Exhibit 99.2
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
BETWEEN
SIRROM CAPITAL CORPORATION
d/b/a
TANDEM CAPITAL
AND
VISTA INFORMATION SOLUTIONS, INC.
August 29, 1997
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TABLE OF CONTENTS
1. SALE AND PURCHASE OF STOCK 1
1.1 Convertible Preferred Stock 1
1.2 Payment of Dividends; Automatic Debit 1
1.3 Redemption Feature 2
1.4 Commitment; Closing Date 2
1.5 Processing Fee 2
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2
2.1 Corporate Status 3
2.2 Capitalization 3
2.3 Authorization 4
2.4 Validity and Binding Effect 5
2.5 Contracts and Other Commitments 5
2.6 Litigation 5
2.7 Financial Statements 5
2.8 SEC Reports 6
2.9 Absence of Changes 6
2.10 No Defaults 6
2.11 Compliance With Law 6
2.12 Taxes 7
2.13 Certain Transactions 7
2.14 Title to Property 7
2.15 Intellectual Property 8
2.16 Environmental Matters 9
2.17 Accounting Matters 10
2.18 Distributions to Company 10
2.19 Prior Sales 10
2.20 Regulatory Compliance 10
2.21 Margin Regulations 10
2.22 1940 Act Compliance 10
2.23 Limited Offering 11
2.24 Registration Obligations 11
2.25 Insurance 11
2.26 Governmental Consents 11
2.27 Employees 11
2.28 ERISA 12
2.29 Fees/Commissions 12
2.30 Disclosure 12
2.31 Survival 12
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER 13
3.1 Corporate Status 13
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3.2 Authorization 13
3.3 Validity and Binding Effect 13
3.4 Accredited Investor, Investment Intent 13
3.5 No Conflicts 15
3.6 Survival 15
4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER 15
4.1 Representations and Warranties 15
4.2 Officer's Certificate 15
4.3 Satisfactory Proceedings and Secretary's Certificate 15
4.4 Legal Opinion 16
4.5 Authorization Agreement 16
4.6 Certificate of Designation 16
4.7 [RESERVED.] 16
4.8 Existence and Authority 16
4.9 Delivery of Operative Documents 16
4.10 Required Consents 16
4.11 Waiver of Conditions 17
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY 17
5.1 Representations and Warranties 17
6. COVENANTS 17
6.1 Use of Proceeds 17
6.2 Corporate Existence, Etc. 17
6.3 Maintenance of Properties, Etc. 17
6.4 Nature of Business 18
6.5 Insurance 18
6.6 Taxes, Claims for Labor and Materials 18
6.7 Compliance with Laws, Agreements, Etc. 18
6.8 ERISA Matters 18
6.9 Books and Records: Rights of Inspection 19
6.10 Reports 19
6.11 Board of Directors; Observer Rights 20
6.12 Annual Plan 21
6.13 Further Assurances 21
6.14 No Violation of MGCL 21
7. CONVERSION OF CONVERTIBLE PREFERRED STOCK 21
7.1 Conversion Privilege 21
7.2 Reservation of Shares 22
8. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS 22
8.1 Legends; Restrictions on Transfer 22
8.2 Registration Rights 22
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9. EVENTS OF DEFAULT; REMEDIES 22
9.1 Events of Default 22
9.2 Remedies Upon Event of ▇▇▇▇▇▇▇ ▇▇
▇▇. AMENDMENTS, WAIVERS AND CONSENTS 24
10.1 Consent Required 24
10.2 Solicitation of Convertible Preferred Stock Holders 24
10.3 Effect of Amendment or Waiver 24
11. INTERPRETATION OF AGREEMENT; DEFINITIONS 24
11.1 Definitions 24
11.2 Accounting Principles 27
11.3 Directly or Indirectly 27
12. MISCELLANEOUS 27
12.1 Expenses, Stamp Tax Indemnity 27
12.2 Powers and Rights Not Waived; Remedies Cumulative 28
12.3 Notices 28
12.4 Assignments 29
12.5 Survival of Covenants and Representations 29
12.6 Severability 29
12.7 Governing Law 29
12.8 Captions; Counterparts 29
12.9 Confidentiality 30
12.10 Publicity 30
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
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This CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement")
entered into the 29th day of August, 1997, by and between VISTA INFORMATION
SOLUTIONS, INC., a Minnesota corporation (the "Company"), and SIRROM CAPITAL
CORPORATION d/b/a TANDEM CAPITAL, a Tennessee corporation (the "Purchaser").
W I T N E S S E T H:
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WHEREAS, the Company desires to obtain additional capital for use in
connection with its business through the issue and sale of certain obligations,
and Purchaser is willing to purchase such obligations from the Company, on the
terms and conditions set forth herein. Capitalized terms shall have the
meanings assigned by Section 11 unless otherwise defined herein.
NOW, THEREFORE, in mutual consideration of the premises and the respective
representations, warranties, covenants and agreements contained herein, the
parties agree as follows:
1. SALE AND PURCHASE OF STOCK.
1.1 CONVERTIBLE PREFERRED STOCK. The Company has authorized the
issue and sale of 2,500 shares of its Series E Convertible Preferred Stock and
2,500 shares of its Series F Convertible Preferred Stock (collectively, the
"Convertible Preferred Stock") having the rights and preferences set forth by
the Certificate of Designation (the "Certificate of Designation") attached as
Exhibit A-1 at a purchase price of $1,000.00 per share, for an aggregate
purchase price of Five Million Dollars ($5,000,000.00). The Certificate of
Designation shall be filed with the Secretary of State of Minnesota on or before
the Closing Date. The Convertible Preferred Stock shall (i) have a Stated Value
of $1,000.00 per share, (ii) entitle the holder to quarterly cumulative
dividends of $30.00 per share (with such quarterly cumulative dividend
increasing by $5.00 for each year after August 31, 2002), (iii) entitle the
holder to vote upon all matters submitted to a vote of the holders of the
Company's common stock, par value $.01 per share (the "Common Stock"),
(iv) entitle the holder to convert such Convertible Preferred Stock into shares
of Common Stock, (v) rank senior with respect to dividends and pari passu with
respect to liquidating distributions to all other Preferred Stock issued by the
Company (unless otherwise authorized by vote of the holders of the Convertible
Preferred Stock), and senior to the Common Stock, and (vi) shall have such other
rights and preferences as are set forth by the Certificate of Designation.
1.2 PAYMENT OF DIVIDENDS; AUTOMATIC DEBIT. The Convertible Preferred
Stock shall entitle the holder to quarterly cumulative dividends of $30.00 per
share, payable quarterly by automatic debit on the first day of March, June,
September, and December in each year, commencing December 1, 1997, provided that
such
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dividends shall not be payable by automatic debit if not later than two
business days prior to such payment dates the Company shall have notified
Purchaser in writing that such dividends have not been declared.
1.3 REDEMPTION FEATURE. The Series E Convertible Preferred Stock may
be redeemed, at the option of the Company, at any time, PROVIDED the average
closing bid price of the Company's Common Stock for the 20 trading days
preceding the date of the Redemption Notice exceeds 200% of the Series E
Conversion Price, and the Redemption Price per share shall be the sum of
(i) $1,000.00, (ii) all accrued but unpaid dividends, and (iii) interest on such
accrued but unpaid dividends at an annual rate of 14.0% (or, if less, the
maximum rate allowable by law). The Series F Convertible Preferred Stock may be
redeemed, at the option of the Company, at any time on or after June 30, 1998;
PROVIDED the average closing bid price of the Company's Common Stock for the 20
trading days preceding the date of the Redemption Notice (which such 20-trading
day period may include trading days that fall on or prior to June 30, 1998)
exceeds 200% of the Series F Conversion Price, and the Redemption Price per
share shall be the sum of (i) $1,000.00, (ii) all accrued but unpaid dividends,
and (iii) interest on such accrued but unpaid dividends at an annual rate of
14.0% (or, if less, the maximum rate allowable by law). PROVIDED, that if the
Company redeems any Series E Convertible Preferred Stock prior to the second
anniversary of the Closing Date, the Company shall pay to the holder of such
Series E Convertible Preferred Stock, in addition to the Redemption Price, a
Redemption Premium per share equal to an annual rate of 12% of Stated Value
computed from the Redemption Date to the second anniversary of the Closing Date.
FURTHER PROVIDED, the Convertible Preferred Stock may be redeemed, at the option
of the Company, at any time on or after August 31, 2002, and the Redemption
Price per share shall be the sum of (i) $1,000.00, (ii) all accrued but unpaid
dividends, and (iii) interest on such accrued but unpaid dividends at an annual
rate of 14.0% (or, if less, the maximum rate allowable by law).
1.4 COMMITMENT; CLOSING DATE. Subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to Purchaser, and Purchaser agrees
to purchase from the Company, 2,500 shares of Series E Convertible Preferred
Stock and 2,500 shares of Series F Convertible Preferred Stock for an aggregate
purchase price of $5,000,000. Delivery of certificates representing the
Convertible Preferred Stock purchased by Purchaser shall be made at the offices
of Tandem Capital, Inc., Nashville, Tennessee, against payment therefor by
federal funds wire transfer in immediately available funds and to the accounts
and in the amounts set forth in the Company's wire instructions in the form of
EXHIBIT B hereto, at 10:00 A.M., Nashville time, on August 29, 1997 or such
later date as the Company and Purchaser shall agree (the "Closing Date"). The
stock certificates shall be registered in Purchaser's name or in the name of
such nominee as Purchaser may specify at least 24 hours prior to the date fixed
for delivery.
1.5 PROCESSING FEE. The Company shall pay to Purchaser on or before
the Closing Date a processing fee in an amount equal to $75,000.
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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Purchaser as follows:
2.1 CORPORATE STATUS.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Minnesota, and has the corporate
power to own and operate its properties, to carry on its business as now
conducted and to enter into and to perform its obligations under this Agreement,
the Certificate of Designation, the Registration Rights Agreement, and any other
document executed and delivered by the Company in connection herewith or
therewith (collectively, the "Operative Documents"). The Company is qualified
to do business and is in good standing in each state or other jurisdiction in
which such qualification is necessary under applicable law, except where the
failure to so qualify would not have a Material Adverse Effect on the financial
condition or results of operations of the Company.
(b) SCHEDULE 2.1(b) sets forth a complete list of each corporation,
partnership, joint venture, limited liability company or other business
organization in which the Company owns, directly or indirectly, any capital
stock or other equity interest (the "Subsidiary" or, collectively, the
"Subsidiaries"), or with respect to which the Company or any Subsidiary, alone
or in combination with others, is in a control position, which list shows the
jurisdiction of incorporation or other organization, and, if the Company does
not directly or indirectly own 100% of the outstanding equity interests in the
entities so listed on SCHEDULE 2.1(b), the percentage interest so owned by the
Company or any Subsidiary. Each Subsidiary is duly organized, validly existing
and in good standing under the laws of the jurisdiction of incorporation or
other organization as indicated on SCHEDULE 2.1(b), each has all requisite power
and authority and holds all material licenses, permits and other required
authorizations from government authorities necessary to own its properties and
assets and to conduct its business as now being conducted, and each is qualified
to do business as a foreign corporation (or business organization) and is in
good standing in every jurisdiction in which such qualification is necessary
under applicable law, except where the failure to so qualify would not have a
Material Adverse Effect on the financial condition or results of operations of
the Company. All of the outstanding shares of capital stock, or other equity
interest, of each Subsidiary owned, directly or indirectly, by the Company have
been validly issued, are fully paid and nonassessable, and except as set forth
in SCHEDULE 2.1(b) are owned by the Company free and clear of all liens,
charges, security interests, or encumbrances.
2.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
45,000,000 shares, par value $.01 per share, of which (i) 200,000 shares have
been designated as Series B Convertible Preferred Stock, 200,000 of which are
issued and outstanding, (ii) 670,000 shares have been designated as Series C
Convertible Preferred Stock, 588,108 of which are issued and outstanding, and
(iii) 240,000 shares have been designated as Series D Convertible Preferred
Stock, 187,134 of which are issued and
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outstanding. All other shares are Common Stock, of which 14,999,113 shares
are issued and outstanding. All shares of Preferred Stock and Common Stock
outstanding have been validly issued and are fully paid and nonassessable.
There are no statutory or contractual preemptive rights, rights of first
refusal, antidilution rights, or any similar rights held by any party with
respect to the issuance of the Convertible Preferred Stock.
(b) The Company has not granted, or agreed to grant or issue, any
options, warrants or rights to purchase or acquire from the Company any shares
of capital stock of the Company, there are no securities outstanding or
committed to be issued by the Company or any Subsidiary which are convertible
into or exchangeable for any shares of capital stock or other securities of the
Company, and there are no contracts, commitments, agreements, understandings,
arrangements or restrictions as to which the Company is a party, or by which it
is bound, requiring or restricting the issuance of any shares of capital stock
or other securities of the Company, whether or not outstanding, except for (i)
the Convertible Preferred Stock to be issued pursuant to this Agreement,
(ii) options to purchase an aggregate of 3,357,038 shares of the Company's
Common Stock under its 1990 Stock Option Plan, its 1995 Stock Option Plan, and
the 1993 VISTA Environmental, Inc. ("VEI") Stock Option Plan assumed in
connection with the Company's acquisition of VEI, (iii) the Series B Convertible
Preferred Stock, (iv) the Series C Convertible Preferred Stock, (v) the Series D
Convertible Preferred Stock, and (vi) such other warrants and other rights to
acquire capital stock of the Company as set forth on SCHEDULE 2.2(b). Except as
set forth on SCHEDULE 2.2(b), all such shares have been duly reserved for
issuance, have been duly and validly authorized, and upon issuance in accordance
with the terms of the respective instruments and receipt of payment therefor,
will be validly issued, fully paid, and nonassessable.
(c) The Convertible Preferred Stock that is being purchased by the
Purchaser, when issued, sold, and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and validly
issued, fully paid, and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and the
Operative Documents and under applicable state and federal securities laws. The
Common Stock issuable upon conversion of the Preferred Stock being purchased
under this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Certificate of Designation and this
Agreement, will be duly and validly issued, fully paid, and nonassessable and
will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and under applicable state and federal securities laws.
2.3 AUTHORIZATION. The Company has full legal right, power and
authority to enter into and perform its obligations under this Agreement and the
Operative Documents without the consent or approval of any other person, firm,
governmental agency, or other legal entity, except as contemplated hereby or
thereby. The execution and delivery of this Agreement, the issuance of the
Convertible Preferred Stock hereunder, the execution and delivery of each other
document in connection herewith or therewith to which the Company is a party,
and the performance by the Company of its
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obligations hereunder or thereunder are within the corporate powers of the
Company and have been duly authorized by all necessary corporate action
properly taken, have received all necessary governmental approvals, if any
were required, and do not and will not contravene or conflict with (i) the
Articles of Incorporation or Bylaws of the Company, (ii) any material
agreement to which the Company or any of its Subsidiaries is a party or by
which any of them or their properties is bound, or constitute a default
thereunder, or result in the creation or imposition of any lien, charge,
security interest, or encumbrance of any nature upon any of the property or
assets of the Company or any of its Subsidiaries pursuant to the terms of any
such agreement or instrument, or (iii) violate any provision of law or any
applicable judgment, ordinance, regulation or order of any court or
governmental agency. The officer executing this Agreement, and any other
document executed and delivered by the Company in connection herewith or
therewith, is duly authorized to act on behalf of the Company.
2.4 VALIDITY AND BINDING EFFECT. Each of the Operative Documents is
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
2.5 CONTRACTS AND OTHER COMMITMENTS. Except as disclosed on SCHEDULE
2.5 and other than as filed by the Company with the Securities and Exchanges
Commission ("SEC") as an exhibit pursuant to Item 601(b)(10) of Regulation S-K
under the Securities Act (each disclosed or filed agreement an "Applicable
Contract"), the Company and its Subsidiaries do not have and are not bound by
any loans, liens, pledges, security interests agreements, indentures or other
instruments defining the rights of security holders, under any securities or
other financings upon which the Company or any Subsidiary is obligated or by
which the Company is bound.
2.6 LITIGATION. Except as set forth on SCHEDULE 2.6, there is no
litigation, arbitration, claim, proceeding or investigation pending or
threatened in writing to which the Company or any Subsidiary is a party or to
which any of its respective properties or assets is the subject which, if
determined adversely to the Company or such Subsidiary, would individually or in
the aggregate have a Material Adverse Effect on the financial position, results
of operations, or business of the Company and its Subsidiaries.
2.7 FINANCIAL STATEMENTS. The consolidated financial statements of
the Company and its Subsidiaries for the fiscal years ended December 31, 1996,
1995, and 1994, and the unaudited consolidated financial statements as of and
for the six months ended June 30, 1997, and the related notes, copies of which
the Company previously has delivered to Purchaser, fairly present the financial
position, results of operations, cash flows and changes in stockholders' equity
of the Company and its consolidated Subsidiaries, at the respective dates of and
for the periods to which they apply in such financial statements, and have been
prepared in accordance with generally accepted
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accounting principles ("GAAP") consistently applied throughout the periods
indicated, subject, in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or
in the aggregate, be materially adverse) and the absence of notes (that, if
presented, would not differ materially from those included in the most recent
audited consolidated financial statements). No financial statements of any
other person(s) are required by GAAP to be included in the consolidated
financial statements of the Company.
2.8 SEC REPORTS. The Company's Common Stock is listed for trading on
the NASDAQ SmallCap Market and has been duly registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Since
January 1, 1994, the Company has timely filed all reports, registrations, proxy
or information statements, and all other documents, together with any amendments
required to be made thereto, required to be filed with the SEC under the
Securities Act and the Exchange Act (collectively, the "SEC Reports"). As of
their respective dates, the SEC Reports complied in all material respects with
all rules and regulations promulgated by the SEC and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
2.9 ABSENCE OF CHANGES. Since June 30, 1997 except as contemplated
hereby or by the other Operative Documents, or as set forth on SCHEDULE 2.9,
(i) neither the Company nor any of its Subsidiaries have incurred any
liabilities or obligations, direct or contingent, or entered into any
transactions, not in the ordinary course of business, that are material to the
Company, (ii) neither the Company nor any of its Subsidiaries have purchased any
of its outstanding capital stock or declared, or paid any dividend or other
distribution or payment in respect of its capital stock, (iii) there has not
been any change in the authorized or issued capital stock, long-term debt, or
short-term debt of the Company, and (iv) there has not been any material adverse
change in or affecting the business, operations, properties, prospects, assets,
or condition (financial or otherwise) of the Company or any Subsidiary, taken as
a whole.
2.10 NO DEFAULTS. Except as set forth on SCHEDULE 2.10 and except
where a default or event of default does not and would not constitute a Material
Adverse Event, no default or event of default by the Company or any Subsidiary
exists under this Agreement or any of the other Operative Documents, or under
any Applicable Contract, or other material instrument or agreement to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or its respective properties may be bound, except for any such default or event
of default which would not reasonably be expected to cause a Material Adverse
Event, and no event has occurred and is continuing that with notice or the
passage of time or both would constitute a default or event of default
thereunder.
2.11 COMPLIANCE WITH LAW. The Company is in compliance with all
foreign, federal, state or local laws, regulations, decrees and orders
applicable to it
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(including but not limited to the Foreign Corrupt Practices Act, occupational
and health standards and controls, antitrust, monopoly, restraint of trade or
unfair competition) to the extent that noncompliance, in the aggregate, would
not reasonably be expected to cause a Material Adverse Event.
2.12 TAXES. Except as set forth on SCHEDULE 2.12, the Company and its
Subsidiaries have filed or caused to be filed all federal, state and local
income, excise and franchise tax returns required to be filed (except for
returns that have been appropriately extended), and have paid, or provided for
the payment of, all taxes shown to be due and payable on said returns and all
other taxes, impositions, assessments, fees or other charges imposed on it by
any governmental authority, agency or instrumentality, prior to any delinquency
with respect thereto (other than taxes, impositions, assessments, fees and
charges currently being contested in good faith by appropriate proceedings, for
which appropriate amounts have been reserved), and the Company does not know of
any proposed assessment for additional taxes or any basis therefor. No tax
liens have been filed against the Company or its properties. The Company's
federal income tax liability has been finally determined by the Internal Revenue
Service and satisfied for all taxable years up to and including the taxable year
ended December 31, 1992, or closed by applicable statutes of limitation.
2.13 CERTAIN TRANSACTIONS. Except as set forth on in the proxy
statements filed by the Company with the SEC and except as to indebtedness
incurred in the ordinary course of business and approved by the Board of
Directors of the Company, neither the Company nor any Subsidiary is indebted,
directly or indirectly, to any of its officers or directors, or to their
respective spouses or children, or to any affiliate, in excess of an aggregate
amount of $60,000, and none of such officers or directors or any members of
their immediate families or affiliates, are indebted to the Company or any
Subsidiary in excess of an aggregate amount of $60,000, or have any direct or
indirect ownership interest in any firm or corporation with which the Company or
any Subsidiary is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the Company or any
Subsidiary, except as set forth on SCHEDULE 2.13. Except as set forth in the
proxy statements filed by the Company with the SEC, no officer or director of
the Company or any Subsidiary or any member of their immediate families is,
directly or indirectly, interested in any material contract with the Company or
any Subsidiary that would require disclosure under Item 404 of Regulation S-K.
Neither the Company nor any Subsidiary is a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
2.14 TITLE TO PROPERTY. The Company and each Subsidiary has good and
marketable title to all of the real and personal property owned by it, free and
clear of all liens, security interests, pledges, encumbrances, equities claims
and restrictions of every kind and nature whatsoever, except as disclosed on
SCHEDULE 2.14 and other than (i) liens for taxes not yet due, (ii) imperfections
in title, if any, not material in amount and which, individually or in the
aggregate, do not materially interfere with the conduct of the business of the
Company or the use of its assets, (iii) such secured indebtedness as is
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disclosed in the Financial Statements covering the assets and properties
referred to therein (if any), (iv) liens in the ordinary course of business
consistent with past practice and (v) installments of special assessments not
yet delinquent, recorded easements, covenants and other restrictions, and
utility easements, building restrictions, zoning restrictions and other
easements and restrictions existing generally with respect to properties of a
similar character. Any real property and buildings held under lease by the
Company or any Subsidiary are held under valid existing and enforceable leases,
except as disclosed on SCHEDULE 2.14 or which are not material and do not
interfere with the use to be made of such buildings or property by the Company.
2.15 INTELLECTUAL PROPERTY.
(a) Except as set forth in SCHEDULE 2.15, or for items that would not
constitute a Material Adverse Event, to the Company's knowledge, the Company is
the lawful owner or has a valid right to use the proprietary information used in
its business free and clear of any claim, right, trademark, patent or copyright
protection of any third party; provided, however, that this paragraph (a) shall
not be deemed to include any representation regarding the absence of
infringements or conflicts with the rights of others, which representation is
made only in paragraph (c) hereof and only to the knowledge of the Company. As
used herein, "proprietary information" includes without limitation (i) any
computer software and related documentation, inventions, technical and
nontechnical data related thereto, and (ii) other documentation, inventions and
data related to patterns, plans, methods, techniques, drawings, finances,
customer lists, suppliers, products, special pricing and cost information,
designs, processes, procedures, formulas, research data owned or used by the
Company or any Subsidiary or marketing studies conducted by the Company, all of
which the Company considers to be commercially important and competitively
sensitive and which generally has not been disclosed to third parties other than
customers in the ordinary course of business.
(b) Except as set forth in SCHEDULE 2.15, to the Company's knowledge,
the Company has good and marketable title to or has a valid right to use all
patents, trademarks, trade names, service marks, copyrights or other intangible
property rights, and registrations or applications for registration thereof,
owned by the Company or any Subsidiary or used or required by the Company or any
Subsidiary in the operation of its business as presently being conducted;
provided, however, that this paragraph (a) shall not be deemed to include any
representation regarding the absence of infringements or conflicts with the
rights of others, which representation is made only in paragraph (c) hereof and
only to the knowledge of the Company.
(c) The Company has no knowledge of any infringements or conflict
with asserted rights of others with respect to copyrights, patents, trademarks,
service marks, trade names, trade secrets or other intangible property rights or
know-how which could cause a Material Adverse Event. To the Company's
knowledge, no products or processes of the Company infringe or conflict with any
rights of patent or copyright, or any discovery, invention product or process,
that is the subject of a patent or copyright
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application or registration known to the Company. The Company follows such
procedures as the Company deems necessary or appropriate to provide
reasonable protection of the Company's trade secrets and proprietary rights
in intellectual property of all kinds. To the knowledge of the Company, no
person employed by or affiliated with the Company has employed or proposes to
employ any trade secret or any information or documentation proprietary to
any former employer, and to the knowledge of the Company, no person employed
by or affiliated with the Company has violated any confidential relationship
that such person may have had with any third person, in connection with the
development, manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the Company.
2.16 ENVIRONMENTAL MATTERS. The Company has duly complied in all
material respects with, and its business, operations, assets, equipment,
property, leaseholds or other facilities are in compliance in all material
respects with, the provisions of all federal, state and local environmental,
health, and safety laws, codes and ordinances, and all rules and regulations
promulgated thereunder except to the extent that the violation thereof would not
reasonably be expected to cause a Material Adverse Event. The Company has been
issued and will maintain all required material federal, state and local permits,
licenses, certificates and approvals relating to (i) air emissions; (ii)
discharges to surface water or groundwater; (iii) noise emissions; (iv) solid or
liquid waste disposal; (v) the use, generation, storage, transportation or
disposal of toxic or hazardous substances or wastes (which shall include any and
all such materials listed in any federal, state or local law, code or ordinance
and all rules and regulations promulgated thereunder as hazardous or potentially
hazardous); or (vi) other environmental, health or safety matters, except to the
extent that the absence thereof would not reasonably be expected to cause a
Material Adverse Event. The Company has not during the two years prior to the
date hereof received notice of, does not know of, and does not suspect facts
which might constitute a material violation of any federal, state or local
environmental, health or safety laws, codes or ordinances, and any rules or
regulations promulgated thereunder with respect to its businesses, operations,
assets, equipment, property, leaseholds, or other facilities. Except in
accordance with a valid governmental permit, license, certificate or approval,
there has been no material emission, spill, release or discharge into or upon
(i) the air; (ii) soils, or any improvements located thereon; (iii) surface
water or groundwater; or (iv) the sewer, septic system or waste treatment,
storage or disposal system servicing the premises, of any toxic or hazardous
substances or wastes at or from the premises, except to the extent that any such
emission, spill, release or discharge would not reasonably be expected to cause
a Material Adverse Event. During the two years prior to the date hereof, there
has been no complaint, order, directive, claim, citation or notice by any
governmental authority or any person or entity with respect to (i) air
emissions; (ii) spills, releases or discharges to soils or improvements located
thereon, surface water, groundwater or the sewer, septic system or waste
treatment, storage or disposal systems servicing the premises; (iii) noise
emissions; (iv) solid or liquid waste disposal; (v) the use, generation,
storage, transportation or disposal of toxic or hazardous substances or waste;
or (vi) other environmental, health or safety matters materially affecting the
Company or its business, operations, assets,
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equipment, property, leaseholds or other facilities. The Company does not
have any material indebtedness, obligation or liability (absolute or
contingent, matured or not matured), with respect to the storage, treatment,
cleanup or disposal of any solid wastes, hazardous wastes or other toxic or
hazardous substances (including without limitation any such indebtedness,
obligation, or liability with respect to any current regulation, law or
statute regarding such storage, treatment, cleanup or disposal).
2.17 ACCOUNTING MATTERS. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain accountability for the assets of the Company and each of
its Subsidiaries; (iii) access to the assets of the Company and each of its
Subsidiaries is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets of the
Company and each of its Subsidiaries are compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
2.18 DISTRIBUTIONS TO COMPANY. Except for limitations existing under
applicable law, no Subsidiary of the Company is currently prohibited, directly
or indirectly, from paying any dividends to the Company, from making any other
distributions on such Subsidiary's capital stock, from repaying to the Company
any loans or advances to such Subsidiary, or from transferring any of such
Subsidiary's property or assets to the Company or any other Subsidiary of the
Company.
2.19 PRIOR SALES. All offers and sales of the Company's capital stock
prior to the date hereof were at all relevant times (i) exempt from the
registration requirements of the Securities Act or were duly registered under
the Securities Act, and (ii) were duly registered or were the subject of an
available exemption from the registration requirements of all applicable state
securities or Blue Sky laws.
2.20 REGULATORY COMPLIANCE. Except as set forth on SCHEDULE 2.20, the
conduct of the business and the ownership of the assets of the Company is not
dependent on any license, permit, approval, waiver or other authorization of any
federal, state or local governmental or regulatory body which the Company has
not obtained, except to the extent that the absence thereof would not reasonably
be expected to cause a Material Adverse Event. All material licenses, permits
and authorizations held by the Company are in full force and effect.
2.21 MARGIN REGULATIONS. The Company is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock. No
proceeds received pursuant to this Agreement will be used to purchase or carry
any equity security of a class which is registered pursuant to Section 12 of
the Exchange Act.
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2.22 1940 ACT COMPLIANCE. The Company is an " eligible portfolio
company" as such term is defined in Section 2(a)(46) of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and the
issuance and sale by the Company of the Convertible Preferred Stock does not
constitute a "public offering" as such term is used in Section 55(a)(1)
thereof.
2.23 LIMITED OFFERING. Subject in part to the truth and accuracy of
Purchaser's representations set forth in this Agreement, the offer, sale and
issuance of the Convertible Preferred Stock is exempt from the registration
requirements of the Securities Act, and neither the Company nor any
authorized agent acting on its behalf has taken or will take any action
hereafter that would cause the loss of such exemption.
2.24 REGISTRATION OBLIGATIONS. Except as described in Schedule
2.24, the Company is not under any obligation to register under the
Securities Act or the Trust Indenture Act of 1939, as amended, any of its
presently outstanding securities or any of its securities that are proposed
to be subsequently issued.
2.25 INSURANCE. The Company has maintained, and has caused each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers with respect to their respective properties and business in such
forms and amounts and against such risks, casualties and contingencies as are
customary for corporations of comparable size and condition (financial and
otherwise) engaged in the same or a similar business and owning and operating
similar properties.
2.26 GOVERNMENTAL CONSENTS. No consent, approval, qualification,
order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of the Company in connection
with the Company's valid execution, delivery, or performance of this
Agreement by the Company, except (i) the filing of the Certificate of
Designation with the Secretary of State of the State of Minnesota, and (ii)
such filings as have been made prior to the Closing, except notices of sale
required to be filed with the Securities and Exchange Commission under
Regulation D of the Securities Act or such post-closing filings as may be
required under applicable state securities laws, which will be timely filed
within the applicable periods therefor.
2.27 EMPLOYEES. To the best of the Company's knowledge, there is no
strike, labor dispute or union organization activities pending or threatened
between it and its employees. None of the Company's employees belongs to any
union or collective bargaining unit. To the knowledge of the Company, the
Company has complied in all material respects with all applicable state and
federal equal opportunity and other laws related to employment. To the
knowledge of the Company, no employee of the Company is or will be in
violation of any judgment, decree, or order, or any term of any employment
contract, patent disclosure agreement, or other contract or agreement
relating to the relationship of any such employee with the Company, or any
other party because of the nature of the business conducted or presently
proposed to be conducted by the Company or to the use by the employee of his
or her best efforts with respect to such
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business. Other than as set forth on SCHEDULE 2.27 hereto, the Company is
not a party to or bound by any employment contract, deferred compensation
agreement, bonus plan, incentive plan, profit sharing plan, retirement
agreement, or other employee compensation agreement. To the knowledge of the
Company, no officer or key employee, or any group of key employees, intends
to terminate employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the foregoing. Subject to
general principles related to wrongful termination of employees and to
existing employment contracts set forth on SCHEDULE 2.27, the employment of
each officer and employee of the Company is terminable at the will of the
Company.
2.28 ERISA. The Company is in compliance in all material respects
with all applicable provisions of Title IV of the Employee Retirement Income
Security Act of 1974, Pub. L. No. 93-406, September 2, 1974, ▇▇ ▇▇▇▇. ▇▇▇,
▇▇ ▇.▇.▇.▇. SS 1001 et seq. (1975), as amended from time to time ("ERISA").
Neither a reportable event nor a prohibited transaction (as defined in ERISA)
has occurred and is continuing with respect to any "pension plan" (as such
term is defined in ERISA, a "Plan"); no notice of intent to terminate a Plan
has been filed nor has any Plan been terminated; no circumstances exist which
constitute grounds entitling the Pension Benefit Guaranty Corporation
(together with any entity succeeding to or all of its functions, the "PBGC")
to institute proceedings to terminate, or appoint a trustee to administer, a
Plan, nor has the PBGC instituted any such proceedings; neither the Company
nor any commonly controlled entity (as defined in ERISA) has completely or
partially withdrawn from a multiemployer plan (as defined in ERISA). The
Company and each commonly controlled entity has met its minimum funding
requirements under ERISA with respect to all of its Plans and the present
fair market value of all Plan property equals or exceeds the present value of
all vested benefits under each Plan, as determined on the most recent
valuation date of the Plan and in accordance with the provisions of ERISA and
the regulations thereunder for calculating the potential liability of the
Company or any commonly controlled entity to the PBGC or the Plan under Title
IV or ERISA; and neither the Company nor any commonly controlled entity has
incurred any liability to the PBGC under ERISA.
2.29 FEES/COMMISSIONS. The Company has not agreed to pay any
finder's fee, commission, origination fee or other fee or charge to any
person or entity with respect to or as a result of the consummation of the
transactions contemplated hereunder, except for the processing fee due to
Purchaser under Section 1.5.
2.30 DISCLOSURE. No representation or warranty made as of the date
hereof by the Company contained in this Agreement, taken as a whole, contains
or will (as of the time so furnished) contain any untrue statement of a
material fact, or omits or will (as of the time so furnished) omit to state
any material fact which is necessary in order to make the statements
contained herein or therein not misleading.
2.31 SURVIVAL. The representations and warranties of the Company
contained in this Agreement shall survive until the first anniversary of the
date hereof,
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provided, however, that the representations and warranties contained in
Sections 2.1 through 2.4 shall survive until the termination of this
Agreement.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser
hereby represents to the Company as follows:
3.1 CORPORATE STATUS. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Tennessee and has the corporate power to own and operate its properties, to
carry on its business as now conducted and to enter into and to perform its
obligations under this Agreement and any other document executed or delivered
by Purchaser in connection herewith.
3.2 AUTHORIZATION. Purchaser has full legal right, power and
authority to enter into and perform its obligations under this Agreement and
any other document executed and delivered by Purchaser in connection
herewith, without the consent or approval of any other person, firm,
governmental agency or other legal entity. The execution and delivery of
this Agreement and any other document executed and delivered by Purchaser in
connection herewith, and the performance by Purchaser of its obligations
hereunder and/or thereunder are within the corporate powers of Purchaser,
have received all necessary governmental approvals, if any were required,
have been duly authorized by all necessary corporate action properly taken,
and do not and will not contravene or conflict with (i) the Charter or Bylaws
of Purchaser, (ii) any material agreement to which Purchaser is a party or by
which it or any of its properties is bound, or constitute a default
thereunder, or result in the creation or imposition of any lien, charge,
security interest or encumbrance of any nature upon any of the property or
assets of Purchaser pursuant to the terms of any such agreement or
instrument, or (iii) violate any provision of law or any applicable judgment,
ordinance, regulation or order of any court or governmental agency. The
officer(s) executing this Agreement and any other document executed and
delivered by Purchaser in connection herewith, is duly authorized to act on
behalf of Purchaser.
3.3 VALIDITY AND BINDING EFFECT. This Agreement and any other
document executed and delivered by Purchaser in connection herewith are the
legal, valid and binding obligations of the Purchaser, enforceable against it
in accordance with their respective terms.
3.4 ACCREDITED INVESTOR, INVESTMENT INTENT. In connection with the
issuance and sale to Purchaser of the Convertible Preferred Stock and shares
of Common Stock issuable upon conversion thereof pursuant to this Agreement,
Purchaser further represents and warrants to the Company as follows:
(a) PURCHASE FOR INVESTMENT. Purchaser is acquiring the
Convertible Preferred Stock and any shares of Common Stock issuable upon
conversion thereof for its own account as principal, for investment, and not
with a view to the distribution or resale thereof, in whole or in part, in
violation of the Securities Act or any applicable state securities law, and
Purchaser has no present intention of selling, negotiating or otherwise
-25-
disposing of the Convertible Preferred Stock or shares of Common Stock
issuable upon conversion thereof.
(b) NO REGISTRATION; RULE 144. (i) Neither the Convertible
Preferred Stock nor the shares of Common Stock issuable upon conversion
thereof have been registered under the Securities Act, and as such, such
shares of Convertible Preferred Stock and any shares of Common Stock issuable
upon conversion thereof are "restricted securities" as defined in Rule 144;
(ii) neither the shares of Convertible Preferred Stock nor the shares of
Common Stock issuable upon conversion thereof may be resold unless they are
registered under the Securities Act or unless an exemption therefrom is
available; (iii) the Purchaser understands that the availability of Rule 144
for the sale and transfer of the Convertible Preferred Stock and any shares
of Common Stock issuable upon conversion thereof is limited, and that certain
conditions and events must exist and occur before Purchaser would be able to
utilize Rule 144 in connection with the sale or other disposition of the
Convertible Preferred Stock or shares of Common Stock issuable upon
conversion thereof.
(c) INVESTMENT COMPANY; ACCESS TO INFORMATION. Purchaser is a
registered investment company under the Investment Company Act and as such is
an "accredited investor" under Rule 501(a) under the Securities Act.
Purchaser understands that its investment in the Convertible Preferred Stock
involves a high degree of risk. Purchaser has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the investments contemplated by this Agreement. Purchaser has
been afforded, to the satisfaction of Purchaser, the opportunity to review
the financial and other information which it has requested from the Company,
and to obtain such additional publicly available information concerning the
Company and its business, and to ask such questions and receive such answers
(based upon publicly available information), as the Purchaser deems necessary
to make an informed investment decision.
(d) RELIANCE ON REPRESENTATIONS OF PURCHASER. Purchaser
understands that the Convertible Preferred Stock is being offered and sold,
and the shares of Common Stock issuable upon conversion thereof are being
offered, to Purchaser in reliance on specific exemptions from the
registration requirements of the United States securities laws and that the
Company is relying of the truth and accuracy of, and the Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings set forth herein in order to determine the availability of
such exemptions and the eligibility of Purchaser to acquire the Convertible
Preferred Stock and the shares of Common Stock issuable upon conversion
thereof.
(e) TRANSFER TO SUBSIDIARY. Notwithstanding anything in this
Section 3.4 to the contrary, Purchaser may transfer and assign its rights and
obligations under this Agreement to one or more of its Wholly-owned
Subsidiaries, provided that any such Subsidiary shall agree to become bound
by the terms of this Agreement, including the representations and warranties
contained in this Section 3.4, and provided, further that
-26-
Purchaser shall remain liable for the performance of its obligations
hereunder notwithstanding any such assignment.
3.5 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby or relating hereto do not and will not (i)
result in the violation of the Purchaser's charter documents or by-laws, or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, any agreement, indenture
or instrument to which the Purchaser is a party, or, to the actual knowledge
of the Purchaser, result in a violation of any law, rule, regulation, order,
judgment or decree of any court of governmental agency applicable to the
Purchaser or its properties (except for such conflicts, defaults and
violations as would not, individually or in the aggregate, have a material
adverse effect on the Purchaser). The Purchaser is not required to obtain
any consent, authorization or order of, or make any filing or registration
with, any court of governmental agency in order for it to execute, deliver or
perform any of its obligations under this Agreement or purchase the
Convertible Preferred Stock in accordance with terms hereof.
3.6 SURVIVAL. The representations and warranties of the Purchaser
contained in this Agreement shall survive until the first anniversary of the
date hereof.
4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. The
obligation of Purchaser to purchase and pay for the Convertible Preferred
Stock on the Closing Date shall be subject to the satisfaction, on or before
the Closing Date, of each of the following conditions set forth below. These
conditions are for Purchaser's sole benefit and may be waived by Purchaser at
any time in its sole discretion.
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement and in any Schedule
hereto or any document or instrument delivered to Purchaser or its
representatives hereunder, shall have been true and correct when made and
shall be true and correct as of the Closing Date as if made on such date,
except to the extent such representations and warranties expressly relate to
a specific date. The Company shall have duly performed all of the covenants
and agreements to be performed by it hereunder on or prior to the Closing
Date.
4.2 OFFICER'S CERTIFICATE. The Company shall have delivered to
Purchaser a certificate, dated the Closing Date, signed on behalf of the
Company by the President or Chief Financial Officer of the Company,
substantially in the form attached hereto as EXHIBIT C.
4.3 SATISFACTORY PROCEEDINGS AND SECRETARY'S CERTIFICATE. All
proceedings taken in connection with the transactions contemplated by this
Agreement, and all documents necessary to the consummation thereof, shall be
satisfactory in form and substance to Purchaser and Purchaser's counsel, and
the Company shall have
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delivered to Purchaser a certificate, dated the Closing Date, signed by the
Secretary of the Company, substantially in the form attached hereto as
EXHIBIT D.
4.4 LEGAL OPINION. Purchaser shall have received the opinion of
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ Freidenrich PC, counsel for the Company, dated the Closing
Date, addressed to Purchaser, in form and substance satisfactory to
Purchaser's counsel, and covering the matters set forth in EXHIBIT E hereto.
4.5 AUTHORIZATION AGREEMENT. The Company shall have delivered to
Purchaser an Authorization Agreement for Pre-Authorized Payments (Debit),
dated the Closing Date, executed by a duly authorized officer of the Company
in the form attached hereto as EXHIBIT F.
4.6 CERTIFICATE OF DESIGNATION. The Certificate of Designation
shall have been filed with the Secretary of State of Minnesota.
4.7 [RESERVED.]
4.8 EXISTENCE AND AUTHORITY. The Company shall have delivered to
Purchaser the following certificates of public officials, in each case as of
a date within ten days of the Closing Date:
(a) the Articles of Incorporation of the Company certified by the
Secretary of State of the State of Minnesota; and
(b) a certificate as to the legal existence and good standing of
the Company from the Secretary of State of the State of Minnesota.
4.9 DELIVERY OF OPERATIVE DOCUMENTS. The Company shall have
delivered to Purchaser the following documents, executed by the Company and
dated the Closing Date:
(a) its certificate(s) representing the shares of Convertible
Preferred Stock;
(b) the Certificate of Designation as filed with the Minnesota
Secretary of State;
(c) the Registration Rights Agreement between the Company and the
Purchaser.
4.10 REQUIRED CONSENTS. Any consents or approvals required to be
obtained from any third party, including any holder of indebtedness or any
outstanding security of the Company, and any amendments of agreements which
shall be necessary to permit the consummation of the transactions
contemplated hereby on the Closing Date,
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shall have been obtained and all such consents or amendments shall be
satisfactory in form and substance to Purchaser and Purchaser's counsel.
4.11 WAIVER OF CONDITIONS. If on the Closing Date the Company fails
to tender to Purchaser the Convertible Preferred Stock certificate to be
issued to Purchaser, or if the conditions specified in this ARTICLE IV have
not been fulfilled, Purchaser may thereupon elect to be relieved of all
further obligations under this Agreement and shall (i) retain the processing
fee provided by Section 1.5, and (ii) be paid the expense allowance provided
by Section 12.1. Without limiting the foregoing, if the conditions specified
in this ARTICLE IV have not been fulfilled, Purchaser may waive compliance by
the Company with any such condition to such extent as Purchaser, in
Purchaser's sole discretion, may determine. Nothing in this Section 4.11
shall operate to relieve the Company of any of its obligations hereunder or
to waive any of Purchaser's rights against the Company.
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company hereunder to sell the shares of Convertible
Preferred Stock to Purchaser is further subject to the satisfaction, on or
before the Closing, of each of the following conditions set forth below.
These conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion.
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser contained in this Agreement shall have been true and
correct when made and shall be true and correct as of the Closing Date as if
made on such date, except to the extent such representations and warranties
expressly relate to a specific date. Purchaser shall have duly performed all
of the covenants and agreements to be performed by it hereunder on or prior
to the Closing Date.
6. COVENANTS. From and after the Closing Date and continuing so long
as the Convertible Preferred Stock remains outstanding,
6.1 USE OF PROCEEDS. The Company shall use the proceeds of the
Convertible Preferred Stock for general corporate purposes, including working
capital.
6.2 CORPORATE EXISTENCE, ETC. The Company will preserve and keep
in force and effect, and will cause each Subsidiary to preserve and keep in
force and effect, its corporate existence and good standing in the state of
incorporation thereof, its qualification and good standing as a foreign
corporation in each jurisdiction where such qualification is required by
applicable law except where the failure to so qualify would not have a
Material Adverse Effect on the financial condition or results of operations
of the Company, and all licenses and permits necessary to the proper conduct
of its business.
6.3 MAINTENANCE OF PROPERTIES, ETC. The Company will maintain,
preserve and keep, and will cause each Subsidiary to maintain, preserve and
keep, its properties and assets which are used or useful in the conduct of
its business (whether
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owned in fee or pursuant to a leasehold interest) in good repair and working
order and from time to time will make all necessary repairs, replacements,
renewals and additions so that at all times the efficiency thereof shall be
maintained.
6.4 NATURE OF BUSINESS. Neither the Company nor any Subsidiary
will engage in any business if, as a result, the general nature of the
business, taken on a consolidated basis, which would then be engaged in by
the Company and its Subsidiaries would be substantially changed from the
general nature of the business engaged in by the Company and its Subsidiaries
on the date of this Agreement.
6.5 INSURANCE. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers with respect to their respective properties and business in such
forms and amounts and against such risks, casualties and contingencies as are
customary for corporations of comparable size and condition (financial and
otherwise) engaged in the same or a similar business and owning and operating
similar properties.
6.6 TAXES, CLAIMS FOR LABOR AND MATERIALS. The Company will
promptly pay and discharge, and will cause each Subsidiary promptly to pay
and discharge, (i) all lawful taxes, assessments and governmental charges or
levies imposed upon the property or business of the Company or such
Subsidiary, respectively, (ii) all trade accounts payable in accordance with
usual and customary business terms, and (iii) all claims for work, labor or
materials, which if unpaid might become a lien or charge upon any property of
the Company or such Subsidiary; provided the Company or such Subsidiary shall
not be required to pay any such tax, assessment, charge, levy, account
payable or claim if (i) the validity, applicability or amount thereof is
being contested in good faith by appropriate actions or proceedings which
will prevent the forfeiture or sale of any property of the Company or such
Subsidiary or any material interference with the use thereof by the Company
or such Subsidiary, and (ii) the Company or such Subsidiary shall set aside
on its books, reserves deemed by it to be adequate with respect thereto.
6.7 COMPLIANCE WITH LAWS, AGREEMENTS, ETC. Except where failure to
do so does not and would not constitute a Material Adverse Event, the Company
shall maintain its business operations and property owned or used in
connection therewith in compliance with (i) all applicable federal, state and
local laws, regulations and ordinances, and such laws, regulations and
ordinances of foreign jurisdictions, governing such business operations and
the use and ownership of such property, and (ii) all agreements, licenses,
franchises, indentures and mortgages to which the Company is a party or by
which the Company or any of its properties is bound. Without limiting the
foregoing, the Company shall pay all of its indebtedness promptly and
substantially in accordance with the terms thereof.
6.8 ERISA MATTERS. If the Company has in effect, or hereafter
institutes, a pension plan that is subject to the requirements of Title IV of
ERISA (a "Plan"), then the following covenants shall be applicable during
such period as any such
-30-
Plan shall be in effect: (i) throughout the existence of the Plan, the
Company's contributions under the Plan will meet the minimum funding
standards required by ERISA and the Company will not institute a distress
termination of the Plan; and (ii) the Company will send to Purchaser a copy
of any notice of a reportable event (as defined in ERISA) required by ERISA
to be filed with the Labor Department or the PBGC, at the time that such
notice is so filed.
6.9 BOOKS AND RECORDS: RIGHTS OF INSPECTION. The Company will
keep, and will cause each Subsidiary to keep, proper books of record and
account in which full and correct entries will be made of all dealings or
transactions of or in relation to the business and affairs of the Company or
such Subsidiary, in accordance with GAAP consistently maintained. The
Company shall permit a representative of Purchaser to visit any of its
properties and inspect its corporate books and financial records, and will
discuss its accounts, affairs and finances with a representative of
Purchaser, during reasonable business hours, at such times as Purchaser may
reasonably request.
6.10 REPORTS. The Company will furnish to Purchaser the following:
(a) MONTHLY STATEMENTS. Within 30 days after the end of each
month, beginning the month of September 1997, monthly internal financial
reports which at a minimum shall consist of a balance sheet of the Company as
of the close of such month and related statements of income and cash flows
for the one-month period then ended, as well as any additional financial
reports for such period routinely prepared with respect to the Company and
the Subsidiaries;
(b) QUARTERLY STATEMENTS. As soon as available and in any event
within 45 days after the end of each quarterly fiscal period (except the
last) of each fiscal year, copies of:
(i) consolidated balance sheets of the Company and Subsidiaries
as of the close of the three-month period then ended, setting forth in
comparative form the consolidated figures at the end of the preceding
fiscal year,
(ii) consolidated statements of income of the Company and
Subsidiaries for the three-month period then ended, setting forth in
comparative form the consolidated figures for the corresponding period of
the preceding fiscal year, and
(iii) consolidated statements of cash flows of the Company
and Subsidiaries for the portion of the fiscal year ending with such
three-month period, setting forth in comparative form the consolidated
figures for the corresponding period of the preceding fiscal year,
all in reasonable detail and accompanied by a certificate of an authorized
financial officer of the Company that such financial statements fairly
present the financial condition and
-31-
results of operations and cash flows of the Company at and for the periods
presented, subject to normal year-end adjustment;
(c) ANNUAL STATEMENTS. As soon as available and in any event
within 90 days after the close of each fiscal year of the Company, copies of:
(i) consolidated balance sheets of the Company and Subsidiaries
as of the close of such fiscal year, and
(ii) consolidated statements of income and consolidated
statements of changes in stockholders' equity and cash flows of the Company
and Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated figures for
the preceding fiscal year, all in reasonable detail and accompanied by an
unqualified report thereon of a firm of independent public accountants of
recognized national standing or a firm reasonably acceptable to Purchaser;
(d) SEC AND OTHER REPORTS. Promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement sent
by the Company to stockholders generally and of each periodic or current
report, and any registration statement or prospectus filed by the Company or
any Subsidiary with any securities exchange or the SEC or any successor
agency, and copies of any orders in any proceedings to which the Company or
any of its Subsidiaries is a party, issued by any governmental agency,
federal or state, having jurisdiction over the Company or any of its
Subsidiaries. The Company specifically covenants to timely file each such
item required to be filed with the SEC and each state requiring securities
laws filings.
6.11 BOARD OF DIRECTORS; OBSERVER RIGHTS.
(a) OBSERVER. For so long as the Purchaser or any Affiliate owns
Convertible Preferred Stock representing at least 25% of the aggregate Stated
Value of the Convertible Preferred Stock, provided that no nominee of the
Purchaser is a director, the Company shall invite one representative of
Purchaser to attend, at the Company's expense, all meetings of the Company's
Board of Directors and all committees of the Company's Board of Directors in
a nonvoting observer capacity and, in this respect, shall give such
representative copies of all notices and meeting agenda in advance of such
meetings and shall permit such representative to review all documents and
other materials provided to directors at such meetings. The Company shall
also provide Purchaser, in advance, with copies of all actions proposed to be
taken by the Board of Directors in lieu of meeting.
(b) BOARD MEMBER. Not later than April 1, 1998, management of the
Company, the then serving Board of Directors, and Purchaser shall nominate a
mutually agreeable candidate to serve on the Board of Directors of the
Company. Such candidate shall be elected a director (or included in the
management's slate of nominees) at the next
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succeeding Board of Directors meeting (or, if such election is precluded by
law, nominated for the next succeeding election of directors by the
shareholders of the Company). Any such nominee hereunder shall be reimbursed
for all reasonable expenses incurred as a director and shall be entitled to
receive such compensation as may be received by other non-employee directors
of the Company, including indemnity and advancement of expenses to the
fullest extent permitted under applicable law.
6.12 ANNUAL PLAN. The Board of Directors shall adopt no later than
the thirty-first day of each fiscal year, a financial plan for the Company,
which shall include at least a projection of income and expenses (including
capital expenditures) and a projected cash flows statement for each quarter
in such fiscal year, and a projected balance sheet as of the end of each
month in such fiscal year (the "Annual Plan"). The Annual Plan may only be
amended or revised, in any material manner, with the approval of the Board of
Directors.
6.13 FURTHER ASSURANCES. The Company and Purchaser will each take
all actions reasonably requested by the other party to effect the
transactions contemplated by this Agreement and the other Operative Documents.
6.14 NO VIOLATION OF MGCL. Notwithstanding any provision of this
Agreement to the contrary, if any repurchase or redemption of shares of
Convertible Preferred Stock otherwise required under this Agreement would be
prohibited by the relevant provisions of the Minnesota General Corporation
Law (the "MGCL"), such repurchase or redemption shall be effected as soon as
it is permitted under the MGCL.
7. CONVERSION OF CONVERTIBLE PREFERRED STOCK.
7.1 CONVERSION PRIVILEGE. The Convertible Preferred Stock shall be
convertible into Common Stock as follows, and as more particularly set forth
in the Certificate of Designation.
(a) Shares of Series E Convertible Preferred Stock shall be
convertible at any time into Common Stock at an initial Conversion Price of
$2.75. If the Company does not successfully close a registered public
offering of Common Stock, in which (i) the gross proceeds of the offering are
at least $15,000,000.00, and (ii) the offering price per share of Common
Stock is greater than $4.00 per share (adjusted for stock splits, stock
dividends, or other recapitalizations) by June 30, 1998 (a "Qualified
Offering), the Conversion Price of Series E Convertible Preferred Stock shall
automatically be adjusted to $2.00 (adjusted for stock splits, stock
dividends, or other recapitalizations), unless the Conversion Price is then
lower than $2.00.
(b) Shares of Series F Convertible Preferred Stock shall be
convertible on or after the earlier of the closing of a Qualified Offering or
July 1, 1998 into Common Stock at an initial Conversion Price of (i) 75% of
the offering price in a successfully
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closed Qualified Offering, or (ii) if no Qualified Offering is closed, 75% of
the average closing bid price for the Common Stock for the 20 consecutive
trading days ending on June 30, 1998.
7.2 RESERVATION OF SHARES. The Company shall take all such
corporate action as may be required to validly reserve for issuance a
sufficient number of shares of Common Stock into which the Convertible
Preferred Stock may be converted.
8. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
8.1 LEGENDS; RESTRICTIONS ON TRANSFER. Neither the Convertible
Preferred Stock nor the shares of Common Stock issuable upon conversion of
the Convertible Preferred Stock have been registered under the Securities Act
or any state securities laws. Each certificate representing Convertible
Preferred Stock issued pursuant to this Agreement and each stock certificate
issued upon conversion of the Convertible Preferred Stock shall bear a legend
in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED , OR
ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE
TRANSFERRED IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 AND SUCH
APPLICABLE STATE SECURITIES LAWS, OR (II) AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
8.2 REGISTRATION RIGHTS. The Purchaser shall be entitled to
register Common Stock issuable upon conversion of the Convertible Preferred
Stock as provided in the Registration Rights Agreement.
9. EVENTS OF DEFAULT; REMEDIES.
9.1 EVENTS OF DEFAULT. The occurrence of any one of the following
shall constitute an "Event of Default" under this Agreement:
(a) Default shall occur in the payment of any dividends when the
same shall have accrued and be due and payable; provided, that any such
default shall be curable within two business days if the failure to make the
dividend payment when due was caused by a financial institution's error in
effecting an automatic debit transaction against an account containing
sufficient funds; or
(b) Default shall occur in the observance or performance of any
covenant or agreement contained in Sections 6.2 through 6.10 hereof and such
default
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shall continue for a period of 10 days after the sooner to occur of (i)
senior management's knowledge of such default, or (ii) the date on which the
Company receives notice thereof in writing from any holder of Convertible
Preferred Stock; or
(c) Default shall occur in the observance or performance of any
other provision of this Agreement which is not remedied within 30 days after
the sooner to occur of (i) senior management's knowledge of such default, or
(ii) the date on which the Company receives notice thereof in writing from
any holder of Convertible Preferred Stock; or
(d) Any representation or warranty made by the Company herein is
untrue in any material respect as of the date of the issuance or making
thereof; or
(e) The Company or any Subsidiary becomes insolvent or bankrupt, is
generally not paying its debts as they become due or makes an assignment for
the benefit of creditors, or the Company or any Subsidiary applies for or
consents to the appointment of a custodian, trustee, liquidator, or receiver
for the Company or such Subsidiary or for the major part of the property of
either; or
(f) A custodian, trustee, liquidator, or receiver is appointed for
the Company or any Subsidiary or for the major part of the property of either
and is not discharged within 60 days after such appointment; or
(g) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar
law or laws for the relief of debtors, are instituted by or against the
Company or any Subsidiary and, if instituted against the Company or any
Subsidiary, are consented to or are not dismissed within 60 days after such
institution; or
(h) ▇▇▇▇▇▇ ▇. ▇▇▇ or ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall resign or be
terminated, other than for cause, as President and Chief Financial Officer,
respectively, of the Company, and a successor reasonably acceptable to
Purchaser shall not have been elected within 180 days after such resignation
or termination; provided, that if no such successor is elected, an Event of
Default shall be deemed to have occurred and have been continuing from and
after the date of such resignation or termination.
9.2 REMEDIES UPON EVENT OF DEFAULT.
(a) If an Event of Default shall occur, and for so long as such
Event of Default continues, the dividend rate on the Convertible Preferred
Stock shall increase by 2% of Stated Value per annum until such Event of
Default is cured.
(b) If either (i) the Company fails to pay dividends when the same
shall have accrued and be payable on three consecutive dividend payment
dates, or (ii) the aggregate amount of all accrued but unpaid dividends shall
equal or exceed the
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sum of $450,000, then upon the request of Purchaser, the Company shall use
its best efforts to increase the size of its Board of Directors by one, and
shall use its best efforts to cause a designee of Purchaser to be elected a
director to fill such newly created directorship.
10. AMENDMENTS, WAIVERS AND CONSENTS.
10.1 CONSENT REQUIRED. Any term, covenant, agreement or condition
of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), if the Company shall
have obtained the consent in writing of the holders of more than 50% of the
outstanding Convertible Preferred Stock.
10.2 SOLICITATION OF CONVERTIBLE PREFERRED STOCK HOLDERS. The
Company will not, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any holder of the Convertible Preferred Stock as consideration
for or as an inducement to the entering into by any holder of the Convertible
Preferred Stock of any waiver or amendment of any of the terms and provisions
of this Agreement, unless remuneration is currently paid, on the same terms,
ratably to the holders of all of the Convertible Preferred Stock then
outstanding.
10.3 EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver
shall apply equally to all of the holders of the Convertible Preferred Stock
and shall be binding upon them, upon each future holder of any Convertible
Preferred Stock, and upon the Company, whether or not such Convertible
Preferred Stock shall have been marked to indicate such amendment or waiver.
No such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon.
11. INTERPRETATION OF AGREEMENT; DEFINITIONS.
11.1 DEFINITIONS. As used herein,
"Affiliate" means any Person (i) which directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common
control with, the Company, (ii) which beneficially owns or holds 10% or more
of any class of the Voting Stock of the Company or (iii) 10% or more of the
Voting Stock (or in the case of a Person which is not a corporation, 10% or
more of the equity interest) of which is beneficially owned or held by the
Company or a Subsidiary.
"Business Day" means any day other than a Saturday, Sunday, or other day
on which banks in Tennessee are authorized to close.
The term "control" (including the terms "controlling," "controlled by"
and "under common control") means the possession, directly or indirectly, of
the power to direct or
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cause the direction of the management and policies of a person, whether
through the ownership of Voting Stock, by contract, or otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer any
successor sections.
"Guaranties" by any Person means all obligations (other than endorsements
in the ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing, or in effect guaranteeing, any
Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation
or any property or assets constituting security therefor, (ii) to advance or
supply funds (A) for the purchase or payment of such Indebtedness or
obligation, (B) to maintain working capital or other balance sheet condition
or (C) otherwise to advance or make available funds for the purchase or
payment of such Indebtedness or obligation, or (iii) to lease property or to
purchase Securities or other property or services primarily for the purpose
of assuring the owner of such Indebtedness or obligation of the ability of
the primary obligor to make payment of the Indebtedness or obligation, or
(iv) otherwise to assure the owner of the Indebtedness or obligation of the
primary obligor against loss in respect thereof. For the purposes of all
computations made under this Agreement, a Guaranty in respect of any
Indebtedness for borrowed money shall be deemed to be Indebtedness equal to
the principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum
aggregate amount of such obligation, liability or dividend.
"Hazardous Substance" means any hazardous or toxic material, substance or
waste, pollutant or contaminant which is regulated under any statute, law,
ordinance, rule or regulation of any local, state, regional or Federal
authority having jurisdiction over the property of the Company and its
Subsidiaries or its use, including but not limited to any material, substance
or waste which is: (i) defined as a hazardous substance under Section 311 of
the Federal Water Pollution Control Act (33 U.S. C. SS 1317. 1) as amended;
(ii) regulated as a hazardous waste under Section 1004 or Section 3001 of the
Federal Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act (42 U.S.C. SS 6901 et seq.) as amended; (iii) defined as a
hazardous substance under Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. SS 9601 et seq.) as
amended; or (iv) defined or regulated as a hazardous substance or hazardous
waste under any rules or regulations promulgated under any of the foregoing
statutes.
"Indebtedness" of any Person means and includes all obligations of such
Person which in accordance with GAAP shall be classified upon a balance sheet
of such Person
-37-
as liabilities of such Person, and in any event shall include all (i)
obligations of such Person for borrowed money or which have been incurred in
connection with the acquisition of property or assets, (ii) obligations
secured by any lien or other charge upon property or assets owned by such
Person, even though such Person has not assumed or become liable for the
payment of such obligations, (iii) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and
remedies of the seller, lender or lessor under such agreement in the Event of
Default are limited to repossession or sale or property, (iv) capitalized
rentals, and (v) Guaranties of obligations of others of the character
referred to in this definition.
"Investments" means all investments, in cash or by delivery of property
made, directly or indirectly in any Person, whether by acquisition of shares
of capital stock, indebtedness or other obligations or Securities or by loan,
advance, capital contribution or otherwise; provided, however that
"Investments" shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
"Material Adverse Event" means any event or circumstance, or set of
events or circumstances, individually or collectively, that reasonably could
be expected to result in any (i) material adverse effect upon the validity or
enforceability of any of the Operative Documents, or (ii) material and
adverse effect on the financial condition or business prospects of the
Company (a Material Adverse Effect") or (iii) material default or potential
material default under any of the Operative Documents.
"Redemption Notice" means the notice of redemption delivered by the
Company to the holder of Convertible Preferred Stock indicating the Company's
intent to redeem all or a portion of the shares held by such holder.
"Person" means an individual, partnership, corporation, limited liability
company, trust or unincorporated organization, and a government or agency or
political subdivision thereof.
"Plan" means a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to
which the Company or any ERISA Affiliate contributed or is a member or
otherwise may have any liability.
"Registration Rights Agreement" means the Registration Rights Agreement
between the Company and the Purchaser of even date herewith.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
The term "subsidiary" means, as to any particular parent corporation, any
corporation of which more than 50% (by number of votes) of the Voting Stock
shall be owned by such parent corporation and/or one or more corporations
which are themselves
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Restricted Subsidiaries of such parent corporation. The term "Subsidiary"
shall mean a subsidiary of the Company.
"Voting Stock" means Securities of any class or classes the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) shall be owned by the
Company and/or one or more of its Subsidiaries.
11.2 ACCOUNTING PRINCIPLES. Where the character or amount of any
asset or liability or item of income or expense is required to be determined
or any consolidation or other accounting computation is required to be made
for the purposes of this Agreement, the same shall be done in accordance with
GAAP as applied by the Company, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.
11.3 DIRECTLY OR INDIRECTLY. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action
in question is taken directly or indirectly by such Person.
12. MISCELLANEOUS.
12.1 EXPENSES, STAMP TAX INDEMNITY. Whether or not the transactions
herein contemplated shall be consummated, the Company agrees to pay to
Purchaser (i) up to $25,000 as reimbursement for Purchaser's out-of-pocket
expenses in connection with the entering into of this Agreement and the
consummation of the transactions contemplated hereby, including but not
limited to the reasonable fees, expenses and disbursements, of Purchaser's
counsel, and (ii) so long as Purchaser holds any of the Convertible Preferred
Stock, all such expenses relating to any amendment, waiver or consent
pursuant to the provisions hereof (whether or not the same are actually
executed and delivered), including, without limitation, any amendments,
waivers or consents resulting from any work-out, restructuring or similar
proceedings relating to the performance by the Company of its obligations
under this Agreement and the Convertible Preferred Stock. The Company also
agrees that it will pay and save Purchaser harmless against any and all
liability with respect to stamp and other taxes, if any, which may be payable
in connection with the execution and delivery of this Agreement or the
Convertible Preferred Stock, whether or not any Convertible Preferred Stock
is then outstanding. The Company agrees to protect and indemnify Purchaser
against any liability for any and all brokerage fees and commissions payable
or claimed to be payable to any Person as a result of any actions of the
Company or its agents in connection with the transactions contemplated by
this Agreement.
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12.2 POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay or
failure on the part of the holder of any share of Convertible Preferred Stock
in the exercise of any power or right shall operate as a waiver thereof; nor
shall any single or partial exercise of the same preclude any other or
further exercise thereof, or the exercise of any other power or right, and
the rights and remedies of the holder of any share of Convertible Preferred
Stock are cumulative to and are not exclusive of any rights or remedies any
such holder would otherwise have, and no waiver or consent, shall extend to
or affect any obligation or right not expressly waived or consented to.
12.3 NOTICES. All communications provided for hereunder shall be in
writing and shall be delivered personally, or mailed by registered mail, or
by prepaid overnight air courier, or by facsimile communication, in each case
addressed:
If to Purchaser: Tandem Capital, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to: C. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company: VISTA Information Solutions, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with a copy to: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ Freidenrich PC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
or such other address as Purchaser or the subsequent holder of any
Convertible Preferred Stock initially issued to Purchaser may designate to
the Company in writing, or such other address as the Company may in writing
designate to Purchaser or to a subsequent holder of the Convertible Preferred
Stock initially issued to Purchaser, provided, however, that a notice sent by
overnight air courier shall only be effective if delivered at a street
address designated for such purpose by such person and a notice sent by
facsimile communication shall only be effective if made by confirmed
transmission at a telephone number designated for such purpose by such person
or, in either case, as Purchaser or a
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subsequent holder of any Convertible Preferred Stock initially issued to
Purchaser may designate to the Company in writing or at a telephone number
herein set forth.
12.4 ASSIGNMENTS. This Agreement, the Convertible Preferred Stock
and the other Operative Documents may be endorsed, assigned and/or
transferred in whole or in part by Purchaser to no more than three
transferees (each a "Permitted Transferee"). Any Permitted Transferee shall
succeed to and be possessed of the rights and powers of Purchaser under all
of the same to the extent transferred and assigned, and shall assume and be
subject to all representations and warranties made by Purchaser if such
transfer occurs prior to the Closing Date. The Company shall not assign any
of its rights nor delegate any of its duties under this Agreement or any of
the other Operative Documents by operation of law or otherwise without the
prior express written consent of Purchaser, and if the Company obtains such
consent, this Agreement and the other Operative Documents shall be binding
upon such assignee.
12.5 SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations and warranties made by the Company and the Purchaser herein
and in any instruments or certificates delivered pursuant hereto shall
survive the Closing and the delivery of this Agreement for so long as the
Convertible Preferred Stock remains outstanding, except that the
representations and warranties set forth herein (other than those contained
in Sections 2.1 through 2.4, which shall survive until termination of this
Agreement) shall expire on the first anniversary of the Closing Date.
12.6 SEVERABILITY. Should any part of this Agreement for any reason
be declared invalid or unenforceable, such decision shall not affect the
validity of any remaining portion, which remaining portion shall remain in
force and effect as if this Agreement had been executed with the invalid or
unenforceable portion thereof eliminated and it is hereby declared the
intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may for any reason, be hereafter declared invalid or
unenforceable.
12.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with California law, without regard to its conflicts
of law rules.
12.8 CAPTIONS; COUNTERPARTS. The descriptive headings of the
various Sections or parts of this Agreement are for convenience only and
shall not affect the meaning or construction of any of the provisions hereof.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument.
12.9 CONFIDENTIALITY. Each party hereto agrees that, except with
the prior written permission of the other party hereto, it shall at all times
keep confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other
-41-
party to which such party has been or shall become privy by reason of this
Agreement, discussions or negotiations relating to this Agreement, the
performance of its obligations hereunder or the ownership of Convertible
Preferred Stock purchased hereunder. The parties hereto further agree that
there shall be no press release or other public statement issued by any party
relating to this Agreement or the transactions contemplated hereby, unless
the party otherwise agrees in writing.
12.10 PUBLICITY. The Company and Purchaser shall consult with
each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby. Neither
party shall issue any press release or otherwise make any public statement
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Preferred Stock Purchase Agreement to be executed and delivered by their duly
authorized officers as of the date first written above.
VISTA INFORMATION SOLUTIONS, INC.
By:
---------------------------------------
Name:
-----------------------------------------
Title:
------------------------------------------
SIRROM CAPITAL CORPORATION
d/b/a TANDEM CAPITAL
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By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
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