS. All transactions between the
Company and any officer, Key Employee, director or stockholder of the Company or
Persons controlled by or affiliated with such officer, Key Employee, director or
stockholder, shall be conducted on an arms-length basis, shall be on terms and
conditions no less favorable to the Company than could be obtained from
nonrelated Persons and shall be approved in advance by a majority of
disinterested Directors of the Company after full disclosure of the terms
thereof.
17
SECTION 5.7. INSPECTION. The Company shall permit the director
nominated by the Investor to visit and inspect any of the properties of the
Company, including its books of account (and to make copies thereof and take
extracts therefrom), and to discuss its affairs, finances and accounts with the
Company's officers, administrative employees and independent accountants, all at
such reasonable times and as often as may be reasonably requested; provided that
all such information provided to the Investor by the Company will be maintained
as confidential by the Investor and not be disclosed to third parties, and
provided, further, that the Investor shall take all reasonable precautions to
cause the Investor's officers and employees to take all measures reasonably
practicable to maintain the confidentiality of such information.
SECTION 5.8. BOARD OF DIRECTORS MEETINGS. The Company shall cause one
nominee of the Investor, who shall initially be J. ▇▇▇▇ ▇▇▇▇▇▇▇▇, to be elected
as a director at all meetings of stockholders, or consents in lieu thereof, for
such purpose during which any of the Preferred Stock is outstanding. The Company
will reimburse all direct out-of-pocket expenses reasonably incurred by the
director of the Company who is the nominee of the Investor in attending meetings
of the Board of Directors or any committee thereof. Any director nominated by
the Investor shall be entitled to the same reimbursement, whether in the form of
cash, stock, options, or stock equivalents, as other members of the Board, plus
reimbursement of all out-of-pocket expenses. The Company shall ensure that
meetings of its full Board of Directors are held no less than once a month in
the first quarter after issuance of the Preferred Stock and, following the
conclusion of the first quarter after issuance of the Preferred Stock, at its
discretion provided that meetings of the full Board shall be held not less than
quarterly each year thereafter. The Company's Articles of Incorporation and
Bylaws shall provide for indemnification and exculpation of directors from
personal liability, to the fullest extent permitted under applicable state law.
The Company shall obtain liability insurance for directors and officers
providing reasonable coverage and the payment of reasonable premiums.
SECTION 5.9. DIVIDENDS. The Company shall pay dividends on the
Purchased Shares pursuant to the terms of the Articles of Incorporation.
SECTION 5.10. LOANS AND ADVANCES. The Company will not make any loan or
advance to, or own any stock or other securities of, any Person (other than any
subsidiary of the Company) except for reasonable advances to employees in the
ordinary course of business.
SECTION 5.11. INDEBTEDNESS. Except for Indebtedness incurred by the
Company to shareholders on an arms length basis which has been approved by the
disinterested members of the Company's Board of Directors, the Company will not
create, incur, assume or suffer to exist any Indebtedness, or repay any
Indebtedness existing on the Closing Date, to its shareholders.
SECTION 5.12. "C" CORPORATION. The Company shall remain a "C"
Corporation.
SECTION 5.13. MAINTENANCE OF INTELLECTUAL PROPERTY ASSETS. At all
times, the Company shall maintain in good standing and take all action that may
be required to maintain all rights in its Intellectual Property Assets,
including, but not limited to, Patents, Trademarks, Copyrights and Trade
Secrets.
SECTION 5.14. KEY MAN LIFE INSURANCE. Within 120 days after the date of
this Agreement, the Company shall have obtained, and thereafter shall maintain
in full force and effect, a key man life insurance policy in the amount of
$700,000 on the life of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Principal Shareholder") which
names the Investor as the sole beneficiary and loss payee.
18
COVENANTS OF THE INVESTOR
SECTION 5.15. RIGHT OF FIRST OFFER. The Investor shall not sell or
transfer any Purchased Shares other than to any transferee who is an affiliate,
as that term is defined in the Investment Company Act of 1940, of the Investor
(including a shareholder of the Investor), unless the Investor first submits a
bona-fide written offer to the Company to purchase such Purchased Shares. The
Investor offer to the Company shall remain open and irrevocable for twenty (20)
business days. During the twenty (20) business day period commencing after the
receipt of such offer, the Company shall have the right to purchase all, but not
less than all, of such Purchased Shares upon such terms and conditions as are
specified in the offer. Promptly upon the expiration of such twenty (20)
business day period, any of such Purchased Shares not so purchased by the
Company may be sold by the Investor to a third party at the same price and upon
terms and conditions not materially less favorable to the Investor (taken as a
whole) than were offered the Company, but may not otherwise be sold without
again complying with this Section for a period of 90 days after expiration of
such twenty (20) business day period.
SECTION 5.16. CONFIDENTIALITY. The Investor and Investor's employees,
agents and representatives will keep confidential and will not disclose or
divulge (other than to Investor's Board of Directors) any confidential,
proprietary or secret information which Investor and/or its employees, agents
and representatives may obtain from the Company pursuant to Financial
Statements, reports, contracts and other materials submitted by the Company to
the Investor pursuant to this Agreement, or pursuant to visitation or inspection
rights granted under this Agreement unless such information is known or until
such information becomes known, to the public other than by action of the
Investor or its agents.
ARTICLE 6
INDEMNIFICATION
SECTION 6.1. INVESTOR INDEMNIFICATION. The Company shall indemnify the
Investor against all claims, losses, damages and liabilities, including legal
and other expenses reasonably incurred in investigating or defending against the
same, arising out of any breach of any representation, warranty or covenant made
by the Company and the Principal Shareholder in Articles 2 and 5 hereof.
SECTION 6.2. COMPANY INDEMNIFICATION. The Investor shall indemnify the
Company against all claims, losses, damages and liabilities, including legal and
other expenses reasonably incurred in investigating or defending against the
same, arising out of any breach of any representation, warranty or covenant made
in Articles 3 and 6 by the Investor.
SECTION 6.3. INDEMNIFICATION GENERALLY. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to this Article 6,
such person (the "Indemnified Party") shall promptly notify the person against
whom such indemnity may be sought (the "Indemnifying Party") in writing. No
indemnification provided for in Section 6.1 or 6.2 shall be available to any
party who shall fail to give notice as provided in this Section 6.3, but the
failure to give such notice shall not relieve the Indemnifying Party or parties
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from any liability which it or they may have to the Indemnified Party for
contribution or otherwise on account of the provisions of Section 6.1 or 6.2. In
case any such proceeding shall be brought against any Indemnified Party and it
shall notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such Indemnified Party and shall pay as incurred the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the Indemnifying Party shall pay as incurred the
fees and expenses of the counsel retained by the Indemnified Party in the event
(i) the Indemnifying Party and the Indemnified Party shall have mutually agreed
to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the Indemnifying Party agrees
to indemnify the Indemnified Party from and against any loss or liability by
reason of such settlement or judgment.
SECTION 6.4. FINAL ADJUDICATION. In the event indemnification arises as
a result of a third party claim against the Indemnifying Party, no
indemnification shall be made effective pursuant to this Article 6 until such
time as the Indemnifying Party shall have been finally adjudicated or otherwise
bound to be liable hereunder to such third party.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. BROKER'S FEE. Each party will indemnify and hold harmless
the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 7.2. SBA COMPLIANCE. Should it be determined that any provision
of this Agreement is in violation of any statute or regulation governing small
business investment companies, the parties agree that any such offending
provision shall be modified or re-written as may be reasonably necessary to
comply with the applicable statute or regulation and effect the parties'
original intent under this Agreement.
SECTION 7.3. AMENDMENTS AND WAIVERS. This Agreement may not be amended
or modified, and no provisions may be waived, without the written consent of the
Company, the Principal Shareholder and the Investor.
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SECTION 7.4. SURVIVAL OF COVENANTS; ASSIGNABILITY OF RIGHTS.
7.4.1. All covenants, agreements, representations and
warranties of the Company and the Principal Shareholder made herein and in the
certificates, lists, exhibits, schedules or other written information delivered
or furnished in connection therewith and herewith shall be deemed material and
to have been relied upon by the Investor, and, except as provided otherwise in
this Agreement, shall survive the entry into of this Agreement for a period of
two (2) years and shall bind the Company's and the Principal Shareholder's
successors and assigns, whether so expressed or not, and, except as provided
otherwise in this Agreement, all such covenants, agreements, representations and
warranties shall inure to the benefit of the Investor's successors and assigns
and to permitted transferees of the Purchased Shares, whether so expressed or
not.
7.4.2. All covenants, agreements, representations and
warranties of the Investor made herein shall be deemed material and to have been
relied upon by the Company, and, except as provided otherwise in this Agreement,
shall survive the delivery of the Purchased Shares and shall bind each of the
Investor's successors and assigns, whether so expressed or not and, except as
provided otherwise in this Agreement, all such covenants, agreements,
representations and warranties shall inure to the benefit of the Company's
successors and assigns whether so expressed or not.
SECTION 7.5. GOVERNING LAW/ENFORCEMENT. This Agreement shall be
governed by and construed in accordance with the substantive laws of the
Commonwealth of Virginia.
SECTION 7.6. JURISDICTION AND VENUE; WAIVER OF JURY TRIAL. The Company
consents to the jurisdiction of the Circuit Court of the City of Norfolk,
Virginia, for the purpose of any suit, action or other proceeding arising out of
any of its obligations arising under this Agreement or with respect to the
transactions contemplated hereby, and expressly waives (a) any and all
objections it may have as to venue in such court and (b) the right to a trial by
jury.
SECTION 7.7. SECTION HEADINGS. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision hereof.
SECTION 7.8. COUNTERPARTS. This Agreement may be executed
simultaneously in any number of counterparts, each of which when so executed and
delivered shall be taken to be an original; but such counterparts shall together
constitute but one and the same document.
SECTION 7.9. NOTICES AND DEMANDS. Any notice or demand which, by any
provision of this Agreement or any agreement, document or instrument executed
pursuant hereto or thereto, except as otherwise provided therein, is required or
provided to be given shall be deemed to have been sufficiently given or served
for all purposes three days after being sent by first class mail, postage and
charges prepaid to the following addresses: if to the Company, at its mailing
address set out above, or at any other address designated by the Company to the
Investor in writing; if to the Principal Shareholder at the Company's address;
if to the Investor at its mailing address of ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at any other address (or facsimile number)
designated by the Investor to the Company in writing with a copy to ▇▇▇▇ ▇.
Paris, Jr., Williams, Mullen, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and if to an assignee of the Investor, to its address (or
facsimile number) as designated to the Company in writing. Any notice given by
facsimile pursuant to this Section 7.9 shall be followed by written notice
delivered by Federal Express or similar courier service. Any documents, reports
or other materials which are required to be delivered to the Investor shall be
deemed to have been delivered if delivered to the Investor at the address
indicated above.
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SECTION 7.10. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
SECTION 7.11. DEFINITIONS OF TERMS
SECTION
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1933 Act 2.3
Articles of Incorporation 1.1
Closing Date 1.2.2
Common Stock 2.2
Contracts 2.14
Copyright 2.17.1.3
Financial Statements 2.11
Intellectual Property Assets 2.17.1
Investor Rights Agreement 2.2
Marks 2.17.1.1
Mask Works 2.17.1.4
Material Adverse Change 2.5
Material Adverse Effect 2.1
Patents 2.17.1.2
Preferred Stock 2.3
Properties 2.15
Purchased Shares 1.1
Registration Rights Agreement 2.2
SBA 1.2.3
Series D Preferred Stock 1.1
Stock Purchase Warrant 2.2
Trade Secrets 2.17.1.5
Warrant Stock 3.3
BEST KNOWLEDGE. The term "best knowledge", or similar terms when
applied to the Company, means the actual knowledge of its respective Key
Employees and directors having conducted a reasonable independent investigation.
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BUSINESS PLAN. The term "Business Plan" means the disclosure contained
in the Company's public filings as well as the financial projections provided
the Investor (a copy of which is included as EXHIBIT C of Section 2.26 of the
Disclosure Schedule).
CERTIFIED. A Financial Statement shall be deemed to be "certified" only
if the person or firm certifying it shall unqualifiedly express the opinion that
it has been prepared in accordance with generally accepted accounting principles
and that the balance sheet included therein fairly presents the financial
position of the Company as at the date thereof and that the statements of income
and of changes in financial position included therein fairly present the results
of operations of the Company for the period indicated. If the person certifying
is a officer of the Company, the certificate shall also state that the Financial
Statements are true, correct and complete. If the person certifying is a member
of an accounting firm, the certificate shall also state that the examination
included such tests of accounting records and such other auditing procedures as
the accountant considered necessary in the circumstances.
INDEBTEDNESS. The term "Indebtedness" shall mean with respect to any
Person (i) all indebtedness or other obligations of such Person for borrowed
money or for the deferred purchase price of property or services, other than for
trade accounts payable incurred in the ordinary course of the Company's
business, (ii) all Indebtedness described in clause (i) of any other Person in
respect of which such Person is liable, contingently or otherwise, to pay or
advance money or property as guarantor, endorser or otherwise (except as
endorser for collection in the ordinary course of business), and (iii) all lease
obligations of such Person which are required, in accordance with generally
accepted accounting principles ("GAAP"), to be capitalized on the books of the
lessee.
KEY EMPLOYEES. The term "Key Employees" shall mean the named executive
officers of the Company, as such persons are determined in accordance with
Section 16 of the Securities Exchange Act of 1934.
PERMITTED TRANSFEREE. The term "Permitted Transferee" shall mean any
purchaser or transferee of Securities who at the time of transfer is an
affiliate, as that term is defined in the Investment Company Act of 1940, of the
Investor (including a shareholder of the Investor). Each such transferee shall
be deemed to be an "Investor" for purposes of this Agreement.
PERSON. The term "Person" shall mean any corporation, association,
partnership, joint venture, organization, business or individual.
SUBSIDIARY. The term "Subsidiary" shall mean any corporation of which a
Person at the applicable time owns or controls, directly or indirectly through
one or more Subsidiaries, a majority of the voting stock.
SECTION 7.12. EXPENSES. Each of the parties hereto shall bear their own
costs and expenses incurred with respect to the negotiation, execution, delivery
and performance of this Agreement.
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SECTION 7.13. ENTIRE AGREEMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with respect to the subjects hereof and thereof.
IN WITNESS, the undersigned have executed this Series D Convertible
Preferred Stock Purchase Agreement as of the day and year first above written.
COMPANY:
TRIANGLE IMAGING GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
and Chief Executive Officer
PRINCIPAL SHAREHOLDER:
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Individually
INVESTOR:
WATERSIDE CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Secretary/Treasurer
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