Exhibit 4.23
▇▇▇▇▇ COMMUNICATIONS, INC.
_____________________________________
SERIES H PREFERRED STOCK
PURCHASE AGREEMENT
February 21, 2001
_____________________________________
TABLE OF CONTENTS
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ARTICLE 1 AUTHORIZATION AND SALE OF SHARES................................ 1
Section 1.1 Authorization................................................ 1
Section 1.2 Purchase and Sale of Purchased Shares........................ 1
1.2.1 Purchased Shares................................................. 1
1.2.2 The Closing...................................................... 1
1.2.3 Use of Proceeds.................................................. 1
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
PRINCIPAL SHAREHOLDER........................................... 2
Section 2.1 Business; Organization, Corporate Power and Authority, etc... 2
Section 2.1 Validity..................................................... 2
Section 2.3 Capitalization; Status of Capital Stock...................... 2
Section 2.4 Taxes........................................................ 3
Section 2.5 No Violations................................................ 4
Section 2.6 Governmental Consents, etc................................... 4
Section 2.7 Compliance with Law.......................................... 4
Section 2.8 Financial Statements......................................... 4
Section 2.9 Absence of Undisclosed Liabilities........................... 5
Section 2.10 Absence of Certain Changes or Events........................ 5
Section 2.11 Title to Assets............................................. 6
Section 2.12 Compliance with Securities Laws............................. 6
Section 2.13 Intellectual Property....................................... 6
2.13.1 Intellectual Property Assets.................................... 6
2.13.2 Agreements...................................................... 7
2.13.3 Know-How Necessary for the Business............................. 7
2.13.4 Patents......................................................... 7
2.13.5 Trademarks...................................................... 8
2.13.6 Copyrights...................................................... 8
2.13.7 Trade Secrets................................................... 9
Section 2.14 Minute Books................................................ 9
Section 2.15 Insurance................................................... 9
Section 2.16 Offering of Preferred Stock................................. 10
Section 2.17 Disclosure; Public Filings.................................. 10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF INVESTORS..................... 11
Section 3.1 Validity..................................................... 11
Section 3.2 Investment Intent............................................ 11
Section 3.3 Resale Restrictions.......................................... 11
Section 3.4 Diligence.................................................... 12
Section 3.5 Reliance..................................................... 12
Section 3.6 Status....................................................... 12
ARTICLE 4 CONDITIONS OF PURCHASE.......................................... 12
Section 4.1 Investor Condition........................................... 12
4.1.1 Certificate of Company........................................... 12
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4.1.2 Opinion of Counsel............................................... 13
4.1.3 Authorization; Consents.......................................... 13
4.1.4 Articles of Incorporation........................................ 13
4.1.5 Registration Rights Agreement.................................... 13
4.1.6 Board of Directors............................................... 13
4.1.7 All Proceedings Satisfactory..................................... 13
4.1.8 Fees and Expenses................................................ 13
Section 4.2 Company's Conditions......................................... 14
4.2.1 Certificate of Investor.......................................... 14
4.2.2 Full Purchase Price.............................................. 14
4.2.3 SBA Compliance................................................... 14
ARTICLE 5 COVENANTS OF THE COMPANY........................................ 14
Section 5.1 Financial Statements......................................... 14
Section 5.2 Conduct of Business.......................................... 15
Section 5.3 Public Announcements......................................... 15
Section 5.4 Insurance.................................................... 15
Section 5.5 Maintenance of Properties.................................... 15
Section 5.6 Affiliated Transactions...................................... 15
Section 5.7 Lock-Up for Certain Stockholders............................. 15
Section 5.8 Board of Directors Meetings.................................. 15
Section 5.10 Loans and Advances.......................................... 16
Section 5.12 "C" Corporation............................................. 16
Section 5.13 Maintenance of Intellectual Property Assets................. 16
Section 5.14 Non-Contravention........................................... 16
ARTICLE 6 COVENANTS OF THE INVESTORS...................................... 16
Section 6.1 Right of First Offer......................................... 16
Section 6.2 Confidentiality.............................................. 16
ARTICLE 7 INDEMNIFICATION................................................. 17
Section 7.1 Investor Indemnification..................................... 17
Section 7.2 Company Indemnification...................................... 17
Section 7.3 Indemnification Generally.................................... 17
Section 7.4 Final Adjudication........................................... 18
ARTICLE 8 MISCELLANEOUS................................................... 18
Section 8.1 Broker's Fee................................................. 18
Section 8.2 SBA Compliance............................................... 18
Section 8.3 Amendments And Waivers....................................... 18
Section 8.4 Survival of Covenants; Assignability of Rights............... 18
Section 8.5 Governing Law/Enforcement.................................... 19
Section 8.6 Jurisdiction and Venue....................................... 19
Section 8.7 Section Headings............................................. 19
Section 8.8 Counterparts................................................. 19
Section 8.9 Notices and Demands.......................................... 19
Section 8.10 Severability................................................ 19
Section 8.11 Definitions of Terms........................................ 20
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Section 8.12 Expenses.................................................... 21
Section 8.13 Entire Agreement............................................ 21
Exhibits
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Exhibit A Amended and Restated Articles of Incorporation
Exhibit B Opinion of Counsel
Exhibit C Registration Rights Agreement
Exhibit D Disbursement Statement
Disclosure Schedules
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iii
SERIES H PREFERRED STOCK
PURCHASE AGREEMENT
THIS AGREEMENT is made as of this 21st day of February, 2001 by and among
▇▇▇▇▇ COMMUNICATIONS, INC. (the "Company"), a Delaware corporation, with its
current principal place of business at ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, WATERSIDE CAPITAL CORPORATION ("WSCC") and CAPITALSOUTH
PARTNERS FUND I, L.P. ("CapitalSouth" and collectively with WSCC, the
"Investors").
ARTICLE 1
AUTHORIZATION AND SALE OF SHARES
Section 1.1. Authorization. The Company has authorized the issuance and
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sale to the Investors of 1,600,000 shares (the "Purchased Shares") of its
authorized, but unissued shares of Series H Preferred Stock (the "Series H
Preferred Stock") having the designations, rights and preferences and other
terms and conditions as set forth in Certificate of Designation attached hereto
as Exhibit A (the "Certificate of Designation").
---------
Section 1.2. Purchase and Sale of Purchased Shares.
-------------------------------------
1.2.1. Purchased Shares. On the terms and subject to the
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conditions set forth in this Agreement, the Company will issue and sell to the
Investors, and the Investors will buy from the Company the Purchased Shares at a
price of $1.00 per share for an aggregate purchase price of $1,600,000. Of the
purchase price, WSCC will pay $1,250,000 and receive 1,250,000 Purchased Shares
and CapitalSouth will pay $350,000 and receive 350,000 Purchased Shares.
1.2.2. The Closing. The purchase and sale shall take place
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at a closing (the "Closing") to be held at the office of Williams, Mullen, ▇▇▇▇▇
& ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at
10:00 a.m. on the date of this Agreement or on such other date and at such time
as may be mutually agreed upon by the Company and the Investors (the "Closing
Date"). At the Closing, the Company will deliver to the Investors certificates
for the Purchased Shares against delivery to the Company of a receipt of wire
transfers, or of certified checks, in payment of the full purchase price
therefor.
1.2.3. Use of Proceeds. The Company shall use the proceeds
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from the sale of the Purchased Shares for general working capital purposes, but
only to the extent permitted by the rules and regulations promulgated from time
to time by the Small Business Administration (the "SBA").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND PRINCIPAL
SHAREHOLDER
To induce the Investors to enter into this Agreement, except as disclosed
in SEC Documents filed and publicly available prior to the date of this
Agreement (the "Public Filings") or as set forth in the Disclosure Schedule
attached hereto, the Company represents and warrants that:
Section 2.1. Business; Organization, Corporate Power and Authority, etc.
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The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full corporate power
and authority to own and hold its properties and to carry on its business as
presently conducted. The Company is duly licensed or qualified and in good
standing as a foreign corporation authorized to do business in all jurisdictions
in which the character of property owned or leased, or the nature of the
activities conducted by it, makes such licensing or qualification necessary,
except where the failure to so qualify would not have a material adverse effect
on the business, assets or condition, financial or otherwise, or operations of
the Company ("Material Adverse Effect"). The Company has no Subsidiaries and
does not own of record or beneficially any shares of capital stock or securities
convertible into capital stock of, or any other proprietary interest in, any
Person.
Section 2.2. Validity. The Company has all necessary power and authority,
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and has taken all action required to execute, deliver and perform this Agreement
and the Registration Rights Agreement referred to in Section 4.1.5 hereof (the
"Registration Rights Agreement") and to issue, sell and deliver the Purchased
Shares, and to enter into and execute all other instruments, certificates and
documents evidencing the transactions contemplated herein (collectively, the
"Investment Documents"). The Investment Documents, when delivered, are and will
be duly authorized, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors; equitable principles limiting rights to specific performance; and, with
respect to the enforceability of the provisions set forth in the Registration
Rights Agreement, applicable federal securities law. Upon the issuance, sale and
delivery of the Purchased Shares in accordance with the terms hereof, the
Purchased Shares will be validly issued, fully paid and non-assessable and will
be free and clear of all liens, charges, restrictions, claims and encumbrances
of any kind, subject to restrictions on transfer under federal and state
securities laws, this Agreement, and the Company's Certificate of Incorporation
Section 2.3. Capitalization; Status of Capital Stock. The Company has, or
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before the Closing will have, a total authorized capitalization consisting of
(i) 20,000,000 shares of Common Stock ("Common Stock"), of which (A) 10,062,076
shares are issued and outstanding, (B) 1,215,216 shares are held by the
Corporation as treasury shares, (C) 32,512 shares were issued in error and are
awaiting cancellation but are shown as outstanding on the records of the
Corporation's transfer agent, and (D) 68 shares are shown as outstanding on the
records of the Corporation's
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transfer agent but cannot be allocated to a holder of record, and (ii)
20,000,000 shares of Preferred Stock ("Preferred Stock") of which (A)391,667
shares are authorized as Series A Junior Convertible Redeemable Preferred Stock,
all of which shares are issued and outstanding, (B) 390,000 shares are
authorized as Series B Junior Convertible Redeemable Preferred Stock, all of
which shares are issued and outstanding, (C) 40,000 shares are authorized as
Series C Junior Convertible Redeemable Preferred Stock, all of which shares are
issued and outstanding, (D) 1,500,000 shares are authorized as Series D Senior
Cumulative Convertible Redeemable Preferred Stock, all of which shares are
issued and outstanding, (E) 350,000 shares are authorized as Series E Junior
Convertible Redeemable Preferred Stock, all of which shares are issued and
outstanding, (F) 2,150,493 shares are authorized as Series G Junior
Participating Convertible Voting Preferred Stock, all of which shares are issued
and outstanding. All of the issued and outstanding shares of Common Stock have
been duly authorized and validly issued, are fully paid, and non-assessable, and
were issued in compliance with all applicable state and federal securities laws.
Other than as set forth in the Company's Public Filings, the Company has no
options or rights to purchase shares of its capital stock, or securities
convertible into shares of its capital stock, authorized, issued or outstanding,
nor is the Company obligated in any manner to issue shares of its capital stock
or securities convertible into or evidencing any right to acquire shares of its
capital stock, or to distribute to holders of any of its capital stock any
evidence of indebtedness or assets; (b) no Person has any preemptive right,
right of first refusal or similar right to acquire additional shares of capital
stock in connection with the sale and purchase of the Purchased Shares pursuant
to this Agreement or otherwise; (c) there are no restrictions on the transfer of
the shares of capital stock of the Company, other than those imposed by relevant
state and federal securities laws or the Company's Certificate of Incorporation;
(d) no Person has any right to cause the Company to effect the registration
under the Securities Act of 1933, as amended (the "1933 Act"), of any shares of
capital stock or any other securities (including debt securities) of the
Company; (e) the Company has no obligation to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein, or to pay any
dividend or make any other distribution in respect thereto; and (f) there are no
voting trusts, stockholders' agreements, or proxies relating to any securities
of the Company. The Company has heretofore delivered to the Investors true and
correct copies of its Certificate of Incorporation and Bylaws, each as amended
and in effect on the date hereof and certified by the Company's Secretary.
Section 2.4. Taxes. The Company is a "C" corporation. The Company has a
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fiscal year end of December 31 and has accurately prepared, to the best of its
knowledge, and timely filed, or has made provision for the timely filing of, all
federal, state and other tax returns that are required to be filed by it and has
paid or made provision for the payment of all taxes that have become due
pursuant to such returns and, to the best of the Company's knowledge, all other
taxes, assessments and governmental charges which have become due and payable,
including, without limitation, all taxes which the Company is obligated to
withhold from amounts owing to employees, creditors and third parties. No
deficiency assessment with respect to or proposed adjustment of the Company's
federal, state, or other taxes is pending or threatened in writing. There is no
tax lien, whether imposed by any Federal, state, or other taxing authority,
outstanding against the assets, properties or business of the Company. Neither
the Company nor any of its stockholders has ever filed a consent pursuant to
Section 341(f) of the Code, relating to collapsible corporations.
3
Section 2.5. No Violations. The execution, delivery and performance of the
-------------
Investment Documents, the consummation of the transactions contemplated by the
Investment Documents (including the issuance, sale and delivery of the Purchased
Shares), and compliance with the provisions hereof, will not violate any
provision of law, the Certificate of Incorporation or Bylaws, as amended, of the
Company, any order of any court or other agency of government or indenture,
agreement or other instrument to which the Company is bound, or conflict with,
result in the breach of or constitute (with due notice or lapse of time or both)
a default under any such indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company in each case which would have a Material Adverse Effect.
Section 2.6. Governmental Consents, etc. No consents, approvals or
--------------------------
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any federal, state or local governmental authority on the part
of the Company are required as a condition precedent to the valid execution and
delivery of the Investment Documents or the valid offer, issue, sale and
delivery of the Purchased Shares.
Section 2.7. Compliance with Law. The Company is currently in compliance
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in all material respects with all federal and state laws, rules, regulations and
orders applicable to its business, operations, properties, assets, products and
services and has obtained all material licenses, permits, approvals and
authorizations necessary or required to conduct its business and affairs as
previously and currently conducted and as the Company intends to conduct it in
the future.
Section 2.8. Financial Statements. The Company has delivered to the
--------------------
Investors an audited balance sheet, statements of income and cash flows as of
December 31, 1999 and an unaudited balance sheet, statement of income for the
nine month(s) ended September 30, 2000 (the "Most Recent Fiscal Month End"),
copies of which financial statements are contained in the Disclosure Schedules
(the "Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles which have been applied
on a consistent basis throughout the periods indicated. The Financial Statements
fairly present the financial condition and operating results of the Company as
of the dates and during the periods indicated therein, are correct and complete
in all material respects, and are consistent with the books and records of the
Company (which books and records are correct and complete in all material
respects), subject to (in the case of the unaudited statements) normal recurring
year-end audit adjustments which are neither individually nor in the aggregate
material.
Section 2.9. Absence of Undisclosed Liabilities. Except as set forth on
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the Financial Statements or in its Public Filings, the Company has no material
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business after the Most Recent Fiscal Month End and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of the Company.
4
Section 2.10. Absence of Certain Changes or Events. Since the Most Recent
------------------------------------
Fiscal Month End, there has not been:
2.10.1. any change in the consolidated assets, liabilities,
prospects, condition (financial or otherwise), affairs, earnings, business, or
operations of the Company from that reflected in the balance sheet as of the
Most Recent Fiscal Month End;
2.10.2. any materially adverse change in the contingent
obligations of the Company by way of guaranty or any assurance of performance or
payment, endorsement, indemnity, warranty or otherwise, except changes in the
ordinary course of business which have not been, either in any case or in the
aggregate, materially adverse;
2.10.3. any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the properties of the
Company, taken as whole;
2.10.4. any waiver by the Company of a valuable right or of
a material debt owed to it;
2.10.5. any loans made by the Company or the Company's
employees, officers or directors other than advances of expenses made in the
ordinary course of business or in connection with employee stock purchases;
2.10.6. except for the Primal Spin-Off and the declaration
and payment of dividends on he Company's outstanding shares of its Preferred
Stock, any declaration or payment of any dividend or other distribution of the
assets of the Company or any direct or indirect redemption, purchase or
acquisition of any of the Company's securities;
2.10.7. any labor organization activity or labor unrest;
2.10.8. any increase in the compensation of any of the
Company's employees, officers or directors;
2.10.9. any resignation or termination of employment of any
officer or Key Employee of the Company;
2.10.10. any agreement entered into by the Company to do any
of the foregoing matters covered by Sections 2.10.1 through 2.10.9; or
2.10.11. any other event or condition of any character which
has had a Material Adverse Effect (given in light of the disclosure contained in
the Public Filings, the Financial Statements and the Company's Business Plan).
Section 2.11. Title to Assets. With the exception of those of its
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properties which are under lease, the Company has good title to, all of its
properties and assets of whatever nature used by the Company in the conduct of
its business and, except as set forth in Section 2.11 of the Disclosure
Schedules, there are no liens or other security interests outstanding against
any of these properties
5
and assets. All leases pursuant to which the Company leases real or personal
property are in good standing and are valid and effective in accordance with
their respective terms and there exists no default on the part of the Company or
other occurrence or condition which could result in a default or termination
thereof.
Section 2.12. Compliance with Securities Laws. Based in part on the
-------------------------------
representations of the Investors set forth in Section 3 below, the Company has
complied with all applicable United States federal and state securities laws in
connection with the offer, issuance and sale of the Purchased Shares. The
Company has not either directly or through any agent, offered any securities to,
or otherwise approached, negotiated or communicated in respect of any securities
with, any Person so as thereby to require that the offer or sale of the
Purchased Shares be registered pursuant to the provisions of Section 5 of the
1933 Act. Based in part on the representations of the Investors set forth in
Section 3 below, the offer, sale and issuance of the Purchased Shares in
conformity with the terms of this Agreement are exempt from the registration
requirements of Section 5 of the 1933 Act and all applicable state securities
laws.
Section 2.13. Intellectual Property.
---------------------
2.13.1. Intellectual Property Assets. For purposes of this
----------------------------
Agreement, the term "Intellectual Property Assets" includes:
2.13.1.1. the name ▇▇▇▇▇ Communications, Inc., HBS Billing
Services Company, ▇▇▇▇▇▇▇▇ Communications Corporation, and TCOM Marketing Corp.,
all fictional business names, trading names, registered and unregistered
trademarks, service marks, and applications (collectively, "Marks");
2.13.1.2. all patents, patent applications, and inventions
and discoveries that may be patentable (collectively, "Patents"); 2.13.1.3. all
copyrights in both published works and unpublished works (collectively,
"Copyrights");
2.13.1.4. all rights in mask works (collectively, "rights in
Mask Works");
2.13.1.5. all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, "Trade Secrets");
owned, used, or licensed by the Company as licensee or licensor.
2.13.2. Agreements. Section 2.13.2 of the Disclosure
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Schedules contains a complete and accurate list and summary description of all
contracts or agreements relating to the Intellectual Property Assets to which
the Company is a party or by which the Company is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for commonly
available software programs with a value of less than $10,000 under which the
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Company is the licensee. There are no outstanding and, to the Company's
knowledge, no threatened disputes or disagreements with respect to the any such
agreement.
2.13.3. Know-How Necessary for the Business.
-----------------------------------
2.13.3.1. The Company is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets necessary for the
operation of the Company's business as it is currently conducted or as reflected
in the Business Plan given to the Investors free and clear of all liens,
security interests, charges, encumbrances, equities, and other adverse claims,
and has the right to use without payment to a third party all of the
Intellectual Property Assets.
2.13.3.2. To the knowledge of the Company, no employee of
the Company has entered into any contract or agreement that restricts or limits
in any way the scope or type of work in which the employee may be engaged or
requires the employee to transfer, assign, or disclose information concerning
his work to anyone other than the Company.
2.13.4. Patents.
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2.13.4.1. Section 2.13.4 of the Disclosure Schedules
contains a complete and accurate list and summary description of all Patents.
The Company is the owner of all right, title, and interest in and to each of the
Patents, free and clear of all liens, security interests, charges, encumbrances,
entities, and other adverse claims.
2.13.4.2. All of the issued Patents are currently in
compliance with formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within 90 days after the Closing Date.
2.13.4.3. No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition proceeding. To the Company's
knowledge, there is no potentially interfering patent or patent application of
any third party.
2.13.4.4. No Patent is infringed or has been challenged or
threatened in any way. None of the products manufactured and sold, nor any
process or know-how used, by the Company infringes or is alleged to infringe any
patent or other proprietary right of any other Person.
2.13.4.5. All products made, used, sold under the Patents
have been marked with the property patent notice.
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2.13.5. Trademarks.
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2.13.5.1. Section 2.13.5 of the Disclosure Schedules
contains a complete and accurate list and summary description of all Marks. The
Company is the owner of all right, title, and interest in and to each of the
Marks, free and clear of all liens, security interests, charges, encumbrances,
requires, and other adverse claims.
2.13.5.2. All Marks that have been registered with the
United States Patent and Trademark Office (which are listed on Section 2.13.5 of
the Disclosure Schedules) are currently in compliance with all formal legal
requirements (including the timely post registration filing of affidavits of use
and incontestability and renewal applications), are valid and enforceable, and
are not subject to any maintenance fee or taxes or actions falling due within 90
days after the Closing Date.
2.13.5.3. No ▇▇▇▇ has been or is now involved in any
opposition, invalidation, or cancellation nor, to the Company's knowledge, is
any such action threatened with respect to any of the Marks.
2.13.5.4. To the Company's knowledge, there is no
potentially interfering trademark or trademark application of any third party.
2.13.5.5. To the Company's knowledge, no ▇▇▇▇ is infringed
or has been challenged or threatened in anyway. None of the Marks used by the
Company infringes or is alleged to infringe any trade name, trademark, or
service ▇▇▇▇ of any third party.
2.13.6. Copyrights.
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2.13.6.1. Section 2.13.6 of the Disclosure Schedules
contains a complete and accurate list and summary description of all Copyrights
which are material to the conduct of the Company's business. The Company is the
owner of all right, title, and interest in and to each of the Copyrights, free
and clear of all liens, security interests, charges, encumbrances, equities, and
other adverse claims.
2.13.6.2. All the Copyrights which are material to the
conduct of the Company's business have been registered and are currently in
compliance with formal legal requirements, are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date.
2.13.6.3. No Copyrights which are material to the conduct of
the Company's business are infringed or, to the Company's knowledge, nor have
any such Copyrights been challenged or threatened in any way. None of the
subject matter of any of the Copyrights which are material to the conduct of the
Company's business infringes or is alleged to infringe any copyright of any
third party or is a derivative work based on the work of a third party.
8
2.13.6.4. All works encompassed by the Copyrights which are
material to the conduct of the Company's business have been marked with the
property copyright notice.
2.13.7. Trade Secrets.
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2.13.7.1. With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any individual.
2.13.7.2. The Company has taken all reasonable precautions
to protect the secrecy, confidentiality, and value of its Trade Secrets.
2.13.7.3. The Company has good title and an absolute (but
not necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are
not part of the public knowledge or literature, and, to the Company's knowledge,
have not been used, divulged, or appropriated either for the benefit of any
Person or to the detriment of the Company. No Trade Secret is subject to any
adverse claim or has been challenged or threatened in any way.
Section 2.14. Minute Books. The copy of the minute book of the Company
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provided to the Investors counsel contains (a) minutes of all meetings of
directors and all actions by written consent without a meeting by the directors
since the date of incorporation (and accurately reflects all actions by the
directors and any committee of the directors and stockholders with respect to
all transactions referred to in such minutes in all material respects), and (b)
a complete and correct copy of the Company's Certificate of Incorporation,
Bylaws, and stock transfer ledger.
Section 2.15. Insurance. The Company has in full force and effect fire and
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casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace fully any of its
properties that might be damaged or destroyed.
Section 2.16. Offering of Preferred Stock. Neither the Company nor anyone
---------------------------
acting on its behalf has offered the Purchased Shares or any similar securities
for sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof, with, any Person other than the
Investors. Neither the Company nor anyone acting on its behalf has taken, or
will take, any action which would subject the issuance or sale of the Purchased
Shares to Section 5 of the 1933 Act, as amended, or the registration or
qualification provisions of the blue sky laws of any state.
Section 2.17. Disclosure; Public Filings.
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2.17.1. Neither this Agreement, the Public Filings, the
Financial Statements, the Business Plan, nor any certificate, list, exhibit,
letter or other written statement furnished by the Company to the Investors or
its special counsel in connection herewith contains any untrue statement of a
material fact or, when read together, omits to state any material fact
9
necessary in order to make the statements contained therein not misleading in
the light of the circumstances under which they are or were made. There exists
no fact or circumstances which has a Material Adverse Effect, or which in the
future, to the best of the Company's knowledge, has a reasonable possibility of
having a Material Adverse Effect, as the Company's business is presented
currently and as it is presented to be conducted in the future in the Public
Filings and the Business Plan, which has not been reflected in the Public
Filings, the Financial Statements or as set forth in this Agreement or the
Exhibits and Disclosure Schedules hereto or fully disclosed in a written
statement or certificate furnished to the Investors by the Company pursuant to
this Agreement.
2.17.2. The projections contained in the Business Plan or
which have otherwise been delivered to the Investors for each of the fiscal
years ended 2000 and 2001, copies of which have been previously delivered to the
Investors, have been prepared in good faith by the principal financial officer
of the Company using reasonable financial planning assumptions which are
disclosed in sufficient detail. As of the date hereof, the Company has no reason
to believe that such projections are incorrect or misleading in any material
respect. No representation is made as to whether the forecasted results will in
fact be realized; the Company's actual results in the future can be expected,
notwithstanding the accuracy of the representations contained in the preceding
two sentences, to vary from those forecasted, and such variations may be
material.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INVESTORS
In order to induce the Company to enter into this Agreement, each Investor
represents and warrants to the Company that:
Section 3.1. Validity. This Agreement, the Registration Rights Agreement
--------
and all other documents and instruments executed by such Investor pursuant
hereto, have each been duly executed and delivered by such Investor and each is
a legal, valid and binding obligation of such Investor enforceable against such
Investor in accordance with its terms. All consents, approvals or authorizations
of any Person, and all qualifications, designations, declarations or filings
with any governmental authority, on the part of such Investor required as a
condition precedent to the valid execution and delivery of this Agreement and
the Registration Rights Agreement shall have been obtained or completed before,
and be effective as of, the Closing.
Section 3.2. Investment Intent. The Investor is acquiring the Purchased
-----------------
Shares for its own account, for investment, and not with a view to any
"distribution" thereof within the meaning of the 1933 Act nor with any present
intention of distributing or selling the same; and, except as contemplated by
this Agreement, the Registration Rights Agreement and all the documents and
instruments executed by the Investors pursuant hereto, such Investor has no
present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof. The officers
of the Company have made available to such Investor any and all written
information which it has requested and have answered to such
10
Investor's satisfaction, all inquiries made by such Investor; the Investors have
adequate net worth and means of providing for its current needs and
contingencies to sustain a complete loss of its investment in the Company.
Nothing contained in this Section 3.2 shall be construed as a waiver of any
rights the Investors may have under this Agreement or otherwise.
Section 3.3. Resale Restrictions. The Investor understands that because
-------------------
the Purchased Shares have not been registered under the 1933 Act, it cannot
dispose of any or all of the Purchased Shares unless the Purchased Shares are
subsequently registered under the 1933 Act or exemptions from such registration
are available. The Investors acknowledges and understands that, except as
provided in the Registration Rights Agreement, it has no independent right to
require the Company to register the Purchased Shares under the 1933 Act or any
state securities law. The Investor understands that the Company may, as a
condition to the transfer of any of the Purchased Shares, require that the
request for transfer be accompanied by opinion of counsel the identity of which
is deemed reasonably acceptable to the Company, in form and substance
satisfactory to the Company, to the effect that the proposed transfer does not
result in violation of the 1933 Act, unless such transfer is covered by an
effective registration statement under the 1933 Act. The Investor understands
that each certificate representing the Purchased Shares will bear the following
legends or ones substantially similar thereto:
These securities have not been registered under the Securities
Act of 1933. These securities have been acquired for investment
and not with a view to distribution or resale, and may not be
sold, mortgaged, pledged, hypothecated or otherwise transferred
without an effective registration statement for such shares
under the Securities Act of 1933, or an opinion of counsel for
the corporation that registration is not required under such
act.
Section 3.4. Diligence. The Investor has carefully reviewed the
---------
representations concerning the Company contained in this Agreement, has read the
Business Plan, has made detailed inquiry concerning the Company, its business
and its personnel and is knowledgeable and experienced in the making of venture
capital investments, is able to bear the economic risk of loss of its investment
in the Company, has been granted the opportunity to make a thorough
investigation of the affairs of the Company, and has availed itself of such
opportunity to the extent it has deemed necessary, either directly or through
its authorized representative.
Section 3.5. Reliance. The Investor has been advised that the Purchased
--------
Shares delivered hereunder have not been and are not being registered under the
1933 Act and that the Company in issuing the Purchased Shares is relying upon,
and will rely upon, among other things, the representations and warranties of
the Investor contained in this Section 3 in concluding that each such issuance
is a private offering" and does not require compliance with the registration
provisions of the 1933 Act.
11
Section 3.6. Status. The Investor is an "accredited investor" as that
------
term is defined in Rule 501 of Regulation D under the 1933 Act.
ARTICLE 4
CONDITIONS OF PURCHASE
Section 4.1. Investors Condition. The Investors' obligations to purchase
-------------------
and pay for the Purchased Shares hereunder shall be subject to compliance, or
the waiver in writing by the Investors of compliance, by the Company in all
material respects with their agreements herein contained and to the fulfillment
on or before and at the Closing of the following conditions:
4.1.1. Certificate of Company. The representations and
----------------------
warranties of the Company contained in this Agreement, including but not limited
to the representations and warranties made in Section 2 shall be true and
correct in all material respects with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date; the
Company shall not have suffered an event resulting in a Material Adverse Effect
before the Closing; the conditions hereafter specified in this Article 4 shall
have been satisfied and the Investors shall have received a duly executed
certificate of the Secretary of the Company, dated as of the Closing Date,
certifying such matters.
4.1.2. Opinion of Counsel. The Investors shall have received
------------------
from special counsel for the Company, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., their
favorable opinion, dated the Closing Date, substantially in the form attached as
Exhibit B.
---------
4.1.3. Authorization; Consents. The Board of Directors and
-----------------------
stockholders of the Company, to the extent necessary, shall have duly adopted
resolutions in form satisfactory to the Investors authorizing the Company to
consummate the transactions contemplated hereby to which it is a party in
accordance with the terms hereof, and the Investors shall have received a duly
executed certificate of the Secretary or an Assistant Secretary of the Company
dated the Closing Date setting forth a copy of such resolutions and such other
matters as may be requested by the Investors. The Company shall have obtained
any and all other consents, permits and waivers and made all filings necessary
or appropriate for consummation of the transactions contemplated by this
Agreement.
4.1.4. Certificate of Designation. The Amended and Restated
--------------------------
Certificate of Designation of the Company shall read as set forth in Exhibit A.
---------
4.1.5. Registration Rights Agreement. The Company and the
-----------------------------
Investors shall have executed and delivered a Registration Rights Agreement,
substantially in the form of Exhibit C.
---------
4.1.6. Board of Directors. J. ▇▇▇▇ ▇▇▇▇▇▇▇▇ shall continue to
------------------
be elected to the Company's Board of Directors as the representative of the
Investors.
12
4.1.7. All Proceedings Satisfactory. All corporate and other
----------------------------
proceedings taken before or at the Closing in connection with the transactions
contemplated by this Agreement, and all documents and evidences incident
thereto, shall be reasonably satisfactory in form and substance to the Investors
and the Investors shall receive such copies thereof and other materials
(certified, if requested) as they may reasonably request in connection
therewith.
4.1.8. Fees and Expense. The Company shall have paid the
----------------
Investors the $80,000 origination fee and sufficient funds as reimbursement for
the Investors' legal fees (and disbursements incurred by the Investors'
attorneys incurred in connection with this transaction) and the SBA compliance
review, as set forth on the Disbursement Statement attached as Exhibit D. Such
legal fees shall be paid by the Company whether or not the transaction
contemplated by this Agreement is consummated.
Section 4.2. Company's Conditions'. The Company's obligation to issue and
--------------------
sell the Purchased Shares hereunder shall be subject to compliance by the
Investors in all material respects with its agreements herein contained and to
the fulfillment on or before and at the Closing of the following conditions:
4.2.1. Certificate of Investors. The representations and
------------------------
warranties of the Investors contained in this Agreement, including but not
limited to the representations and warranties made in Section 6, shall be true
and correct in all material respects with the same force and effect as those
such representations and warranties had been made on and as of the Closing Date.
4.2.2. Full Purchase Price. The Investors shall have delivered
-------------------
the entire amount of $1,600,000 in exchange for the Purchased Shares as provided
in this Agreement less applicable fees and expenses as set forth on the
Disbursement Statement attached as Exhibit D.
---------
4.2.3. SBA Compliance. The terms and conditions of this
--------------
Agreement shall be in compliance with all statutes and regulations governing the
Investors as small business investment companies.
ARTICLE 5
COVENANTS OF THE COMPANY
Until the later of such time as none of the Purchased Shares are held
by the Investors or their Permitted Transferees, or unless otherwise agreed by
the Investors, the Company shall comply with the following covenants:
Section 5.1. Financial Statements. The Company shall maintain a system of
--------------------
accounts in accordance with generally accepted accounting principles, keep full
and complete financial records and furnish to the Investors on behalf of the
Investors the following reports: (i) no later than four months after the end of
the Company's fiscal year, audited Financial Statements Certified by King
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, independent public accountants (or such other independent
public
13
accountants of recognized national or regional standing as may be approved by
the Investors, such approval not to be unreasonably withheld) prepared in
accordance with generally accepted accounting principles and practices
consistently applied; (ii) by the end of the third week of each calendar month
in time for the Investors' monthly Board meetings, its internally prepared
Financial Statements which shall each be prepared in a manner consistent with
those prepared in the prior months and approved by the Company's Board.
Section 5.2. Conduct of Business. The Company will keep in full force and
-------------------
effect its corporate existence and will comply in all material respects with all
applicable laws and regulations in the conduct of its business.
Section 5.3. Public Announcements. The Company shall promptly deliver to
--------------------
the Investors for their review and comment and before its distribution, a draft
copy of any press release mentioning the Investors in any way and two copies of
any other press releases within five business days after the publication of such
release or filing of such press release or form.
Section 5.4. Insurance. The Company shall keep its insurable properties
---------
insured by financially sound and reputable insurers against the perils of
liability, casualty, fire and extended coverage in amounts of coverage at least
equal to those customarily maintained by companies in the same or a similar
business of similar size. The Company shall also maintain with such insurers
insurance against other hazards and risks and liability to persons and property,
to the extent and in the manner customary for corporations engaged in the same
or a similar business of similar size.
Section 5.5. Maintenance of Properties. The Company will maintain all
-------------------------
properties used or useful in the conduct of its business in good repair, working
order and condition as necessary to permit such business to be properly and
advantageously conducted in accordance with its Business Plan.
Section 5.6. Affiliated Transactions. All transactions between the
-----------------------
Company and any officer, Key Employee, director or stockholder of the Company or
Persons controlled by or affiliated with such officer, Key Employee, director or
stockholder, shall be conducted on an arm's-length basis, shall be on terms and
conditions no less favorable to the Company than could be obtained from
unrelated Persons and shall be approved in advance by a majority of
disinterested Directors of the Company after full disclosure of the terms
thereof.
Section 5.7. Lock-Up for Certain Stockholders. The Company will cause any
--------------------------------
compensation benefit plan or contract, whether now existing or hereafter
created, under which offers and sales of securities of the Company are made to
officers, directors and Key Employees of the Company, to provide that in
connection with an underwritten public offering, upon the request of the Company
or the principal underwriter managing such public offering, resales of such
securities may not be sold without the prior written consent of the Company or
such underwriters, as the case may be, for at least 90 days or such other period
of time as the Company or the underwriters, as the case may be, may reasonably
require.
14
Section 5.8. Board of Directors Meetings. The Company shall cause one
---------------------------
(1) nominee of the Investors, who shall initially be J. ▇▇▇▇ ▇▇▇▇▇▇▇▇, to be
elected as directors at all meetings of stockholders, or consents in lieu
thereof, for such purpose. The Company will reimburse all direct out-of-pocket
expenses reasonably incurred by the directors of the Company who are the
nominees of the Investors in attending meetings of the Board of Directors or any
committee thereof.
Section 5.9.
Section 5.10. Loans and Advances. The Company will not make any loan or
------------------
advance to, or own any stock or other securities of, any Person except for
reasonable advances to employees in the ordinary course of business.
Section 5.11.
Section 5.12. "C" Corporation. The Company shall remain a "C"
---------------
Corporation.
Section 5.13. Maintenance of Intellectual Property Assets. At all
-------------------------------------------
times, the Company shall maintain in good standing and take all action that may
be required to maintain all rights in its Intellectual Property Assets,
including, but not limited to, Patents, Trademarks, Copyrights and Trade
Secrets.
Section 5.14. Non-Contravention. The Company shall remain in full
-----------------
compliance with this Agreement, the Registration Rights Agreement and all other
agreements that evidence the transactions described in this Agreement.
ARTICLE 6
COVENANTS OF THE INVESTORS
Section 6.1. Right of First Offer. Neither Investor shall sell or
--------------------
transfer any Purchased Shares other than to any transferee who is an affiliate,
as that term is defined in the Investment Company Act of 1940, of such Investor
(including a shareholder of the Investor), unless such Investor first submits a
bona-fide written offer to the Company to purchase such Purchased Shares. An
Investor's offer to the Company shall remain open and irrevocable for 10
business days. During the 10 business day period commencing after the receipt of
such offer, the Company shall have the right to purchase all, but not less than
all, of such Purchased Shares upon such terms and conditions as are specified in
the offer. Promptly upon the expiration of such 10 business day period, any of
such Purchased Shares not so purchased by the Company may be sold by such
Investor to a third party at the same price and upon terms and conditions not
materially less favorable to the Investors (taken as a whole) than were offered
the Company, but may not otherwise be sold without again complying with this
Section for a period of 90 days after expiration of such 10 business day period.
Section 6.2. Confidentiality. The Investors will keep confidential and
---------------
will not disclose or divulge (other than to their respective Boards of
Directors) any confidential, proprietary or secret
15
information which the Investors may obtain from the Company pursuant to
Financial Statements, reports, contracts and other materials submitted by the
Company to the Investors pursuant to this Agreement, or pursuant to visitation
or inspection rights granted under this Agreement unless such information is
known or until such information becomes known, to the public other than by
action of the Investors or their agents.
ARTICLE 7
INDEMNIFICATION
Section 7.1. Investors Indemnification. The Company shall indemnify the
-------------------------
Investors against all claims, losses, damages and liabilities, including legal
and other expenses reasonably incurred in investigating or defending against the
same, arising out of any breach of any representation, warranty or covenant made
by the Company in Articles 2 and 5 hereof.
Section 7.2. Company Indemnification. The Investors shall indemnify the
-----------------------
Company against all claims, losses, damages and liabilities, including legal and
other expenses reasonably incurred in investigating or defending against the
same, arising out of any breach of any representation, warranty or covenant made
in Articles 3 and 6 by the Investors.
Section 7.3. Indemnification Generally. In case any investigation or
-------------------------
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
this Article 7, such Person (the "Indemnified Party") shall promptly notify the
Person against whom such indemnity may be sought (the "Indemnifying Party") in
writing. No indemnification provided for in Section 7.1 or 7.2 shall be
available to any party who shall fail to give notice as provided in this Section
7.3, but the failure to give such notice shall not relieve the Indemnify Party
or parties from any liability which it or they may have to the Indemnified Party
for contribution or otherwise on account of the provisions of Section 7.1 or
7.2. In case any such proceeding shall be brought against any Indemnified Party
and it shall notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such Indemnified Party and shall pay as incurred the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the Indemnifying Party shall pay as incurred the
fees and expenses of the counsel retained by the Indemnified Party in the event
(i) the Indemnifying Party and the Indemnified Party shall have mutually agreed
to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the Indemnifying Party agrees
to indemnify the Indemnified Party from and against any loss or liability by
reason of such settlement or judgment.
16
Section 7.4. Final Adjudication. If indemnification arises as a result
------------------
of a third party claim against the Indemnifying Party, no indemnification shall
be made effective pursuant to this Article 7 until such time as the Indemnifying
Party shall have been finally adjudicated or otherwise bound to be liable
hereunder to such third party.
ARTICLE 8
MISCELLANEOUS
Section 8.1. Broker's Fee. Each party will indemnify and hold harmless
------------
the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
Section 8.2. SBA Compliance. Should it be determined that any provision
--------------
of this Agreement is in violation of any statute or regulation governing small
business investment companies, the parties agree that any such offending
provision shall be modified or re-written as may be reasonably necessary to
comply with the applicable statute or regulation and effect the parties'
original intent under this Agreement.
Section 8.3. Amendments And Waivers. This Agreement may not be amended
----------------------
or modified, and no provisions may be waived, without the written consent of the
Company and the Investors.
Section 8.4. Survival of Covenants; Assignability of Rights.
----------------------------------------------
8.4.1. All covenants, agreements, representations and
warranties of the Company made herein and in the certificates, lists, exhibits,
schedules or other written information delivered or furnished in connection
therewith and herewith shall be deemed to have been relied upon by the
Investors, and, except as provided otherwise in this Agreement, shall survive
the delivery of the Purchased Shares for a period of one year and shall bind the
Company's successors and assigns, whether so expressed or not, and, except as
provided otherwise in this Agreement, all such covenants, agreements,
representations and warranties shall inure to the benefit of the Investors'
successors and assigns and to permitted transferees of the Purchased Shares,
whether so expressed or not.
8.4.2. All covenants, agreements, representations and
warranties of the Investors made herein shall be deemed to have been relied upon
by the Company, and, except as provided otherwise in this Agreement, shall
survive the delivery of the Purchased Shares and shall bind each of the
Investors' respective successors and assigns, whether so expressed or not and,
except as provided otherwise in this Agreement, all such covenants, agreements,
representations and warranties shall inure to the benefit of the Company's
successors and assigns whether so expressed or not.
17
Section 8.5. Governing Law/Enforcement. This Agreement shall be
-------------------------
governed by and construed in accordance with the substantive laws of the
Commonwealth of Virginia, without regard to conflicts of law provisions.
Section 8.6. Jurisdiction and Venue. The Company consents to the
----------------------
jurisdiction of the Circuit Court of the City of Norfolk, Virginia and the
United States District Court for the Eastern District of Virginia, Norfolk
Division, for the purpose of any suit, action or other proceeding arising out of
any of its obligations arising under this Agreement or with respect to the
transactions contemplated hereby, and expressly waives any and all objections it
may have as to venue in such court.
Section 8.7. Section Headings. The descriptive headings in this
----------------
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision hereof.
Section 8.8. Counterparts. This Agreement may be executed
------------
simultaneously in any number of counterparts, each of which when so executed and
delivered shall be taken to be an original; but such counterparts shall together
constitute but one and the same document.
Section 8.9. Notices and Demands. Any notice or demand which, by any
-------------------
provision of this Agreement or any agreement, document or instrument executed
pursuant hereto or thereto, except as otherwise provided therein, is required or
provided to be given shall be deemed to have been sufficiently given or served
for all purposes three days after being sent by first class mail, postage and
charges prepaid to the following addresses: if to the Company, at its mailing
address set out above, or at any other address designated by the Company to the
Investors in writing; if to WSCC at its mailing address of ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, if to CapitalSouth, at its mailing address
of ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or at any other
addresses designated by the Investors to the Company in writing; and if to an
assignee of the Investors, to its address as designated to the Company in
writing. Any notice given by facsimile pursuant to this Section shall be
followed by written notice delivered by Federal Express or similar courier
service. Any documents, reports or other materials which are required to be
delivered to the Investors shall be deemed to have been delivered if delivered
to the Investors at the address indicated above.
Section 8.10. Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
18
Section 8.11. Definitions of Terms
--------------------
Section
------------
1933 Act 2.3
Certificate of Designation 1.1
Closing Date 1.2.2
Common Stock 2.2
Copyrights 2.13.1.3
Financial Statements 2.8
Intellectual Property Assets 2.13.1
Investment Documents 2.2
Marks 2.13.1.1
Mask Works 2.13.1.4
Material Adverse Effect 2.1
Patents 2.13.1.2
Preferred Stock 2.3
Purchased Shares 1.1
Registration Rights Agreement 2.2
SBA 1.2.3
Series H Preferred Stock 1.1
Trade Secrets 2.13.1.5
Best Knowledge. The term "best knowledge", or similar terms when applied
--------------
to the Company, means the actual knowledge of its respective Key Employees,
officers or directors having conducted a reasonable independent investigation.
Business Plan. The term "Business Plan" means all documents, projections
-------------
and other related information provided and representations made to the Investors
in writing, including, without limitation, (1) the internally prepared profit
and loss statements for the period ending September 30, 2000, pro forma estimate
profit and loss statements for the three month period and year ending December
31, 2000 and the pro forma forecast profit and loss statements for the year
ending December 31, 2001 for HBS Billing Services Company and (2)
representations that the general and administrative expenses (to include
expenses for legal and accounting services, payroll for three executive
officers, travel and entertainment and miscellaneous expenses) of the Company
are forecasted to be $2,500,000 for the year ending December 31, 2001.
Certified. A Financial Statement shall be deemed to be "certified" only if
---------
the Person certifying it shall unqualifiedly express the opinion that it has
been prepared in accordance with generally accepted accounting principles and
that the balance sheet included therein fairly presents the financial position
of the Company as at the date thereof and that the statements of income and of
changes in financial position included therein fairly present the results of
operations of the Company for the period indicated. If the person certifying is
an officer of the Company, the certificate shall also state that the Financial
Statements are true, correct and complete. If the person
19
certifying is a member of an accounting firm, the certificate shall also state
that the examination included such tests of accounting records and such other
auditing procedures as the accountant considered necessary in the circumstances.
Indebtedness. The term "Indebtedness" shall mean with respect to any
------------
Person (i) all indebtedness or other obligations of such Person for borrowed
money or for the deferred purchase price of property or services, other than for
trade accounts payable incurred in the ordinary course of the Company's
business, (ii) all Indebtedness described in clause (i) of any other Person in
respect of which such Person is liable, contingently or otherwise, to pay or
advance money or property as guarantor, endorser or otherwise (except as
endorser for collection in the ordinary course of business), and (iii) all lease
obligations of such Person which are required, in accordance with generally
accepted accounting principles ("GAAP"), to be capitalized on the books of the
----
lessee.
Key Employees. The term "Key Employees" shall mean the "executive
-------------
officers" of the Company, as such persons are identified from time to time by
the Company's board of directors.
Permitted Transferee. The term "Permitted Transferee" shall mean any
--------------------
purchaser or transferee of Securities who at the time of transfer is an
affiliate, as that term is defined in the Investment Company Act of 1940, of an
Investor (including a shareholder of an Investor). Each such transferee shall
be deemed to be an "Investor" for purposes of this Agreement.
Person. The term "Person" shall mean any corporation, association,
------
partnership, joint venture, organization, business or individual.
Primal Spinoff. The term "Primal Spinoff" shall mean the Company's
--------------
distribution of all its shares of the common stock of Primal Solutions, Inc. to
the Company's security holders on February 12, 2001.
SEC Documents. The term "SEC Documents" shall mean all required reports,
-------------
schedules, forms, statements and other documents (including exhibits and all
other information incorporated therein) filed by the Company with the Securities
and Exchange Commission since August 1, 1998,
Section 8.12. Expenses. The Company shall pay all costs and expenses that
--------
it and the Company incur with respect to the negotiation, execution, delivery
and performance of this Agreement.
Section 8.13. Entire Agreement. This Agreement and the other documents
----------------
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with respect to the subjects hereof and thereof.
20
IN WITNESS, the undersigned have executed this Agreement as of the day and
year first above written.
COMPANY:
▇▇▇▇▇ COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, VP, CFO, and Secretary
INVESTORS:
WATERSIDE CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
Title: Vice President
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CAPITALSOUTH PARTNERS FUND I, L.P.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III, President
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