SECOND AMENDED AND RESTATED
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS SECOND AMENDED AND RESTATED PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT (this "Agreement") is made as of March 31, 1998, by and
among IT PARTNERS, INC., a Delaware corporation (the "Company"), CREDITANSTALT
CORPORATE FINANCE, INC., having offices at Two ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (together with any successor, assignee or transferee,
"Creditanstalt"), FF-ITP, L.P., a Delaware limited partnership ("FF-ITP"),
INDOSUEZ IT PARTNERS, having offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (together with any successor, assignee or transferee,
"Indosuez"), WACHOVIA CAPITAL ASSOCIATES, INC., having offices at ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (together with any
successor, assignee or transferee, "Wachovia", which, together with
Creditanstalt, FF-ITP and Indosuez are individually and collectively, as the
context requires, referred to herein as the "Purchaser"), and each of the
STOCKHOLDERS named on the signature pages hereto (individually and
collectively, as the context requires, the "Stockholder").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Preferred Stock and Warrant Purchase
Agreement, dated as of May 30, 1997, as amended by the First Amendment to
Preferred Stock and Warrant Purchase Agreement dated July 11, 1997, as further
amended by the Second Amendment to Preferred Stock and Warrant Purchase
Agreement dated October 27, 1997, as further amended by the Third Amendment to
Preferred Stock and Warrant Purchase Agreement dated October 31, 1997, and as
further amended by the Fourth Amendment to Preferred Stock and Warrant
Purchase Agreement dated December 16, 1997 (as amended, the "Original Purchase
Agreement") by and among the parties thereto, (i) Creditanstalt purchased an
aggregate of 100,000 shares of the Company's Series A Preferred Stock and
warrants (the "Equity Warrants") for the purchase of up to 456,907 shares
(subject to adjustment as set forth in Section 2.08 of the Original Purchase
Agreement) of either the Company's common stock, $.01 par value per share
("Common Stock"), or the Company's Series B Preferred Stock, $.01 par value
per share; and (ii) FF-ITP purchased 110,000 shares of the Company's Series A
Preferred Stock, 29,516 shares of Common Stock, and Equity Warrants for the
purchase of up to 515,724 shares (subject to adjustment as set forth in
Section 2.08 of the Original Purchase Agreement) of the Company's Common
Stock; and
WHEREAS, the Company and the Stockholders amended and restated the
Original Purchase Agreement pursuant to that certain Amended and Restated
Preferred Stock and Warrant Purchase Agreement, dated as of January 8, 1998
(the "First Restated Purchase Agreement") pursuant to which Creditanstalt
acquired (a) 100,000 shares of Series A Preferred Stock with Equity Warrants
for the purchase of 188,680 shares of Common Stock or Series B Preferred
Stock, and (b) 222,222 shares of Series B Preferred Stock; and
WHEREAS, the Company desires that Indosuez and Wachovia make the
following equity investments as of the Second Restatement Closing Date (as
defined herein): (1) Indosuez will purchase 431,965 shares of Series B
Preferred Stock at an aggregate purchase price of $2,000,000 ($4.63 per
share), and (2) Wachovia will purchase 647,948 shares of Series B Preferred
Stock at an aggregate purchase price of $3,000,000 ($4.63 per share) ((1) and
(2) are collectively referred to as the "Additional Equity Investments"); and
WHEREAS, the parties hereto wish to amend and restate the First Restated
Purchase Agreement in order to provide for the Additional Equity Investments
and make certain other changes set forth herein;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Purchasers, the
Stockholders, and the Company, intending to be legally bound, agree as
follows:
Article I
Definitions
As used in this Agreement, the following terms have the meanings
indicated.
Acquisition Stock. This term shall mean Common Stock of the Company
issued subsequent to the Closing Date in consideration for the acquisition of
all or substantially all the assets (including the stock or other ownership
interests) of Persons that are identified by the Company as acquisition
targets, provided that the Fair Market Value of such Common Stock as well as
other consideration paid by the Company for such assets is not unreasonably
disproportionate to the fair market value of the assets being acquired, as
determined by the Company's Board of Directors or its executive committee.
Additional Securities. This term is defined in Section 2.08(b)(iv)
Adjustment Event. Any event in which (a) the Company issues any shares
of Capital Stock in an Adjustment Public Offering for consideration per share
that exceeds the amount received per share by any Holder in connection with
the exercise of the Call Option with respect to such Holder; (b) any Person
acquires Capital Stock in connection with the acquisition of the beneficial
ownership of more than fifty percent (50%) of the voting securities of the
Company, or acquires Capital Stock and the right to elect a majority of the
members of the Company's board of directors for a consideration per share or
unit that exceeds the amount received per share by any such Holder in
connection with the exercise of such Call Option; (c) the Company sells all or
a majority of its assets or revenue or income generating capacity for such
amount of consideration that, if the Company were liquidated on the date that
such sale is consummated, the holders of any class of Capital Stock would
receive per share distributions exceeding the amount received per share by any
such Holder in connection with the exercise of such Call Option; or (d) the
Company participates in any merger, consolidation, reorganization, share
exchange, recapitalization, or similar transaction or series of related
transactions involving a change of control of the Company or disposition of
all or a majority of its assets or revenue or income generating capacity,
directly or indirectly, in which the holders of any class of Capital Stock
receive per share consideration for, or distributions with respect to, their
shares in an amount that exceeds the amount received per share by such Holder
in connection with the exercise of such Call Option.
Adjustment Public Offering. Each public offering of shares of any class
of Capital Stock pursuant to a registration statement filed with the
Commission.
Affiliate. With respect to any Person, (a) a Person that, directly or
indirectly or through one or more intermediaries, controls, is controlled by,
or is under common control with, such Person; (b) any Person of which such
Person or such Person's spouse is an officer, director, security holder,
partner, or, in the case of a trust, the beneficiary or trustee, and (c) any
Person that is an officer, director, security holder, partner, or, in the case
of a trust, the beneficiary or trustee of such Person. The term "control" as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by contract,
or otherwise. In addition, as to any Purchaser, "Affiliate" shall include any
partnership a majority of the partners of which are officers, directors,
employees or Affiliates of such Purchaser, and as to the Company, "Affiliate"
shall not include any Purchaser or any Affiliate of any Purchaser.
Agreement. This term is defined in the preamble.
Appraised Value. The value determined in accordance with the following
procedures. For a period of thirty (30) days after the date of a Valuation
Event (the "Negotiation Period"), each party to this Agreement agrees to
negotiate in good faith to reach agreement upon the Appraised Value of the
securities or property at issue, as of the date of the Valuation Event, which
will be the fair market value of such securities or property, without premium
for control or discount for minority interests, illiquidity, or restrictions
on transfer. In the event that the parties are unable to agree upon the
Appraised Value of such securities or other property by the end of the
Negotiation Period, then the Appraised Value of such securities or property
will be determined for purposes of this Agreement by an Appraiser. An
"Appraiser" shall be a recognized appraisal or investment firm with experience
in making determinations of value of the type required to be made under this
definition. If the Holders and the Company cannot agree on an Appraiser
within thirty (30) days after the end of the Negotiation Period, the Company,
on the one hand, and the Holders, on the other hand, shall each select an
Appraiser within forty (40) days after the end of the Negotiation Period and
those two Appraisers shall select within fifty (50) days after the end of the
Negotiation Period an independent Appraiser to determine the fair market value
of such securities or property, without premium for control or discount for
minority interests. Such independent Appraiser shall be directed to determine
fair market value of such securities or property as soon as practicable, but
in no event later than thirty (30) days from the date of its selection. The
determination by an Appraiser of the fair market value will be conclusive and
binding on all parties to this Agreement. Appraised Value of each share of
Common Stock at a time when (i) the Company is not a reporting company under
the Exchange Act and (ii)
the Common Stock is not traded in the organized securities markets, will, in
all cases, be calculated by determining the Appraised Value of the entire
Company taken as a whole (plus the exercise price of all options, warrants and
other rights to acquire Capital Stock of the Company having an exercise price
per share less than the Fair Market Value of such Capital Stock) and dividing
that value by the sum of (x) the number of shares of Common Stock then
outstanding plus (y) the number of shares of Common Stock Equivalents, without
premium for control or discount for minority interests, illiquidity, or
restrictions on transfer. The costs of the Appraiser or Appraisers will be
borne by the Company. In no event will the Appraised Value of the Common
Stock or Other Securities be less than the per share consideration received or
receivable with respect to the Common Stock or securities or property of the
same class as the Other Securities, as the case may be, in connection with a
pending transaction involving a sale, merger, recapitalization,
reorganization, consolidation, share exchange, dissolution of the Company,
sale or transfer of all or a majority of its assets or revenue or income
generating capacity, or similar transaction. The prevailing market prices for
any security or property will not be dispositive of the Appraised Value
thereof.
Appraiser. This term is defined in the definition of Appraised Value.
Average Market Value. The average of the Closing Prices for the
security in question for the thirty (30) trading days immediately preceding
the date of determination.
Book Value. With respect to shares of Common Stock an amount equal to
the quotient determined by dividing (a) the sum of (x) the total consolidated
assets of the Company shown on the most recent regularly prepared consolidated
balance sheet of the Company prior to the date of the Valuation Event in
question minus (y) the total consolidated liabilities of the Company as shown
on the most recent regularly prepared consolidated balance sheet of the
Company prior to the date of the Valuation Event by (b) the aggregate number
of shares of Common Stock and Common Stock Equivalents as of the date of the
Valuation Event. For the purposes of this Agreement, the Book Value of the
shares of Common Stock will be determined by the independent certified public
accountants then retained by the Company as described in Section 4.06.
Business Combination Options. This term shall mean options to purchase
Common Stock of the Company that (a) are issued to employees of the Company or
of Subsidiaries of the Company hired after the Original Closing Date; (b) in
the aggregate do not exceed 12% of the Acquisition Stock issued by the
Company; and (c) have an exercise price equal to the Fair Market Value on the
date such options are granted, giving effect to any such acquisition
consummated on such date.
Buyer. This term is defined in Section 6.02(a)(ii) of the Stockholder
Agreement.
Call Option. This term is defined in Section 5.01 of the Stockholder
Agreement.
Call Option Closing. This term is defined in Section 5.04 of the
Stockholder Agreement.
Call Option Period. This term is defined in Section 5.01 of the
Stockholder Agreement.
Capital Stock. As to any Person, its common stock and any other capital
stock of such Person authorized from time to time, and any other shares,
options, interests, participations, or other equivalents (however designated)
of or in such Person, whether voting or nonvoting, including, without
limitation, common stock, options, warrants, preferred stock (including the
Series A Preferred Stock and Series B Preferred Stock), phantom stock, stock
appreciation rights, convertible notes or debentures, stock purchase rights,
and all agreements, instruments, documents, and securities convertible,
exercisable, or exchangeable, in whole or in part, into any one or more of the
foregoing.
Certificate. The Certificate of Incorporation of the Company, as
amended.
Closing. This term refers to the purchase and sale of the Series B
Preferred Stock, effective as of the Second Restatement Closing Date.
Closing Price.
(a) If the primary market for the security in question is a
national securities exchange registered under the Exchange Act, the National
Association of Securities Dealers Automated Quotation System -- National
Market System, or other market or quotation system in which last sale
transactions are reported on a contemporaneous basis, the last reported sales
price, regular way, of such security for such day, or, if there has not been a
sale on such trading day, the highest closing or last bid quotation therefor
on such trading day (excluding, in any case, any price that is not the result
of bona fide arm;s length trading); or
(b) If the primary market for such security is not an exchange
or quotation system in which last sale transactions are contemporaneously
reported, the highest closing or last bona fide bid or asked quotation by
disinterested Persons in the over-the-counter market on such trading day as
reported by the National Association of Securities Dealers through its
Automated Quotation System or its successor or such other generally accepted
source of publicly reported bid quotations as the Holders designate from time
to time.
Common Stock. The common stock, $.01 par value, of the Company.
Common Stock Equivalent. Any option, warrant, right, or similar
security exercisable into, exchangeable for, or convertible to Common Stock.
Commission. The Securities and Exchange Commission and any successor
federal agency having similar powers.
Company. IT Partners, Inc. and any successor or assign, and, unless the
context requires otherwise, the term Company includes any Subsidiary.
Conversion Shares. Shares of Common Stock issued or issuable upon
conversion of the Series B Preferred Stock.
Co-Sell Shares. This term is defined in Section 6.02(d) of the
Stockholder Agreement.
Co-Sellers. This term is defined in Section 6.02(d) of the Stockholder
Agreement.
Dilution Fee. This term is defined in Article III of the Stockholder
Agreement.
EBITDA. This term shall mean the Company's earnings before interest,
taxes, depreciation and amortization, all as determined in accordance with
generally accepted accounting principles, consistently applied.
Election Notice. This term is defined in Section 6.02(b) of the
Stockholder Agreement.
Employment Agreements. This term is defined in Section 4.04(g).
Equity of the Company. This term shall mean the total stockholders'
equity of the Company, determined in accordance with generally accepted
accounting principals. The amount of equity of the Company represented by any
Warrant Shares held by Creditanstalt and/or its Affiliates shall be determined
by subtracting from total Equity of the Company the aggregate amount
distributable as a preference upon dissolution of the Company to the holders
of any then outstanding shares of any class or series of preferred stock
(other than the Series B Preferred Stock), dividing the balance obtained by
the sum of the number of shares of Common Stock then outstanding, the number
of shares of Common Stock issuable upon conversion of any Series B Preferred
Stock then outstanding, and the number of shares of Common Stock that
Creditanstalt and/or its Affiliates could obtain upon exercise of any
Warrants, and multiplying that per share
amount by the aggregate number of Warrant Shares held by Creditanstalt and/or
its Affiliates.
Excess Consideration. The amount that a Holder would have realized
following the Adjustment Event had the Call Option not been exercised by the
Company until such time, minus the amount that such Holder realized due to the
exercise of the Call Option; provided, however, that the amount of Excess
Consideration will in all events be deemed to be at least zero.
Exchange Act. The Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.
Exchange Common Stock. This term is defined in Section 7.12 of the
Stockholder Agreement.
Exchange Company. This term is defined in Section 7.12 of the
Stockholder Agreement.
Exchange Notice. This term is defined in Section 7.12 of the
Stockholder Agreement.
Exercise Price. The price per share specified in Section 2.03 as
adjusted from time to time pursuant to the provisions of this Agreement.
Fair Market Value.
(a) As to securities regularly traded in the organized
securities markets, the Average Market Value; and
(b) As to all securities not regularly traded in the securities
markets and other property, the fair market value of such securities or
property as determined in good faith by disinterested members of the Board of
Directors of the Company at the time it authorizes the transaction (a
"Valuation Event") requiring a determination of Fair Market Value under this
Agreement; provided, however, that, at the election of the Holders or if there
are no disinterested members of the Board of Directors of the Company, the
Fair Market Value of such securities and other property will be the Appraised
Value.
Financial Statements. This term is defined in Section 3.01(i).
First Amendment Closing Date. July 11, 1997.
First Restated Purchase Agreement. This term is defined in the preamble
to this Agreement.
First Restatement Closing Date. January 8, 1998.
Holders. Each Purchaser, and all other Persons holding Registrable
Securities so long as such Purchasers or other Person holds Registrable
Securities, except that none of the Company, any Stockholder or any Affiliate
of the Company will at any time be a Holder.
Indebtedness. This term shall mean, collectively but without
duplication, (a) all indebtedness, obligations or other liabilities for
borrowed money or evidenced by debt securities, debentures, acceptances, notes
or other similar instruments, that would, in accordance with GAAP, be
classified as long-term debt, together with the current maturities thereof,
(b) all indebtedness outstanding under any revolving credit, line of credit or
similar agreement providing for borrowings (any extensions or renewals
thereof), notwithstanding that any
such indebtedness is created within one year of the expiration of such
agreement, and (c) the principal component of Capital Lease Obligations (as
defined in the Loan Agreement), in each case calculated on a consolidated
basis for the Company and its Subsidiaries in accordance with GAAP.
Indemnified Party. This term is defined in Section 6.01 hereof and in
Section 11.01 of the Stockholder Agreement.
Initial Holders. Each Purchaser and any Affiliate of such Purchaser to
which any of the Warrants or any part of or interest in the Warrants is
assigned.
Intellectual Property. This term is defined in Section 3.01(q).
Issuable Warrant Shares. Shares of Common Stock or Other Securities
issuable on exercise of the Warrants.
Issued Warrant Shares. Shares of Common Stock or Other Securities
issued on exercise of the Warrants.
Loan Agreement. This term shall mean the Amended and Restated Loan and
Security Agreement dated as of date hereof (as such Agreement may be amended,
restated, supplemented or modified from time to time), between the Company the
Lenders named therein, Creditanstalt as the LC Issuer, Indosuez as the
Co-Agent, and Creditanstalt as the Administrative Agent and Collateral Agent.
Loan Warrants. This term shall mean the stock purchase warrants issued
and/or issuable pursuant to the Amended and Restated Warrant Agreement dated
as of December 16, 1997 (as such may be amended, restated, supplemented or
modified from time to time) by and between the Company and Creditanstalt
entitling the record holders thereof to purchase from the Company an aggregate
of 612,579 shares of Common Stock or Series B Preferred Stock (the "Loan
Warrants Shares") (in the percentages and to the extent, and subject to
adjustment, as provided in such Warrant Agreement), issued to Creditanstalt in
connection with certain loans made by Creditanstalt to the Company.
Material Agreements. This term is defined in Section 3.01(k).
Negotiation Period. This term is defined in the definition of Appraised
Value.
New Securities. Any Capital Stock other than Warrant Shares, Loan
Warrant Shares and the Permitted Stock.
Non-Attributable Stock. This term shall mean shares of Common Stock or
Series B Preferred Stock which have been previously sold by, or were issued
pursuant to the exercise of Warrants which were previously sold by, a
Regulated Holder or an Affiliate of a Regulated Holder, either (a) in a widely
dispersed public offering; (b) in a private placement in which no purchaser,
individually or in concert with others, acquired Warrants, Common Stock,
Series B Preferred Stock or any combination thereof, representing (upon
conversion, in the case of the Series B Preferred Stock, and upon exercise for
Common Stock, in the case of the Warrants) more than 2% of the outstanding
Common Stock; (c) in compliance with Rule 144 (or any rule which is a
successor thereto) of the Securities Act or (d) into the secondary market in a
transaction executed through a registered broker-dealer in blocks of no more
than 2.0% of the shares outstanding of the Company in any six-month period.
Note. All or any portion of any of the Note (as defined in the Loan
Agreement) and any and all documents evidencing the indebtedness under the
Note and any refinancing, refunding, or replacement of the Note.
Notice of Sale. This term is defined in Section 6.02(a) of the Stockholder
Agreement.
Operating Cash Flow. This term shall mean, for any period for which the same
is computed, the sum of (i) the Company's and its Subsidiaries' consolidated
net income (loss) for such period, plus (ii) the Company's and its
Subsidiaries' interest expense for such period, plus (iii) the Company's and
its Subsidiaries' depreciation and amortization for financial reporting
purposes for such period, plus (iv) the Company's and its Subsidiaries' income
tax expense for such period, computed in each case on a consolidated basis in
accordance with generally accepted accounting principles.
Original Closing Date. May 30, 1997.
Original Purchase Agreement. This term is defined in the preamble.
Other Securities. Any stock, other securities, property, or other property or
rights (other than Common Stock) that the Holders become entitled to receive
upon exercise of the Warrants, including, but not limited to, the Series B
Preferred Stock.
Permitted Stock. This term shall mean (a) Warrant Shares, and shares of the
Company's Capital Stock issuable upon exercise thereof; (b) Capital Stock of
the Company issued as a dividend on shares of the Company's Capital Stock or
as a result of a stock split with respect thereto; (c) options and warrants
outstanding (or that the Company's Board of Directors has approved for
issuance to specific employees) as of the date hereof to purchase the
Company's Capital Stock, and shares of the Company's Capital Stock issuable
upon exercise thereof; (d) the Business Combination Options, and shares of the
Company's Capital Stock issuable upon exercise thereof; (e) options to be
granted after the Original Closing Date to employees of the Company and its
Subsidiaries to purchase up to 335,286 shares of Common Stock of the Company,
at an exercise price not less than the Fair Market Value at the time of
issuance of such options, and shares of the Company's Capital Stock issuable
upon exercise thereof; (f) shares of Series A Preferred Stock issuable
pursuant to the Original Purchase Agreement or the First Restated Purchase
Agreement; (g) shares of Series B Preferred Stock issuable pursuant to the
First Restated Purchase Agreement or this Agreement; (h) shares of Common
Stock issuable upon conversion of Series B Preferred Stock (i) 29,516 shares
of Common Stock issuable to FF-ITP on the Third Amendment Closing Date; (j)
103,093 shares of Common Stock issued to ▇▇▇▇▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(jointly) at an aggregate purchase price of $200,000; (k) 29,516 shares of
Common Stock issuable to ▇▇▇▇▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (jointly) at an
aggregate purchase price of $100,000; (l) 14,758 shares of Common Stock
issuable to ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (jointly) at an aggregate purchase price
of $50,000; and (m) 1,001 shares of Common Stock issuable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at
an aggregate purchase price of $3,390. The limits in clauses (e), (i) (j),
(k), (l) and (m) shall be proportionately adjusted for dividends and other
distributions payable in and for subdivisions and combinations of shares of
Common Stock.
Person. This term will be interpreted broadly to include any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, company, institution, entity, party,
or government (whether national, federal, state, county, city, municipal, or
otherwise, including, without limitation, any instrumentality, division,
agency, body, or department of any of the foregoing).
Preferred Shares. This term is defined in Section 2.01.
Preferred Stock. This term means the Series A Preferred Stock and the Series
B Preferred Stock of the Company.
Purchaser. This term is defined in the preamble.
Put Option. This term is defined in Section 4.01 of the Stockholder
Agreement.
Put Option Closing. This term is defined in Section 4.05 of the Stockholder
Agreement.
Put Option Period. This term is defined in Section 4.01 of the Stockholder
Agreement.
Put Price. This term is defined in Section 4.02 of the Stockholder Agreement.
Put Shares. The Warrant Shares plus any other shares of Capital Stock owned
from time to time by a Holder which were issued in respect of the Warrant
Shares.
"Register," "registered," and "registration" refer to a registration effected
by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.
Registrable Securities. (a) The Issuable Warrant Shares, (b) the Issued
Warrant Shares (c) the Preferred Shares and (d) the Conversion Shares that, in
each case, have not been previously sold to the public.
Regulated Holder. Any Purchaser or any Affiliate of any Purchaser
subject to the provisions of (a) the Bank Holding Company Act of 1956, as
amended; (b) Regulation Y of the Board of Governors of the Federal Reserve
System (12 C.F.R. part 225), or (c) any law, rule or regulation that is a
successor to either of the foregoing; provided that a "Regulated Holder"
shall not include a Purchaser or an Affiliate of a Purchaser that is a small
business investment company licensed by the Small Business Administration.
Related Party. An entity wholly owned by a Selling Stockholder or one or more
Related Parties.
Schedule of Exceptions. This term is defined in Section 3.01.
Second Amendment Closing Date. October 27, 1997.
Second Restatement Closing Date. March 31, 1998.
Selling Stockholder. This term is defined in Section 6.02 of the Stockholder
Agreement.
Securities Act. The Securities Act of 1933, as amended, and the rules and
regulations thereunder.
Series A Preferred Stock. Series A Preferred Stock, $.01 par value, of the
Company having the rights, restrictions, privileges and preferences of the
series of preferred stock designated as "Series A Preferred Stock" set forth
in the Certificate.
Series B Preferred Stock. Series B Preferred Stock, $.01 par value, of the
Company having the rights, restrictions, privileges and preferences of the
series of preferred stock designated as "Series B Preferred Stock" set forth
in the Certificate.
Stockholder. This term is defined in the preamble.
Stockholder Agreement. This term shall mean the Amended and Restated
Stockholder Agreement dated as of the date hereof (as such may be amended,
restated, supplemented or otherwise modified from time to time) among the
Company and the stockholders set forth therein, the provisions of which are
incorporated in this Agreement by reference.
Subsidiary. Each Person of which or in which the Company or its other
Subsidiaries own directly or indirectly fifty percent (50%) or more of (i) the
combined voting power of all classes of stock having general voting power
under ordinary circumstances to elect a majority of the board of directors or
equivalent body of such Person, if it is a corporation or similar person; (ii)
the capital interest or profits interest of such Person, if it is a
partnership, joint venture, or similar entity; or (iii) the beneficial
interest of such Person, if it is a trust, association, or other
unincorporated organization.
Third Amendment Closing Date. October 31, 1997.
Valuation Amount. This term shall mean, as of any date, the greater of (x)
zero or (y) an amount equal to Operating Cash Flow for the most recently ended
twelve months preceding the date of determination multiplied by six (6), less
the principal amount of Indebtedness of the Company on such date of
determination, plus the aggregate amount of cash and/or cash equivalents held
by the Company on such date of determination.
Valuation Event. This term is defined in the definition of Fair Market Value.
Warrant A. Warrant A referred to in Section 2.01(a)(i), dated as of May 30,
1997, issued to Creditanstalt, and all Warrants issued upon the transfer or
division of, or in substitution for, such Warrant A.
Warrant B. Warrant B referred to in Section 2.01(b)(i), dated as of May 30,
1997, issued to FF-ITP, and all Warrants issued upon the transfer or division
of, or in substitution for, such Warrant B.
Warrant C. Warrant C referred to in Section 2.01(c)(i), dated as of July 11,
1997, issued to Creditanstalt, and all Warrants issued upon transfer or
division of, or in substitution for, such Warrant C.
Warrant D. Warrant D referred to in Section 2.01(d)(i), dated as of October
27, 1997, issued to Creditanstalt, and all Warrants issued upon transfer or
division of, or in substitution for, such Warrant D.
Warrant E. Warrant E referred to in Section 2.01(e)(i), dated as of January
8, 1998, issued to Creditanstalt, and all Warrants issued upon transfer or
division of, or in substitution for, such Warrant E.
Warrants. Collectively, Warrant A, Warrant B, Warrant C, Warrant D, Warrant
E, the Loan Warrants, and all Warrants issued upon the transfer or the
division of, or in substitution for, such Warrants.
Warrant Shares. The Issued Warrant Shares and the Issuable Warrant Shares.
Article II
The Warrants and the Preferred Shares
2.01 The Warrants and the Preferred Shares.
(a) On the Original Closing Date, Creditanstalt purchased from the Company
at the purchase price set forth below, and the Company issued to
Creditanstalt, all in accordance with the terms and conditions of the Original
Purchase Agreement:
(i) a Warrant A (relating to the Series A Preferred Stock), in substantially
the form attached to the Original Purchase Agreement as Annex B and
incorporated in this Agreement by reference, to purchase, at a purchase price
of $.01 per share, the number of shares of Common Stock and/or Series B
Preferred Stock set forth beneath the name of Creditanstalt on the signature
page of this Agreement for such Warrant A; and
(ii) 50,000 shares of Series A Preferred Stock at a purchase price of
$500,000, or $10 per share, having the rights, restrictions, privileges, and
preferences set forth in the Company's Certificate.
(b) On the Original Closing Date, FF-ITP purchased from the Company, and the
Company issued to FF-ITP, all in accordance with the terms and conditions of
the Original Purchase Agreement;
(i) a Warrant B (relating to the Series A Preferred Stock), in substantially
the form attached to the Original Purchase Agreement as Annex C and
incorporated in this Agreement by reference, to purchase, at a purchase price
of $.01 per share, the number of shares of Common Stock set forth beneath the
name of FF-ITP on the signature page of this Agreement for such Warrant B;
(ii) 100,000 shares of Series A Preferred Stock, at a purchase price of
$1,000,000, or $10 per share, having the rights, restrictions, privileges, and
preferences set forth in the Certificate.
(c) On the First Amendment Closing Date, Creditanstalt purchased
from the Company at the purchase price set forth below, and the Company issued
to Creditanstalt, all in accordance with the terms and conditions of the
Original Purchase Agreement:
(i) a Warrant C (relating to the Series A Preferred Stock), in
substantially the form attached to the Original Purchase Agreement as Annex G
and incorporated in this Agreement by reference, to purchase, at a purchase
price of $.01 per share, 120,335 shares of Common Stock and/or Series B
Preferred Stock; and
(ii) 23,334 shares of Series A Preferred Stock at a purchase
price of $233,340, or $10 per share, having the rights, restrictions,
privileges, and preferences set forth in the Certificate.
(d) On the Second Amendment Closing Date, Creditanstalt
purchased from the Company at the purchase price set forth below, and the
Company issued to Creditanstalt, all in accordance with the terms and
conditions of the Original Purchase Agreement:
(i) a Warrant D (relating to the Series A Preferred Stock), in
substantially the form attached to the Original Purchase Agreement as Annex H
and incorporated in this Agreement by reference, to purchase, at a purchase
price of $.01 per share, 78,710 shares of Common Stock and/or Series B
Preferred Stock; and
(ii) 26,666 shares of Series A Preferred Stock at a purchase
price of $266,660, or $10 per share, having the rights, restrictions,
privileges, and preferences set forth in the Certificate.
(e) On the Third Amendment Closing Date, FF-ITP purchased from
the Company at the purchase price set forth below, and the Company issued to
FF-ITP, all in accordance with the terms and conditions of the Original
Purchase Agreement: 10,000 shares of Series A Preferred Stock and 29,516
shares of Common Stock at an aggregate purchase price of $100,000.
(f) On the First Restatement Closing Date, Creditanstalt
purchased from the Company at the purchase price set forth below, and the
Company issued to Creditanstalt, all in accordance with the terms and
conditions of the First Restated Purchase Agreement:
(i) a Warrant E (relating to the Series A Preferred Stock), in
substantially the form attached to the First Restated Purchase Agreement as
Annex I and incorporated in this Agreement by reference, to purchase, at a
purchase price of $.01 per share, 188,680 shares of Common Stock and/or Series
B Preferred Stock;
(ii) 100,000 shares of Series A Preferred Stock at a purchase
price of $1,000,000, or $10 per share, having the rights, restrictions,
privileges, and preferences set forth in the Certificate; and
(iii) 222,222 shares of Series B Preferred Stock at a purchase
price of $1,000,000, or $4.50 per share, having the rights, restrictions,
privileges, and preferences set forth in the Certificate.
(g) On the Second Restatement Closing Date, Indosuez agrees to purchase from
the Company at the purchase price set forth below, and the Company agrees to
issue to Indosuez, all in accordance with the terms and conditions of this
Agreement:
(i) 431,965 shares of Series B Preferred Stock at a purchase
price of $2,000,000, or $4.63 per share, having the rights, restrictions,
privileges, and preferences set forth in the Certificate.
(h) On the Second Restatement Closing Date, Wachovia agrees to purchase from
the Company at the purchase price set forth below, and the Company agrees to
issue to Wachovia, all in accordance with the terms and conditions of this
Agreement.
(i) 647,948 shares of Series B preferred stock at a purchase
price of $3,000,000, or $4.63 per share, having the rights, restrictions,
privileges, and preferences set forth in the Certificate.
On the Second Restatement Closing Date, the Company will deliver to each of
Indosuez and Wachovia a certificate evidencing and representing the shares of
Series B Preferred Stock, issued to each such Purchaser. The Company has duly
authorized the Series A Preferred Stock and Series B Preferred Stock purchased
and sold pursuant to the terms of this Agreement by duly filing the
Certificate with the Secretary of State of the State of Delaware. The shares
of Series A Preferred Stock and the shares of Series B Preferred Stock subject
to the terms of this Agreement are sometimes referred to in this Agreement as
the "Preferred Shares."
2.02 Legend. The Company will deliver to the appropriate Purchaser on the
Second Restatement Closing Date, one or more certificates representing the
Series B Preferred Stock, purchased by such Purchaser, in such denominations
as such Purchaser requests. Such certificates will be issued in the
Purchaser's name or, subject to compliance with transfer and registration
requirements under applicable federal and state securities laws, in the name
or names of its designee or designees. It is understood and agreed that the
certificates evidencing any Warrants will bear the following legends:
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH
THE DISTRIBUTION HEREOF. THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED
FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS."
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO
THE TERMS AND PROVISIONS OF A SECOND AMENDED AND RESTATED PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT AND AN AMENDED AND RESTATED STOCKHOLDER AGREEMENT,
EACH DATED AS OF MARCH 31, 1998, BY AND AMONG IT PARTNERS, INC. (THE
"COMPANY"), AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES TO SUCH
AGREEMENTS (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR
RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE
AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY."
"THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF
CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT."
It is further understood and agreed that the certificates evidencing the
Preferred Shares issued under this Agreement and any certificates evidencing
Conversion Shares will bear substantially the same as the following legends:
"THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR
SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THESE SHARES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED,
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION
FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS."
"THESE SHARES ARE SUBJECT TO THE TERMS AND PROVISIONS OF A SECOND AMENDED AND
RESTATED PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT AND AN AMENDED AND
RESTATED STOCKHOLDER AGREEMENT, EACH DATED AS OF MARCH 31, 1998, BY AND AMONG
IT PARTNERS, INC. (THE "COMPANY"), AND THE OTHER PARTIES LISTED ON THE
SIGNATURE PAGES TO SUCH AGREEMENTS (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED,
MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF
THE AGREEMENTS ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY."
"THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF
CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT."
2.03 Exercise Price. The Exercise Price per share will be $.01 for each share
of Common Stock (and/or Series B Preferred Stock, if applicable) covered by
the Warrants.
2.04 Exercise of Warrants.
(a) Each of Warrant A and Warrant B may be exercised at any time or from
time to time until the tenth (10th) anniversary of the Original Closing Date,
Warrant C may be exercised at any time or from time to time until the tenth
(10th) anniversary of the First Amendment Closing Date, Warrant D may be
exercised at any time or from time to time until the tenth (10th) anniversary
of the Second Amendment Closing Date, and Warrant E may be exercised at any
time or from time to time until the tenth (10th) anniversary of the First
Restatement Closing Date; each of the foregoing may be exercised on any day
that is a Business Day, for all or any part of the number of Issuable Warrant
Shares purchasable upon its exercise. In order to exercise its Warrant, in
whole or in part, the Holder will deliver to the Company at the address
designated by the Company pursuant to Section 6.06, (i) a written notice of
such Holder's election to exercise its Warrant, which notice will specify the
number of Issuable Warrant Shares to be purchased pursuant to such exercise,
(ii) payment of the Exercise Price, in an amount equal to the aggregate
purchase price for all Issuable Warrant Shares to be purchased pursuant to
such exercise, and (iii) the Warrant. Such notice will be substantially in
the form of the Subscription Form appearing at the end of the Warrants. Upon
receipt of such notice, the Company will, as promptly as practicable, and in
any event within ten (10) business days, execute, or cause to be executed, and
deliver to such Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock and Other Securities issuable
upon such exercise, as provided in this Agreement. The stock certificate or
certificates so delivered will be in such denominations as may be specified in
such notice and will be registered in the name of such Holder, or, subject to
compliance with transfer and registration requirements under applicable
federal and state securities laws, such other name as designated in such
notice. A Warrant will be deemed to have been exercised, such certificate or
certificates will be deemed to have been issued, and such Holder or any other
Person so designated or named in such notice will be deemed to have become a
holder of record of such shares for all purposes, as of the date that such
notice, together with payment of the Exercise Price and the Warrant is
received by the Company. If the Warrant has been exercised in part, the
Company will, at the time of delivery of such certificate of certificates,
deliver to such Holder a new Warrant evidencing the rights of such Holder to
purchase the number of Issuable Warrant Shares with respect to which the
Warrant has not been exercised, which new Warrant will, in all other respects,
be identical with the Warrants, or, at the request of such Holder, appropriate
notation may be made on the original Warrant and the original Warrant returned
to such Holder.
(b) Payment of the Exercise Price will be made, at the option of the Holder,
by (i) company or individual check, certified or official bank check, (ii)
cancellation of any debt owed by the Company to the Holder, or (iii)
cancellation of Warrant Shares, valued at Fair Market Value. If the Holder
surrenders a combination of cash or cancellation of any debt owed by the
Company to the Holder or Warrants, the Holder will specify the respective
number of shares of Common Stock and/or Series B Preferred Stock, if
applicable, to be purchased with each form of consideration, and the foregoing
provisions will be applied to each form of consideration with the same effect
as if the Warrant were being separately exercised with respect to each form of
consideration; provided, however, that a Holder may designate that any cash to
be remitted to a Holder in payment of debt be applied, together with other
monies, to the exercise of the portion of the Warrant being exercised for
cash.
(c) Creditanstalt and its Affiliates shall not have the right to have issued
to it upon exercise Common Stock which, when aggregated with all other shares
of Common Stock (other than shares of Non-Attributable Stock) currently or
previously held by or currently issuable without restriction to such Warrant
Holder, will exceed 4.99% of the then outstanding Common Stock unless such
Warrant Holder certifies that such Warrants have previously been transferred
either (i) in a widely dispersed public offering of the Warrants, or (ii) in a
private placement in which no purchaser, individually or in concert with
others, would have acquired more than 2% of the outstanding Common Stock if
the Warrants so transferred had been exercised for Common Stock, or (iii) in
compliance with Rule 144 (or any rule which is a successor thereto) of the
Securities Act, or (iv) into the secondary market in a market transaction
executed through a registered broker-dealer in blocks of no more than 2.0% of
the shares outstanding of the Company in any six month period. In the event
that Creditanstalt and/or one or more Affiliates attempt to exercise Warrants
for Common Stock simultaneously and, if permitted, such exercises would cause
the 4.99% limitation to be exceeded, then the Company shall notify such
Warrant Holders who had attempted to exercise Warrants for Common Stock and
each such Warrant Holder shall be entitled to exercise for Common Stock only
such number of Warrants as shall equal the product of (i) the number of
Warrants such Warrant Holder sought to exercise for Common Stock times (ii) a
fraction, the numerator of which is the maximum number of Warrants which may
be exercised for Common Stock without exceeding the 4.99% limitation and the
denominator of which is the maximum number of Warrants sought to be exercised
for Common Stock by such Warrant Holders.
(d) Notwithstanding the foregoing provisions of this Section 2.04, in no
event shall any Warrant be exercisable by Creditanstalt and/or an Affiliate
for shares of Common Stock or Series B Preferred Stock which, when aggregated
with all other Capital Stock of the Company (other than shares of
Non-Attributable Stock) currently held or previously held by or currently
issuable without restriction to Creditanstalt or its Affiliates, would, upon
issuance, represent in excess of 24.99% of the Equity of the Company unless
such shares, when issued, would constitute Non-Attributable Stock.
2.05 Taxes. The issuance of any Common Stock or Other Securities upon the
exercise of any of the Warrants will be made without charge to any Holder for
any tax, other than income taxes assessed on such Holder, in respect of such
issuance.
2.06 Register. The Company will, at all times while any of the Warrants or
Preferred Shares remain outstanding, keep and maintain at its principal office
a register in which the registration, transfer, and exchange of the Warrants
and Preferred Shares will be provided for. The Company will not at any time
except upon the dissolution, liquidation, or winding up of the Company, close
such register so as to result in preventing or delaying the exercise or
transfer, as the case may be, of any of the Warrants or Preferred Shares.
2.07 Transfer and Exchange. The Warrants, all options and rights under the
Warrants, and the Preferred Shares are transferable, in whole or in part, in
person or by duly authorized attorney, on the books of the Company upon
surrender of the Warrants or the Preferred Shares, as the case may be, at the
principal offices of the Company, together with the form of transfer
authorization attached to the Warrants duly executed or by endorsement of the
certificates representing the Preferred Shares; provided, however, that such
transfers of the Warrants and Preferred Shares will be made only to Persons
that the transferor in good faith believes to be an "accredited investor" as
such term is defined in Regulation D under the Securities Act. Absent any
such transfer and subject to the Stockholder Agreement, the Company may deem
and treat the registered Holders of the Warrants or the Preferred Shares, as
the case may be, at any time as the absolute owners of the Warrants or the
Preferred Shares, as the case may be, for all purposes and will not be
affected by any notice to the contrary. If any of the Warrants or Preferred
Shares are transferred in part the Company will, at the time of surrender of
such Warrant or Preferred Shares, as the case may be, issue to the transferee
a Warrant or a certificate for Preferred Shares, as the case may be, covering
the number of shares transferred and to the transferor a Warrant or a
certificate for Preferred Shares, as the case may be, covering the number of
shares not transferred.
2.08 Adjustments to Number of Shares Purchasable.
(a) At 12:01 a.m. on the first day of each March, June, September and
December commencing September 1, 1997, for so long as shares of the Company's
Series A Preferred Stock shall remain outstanding, the number of shares
issuable upon exercise of each Warrant shall be increased by multiplying the
number of shares theretofore issuable thereunder by one hundred two percent
(102%), and the product derived thereby shall thereafter be the number of
shares issuable upon exercise of such Warrant, without any adjustment in the
exercise price of such Warrant.
(b) The Warrants will be exercisable for the number of shares of Common
Stock and/or Series B Preferred Stock, if applicable, in such manner that,
following the complete and full exercise of the Warrants of each Holder, the
amount of Common Stock and/or Series B Preferred Stock, if applicable, issued
to all Holders will equal the aggregate number of shares of Common Stock
and/or Series B Preferred Stock, if applicable, set forth beneath the name of
the Purchaser on the signature pages of this Agreement, as adjusted, to the
extent necessary, to give effect to the following events:
(i) In case at any time or from time to time, the holders of any class of
Common Stock or Common Stock Equivalent have received, or (on or after the
record date fixed for the determination of shareholders eligible to receive)
have become entitled to receive, without payment therefor:
(A) consideration (other than cash) by way of dividend or distribution; or
(B) consideration (including cash) by way of spin-off, split-up,
reclas-sification (including any reclassification in connection with a
consolidation or merger in which the Company is the surviving corporation),
recapitalization, combination of shares into a smaller number of shares, or
similar corporate restructuring;
other than additional shares of Common Stock issued as a stock dividend or in
a stock-split (adjustments in respect of which are provided for in Sections
2.08(b)(ii) and (iii)), then, and in each such case, the Holders, on the
exercise of Warrants, will be entitled to receive for each share of Common
Stock or Series B Preferred Stock, if applicable, issuable under the Warrants
as of the record date fixed for such distribution, the greatest per share
amount of consideration received by any holder of any class of Common Stock or
Common Stock Equivalent or to which such Holder is entitled less the amount of
any Dilution Fee actually and irrevocably paid to such Holders. All such
consideration receivable upon exercise of such Warrant with respect to such a
distribution will be deemed to be outstanding and owned by such Holder for
purposes of determining the amount of consideration to which such Holder is
entitled upon exercise of the Warrant with respect to any subsequent
distribution.
(ii) If at any time there occurs any stock split, stock dividend or
distribution, reverse stock split, or other subdivision of the Common Stock,
then the number of shares of Common Stock or Series B Preferred Stock, if
applicable, to be received by the Holder of the Warrant and the Exercise
Price, subject to the limitations set forth in this Agreement, will be
proportionately adjusted.
(iii) In case of any reclassification or change of outstanding shares of
any
class of Common Stock or Common Stock Equivalent (other than adjustments to
the Series B Preferred Stock pursuant to the Certificate and other than a
change in par value, or from par value to no par value, or from no par value
to par value), or in the case of any consolidation of the Company with, or
merger or share exchange of the Company with or into, another Person, or in
case of any sale of all or a majority of the property, assets, business,
income or revenue generating capacity, or goodwill of the Company, the
Company, or such successor or other Person, as the case may be, will provide
that the Holder of this Warrant will thereafter be entitled to receive the
highest per share kind and amount of consideration received or receivable
(including cash) upon such reclassification, change, consolidation, merger,
share exchange, or sale by any holder of any class of Common Stock or Common
Stock Equivalent that this Warrant entitles the Holder to receive immediately
prior to such reclassification, change, consolidation, merger, share exchange,
or sale (as adjusted pursuant to Section 2.08(b)(i) and otherwise in this
Agreement). Any such successor Person, which thereafter will be deemed to be
the Company for purposes of the Warrants, will provide for adjustments that
are as nearly equivalent as may be possible to the adjustments provided for by
this Section 2.08.
(iv) If at any time the Company issues or sells any shares of any Common
Stock or any Common Stock Equivalent (excluding any Permitted Stock) at a per
unit or share consideration (which consideration will include the price paid
upon issuance plus the minimum amount of any exercise, conversion, or similar
payment made upon exercise or conversion of any Common Stock Equivalent) less
than the Exercise Price or the then current Fair Market Value per share of
Common Stock immediately prior to the time such Common Stock or Common Stock
Equivalent is issued or sold (the "Additional Securities"), then:
(A) the Exercise Price will be reduced (but not increased) to the lower of
the prices calculated by:
(I) dividing (x) an amount equal to the sum of (1) the number of shares of
Common Stock outstanding on a fully diluted basis immediately prior to such
issuance or sale multiplied by the then existing Exercise Price plus (2) the
aggregate consideration, if any, received by the Company upon such issuance or
sale, by (y) the total number of shares of Common Stock outstanding
immediately after such issuance or sale on a fully diluted basis; and
(II) multiplying the then existing Exercise Price by a fraction, the
numerator of which is (x) the sum of (1) the number of shares of Common Stock
outstanding on a fully diluted basis immediately prior to such issuance or
sale, multiplied by the Fair Market Value per share of Common Stock
immediately prior to such issuance or sale, plus (2) the aggregate
consideration received by the Company upon such issuance or sale, (y) divided
by the total number of shares of Common Stock outstanding on a fully diluted
basis immediately after such issuance or sale, and the denominator of which is
the Fair Market Value per share of Common Stock immediately prior to such
issuance or sale (for purposes of this subsection (II), the date as of which
the Fair Market Value per share of Common Stock will be computed will be the
earlier of the date upon which the Company will (aa) enters into a firm
contract for the issuance of such shares, or (bb) issues such shares); and
(B) the number of shares of Common Stock or Series B Preferred Stock, if
applicable, for which any of the Warrants may be exercised at the Exercise
Price resulting from the adjustment described in subsection (A) above will be
equal to the product of the number of shares of Common Stock or Series B
Preferred Stock, if applicable, purchasable under such Warrants immediately
prior to such adjustment multiplied by a fraction, the numerator of which is
the Exercise Price in effect immediately prior to such adjustment and the
denominator of which is the Exercise Price resulting from such adjustment.
(v) In case any event occurs as to which the preceding Sections 2.08(b)(i)
through (iv) are not strictly applicable, but as to which the failure to make
any adjustment would not fairly protect the purchase rights represented by the
Warrants in accordance with the essential intent and principles of this
Agreement, then, in each such case, the Holders may appoint an independent
investment bank or firm of independent public accountants, which will give its
opinion as to the adjustment, if any, on a basis consistent with the essential
intent and principles established in this Agreement, necessary to preserve the
purchase rights represented by the Warrants. Upon receipt of such opinion,
the Company will promptly deliver a copy of such opinion to the Holders and
will make the adjustments described in such opinion. The fees and expenses of
such investment bank or independent public accountants will be borne equally
by the Holders and the Company.
(c) The Company and the Stockholder will not by any action including,
without limitation, amending, or permitting the amendment of, the charter
documents, bylaws, or similar instruments of the Company or through any
reorganization, reclassification, transfer of assets, consolidation, merger,
share exchange, dissolution, issue or sale of securities, or any other similar
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Agreement or the Warrants, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of the
Holders against impairment or dilution. Without limiting the generality of
the foregoing, each of the Company and the Stockholder will (i) take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
and Other Securities, free and clear of all liens, encumbrances, equities, and
claims; (ii) use its best efforts to obtain all such authorizations,
exemptions, or consents from any public regulatory body having jurisdiction as
may be necessary to enable the Company to perform its obligations under the
Warrants; and (iii) will take any action necessary to cause the par value per
share of the Company's Common Stock and Series B Preferred Stock to be less
than or equal to the Exercise Price of the Warrants. Without limiting the
generality of the foregoing, the Company represents and warrants that the
board of directors of the Company has determined the Exercise Price to be
adequate and the issuance of the Warrants to be in the best interests of the
Company.
(d) Any calculation under this Section 2.08 will be made to the nearest one
ten-thousandth of a share and the number of Issuable Warrant Shares resulting
from such calculation will be rounded up to the next whole share of Common
Stock or Other Securities comprising Issuable Warrant Shares.
(e) The Company will not, and will not permit any Subsidiary to, issue any
Capital Stock other than Common Stock and Common Stock Equivalents.
2.09 Lost, Stolen, Mutilated, or Destroyed Instruments. If any of the
Warrants or certificates for Preferred Shares are lost, stolen, mutilated, or
destroyed and if the Company receives a lost security affidavit containing an
indemnification from the Holder of such Warrant or Preferred Shares and
containing such other terms and providing for such bonding as may be
reasonably requested by the Company, the Company will issue a new Warrant or
certificate for Preferred Shares, as the case may be, of like denomination,
tenor, and date as the Warrant or certificate for Preferred Shares, as the
case may be, so lost, stolen, mutilated, or destroyed. Any such new Warrant
or certificate for Preferred Shares, as the case may be, will constitute an
original obligation of the Company, whether or not the allegedly lost, stolen,
mutilated, or destroyed Warrant or certificate for Preferred Shares, as the
case may be, is at any time enforceable by any Person.
2.10 Mandatory Redemption and Mandatory Exchange.
(a) (i) Subject to the limitations hereinafter set forth, (A) if the Company
takes any action with respect to its Capital Stock (including without
limitation any purchase of its shares or any combination of shares or reverse
stock split and elimination of fractional shares) which would cause the
Capital Stock currently or previously held by or currently issuable without
restriction to a Regulated Holder and its Affiliates (not including
Non-Attributable Stock) to exceed 24.99 % of the Equity of the Company, then
prior to or simultaneously with such action, the Company shall purchase from
such Regulated Holder and/or its Affiliates such number of Warrants, Warrant
Shares or other shares of Capital Stock as will reduce the shares of Capital
Stock currently or previously held by or currently issuable without
restriction to such Regulated Holder and its Affiliates (not including
Non-Attributable Stock) to 24.99% of the Equity of the Company (any such
mandatory purchase being herein called a "Mandatory Redemption"). The price
to be paid to the Holder upon a Mandatory Redemption shall be an amount equal
to the Valuation Amount at the date of the event causing such Mandatory
Redemption occurs (the "Trigger Date"), multiplied by a fraction the
denominator of which is the number of issued and outstanding shares of Common
Stock of the Company at the Trigger Date, calculated on a fully diluted basis
in accordance with generally accepted accounting principles, and the numerator
of which is (Y) the aggregate number of shares of Common Stock of the Company
(i) comprising the Warrant Shares to be purchased by the Company, and/or (ii)
issuable upon exercise of the Warrants to be purchased by the Company, and/or
(iii) issuable upon conversion of the Series B Preferred Stock comprising the
Warrant Shares to be purchased by the Company, and/or (iv) issuable upon
conversion of the Series B Preferred Stock issuable upon exercise of the
Warrants to be purchased by the Company (assuming Series B Preferred Stock,
rather than Common Stock, is then issuable under such Warrants), and/or (v)
comprising any other shares of Capital Stock of the Company then held or
previously held by a Regulated Holder or its Affiliates (excluding
Non-Attributable Stock) (the "Redemption Price").
(ii) The completion of all purchases and sales of Warrants and Warrant Shares
or other shares of Capital Stock pursuant to a Mandatory Redemption shall take
place on the thirtieth (30th) day following the Trigger Date, unless another
date is mutually agreed upon by the Company and the selling Holder (the
"Redemption Closing Date"). The Redemption Prices for all such purchases and
sales shall be paid by the Company issuing to the selling Holder in
immediately available funds against delivery of certificates representing the
Warrants, Warrant Shares and/or other shares of Capital Stock to be purchased,
duly endorsed for transfer to the Company.
(b) The Redemption Prices for all purchases and sales of Warrants, Warrant
Shares and other shares of Capital Stock pursuant to a Mandatory Redemption
shall be determined and calculated in accordance with subsection 2.10(a) by
the Company's regularly engaged independent accountants. The Company shall
cause such accountants to deliver to the Company and the selling Holder, not
later than 15 days prior to the completion of each purchase and sale under
subsection 2.10(a), a written statement, signed by such accountants, setting
forth in reasonable detail the respective purchase price and the calculation
thereof and stating that such calculation was based on the books and records
of the Company and was made and delivered pursuant to this Section 2.10.
(c) If the Company takes any action with respect to its capital stock
(including without limitation any purchase of its shares or any combination of
shares or reverse stock split and elimination of fractional shares) which
would cause the Common Stock currently or previously held by or currently
issuable without restriction to a Regulated Holder and its Affiliates (other
than shares of Non-Attributable Stock) to exceed 4.99% of the aggregate number
of issued and outstanding shares of Common Stock, prior to or simultaneously
with such action, the Company shall exchange such portion of Common Stock for
Series B Preferred Stock as will reduce the shares of Common Stock currently
or previously held by or currently issuable without restriction to such
Regulated Holder and its Affiliates (not including "Non-Attributable Stock")
to 4.99% of the aggregate number of issued and outstanding shares of Common
Stock (a "Mandatory Exchange").
Article III
Representations and Warranties
3.01 Representations and Warranties of the Company. Subject to and except as
disclosed in the Schedule of Exceptions attached hereto as Annex E (the
"Schedule of Exceptions"), the Company represents and warrants to each
Purchaser that:
(a) The Company is a corporation duly organized and existing and in good
standing under the laws of its state of incorporation and is qualified or
licensed to do business in all other countries, states, and jurisdictions the
laws of which require it to be so qualified or licensed. The Company has no
Subsidiaries or debt or equity investment in any Person. Giving effect to the
transactions contemplated herein, the Stockholder owns beneficially and of
record the number of shares in the aggregate of the issued and outstanding
capital stock or stock equivalents of the Company on a fully converted and
diluted basis as of the Second Restatement Closing Date set forth under the
signature of such Stockholder on this Agreement, all being free and clear of
all liens, claims and encumbrances. Other than Purchaser, and, except for any
other stock issuable under any employee or director stock plan which
constitutes Permitted Stock, no Person has any rights, whether granted by the
Company or any other Person, to acquire any portion of the equity interest of
the Company or the assets of the Company.
(b) Each of the Company and the Stockholder has, and at all times that this
Agreement is in force will have, the right and power, and is duly authorized,
to enter into, execute, deliver, and perform this Agreement, the Stockholder
Agreement, and, in the case of the Company, the Warrants and the Preferred
Shares, and the officers of Company executing and delivering this Agreement,
the Warrants and the Preferred Shares are duly authorized to do so. This
Agreement, the Warrants and the Preferred Shares have been duly and validly
executed, issued, and delivered and constitute the legal, valid, and binding
obligations of Company and the Stockholder, enforceable in accordance with
their respective terms.
(c) The execution, delivery, and performance of this Agreement, the
Stockholder Agreement, the Warrants and the Preferred Shares will not, by the
lapse of time, the giving of notice, or otherwise, constitute a violation of
any applicable provision contained in the charter, bylaws, or organizational
documents of the Company or contained in any agreement, instrument, or
document to which the Company or the Stockholder is a party or by which any of
them is bound.
(d) As of the Second Restatement Closing Date and giving effect to all
issuances on such date of shares of Common Stock, Series A Preferred Stock,
and Series B Preferred Stock, the authorized capital stock of the Company
consists of (i) 20,000,000 shares of Common Stock of which 7,693,526 shares
will be issued and outstanding upon the Closing; and (ii) 6,000,000 shares of
Preferred Stock, of which 600,000 shares have been designated Series A
Preferred Stock, 331,800 of which will be issued and outstanding upon the
Closing; 5,000,000 shares have been designated Series B Preferred Stock,
1,302,135 of which will be issued and outstanding upon the Closing; and the
Company has (and will have as of the Closing) no other shares outstanding. An
aggregate of 4,000,000 shares of Common Stock are reserved for issuance on the
exercise of the Warrants and the Loan Warrants and conversion of the Series B
Preferred Stock, and 2,000,000 shares of Series B Preferred Stock are reserved
for issuance on exercise of the Warrants and the Loan Warrants. An aggregate
of 351,029 shares of Common Stock are reserved for issuance to employees of
the Company and of Subsidiaries of the Company. All of the issued and
outstanding shares of Common
Stock are, and upon issuance and payment therefor in accordance with the terms
of this Agreement, all of the outstanding Series A Preferred Stock and Series
B Preferred Stock will be, validly issued, fully paid and nonassessable. The
Common Stock, Series A Preferred Stock and Series B Preferred Stock have been
offered, issued, sold, and delivered by the Company free from preemptive
rights, rights of first refusal, antidilution rights, cumulative voting rights
or similar rights (except as otherwise provided in this Agreement or in the
powers, designations, rights and preferences of the Preferred Stock contained
in the Certificate) and in compliance with applicable federal and state
securities laws. Except pursuant to this Agreement and the Certificate and
except for the Permitted Stock the Company is not obligated to issue or sell
any Capital Stock and, except for this Agreement and the Stockholder
Agreement, neither the Company nor the Stockholder is party to, or otherwise
bound by, any agreement affecting the voting of any Capital Stock. Except for
the Stockholder Agreement and the Loan Warrant Agreement, the Company is not,
nor will it be, a party to, or otherwise bound by, any agreement obligating it
to register any of its Capital Stock.
(e) The Preferred Shares, the shares of Common Stock and Other Securities
issuable on exercise of the Warrants and the shares of Common Stock issuable
upon conversion of the Series B Preferred Stock have been duly and validly
authorized and reserved for issuance and, when issued in accordance with the
terms of this Agreement, the Warrants or the Certificate, as the case may be,
will be validly issued, fully paid, and nonassessable and free of preemptive
rights, rights of first refusal, or similar rights.
(f) The Company has good, indefeasible, merchantable, and marketable title
to, and ownership of, all of its assets necessary for the conduct of its
business free and clear of all liens, pledges, security interests, claims, or
other encumbrances except those of the Collateral Agent under the Loan
Agreement.
(g) There is no agreement, arrangement, or understanding involving the
Company or the Stockholder, other than this Agreement, the Stockholder
Agreement, and the documents contemplated hereby and thereby, modifying,
restricting, or in any way affecting the rights of any security holder to vote
securities of the Company.
(h) The Company has delivered to the Purchaser audited financial statements
of the Company at December 31, 1997 for the fiscal year then ended and its
unaudited financial statements at and for the one-month period ended January
31, 1998 (collectively, the "Financial Statements"). The Financial Statements
are complete and correct in all material respects, subject (in the case of the
unaudited statements) to normal year-end adjustments, and have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated. The Financial Statements
accurately set out, describe and fairly present the financial condition and
operating results of the Company as of the dates, and for the periods,
indicated therein, subject (in the case of the unaudited statements) to normal
year-end audit adjustments.
(i) Since January 31, 1998, there has not been:
(A) any change in the assets, liabilities, financial condition or operating
results of the Company from that reflected in the Financial Statements, except
changes in the ordinary course of business that have not been, in the
aggregate, materially adverse;
(B) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted and as it is currently proposed to be
conducted);
(C) any amendments or changes in the certificate of incorporation or bylaws
of the Company; other than the Certificate of Amendment of the Certificate of
Incorporation of the Company, filed on March 31, 1998;
(D) any waiver or compromise by the Company of a valuable right or of a
material debt owed to the Company;
(E) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is currently proposed to be conducted);
(F) any change or amendment to a material contract or arrangement by which
the Company or any of its assets or properties is bound or subject;
(G) any declaration or payment of any dividend or other distribution of the
assets of the Company;
(H) any increase in or modification of the compensation or benefits payable
by the Company to any of their directors or employees, except in the ordinary
course of business consistent with past practice;
(I) any increase in or modification of any bonus, pension, insurance or
other employee benefit plan, payment or arrangement (including, but not
limited to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any employee of the Company, except
in the ordinary course of business consistent with past practice;
(J) any incurrence, assumption or guarantee by the Company of any debt for
borrowed money; issuance or sale of any securities convertible into or
exchangeable for debt securities of the Company; or issuance or sale of
options or other rights to acquire from the Company, directly or indirectly,
debt securities of the Company, or any securities convertible into or
exchangeable for any such debt securities;
(K) any making of any loan, advance or capital contribution to any person
other than travel loans or advances made in the ordinary course of business;
or
(L) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company.
(j) The Schedule of Exceptions contains a complete list of all of the
following agreements to which the Company is a party: (a) all contracts,
agreements and instruments that involve a commitment by the Company in excess
of $10,000; (b) all stock purchase agreements; (c) all loan,
lease or debt agreements in excess of $10,000; (d) all employment agreements
with Stockholders; (e) all material licenses of any patent, trade secret or
other proprietary right to or from the Company; (f) any existing or currently
effective plan, contract or arrangement, whether written or oral, providing
for bonuses, pensions, deferred compensation, severance pay or benefits,
retirement payments, profit-sharing or the like; or (g) any other existing or
currently effective agreement, contract or commitment that is material to the
Company (collectively, the "Material Agreements"). All the Material
Agreements are valid and binding obligations of the Company, in full force and
effect in all material respects. The Company is not in material default under
any of the Material Agreements, and the Company is not aware of any material
default by another party, either pending or threatened, with respect to the
Material Agreements. The Company does not intend to cancel, withdraw, modify
or amend any such Material Agreement and neither has been notified that any
other party to any such Material Agreement intends to cancel, withdraw, modify
or amend such Material Agreement. The Company is not a party to or bound by
any material contract agreement or instrument, or subject to any restriction
under its certificate of incorporation or bylaws, that adversely affects its
business as presently conducted or as currently proposed to be conducted, its
properties or its financial condition.
(k) The Company has no material liability or obligation, absolute or
contingent (individually or in the aggregate), that is not disclosed in the
Financial Statements, except obligations and liabilities incurred after the
date of the Financial Statements in the ordinary course of business that are
not individually or in the aggregate material. The Company after reasonable
investigation has no knowledge of any basis for any other claim against or
liability or obligation of the Company.
(l) Set forth on the Schedule of Exceptions is a list of (a) all the
material obligations of the Company to its officers, directors, shareholders
and employees, including any member of their immediate families (other than
normal accrued wages and benefits and travel expense vouchers) and (b) all the
obligations of the officers, directors, shareholders and employees of the
Company, including any member of their immediate families (other than expense
advances made in the ordinary course of business) to the Company, which
schedule is complete and correct in all material respects as of the date of
this Agreement.
(m) To the best of the Company's knowledge, no employee of the Company is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency that would conflict with such employee's
obligation to use his best efforts to promote the interests of the Company or
that would conflict with the Company's business as conducted or as proposed to
be conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as currently proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. To
the best of the Company's knowledge, no employee or consultant of the Company
is in violation of any term of any employment contract, proprietary
information and inventions agreement, noncompetition agreement or any other
contract or agreement relating to the relationship of any such employee or
consultant with the Company or any previous employer. To the best of the
Company's knowledge, no officer of the Company, the termination of whose
employment, either individually or in the aggregate, would have a materially
adverse effect on the Company, has any present intention of terminating his or
her employment with the Company. The Company has no collective bargaining
agreements with any of its employees and to the best of the Company's
knowledge there is no labor-union-organizing activity pending or threatened
with respect to the Company.
(n) The Company is not in violation of any provisions of its certificate of
incorporation or its bylaws as amended and in effect on and as of the Closing,
or of any provisions of any material instrument or contract to which it is a
party or any judgment, decree or order by which it is bound or any statute,
rule or regulation applicable to it. The execution, delivery and performance
of this Agreement, the Stockholder Agreement and the issuance and sale of the
Preferred Shares and Warrants pursuant hereto and the issuance of the
Conversion Shares upon conversion of the Series B Preferred Shares and the
Issuable Warrant Shares pursuant to the exercise of the Warrants, will not
result in any such violation or be in conflict with or constitute a default
under any such provisions or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any properties or assets of the Company.
(o) To the best of the Company's knowledge, there is no action, proceeding
or investigation pending or currently threatened against the Company before
any court or administrative agency (or any basis therefor known to the
Company). The foregoing includes, without limiting its generality, actions
pending or threatened (or any basis therefor known to the Company) involving
the prior employment of any of the Company's employees or their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former
employers. There is no action, proceeding or investigation by the Company
currently pending or that the Company intends to initiate.
(p) To the best of the Company's knowledge, the Company has sufficient title
and ownership of or is licensed under all patents, trademarks, service marks,
trade names, copyrights, and all registrations and applications for
registration of any of the foregoing, and all trade secrets, information,
inventions, computer programs owned or licensed by the Company, documentation,
proprietary rights and processes (collectively, "Intellectual Property")
necessary for its business as now conducted and as currently proposed to be
conducted without any conflict with or without infringement of the rights of
others. There are no outstanding material options, licenses or agreements
relating to the foregoing nor is the Company bound by or a party to any
material options, licenses or agreements with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that it has violated
or, by conducting its businesses as currently proposed, would violate any of
the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity. The
Company does not believe it is or will be necessary to use any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company.
(q) To the best of the Company's knowledge, the Company has not done
anything to compromise the secrecy, confidentiality or value of any of its
trade secrets, know-how, inventions, prototypes, designs, processes or
technical data required to conduct its business as now conducted or as
proposed to be conducted. The Company has taken in the past and will take in
the future reasonable security measures to protect the secrecy,
confidentiality and value of all its trade secrets, know-how, inventions,
prototypes, designs, processes, and technical data important to the conduct of
its business.
(r) The Company has accurately prepared and timely filed all United States
income tax returns and all state and municipal 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. No deficiency assessment or
proposed adjustment of the Company's United States income tax or state or
municipal taxes is pending and the Company has no knowledge of any liability
as of the date hereof for any tax for which there is not an adequate reserve
reflected in the Financial Statements.
(s) The Company has fire, casualty and liability insurance policies
customary for the type and scope of its properties and business.
(t) All consents, approvals, orders or authorizations of, or registrations,
qualifications, designations, declarations or filings with any federal or
state governmental authority on the part of the Company required in connection
with the valid execution and delivery of this Agreement and the Stockholder
Agreement, the offer, sale or issuance of the Preferred Shares, the Conversion
Shares, the Warrants, the Issuable Warrant Shares, or the consummation of any
other transaction contemplated hereby have been obtained, or will be obtained
prior to the Closing, except for notices required to be filed with certain
state and federal securities commissions after the Closing, which notices will
be filed on a timely basis.
(u) The Company (i) represents and warrants that it has retained no finder
or broker in connection with the transactions contemplated by this Agreement
and (ii) hereby agrees to indemnify and to hold the Purchaser harmless of and
from any liability for any commission or compensation in the nature of a
finder's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which the
Company or any of its employees or representatives is responsible.
(v) Each of the representations and warranties made by the Company pursuant
to the Loan Agreement is true and correct in all material respects.
(w) None of the documents, instruments, or other information furnished to
the Purchaser by the Company or the Stockholder, contains any untrue statement
of a material fact or omits to state any material fact necessary in order to
make any statements made therein not misleading. No representation, warranty,
or statement made (i) by the Company in this Agreement, the Loan
Agreement, or the Stockholder Agreement, or (ii) by the Stockholder made in
this Agreement or the Stockholder Agreement, or in any applicable document,
certificate, exhibit or schedule attached hereto or thereto or delivered in
connection herewith or therewith, contains or, at the Second Restatement
Closing Date, will contain any untrue statement of a material fact, or, at the
Second Restatement Closing Date, omits or will omit to state a material fact
necessary to make any statements made herein or therein not misleading. There
is no fact that materially and adversely affects the condition (financial or
otherwise), results of operations, business, properties, or prospects of the
Company that has not been disclosed in the documents provided to the
Purchaser.
3.02 Representations and Warranties of the Purchaser. Each Purchaser
represents and warrants severally and not jointly to the Company:
(a) It is a corporation, limited partnership or limited liability company,
as the case may be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization.
(b) It has the right and power and is duly authorized to enter into,
execute, deliver, and perform this Agreement and the Stockholder Agreement,
and its officers, managers or agents executing and delivering this Agreement
and the Stockholder Agreement are duly authorized to do so. This Agreement
and the Stockholder Agreement has been duly and validly executed, issued, and
delivered and constitutes the legal, valid, and binding obligation of such
Purchaser, enforceable in accordance with their respective terms.
(c) It (i) is an "accredited investor," as that term is defined in
Regulation D under the Securities Act; (ii) has such knowledge, skill, and
experience in business and financial matters, based on actual participation,
that it is capable of evaluating the merits and risks of an investment in the
Company and the suitability thereof as an investment for each Purchaser; (iii)
has received and reviewed all such financial and other information and records
of the Company as it considered necessary or appropriate in deciding whether
to purchase the Preferred Shares and the Warrants and any securities issuable
upon exercise of the Warrants, and the Company and the Stockholder have made
available to it the opportunity to ask questions of, and to receive answers
and to obtain additional information from, representatives of the Company and
the Stockholder; (iv) all such additional information has been provided to and
reviewed by it; and (v) it has the ability to bear the economic risks of
losing its entire investment in the Preferred Shares and the Warrants and any
securities issuable upon exercise of the Warrants.
(d) Except as otherwise contemplated by this Agreement and the Stockholder
Agreement, each Purchaser is acquiring its Series A Preferred Stock, its
Series B Preferred Stock, and/or its Warrants and any securities issuable upon
exercise of the Warrants or upon conversion of the Series B Preferred Stock
for investment for its own account and not with a view to any distribution
thereof in violation of applicable securities laws.
(e) It agrees that the certificates representing its Preferred Shares, its
Warrants, any Issued Warrant Shares and any Conversion Shares will bear the
legends referenced in this Agreement, and such Preferred Shares, Warrants or
securities issuable upon exercise of the Warrants and pursuant to the
Stockholder Agreement, as the case may be, will not be offered, sold, or
transferred in the absence of registration or exemption under applicable
securities laws.
(f) It has no current contract, undertaking, agreement, arrangement or
understanding with any Person to sell, transfer, grant any participation in,
or otherwise distribute any of the Preferred Shares, the Warrants or any
securities issuable upon exercise of the Warrants or upon conversion of the
Series B Preferred Shares to any Person.
Article IV
Covenants
4.01 Financial Statements. The Company will keep books of account and
prepare financial statements and will cause to be furnished to each Purchaser
and each other Holder (all of the foregoing and following to be kept and
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis):
(a) As soon as available, and in any event within one hundred twenty (120)
days after the end of each fiscal year of the Company, beginning with the
fiscal year ending December 31, 1997, (i) a copy of the financial statements
of the Company for such fiscal year containing a consolidated and
consolidating balance sheet, statement of income, statement of stockholders'
equity, and statement of cash flows, each as at the end of such fiscal year
and for the period then ended and
in each case setting forth in comparative form the figures for the preceding
fiscal year, all in reasonable detail and audited and certified by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, or other independent certified public accountants of recognized
standing selected by the Company and consented to by the Holders and (ii) a
comparison of the actual results during such fiscal year to those originally
budgeted by the Company prior to the beginning of such fiscal year and a
narrative description and explanation of any budget variances. The annual
audit report required by this Agreement will not be qualified by or make
reference to any disclosure that the Company may not continue as a going
concern or otherwise be qualified or limited because of restricted or limited
examination by the accountant of any portion of any of the records of the
Company.
(b) As soon as available, and in any event within thirty (30) days after the
end of each calendar month, a copy of unaudited consolidated and consolidating
financial statements of the Company as of the end of such calendar month and
for the portion of the fiscal year then ended, containing a balance sheet, a
statement of retained earnings, statement of income, and statement of cash
flows, in each case setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year and all in reasonable
detail, including, without limitation, a comparison of the actual results
during such period to those originally budgeted by the Company prior to the
beginning of such fiscal period and for the fiscal year to date.
(c) Within forty-five (45) days after the beginning of each fiscal year, an
annual budget or business plan for such fiscal year, including a projected
consolidated and consolidating balance sheet, income statement, and cash flow
statement for such year, and, promptly during each fiscal year, all revisions
thereto approved by the board of directors of the Company.
(d) Concurrently with the delivery of each of the financial statements
referred to in Section 4.01(a) and, on the request of any Purchaser, Section
4.01(b), a certificate of an authorized officer of the Company in form and
substance satisfactory to the Holders (i) certifying that the financial
statements attached to such certificates have been prepared in accordance with
generally accepted accounting principles consistently applied and fairly and
accurately present (subject to year-end audit adjustments) the consolidated
and consolidating financial condition and results of operations of the Company
at the date and for the period indicated therein, and (ii) containing a
narrative report of the business and affairs of the Company that includes, but
is not limited to, a discussion of the results of operations compared to those
originally budgeted for such period by the Company prior to the beginning of
such period.
(e) As soon as available, a copy of each (i) financial statement, report,
notice, or proxy statement sent by the Company to its stockholders; (ii)
regular, periodic, or special report, registration statement, or prospectus
filed by the Company with any securities exchange, state securities regulator,
or the Commission; (iii) material order issued by any court, governmental
authority, or arbitrator in any material proceeding to which the Company is a
party or to which any of its assets is subject; (iv) press release or other
statement made available generally by the Company or the Stockholder to the
public generally concerning material developments in the business of the
Company; and (v) item of correspondence, report, or other information sent by
the Company to any holder of any indebtedness, including, without limitation
the lenders under the Loan Agreement.
(f) Promptly, such additional information concerning the Company as any
Holder may request, including, without limitation, auditor management reports
and audit "waive" lists.
4.02 Inspection. The Company will permit any representative designated by a
Holder to (a) visit and inspect any of the properties of the Company; (b)
examine the corporate and financial records of Company and make copies thereof
or extracts therefrom; and (c) discuss the affairs, finances, and accounts of
the Company with the directors, officers, key employees, and independent
accountants of the Company. The inspections, examinations and discussions
provided for in the preceding sentence shall be conducted during normal
business hours, shall be reasonable in scope and shall not disrupt or
adversely affect any aspect of the operations of the Company.
4.03 Existence. Except as otherwise expressly required or permitted by the
Loan Agreement or this Agreement, the Company will maintain in full force and
effect its corporate existence, rights, and franchises and all licenses and
other rights to use Intellectual Property.
4.04 Notice.
(a) In the event of (i) any setting by the Company of a record
date with respect to the holders of any class of Capital Stock for the purpose
of determining which of such holders are entitled to dividends, repurchases of
securities or other distributions, or any right to subscribe for, purchase or
otherwise acquire any shares of Capital Stock or other property or to receive
any other right; or (ii) any capital reorganization of the Company, or
reclassification or recapitalization of the Capital Stock or any transfer of
all or a majority of the assets, business, or revenue or income generating
capacity of the Company, or consolidation, merger, share exchange,
reorganization, or similar transaction involving the Company; or (iii)
any voluntary or involuntary dissolution, liquidation, or winding up of the
Company; or (iv) any proposed issue or grant by the Company of any Capital
Stock, or any right or option to subscribe for, purchase, or otherwise acquire
any Capital Stock (other than the issue of Issuable Warrant Shares upon
exercise of the Warrants or the issue of Conversion Shares upon conversion of
the Series B Preferred Stock), then, in each such event, the Company will
deliver or cause to be delivered to the Holders a notice specifying, as the
case may be, (A) the date on which any such record is to be set for the
purpose of such dividend, distribution, or right, and stating the amount and
character of such dividend, distribution, or right; (B) the date as of which
the holders of record will be entitled to vote on any reorganization,
reclassification, recapitalization, transfer, consolidation, merger, share
exchange, conveyance, dissolution, liquidation, or winding-up; (C) the date on
which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, share exchange, conveyance, dissolution, liquidation,
or winding-up is to take place and the time, if any is to be fixed, as of
which the holders of record of any class of Capital Stock will be entitled to
exchange their shares of Capital Stock for securities or other property
deliverable upon such event; and (D) the amount
and character of any Capital Stock property, or rights proposed to be issued
or granted, the consideration to be received therefor, and, in the case of
rights or options, the exercise price thereof, and the date of such proposed
issue or grant and the Persons or class of Persons to whom such proposed issue
or grant will be offered or made. Any such notice will be deposited in the
United States mail, postage prepaid, at least thirty (30) days prior to the
date therein specified, and notwithstanding anything in this Agreement or the
Warrants to the contrary the Holders may exercise the Warrants within thirty
(30) days from the mailing of such notice. The Company shall, promptly on
request of a Holder, provide such other information as the Holders may
reasonably request.
(b) If there is any adjustment as provided above in Article II
(other than as provided in Section 2.08(a)), or if any Other Securities (other
than Series B Preferred Stock) become issuable in lieu of shares of such
Common Stock upon exercise of the Warrants, the Company will immediately cause
written notice thereof to be sent to each Holder, which notice will be
accompanied by a certificate of the independent public accountants of the
Company setting forth in reasonable detail the basis for the Holders' becoming
entitled to receive such Other Securities, the facts requiring any such
adjustment in the number of shares receivable after such adjustment, or the
kind and amount of any Other Securities so purchasable upon the exercise of
the Warrants, as the case may be. At the request of any Holder and upon
surrender of the Warrant of such Holder, the Company will reissue such Warrant
of such Holder in a form conforming to such adjustments.
4.05 Warrant Rights. The Company covenants and agrees that during the
term of this Agreement and so long as any of the Warrants are outstanding, (a)
the Company will at all times have authorized and reserved a sufficient number
of shares of Common Stock and Other Securities, to provide for the exercise in
full of the rights represented by the Warrants and the exercise in full of the
rights of the Holders under the Stockholder Agreement; (b) the Company will
not increase or permit to be increased the par value per share or stated
capital of the Issuable Warrant Shares or the consideration receivable upon
issuance of its Issuable Warrant Shares; and (c) in the event that the
exercise of the Warrants would require the payment by the Holder of
consideration for the Common Stock or Other Securities receivable upon such
exercise of less than the par or stated value of such Issuable Warrant Shares,
the Company and the Stockholder will promptly take such action as may be
necessary to change the par or stated value of such Issuable Warrant Shares to
an amount less than or equal to such consideration.
4.06 Certain Actions. Without the prior written consent of each of
FF-ITP and, in the case of subparagraphs (a), (b), (d), (e), (f), (m), (n),
(o), and (p), the consent of the holders of a majority of the outstanding
shares of Series B Preferred Stock (other than shares held by a Regulated
Holder), which consent may be withheld for any reason, the Company will not,
and will not permit any Subsidiary to:
(a) permit to occur any amendment, alteration, or modification
of the bylaws of the Company, as constituted on the date of this Agreement,
the effect of which, in the judgment of FF-ITP and the holders of a majority
of the outstanding shares of Series B Preferred Stock (other than shares held
by a Regulated Holder), would be to alter, impair, or affect adversely, either
the rights and benefits of the Holders or the duties and obligations of the
Company under this Agreement, the Warrants, the Certificate or the Stockholder
Agreement or permit to occur any amendment, alteration, or modification of the
other charter or organizational documents of the Company, as constituted on
the date of this Agreement except to the extent necessary to comply with
Section 4.04(j) or 4.10;
(b) except as otherwise permitted in the Certificate or those
Stock Repurchase Agreements dated May 30, 1997, between the Company and each
of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇, or as required by the Stockholder
Agreement or the Loan Warrant Agreement, (i) declare or make any dividends or
distributions of its cash, stock property, or assets or redeem, retire,
purchase, or otherwise acquire, directly or indirectly, any of the Capital
Stock or capital stock or securities of any Affiliate or any Subsidiary of the
Company, or any securities convertible or exchangeable into Capital Stock or
capital stock or securities of any Affiliate or any Subsidiary of the Company
or otherwise make any distribution on account of the purchase, repurchase,
redemption, put, call or other retirement of any shares of Capital Stock of
the Company or any Subsidiary thereof or of any warrant, option or other right
to acquire such shares, or (ii) pay any professional consulting or management
fees or any other payments to any shareholders of Parent or any Subsidiary;
provided, however, that the Company shall be permitted as exceptions to the
preceding provisions of this clause (b): to declare and make payments of (A)
dividends in cash from Subsidiaries of the Company to the Company to the
extent necessary to
permit the Company or its Subsidiaries to pay amounts due and payable under
the Loan Agreement, and (B) dividends on the Preferred Stock as provided in
the Certificate;
(c) effect any sale, lease, assignment, transfer, or other
conveyance of any material portion of the assets or operations or the revenue
or income generating capacity of the Company (other than inventory in the
ordinary course of business and other assets reasonably and in good faith
determined by the Company to be obsolete or no longer necessary to the
business of the Company), or to take any such action that has the effect of
any of the foregoing;
(d) except for issuances of stock permitted by this Agreement,
the Permitted Stock, and the mergers permitted by the Loan Agreement or
pursuant to the express terms of this Agreement or the Stockholder Agreement,
issue or sell, or otherwise dispose of any Capital Stock (including the Series
A Preferred Stock) or Capital Stock of any Subsidiary, dissolve or liquidate,
or effect any consolidation or merger involving the Company or any Subsidiary
or any reclassification, corporate reorganization, stock split or reverse
stock split, or other change of any class of Capital Stock of the Company or
of any Subsidiary;
(e) issue any Capital Stock unless the holder of such Capital
Stock either (i) has become a party to the Stockholder Agreement, or (ii)
owns, after such issuance, less than three percent (3%) of the Company's
Common Stock, assuming full exercise or conversion of all outstanding
securities exercisable for or convertible into Common Stock.
(f) enter into any business that the Company or any Subsidiary
is not conducting on the date of this Agreement or acquire any substantial
business operation or assets (through a stock or asset purchase or otherwise
except for businesses and acquisitions permitted by the Loan Agreement);
(g) except for Permitted Stock, enter into any transaction or
transactions with any director, officer, employee, or stockholder of the
Company, or any Affiliate or relative of the foregoing except upon terms that,
in the opinion of the FF-ITP, are fair and reasonable and that are, in any
event, at least as favorable as would result in a comparable arm's-length
transaction with a Person not a director, officer, employee, shareholder, or
Affiliate of the Company or any Affiliate or related party of the foregoing,
or advance any monies to any such Persons, except for travel advances in the
ordinary course of business;
(h) increase the amount of remuneration paid to officers under
the employment agreements disclosed with respect to Section 3.01(k) of this
Agreement (the "Employment Agreements");
(i) modify, amend, terminate or waive any material provision of
the Employment Agreements;
(j) allow the aggregate par value of the Capital Stock subject
to the Warrants from time to time to exceed the price payable upon exercise of
the Warrants, as adjusted from time to time;
(k) fail to achieve $30,000,000 in net revenue and $1,500,000 in
EBITDA for the year ending one year after the Original Closing Date;
$60,000,000 in net revenue and $3,500,000 in EBITDA for the year ending two
years after the Original Closing Date; and $90,000,000 in net revenue and
$5,500,000 in EBITDA for the year ending three years after the Original
Closing Date;
(l) fail to comply, in all material respects, with all
applicable statutes, regulations, and orders of the United States, domestic
and foreign states, and municipalities, agencies, and instrumentalities of the
foregoing applicable to the Company;
(m) fail to file all required tax returns, reports, and requests
for refunds on a timely basis or pay on a timely basis all taxes imposed on
either it, or upon any of its assets, income or franchises; provided, however,
that neither the Company nor any Subsidiary shall be required to pay or
discharge any tax, levy, assessment, or governmental charge that is being
contested in good faith by appropriate proceedings diligently pursued, and for
which adequate reserves in accordance with generally accepted accounting
principles, consistently applied, have been establis-hed;
(n) authorize or issue stock to ▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
or any Affiliate or Related Party of the foregoing;
(o) fail to keep books and records of account in which full,
true, and correct entries will be made of all dealings and transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis;
(p) create or authorize any class or series of capital stock
ranking prior to or pari passu with the Series A Preferred Stock with respect
of the payment of dividends or the distribution of assets upon a liquidation,
or create or authorize any rights, options or warrants exercisable for, or
securities convertible into or exchangeable for, shares of any such class or
series of capital stock;
(q) except for Permitted Stock, authorize the issuance of the
Company's equity securities at a price per share of less than their Fair
Market Value; or
(r) obligate itself or otherwise agree to take, permit or enter
into any of the events described in subsections (a) through (q) above.
4.07 Accountants. The Company will retain independent public
accountants acceptable to FF-ITP who will certify the consolidated and, at
FF-ITP's request, consolidating financial statements of the Company and its
Subsidiaries at the end of each fiscal year, and in the event that the
services of the independent public accountants so selected, or any firm of
independent public accounts hereafter employed by Company or any Subsidiary,
are terminated, the Company will promptly thereafter notify FF-ITP and upon
FF-ITP's request, the Company will request the firm of independent public
accountants whose services are terminated to deliver (without liability for
such firm) to FF-ITP a letter of such firm setting forth the reasons for the
termination of their services and in its notice to FF-ITP the Company or such
Subsidiary will state whether the change of accountants was recommended or
approved by the board directors of the Company or any Subsidiaries or any
committee thereof.
4.08 Each of the Regulated Holders Not a Party to Covenants. The
Regulated Holders and the other parties hereto agree that (a) the covenants
set forth in Sections 4.06 and 4.07 hereof shall not inure to the benefit of
any Regulated Holder or its successors or assigns; (b) neither a Regulated
Holder nor its successors or assigns shall have the right to enforce such
covenants or the right to give consents or waivers in connection therewith;
and (c) the effectiveness of any and all amendments, consents, waivers or
other actions required or requested of the Holders under Section 4.06 hereof
shall be determined as if such Regulated Holder or its successors and assigns
were not Holders hereunder.
Article V
Conditions
The obligations of each Purchaser to effect the transactions
contemplated by this Agreement are subject to the following conditions
precedent:
5.01 Opinion. Each Purchaser will have received a favorable opinion,
dated the Second Restatement Closing Date, from counsel for the Company,
covering matters raised by this Agreement, the Stockholder Agreement, and such
other matters as any Purchaser or its counsel may request, and otherwise in
form and substance satisfactory to each Purchaser and its counsel.
5.02 Loan Agreement Conditions. All of the conditions precedent to the
obligations of Purchaser under the Loan Agreement will have been satisfied in
full.
5.03 Material Change. There will have occurred no material adverse
change in the business, prospects, results of operations, or condition,
financial or otherwise, of the Company.
5.04 Stockholder Agreement. The Company and the Stockholders will have
entered into the Stockholder Agreement with Purchaser.
5.05 Representations and Agreements. Each representation and warranty
of the Company and the Stockholders set forth in this Agreement will be true
and correct in all material respects when made and as of the Second
Restatement Closing Date, and the Company and the Stockholders will have fully
performed all their covenants and agreements set forth in this Agreement in
all material respects.
5.06 Proceedings; Consents. All proceedings taken in connection with
the transactions contemplated by this Agreement, and all documents necessary
to the consummation of this Agreement, will be satisfactory in form and
substance to the Purchaser and its counsel, and the Purchaser and its counsel
will have received certificates of compliance and copies (executed or
certified as may be appropriate) of all documents, instruments, and agreements
that the Purchaser or its counsel reasonably may request in connection with
the consummation of such transactions. All consents of any Person necessary to
the consummation of the transactions contemplated by this Agreement will have
been received, be in full force and effect, and not be subject to any onerous
condition.
5.07 Reservation of Common Stock. The Purchaser will have received
evidence satisfactory to the Purchaser that the Company has reserved a
sufficient number of shares of Common Stock for the Purchaser to convert the
Series B Preferred Stock and/or exercise the Warrants.
5.08 Expenses. The Company shall pay the reasonable fees and expenses
of Purchasers incurred in connection with their review of the Company, the
preparation of this Agreement (including exhibits hereto), and the closing of
the transactions contemplated hereby.
5.09 Operating Plan. As of the Second Restatement Closing Date, the
Company shall have prepared a 5-year operating plan and projections in form
and substance satisfactory to the Purchasers.
5.10 Board of Directors. The Company's Board of Directors as of the
Second Restatement Closing Date shall consist of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Nice, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇..
5.11 Compliance Certificate. There shall have been delivered to the
Purchasers a certificate, dated as of the Closing, signed by the Company's
Chairman or President, certifying that the conditions specified in Sections
5.02, 5.03, 5.05, 5.06 (but only the last sentence thereof), 5.07 and 5.10
have been fulfilled.
5.12 Secretary's Certificate. There shall have been delivered to the
Purchasers a certificate, dated as of the Closing, signed by the Company's
Secretary or an Assistant Secretary and in form and substance satisfactory to
the Purchasers, that shall certify (i) the names of its officers authorized to
sign this Agreement, the certificates for purchased shares and warrants and
the other documents, instruments or certificates to be delivered pursuant to
this Agreement by the Company or any of its officers, together with true
signatures of such officers; (ii) that the copy of the certificate of
incorporation (including any amendments) attached thereto is true, correct and
complete; (iii) that the copy of the Bylaws attached thereto is true, correct
and complete; (iv) that the copy of Board of Directors' resolutions attached
thereto evidencing the approval of this Agreement, the issuance of the
Preferred Shares on the Second Restatement Closing Date and the other matters
contemplated hereby was duly adopted and is in full force and effect.
5.13 Certificates of Good Standing. There shall have been delivered to
the Purchasers Certificates of the Secretary of State of the States of
Delaware and New Jersey, and the Maryland State Department of Assessments &
Taxation, as to the good standing of the Company as of a recent date.
Article VI
Miscellaneous
6.01 Indemnification. In addition to any other rights or remedies to
which the Purchaser and the Holders may be entitled, the Company and each
Stockholder (solely with respect to the representations and warranties made by
him) severally and not jointly agree to and will indemnify and hold harmless
the Purchaser, the Holders, and their Affiliates and their successors,
assigns, officers, directors, managers, employees, attorneys, and agents
(individually and collectively, an "Indemnified Party") from and against any
and all losses, claims, obligations, liabilities, deficiencies, penalties,
causes of action, damages, costs, and expenses (including, without limitation,
costs of investigation and defense, attorneys' fees, and expenses), including,
without limitation, those arising out of the contributory negligence of any
Indemnified Party, that the Indemnified Party may suffer, incur, or be
responsible for, arising or resulting from, to the extent applicable, any
misrepresentation, breach of warranty, or nonfulfillment of any covenant or
agreement on the part of the Company or the Stockholder (solely with respect
to the representations and warranties made by him) under this Agreement, the
Stockholder Agreement, or under any other agreement to which the Company or
the Stockholder is a party in connection with this transaction, or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished to the Purchaser or the Holders under this
Agreement.
6.02 Default. It is agreed that a violation by any party of the terms
of this Agreement cannot be adequately measured or compensated in money
damages, and that any breach or threatened breach of this Agreement by a party
to this Agreement would do irreparable injury to the nondefaulting party. It
is, therefore, agreed that in the event of any breach or threatened
breach by a party to this Agreement of the terms and conditions set forth in
this Agreement, the nondefaulting party will be entitled, in addition to any
and all other rights and remedies that it may have in law or in equity, to
apply for and obtain injunctive relief requiring the defaulting party to be
restrained from any such breach or threatened breach or to refrain from a
continuation of any actual breach.
6.03 Integration. This Agreement, the Warrants, the Preferred Shares,
the Stockholder Agreement, and the Company's Certificate of Incorporation, as
amended, constitute the entire agreement between the parties with respect to
the subject matter hereof and thereof and supersede all previous written, and
all previous or contemporaneous oral, negotiations, understandings,
arrangements, and agreements. This Agreement may not be amended or
supplemented except by a writing signed by Company, the Stockholder, and each
Holder.
6.04 Headings. The headings in this Agreement are for convenience and
reference only and are not part of the substance of this Agreement.
References in this Agreement to Sections and Articles are references to the
Sections and Articles of this Agreement unless otherwise specified.
6.05 Severability. The parties to this Agreement expressly agree that
it is not the intention of any of them to violate any public policy, statutory
or common law rules, regulations, or decisions of any governmental or
regulatory body. If any provision of this Agreement is judicially or
administratively interpreted or construed as being in violation of any such
policy, rule, regulation, or decision, the provision, section, sentence, word,
clause, or combination thereof causing such violation will be inoperative (and
in lieu thereof there will be inserted such provision, sentence, word, clause,
or combination thereof as may be valid and consistent with the intent of the
parties under this Agreement) and the remainder of this Agreement, as amended,
will remain binding upon the parties, unless the inoperative provision would
cause enforcement of the remainder of this Agreement to be inequitable under
the circumstances.
6.06 Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration, or other communication be given to or
served upon any of the parties by another, such notice, demand, request,
consent, approval, declaration, or other communication will be in writing and
addressed to the party to be notified as set forth below. Notices shall be
deemed to have been validly served, given or delivered (and "the date of such
notice" or words of similar effect shall mean the date) five (5) days after
deposit in the United States mails, certified mail, return receipt requested,
with proper postage prepaid, or upon actual receipt thereof with written
acknowledgment of receipt (whether by noncertified mail telecopy, telegram,
facsimile, express delivery, hand delivery or otherwise), whichever is
earlier.
If to Creditanstalt, at: Address of Creditanstalt beneath the name of
Creditanstalt on the signature pages of this Agreement
with courtesy copies to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
NationsBank Plaza, Suite 5200
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to FF-ITP, at: Address of FF-ITP beneath the name of FF-ITP on the
signature pages of this Agreement
with courtesy copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esquire
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company, at: IT Partners, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with courtesy copies to: ▇▇▇▇▇▇▇ & Berlin
▇▇▇▇ ▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇ ▇. ▇▇▇, Esquire
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Indosuez, at: Indosuez IT Partners
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Wachovia, at: Wachovia Capital Associates, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇.▇.
Mailcode GA423
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Senior Vice President/ITP
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with courtesy copies to: Wachovia Capital Associates, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇.▇.
Mailcode GA715
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Legal Department/WCA/ITP
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Stockholder: Address of such Stockholder beneath his/her name on
the signature pages of this Agreement
or to such other address as each party may designate for itself by like
notice. Notice to any Holder other than the Purchaser will be delivered as set
forth above to the address shown on the stock transfer books of the Company or
the Warrant Register unless such Holder has advised the Company in writing of
a different address to which notices are to be sent under this Agreement.
Failure or delay in delivering courtesy copies of any notice, demand,
request, consent, approval, declaration, or other communication to the persons
designated above to receive copies of the actual notice will in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration, or other communication.
No notice, demand, request, consent, approval, declaration or other
communication will be deemed to have been given or received unless and until
it sets forth all items of information required to be set forth therein
pursuant to the terms of this Agreement.
6.07 Successors. This Agreement will be binding upon and inure to the
benefit of the parties and their respective successors and assigns; provided,
however, that no sale, assignment or other transfer by any party to this
Agreement of any of its Capital Stock or rights hereunder to another Person
will be valid and effective unless and until the transferee or assignee first
agrees in writing to be bound by the terms and conditions of this Agreement
and the Stockholders Agreement and the agreements and instruments related
hereto and thereto, in a form and substance reasonably satisfactory to the
Company.
6.08 Remedies. The failure of any party to enforce any right or remedy
under this Agreement, or promptly to enforce any such right or remedy, will
not constitute a waiver thereof, nor give rise to any estoppel against such
party, nor excuse any other party from its obligations under this Agreement.
Any waiver of any such right or remedy by any party must be in writing and
signed by the party against which such waiver is sought to be enforced.
6.09 Survival. All warranties, representations, and covenants made by
any party in this Agreement or in any certificate or other instrument
delivered by such party or on its behalf under this Agreement will be
considered to have been relied upon by the party to which it is delivered and
will survive the Original Closing Date, the First Amendment Closing Date, the
Second Amendment Closing Date, the Third Amendment Closing, the First
Restatement Closing Date, and the Second Restatement Closing Date, as the case
may be, regardless of any investigation made by such party or on its behalf.
All statements in any such certificate or other instrument will constitute
warranties and representations under this Agreement.
6.10 Fees. Any and all fees, costs, and expenses, of whatever kind and
nature, including attorneys' fees and expenses, incurred by the Holders in
connection with the defense or prosecution of any actions or proceedings
arising out of or in connection with this Agreement will be borne and paid by
the Company within ten (10) days of demand by the Holders.
6.11 Counterparts. This Agreement may be executed in any number of
counterparts, which will individually and collectively constitute one
agreement.
6.12 Other Business. It is understood and accepted that the Purchaser,
the Holders, and their Affiliates have interests in other business ventures
that may be in conflict with the activities of the Company and that nothing in
this Agreement will limit the current or future business activities of such
parties whether or not such activities are competitive with those of the
Company. The Company and the Stockholder agree that all business
opportunities that may be available to such parties in any field substantially
related to the business of the Company will be pursued exclusively through the
Company.
6.13 Choice of Law. THIS AGREEMENT WILL BE INTERPRETED AND THE RIGHTS
OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF DELAWARE APPLICABLE
TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING
EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD
REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION.
6.14 Duties Among Holders. Each Holder agrees that no other Holder
will by virtue of this Agreement be under any fiduciary or other duty to give
or withhold any consent or approval under this Agreement or to take any other
action or omit to take any action under this Agreement, and that each other
Holder may act or refrain from acting under this Agreement as such other
Holder may, in its discretion, elect.
6.15 Waiver of Jury Trial. AFTER REVIEWING THIS SECTION 6.15 WITH ITS
COUNSEL, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY, EACH
PURCHASER AND EACH STOCKHOLDER HEREBY KNOWINGLY, INTELLIGENTLY AND
INTENTIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY OR THE ACTIONS OF THE COMPANY, EACH PURCHASER AND EACH STOCKHOLDER IN
THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF OR THEREOF. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR EACH PURCHASER TO PURCHASE THE WARRANTS
AND PREFERRED SHARES FROM THE COMPANY.
6.16 Amendment. This Agreement shall not be modified or amended except
by a writing signed by (a) the Purchasers and/or Stockholders holding at least
a majority of the outstanding Series A Preferred Stock and (b) the Purchasers
holding at least a majority of the Series B Preferred Stock (or if converted,
Conversion Shares) issued or issuable under this Agreement. All of the
parties hereto agree that such modification or amendment shall be binding upon
and is hereby consented to by all parties to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY:
IT PARTNERS, INC.
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman of the Board
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇
Attn: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
CREDITANSTALT:
CREDITANSTALT CORPORATE FINANCE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President
By: /s/ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
Address: Two ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇
Attn: ▇▇▇▇
▇▇▇▇▇
Fax: (770)
▇▇▇-▇▇▇▇
OWNED ON THE SECOND RESTATEMENT CLOSING DATE:
200,000 Shares of Series A Preferred Stock
222,222 Shares of Series B Preferred Stock
None Shares of Common Stock
257,862 Shares issuable under Warrant A*
120,335 Shares issuable under Warrant C*
78,710 Shares issuable under Warrant D*
188,680 Shares issuable under Warrant E*
* Prior to any adjustments to such number of shares as set forth in Section
2.08 of this Agreement.
FF-ITP:
FF-ITP, L.P.
BY: FSFC Associates, L.P.,
its General Partner
BY: Franklin Capital, L.L.C.,
its General Partner
BY: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager
OWNED ON THE SECOND RESTATEMENT CLOSING DATE:
110,000 Shares of Series A Preferred Stock
29,516 Shares of Common Stock
515,724 Shares issuable under Warrant B*
* Prior to any adjustments to such number of shares as set forth in Section
2.08 of this Agreement.
INDOSUEZ:
INDOSUEZ IT PARTNERS
By: Indosuez ▇▇ ▇▇, Inc.
Managing General Partner
By: /s/▇▇▇ ▇▇▇▇▇▇▇▇▇
TITLE: Executive Vice President
BY:▇▇▇ ▇▇▇▇▇▇▇▇▇
TITLE: Executive Vice President
OWNED ON THE SECOND RESTATEMENT CLOSING DATE:
431,965 Shares of Series B Preferred Stock
WACHOVIA:
WACHOVIA CAPITAL ASSOCIATES, INC.
BY:/s/
TITLE:
OWNED ON THE SECOND RESTATEMENT CLOSING DATE:
647,948 Shares of Series B Preferred Stock
STOCKHOLDER
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
OWNED ON THE SECOND RESTATEMENT CLOSING DATE:
550,101 Shares of Common Stock
10,900 Shares of Series A Preferred Stock
None Common Stock Options
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
OWNED ON THE SECOND RESTATEMENT CLOSING DATE:
550,101 Shares of Common Stock
10,900 Shares of Series A Preferred Stock
None Common Stock Options
FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this "First Amendment
to Second Restatement") is made and entered to as of , 1998, by
and among IT
PARTNERS, INC., a Delaware corporation (the "Company"), CREDITANSTALT
CORPORATE FINANCE, INC., having offices at Two ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ (together with any successor, assignee or transferee, "Creditanstalt"),
FF-ITP, L.P., a
Delaware limited partnership ("FF-ITP"), INDOSUEZ IT PARTNERS, having offices
at ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (together with any
successor, assignee
or transferee, "Indosuez I"), INDOSUEZ IT PARTNERS II, having offices at ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (together with any successor, assignee
or transferee,
"Indosuez II"), WACHOVIA CAPITAL ASSOCIATES, INC., having offices at ▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇.▇., ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (together with any successor,
assignee or transferee,"Wachovia", which, together with Creditanstalt, FF-ITP
Indosuez I and Indosuez II are individually and collectively, as the context
requires, referred to herein as the "Purchaser"), and each of the STOCKHOLDERS
named on the signature pages hereto (individually and collectively, as the
context requires, the "Stockholder").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Preferred Stock and Warrant Purchase
Agreement, dated
as of May 30, 1997, as amended by the First Amendment to Preferred Stock and
Warrant Purchase
Agreement dated July 11, 1997, as further amended by the Second Amendment to
Preferred Stock
and Warrant Purchase Agreement dated October 27, 1997, as further amended by
the Third
Amendment to Preferred Stock and Warrant Purchase Agreement dated October 31,
1997, and as
further amended by the Fourth Amendment to Preferred Stock and Warrant
Purchase Agreement
dated December 16, 1997 (as amended, the "Original Purchase Agreement") by and
among the
parties thereto, (i) Creditanstalt purchased an aggregate of 100,000 shares of
the Company's
Series A Preferred Stock and warrants (the "Equity Warrants") for the purchase
of up to 456,907
shares (subject to adjustment as set forth in Section 2.08 of the Original
Purchase Agreement) of
either the Company's common stock, $.01 par value per share ("Common Stock"),
or the Company's
Series B Preferred Stock, $.01 par value per share; and (ii) FF-ITP purchased
110,000 shares of
the Company's Series A Preferred Stock, 29,516 shares of Common Stock, and
Equity Warrants for
the purchase of up to 515,724 shares (subject to adjustment as set forth in
Section 2.08 of the
Original Purchase Agreement) of the Company's Common Stock; and
WHEREAS, the Company and the Stockholders amended and restated the
Original Purchase
Agreement pursuant to that certain Amended and Restated Preferred Stock and
Warrant Purchase
Agreement, dated as of January 8, 1998 (the "First Restated Purchase
Agreement") pursuant to
which Creditanstalt acquired (a) 100,000 shares of Series A Preferred Stock
with Equity Warrants
for the purchase of 188,680 shares of Common Stock or Series B Preferred
Stock, and (b) 222,222
shares of Series B Preferred Stock; and
WHEREAS, the Company and the Stockholders amended and restated the First
Restated
Purchase Agreement, pursuant to that certain Second Amended and Restated
Preferred Stock and
Warrant Purchase Agreement, dated as of March 31, 1998 (the "Second Restated
Purchase
Agreement") pursuant to which Indosuez I acquired (a) 431,965 shares of Series
B Preferred Stock,
and (b) Wachovia acquired 647,948 shares of Series B Preferred Stock; and
WHEREAS, the Company desires that Indosuez II make the following equity
investment
as of the First Amendment to Second Restatement Closing Date (as defined
herein): Indosuez II
will purchase 85,313 shares of Series B Preferred Stock at an aggregate
purchase price of
$395,000 ($4.63 per share), (the "Additional Equity Investment"); and
WHEREAS, in connection with such proposed purchase of shares of Series B
Preferred
Stock the parties hereto wish to amend the Second Restated Purchase Agreement
in order to
provide for the Additional Equity Investment and make certain other changes
set forth herein;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained
in this Agreement, and other good and valuable consideration, the receipt and
sufficiency of
which are hereby acknowledged, the Purchasers, the Stockholders, and the
Company, intending to be
legally bound, agree as follows:
Section 1. Definitions. As used in this First Amendment to Second
Restatement,
unless otherwise defined herein, terms defined in the Second Restated Purchase
Agreement shall
have the meaning set forth therein when used herein.
Section 2. Definition of "First Amendment to Second Restatement
Closing Date".
Article I of the Second Restated Purchase Agreement is hereby amended by
adding following the
definition of "First Amendment Closing Date" a new definition of "First
Amendment to Second
Restatement Closing Date" as follows:
First Amendment to Second Restatement Closing Date:
, 1998.
Section 3. Amendment of Definition of "Closing". The term "Closing"
as set forth in
Article I of the Second Restated Purchase Agreement, is hereby deleted in its
entirety and the
following definition is substituted in lieu thereof:
Closing. This term refers to the purchase and sale
of the Series B
Preferred Stock effective as of the Second Restated Purchase
Agreement or the
First Amendment to Second Restatement Closing Date, as the case may
be.
Section 4. Amendment of Definition of "Permitted Stock". The term
"Permitted
Stock," as set forth in Article I of the Second Restated Purchase Agreement,
is hereby deleted in
its entirety and the following definition is substituted in lieu thereof:
Permitted Stock. This term shall mean (a) Warrant Shares,
and shares of the
Company's Capital Stock issuable upon exercise thereof; (b) Capital
Stock of the
Company issued as a dividend on shares of the Company's Capital Stock
or as a
result of a stock split with respect thereto; (c) options and
warrants outstanding (or
that the Company's Board of Directors has approved for issuance to
specific
employees) as of the Original Closing Date to purchase the Company's
Capital
Stock, and shares of the Company's Capital Stock issuable upon
exercise thereof;
(d) the Business Combination Options, and shares of the Company's
Capital Stock
issuable upon exercise thereof; (e) options to be granted after the
Original Closing
Date to employees of the Company and its Subsidiaries to purchase up
to 335,286
shares of Common Stock of the Company, at an exercise price not less
than the
Fair Market Value at the time of issuance of such options, and shares
of the
Company's Capital Stock issuable upon exercise thereof; (f) shares of
Series A
Preferred Stock issuable pursuant to the Original Purchase Agreement
or the First
Restated Purchase Agreement; (g) shares of Series B Preferred Stock
issuable
pursuant to the First Restated Purchase Agreement, the Second
Restated Purchase
Agreement or this First Amendment to Second Restatement; (h) shares
of
Common Stock issuable upon conversion of Series B Preferred Stock (i)
29,516
shares of Common Stock issuable to FF-ITP on the Third Amendment
Closing
Date; (j) 103,093 shares of Common Stock issued to ▇▇▇▇▇▇▇▇▇▇▇ ▇. and
▇▇▇▇▇▇
▇▇▇▇▇▇▇ (jointly) at an aggregate purchase price of $200,000; (k)
29,516 shares of
Common Stock issuable to ▇▇▇▇▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (jointly)
at an
aggregate purchase price of $100,000; (l) 14,758 shares of Common
Stock issuable
to ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (jointly) at an aggregate purchase price
of $50,000;
(m) 1,001 shares of Common Stock issuable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at an
aggregate
purchase price of $3,390; (n) options to be granted to FBD
Consulting, Inc.
("FBD") to purchase up to 2400 shares of Common Stock of the Company,
at an
exercise price not less than $5.60 per share, and shares of the
Company's Capital
Stock issuable upon exercise thereof; and (o) options to be granted
to Doig, Elliott,
Schur, Inc. ("DES") to purchase up to 18,304 shares of Common Stock
of the
Company, at an exercise price not less than $5.60 per share, and
shares of the
Company's Capital Stock issuable upon exercise thereof. The limits
in clauses (e),
(i) (j), (k), (l) and (m) shall be proportionately adjusted for
dividends and other
distributions payable in and for subdivisions and combinations of
shares of
Common Stock.
Section 5. The Warrants and the Preferred Shares. Section 2.01 of
the Second
Restated Purchase Agreement is hereby amended by adding following section
(h)(i) the
following:
(i) On the First Amendment to Second Restatement Closing Date,
Indosuez II
agrees to purchase from the Company at the purchase price set forth below, and
the Company
agrees to issue to Indosuez II, all in accordance with the terms and
conditions of this Agreement:
(i) 85,313 shares of Series B Preferred Stock at a purchase
price of
$395,000, or $4.63 per share, having the rights,
restrictions, privileges,
and preferences set forth in the Certificate.
Section 6. The Warrants and the Preferred Shares. Section 2.01 of
the Second
Restated Purchase Agreement is hereby further amended by deleting the first
sentence of the last
paragraph thereof and substituting in lieu thereof the following:
On the First Amendment to Second Restatement Closing Date,
the Company will
deliver to Indosuez II a certificate evidencing and representing the
shares of Series
B Preferred Stock, issued to such Purchaser. The Company has duly
authorized the
Series A Preferred Stock and Series B Preferred Stock purchased and
sold pursuant
to the terms of this Agreement by duly filing the Certificate with
the Secretary of
State of the State of Delaware. The shares of Series A Preferred
Stock and the shares
of Series B Preferred Stock subject to the terms of this Agreement
are sometimes
referred to in this Agreement as the "Preferred Shares."
Section 7. Legend. Section 2.02 of the Second Restated Purchase
Agreement is hereby
amended by deleting the first sentence thereof in its entirety and
substituting in lieu thereof the following:
The Company will deliver to the Purchaser on the First
Amendment to Second
Restatement Closing Date, one or more certificates representing the
Series B
Preferred Stock, purchased by such Purchaser, in such denominations
as such
Purchaser requests.
Section 8. Representations and Warranties of the Company. All of the
representations
and warranties of the Company found in Section 3.01 of the Second Restated
Purchase Agreement
are true and accurate as of the First Amendment to Second Restated Purchase
Agreement Closing
Date with the exception of subsection (d) which shall read as follows:
(d) As of the First Amendment to Second Restatement Closing
Date and giving
effect to all issuances on such date of shares of Common Stock, Series A
Preferred Stock,
and Series B Preferred Stock, the authorized capital stock of the Company
consists of (i)
20,000,000 shares of Common Stock of which 7,693,526 shares will be
issued and
outstanding upon the Closing; and (ii) 6,000,000 shares of Preferred
Stock, of which 600,000
shares have been designated Series A Preferred Stock, 347,230 of which
will be issued and
outstanding upon the Closing; 5,000,000 shares have been designated
Series B Preferred
Stock, 1,387,448 of which will be issued and outstanding upon the
Closing; and the
Company has (and will have as of the Closing) no other shares
outstanding. An aggregate
of 4,000,000 shares of Common Stock are reserved for issuance on the
exercise of the
Warrants and the Loan Warrants and conversion of the Series B Preferred
Stock, and
2,000,000 shares of Series B Preferred Stock are reserved for issuance on
exercise of the
Warrants and the Loan Warrants. An aggregate of 351,029 shares of Common
Stock are
reserved for issuance to employees of the Company and of Subsidiaries of
the Company. All
of the issued and outstanding shares of Common Stock are, and upon
issuance and payment
therefor in accordance with the terms of this Agreement, all of the
outstanding Series A
Preferred Stock and Series B Preferred Stock will be, validly issued,
fully paid and
nonassessable. The Common Stock, Series A Preferred Stock and Series B
Preferred Stock
have been offered, issued, sold, and delivered by the Company free from
preemptive rights,
rights of first refusal, antidilution rights, cumulative voting rights or
similar rights
(except as otherwise provided in this Agreement or in the powers,
designations, rights and
preferences of the Preferred Stock contained in the Certificate) and in
compliance with
applicable federal and state securities laws. Except pursuant to this
Agreement and the
Certificate and except for the Permitted Stock the Company is not
obligated to issue or sell
any Capital Stock and, except for this Agreement and the Stockholder
Agreement, neither
the Company nor the Stockholder is party to, or otherwise bound by, any
agreement affecting
the voting of any Capital Stock. Except for the Stockholder Agreement
and the Loan
Warrant Agreement, the Company is not, nor will it be, a party to, or
otherwise bound by,
any agreement obligating it to register any of its Capital Stock.
Section 9. Representations and Warranties of the Purchaser. All of
the
representations and warranties of the Purchaser found in Section 3.02 of the
Second Restated
Purchase Agreement are true and accurate as of the First Amendment to Second
Restatement
Closing Date. In addition, the Purchaser represents and warrants to the
Company the following:
A majority of the partners of the general partnership are
officers, directors, employees or Affiliates of a Regulated Holder.
Section 10. Notices. Notice shall be provided in accordance with
Section 6.06 of the
Second Restated Purchase Agreement and if to Indosuez II, notice is to be
given according to the
name and address as set forth on the signature page to this First Amendment to
Second
Restatement.
Section 11. Survival. Section 6.09 of the Second Restated Purchase
Agreement is
hereby deleted in its entirety and substituting in lieu thereof the following:
6.09 Survival. All warranties, representations, and
covenants made by any
party in this Agreement or in any certificate or other instrument
delivered by such
party or on its behalf under this Agreement will be considered to
have been relied upon
by the party to which it is delivered and will survive the Original
Closing Date, the
First Amendment Closing Date, the Second Amendment Closing Date, the
Third
Amendment Closing, the First Restatement Closing Date, the Second
Restatement
Closing Date, the First Amendment to Second Restatement Closing
Date, as the case
may be, regardless of any investigation made by such party or on its
behalf. All
statements in any such certificate or other instrument will
constitute warranties and
representations under this Agreement.
Section 12. Expenses. The Company shall pay the reasonable fees and
expenses of
Purchasers incurred in connection with the negotiation, preparation, execution
and delivery of this First Amendment to Second Restatement.
Section 13. Limitation of Amendment. Except as expressly set forth
herein, this First
Amendment to Second Restatement shall not be deemed to waive, amend or modify
any term or
condition of the Second Restated Purchase Agreement, each of which is hereby
ratified and
reaffirmed and shall remain in full force and effect, nor to serve as a
consent to any matter
prohibited by the terms and conditions thereof.
Section 14. Counterparts. This First Amendment to Second Restatement
may be
executed in any number of counterparts and any party hereto may execute any
counterpart, each
of which when executed and delivered will be deemed to be an original and all
of which, when
taken together, will be deemed but one and the same agreement.
Section 15. Choice of Law. THIS FIRST AMENDMENT TO SECOND
RESTATEMENT WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF
DELAWARE APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND
PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW
RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE
APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION.
Section 16. Waiver of Jury Trial. AFTER REVIEWING THIS SECTION 16
WITH ITS COUNSEL, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE COMPANY, EACH PURCHASER AND EACH STOCKHOLDER HEREBY
KNOWINGLY, INTELLIGENTLY AND INTENTIONALLY, IRREVOCABLY AND
EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT,
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS FIRST AMENDMENT
TO SECOND RESTATEMENT OR ANY DOCUMENTS ENTERED INTO IN
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY OR THE ACTIONS OF THE COMPANY, EACH PURCHASER AND
EACH STOCKHOLDER IN THE NEGOTIATION, ADMINISTRATION, OR
ENFORCEMENT THEREOF OR THEREOF. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR EACH PURCHASER TO PURCHASE THE WARRANTS AND
PREFERRED SHARES FROM THE COMPANY.
Section 17. Amendment. This First Amendment to Second Restatement
shall not be
modified or amended except by a writing signed by (a) the Purchaser and/or
Stockholders holding
at least a majority of the outstanding Series A Preferred Stock and (b) the
Purchasers holding at
least a majority of the Series B Preferred Stock (or if converted, Conversion
Shares) issued or
issuable under this Agreement. All of the parties hereto agree that such
modification or
amendment shall be binding upon and is hereby consented to by all parties to
this Agreement.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the
date first above written.
COMPANY:
IT PARTNERS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman of the Board
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
CREDITANSTALT:
CREDITANSTALT CORPORATE FINANCE, INC.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President
By: /s/ ▇▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇ ▇▇▇▇▇
Address: Two ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
OWNED ON THE FIRST AMENDMENT TO
SECOND RESTATEMENT CLOSING DATE:
207,569 Shares of Series A Preferred Stock
222,222 Shares of Series B Preferred Stock
None Shares of Common Stock
273,647 Shares issuable under Warrant A
127,701 Shares issuable under Warrant C
81,891 Shares issuable under Warrant D
192,454 Shares issuable under Warrant E
FF-ITP:
FF-ITP, L.P.
By: FSFC Associates, L.P.,
its General Partner
By: Franklin Capital, L.L.C.,
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager
OWNED ON THE FIRST AMENDMENT TO
SECOND RESTATEMENT CLOSING DATE:
116,525 Shares of Series A Preferred Stock
29,516 Shares of Common Stock
547,292 Shares issuable under Warrant B
INDOSUEZ I:
INDOSUEZ IT PARTNERS
By: Indosuez ▇▇ ▇▇, Inc.
Managing General Partner
By:/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
By: ▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
OWNED ON THE FIRST AMENDMENT TO
SECOND RESTATEMENT CLOSING DATE:
431,965 Shares of Series B Preferred Stock
INDOSUEZ II:
INDOSUEZ IT PARTNERS II
By:/s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇
Managing General Partner
OWNED ON THE FIRST AMENDMENT TO
SECOND RESTATEMENT CLOSING DATE:
85,313 Shares of Series B Preferred Stock
WACHOVIA:
WACHOVIA CAPITAL ASSOCIATES, INC.
By: /s/
Title:
OWNED ON THE FIRST AMENDMENT TO
SECOND RESTATEMENT CLOSING DATE:
647,948 Shares of Series B Preferred Stock
STOCKHOLDER:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
OWNED ON THE FIRST AMENDMENT TO
SECOND RESTATEMENT CLOSING DATE:
550,101 Shares of Common Stock
11,568 Shares of Series A Preferred
Stock
None Common Stock Options
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
OWNED ON THE FIRST AMENDMENT TO
SECOND RESTATEMENT CLOSING DATE:
550,101 Shares of Common Stock
11,568 Shares of Series A Preferred
Stock
None Common Stock Options
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED PREFERRED STOCK AND
WARRANT PURCHASE AGREEMENT (this "Second Amendment to Second Restatement") is
made and entered into as of this 27th day of July, 1998 by and among IT
PARTNERS, INC., a Delaware corporation (the "Company"), CREDITANSTALT
CORPORATE FINANCE, INC., having offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Creditanstalt"), FF-ITP, L.P., a Delaware limited
partnership ("FF-ITP"), INDOSUEZ IT PARTNERS, having offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (together with any successor,
assignee or transferee, "Indosuez I"), INDOSUEZ IT PARNERS II, , having
offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(together with any successor, assignee or transferee, "Indosuez II"), WACHOVIA
CAPITAL ASSOCIATES, INC., having offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (together with any successor, assignee or
transferee, "Wachovia"), and each of the STOCKHOLDERS named on the signature
pages hereto (individually and collectively, as the context requires, a
"Stockholder").
WHEREAS, pursuant to a certain Preferred Stock and Warrant Purchase
Agreement, dated as of May 30, 1997, as amended by the First Amendment to
Preferred Stock and Warrant Purchase Agreement dated July 11, 1997, as further
amended by the Second Amendment to Preferred Stock and Warrant Purchase
Agreement dated October 27, 1997, as further amended by the Third Amendment to
Preferred Stock and Warrant Purchase Agreement dated October 31, 1997, and as
further amended by the Fourth Amendment to Preferred Stock and Warrant
Purchase Agreement dated December 16, 1997 (as amended, the "Original Purchase
Agreement") by and among the parties thereto, (i) Creditanstalt purchased an
aggregate of 100,000 shares of the Company's Series A Preferred Stock and
warrants (the "Equity Warrants") for the purchase of up to 456,907 shares of
either the Company's common stock, $.01 par value per share ("Common Stock"),
or the Company's Series B Preferred Stock, $.01 par value per share; and (ii)
FF-ITP purchased 110,000 shares of the Company's Series A Preferred Stock,
29,516 shares of Common Stock, and Equity Warrants for the purchase of up to
515,724 shares of the Company's Common Stock; and
WHEREAS, the Company and certain of the Stockholders amended and retated
the Original Purchase Agreement pursuant to that certain Amended and Restated
Preferred Stock and Warrant Purchase Agreement, dated as of January 8, 1998
(the "First Restated Purchase Agreement") pursuant to which Creditanstalt
acquired (i) 100,000 shares of Series A Preferred Stock with Equity Warrants
for the purchase of 188,680 shares of Common Stock or Series B Preferred
Stock, and (ii) 222,222 shares of Series B Preferred Stock; and
WHEREAS, the Company and the Stockholders amended and restated the First
Restated Purchase Agreement, pursuant to that certain Second Amended and
Restated Preferred Stock and Warrant Purchase Agreement, dated as of March 31,
1998, as amended by the First Amendment to the Second Amended and Restated
Preferred Stock and Warrant Purchase Agreement, dated as of May __, 1998 (as
amended, the "Second Restated Purchase Agreement") pursuant to which (i)
Indosuez acquired 431,965 shares of Series B Preferred Stock, (ii) Wachovia
acquired 647,948 shares of Series B Preferred Stock, and (c) Indosuez II
acquired 85,313 shares of Series B Preferred Stock; and
WHEREAS, the Company desires to enter into a certain 12% Series C Senior
Redeemable Preferred Stock Purchase Agreement, dated as of the date hereof
(the "Series C Purchase Agreement"), among the Company and FBR Business
Development Capital ("FBR"), pursuant to which FBR will purchase an aggregate
of 700 shares of the Company's 12% Series C Senior Redeemable Preferred Stock
(the "Series C Preferred Stock"); and
WHEREAS, the Company intends to enter into a stock purchase agreement
with Wachovia pursuant to which Wachovia may purchase up to 300 shares of
Series C Preferred Stock; and
WHEREAS, in connection with the execution, delivery and performance of
the Series C Purchase Agreement and the issuance of the Series C Preferred
Stock by the Company to FBR and Wachovia, the Company and the Stockholders
have agreed to amend the Second Restated Purchase Agreement and to waive
certain provisions thereunder in order to provide for the issuance of the
Series C Preferred Stock and the issuance of Common Stock as a dividend upon
redemption of the Series C Preferred Stock;
NOW, THEREFORE, in consideration of the premises, the terms and
conditions herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions. As used in this Second Amendment to Second
Restatement, unless otherwise defined herein, terms defined in the Second
Restated Purchase Agreement shall have the meaning set forth therein when used
herein.
Section 2. Capital Stock. The term "Capital Stock," as set forth in
Section 1 of the Second Restated Purchase Agreement is hereby deleted in its
entirety and the following definition is substituted in lieu thereof:
Capital Stock. As to any Person, its common stock and any other
capital stock of such Person authorized from time to time, and any other
shares, options, interests, participations, or other equivalents (however
designated) of or in such Person, whether voting or nonvoting, including,
without limitation, common stock, options, warrants, preferred stock
(including the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock),
phantom stock, stock appreciation rights, convertible notes or debentures,
stock purchase rights, and all agreements, instruments, documents, and
securities convertible, exercisable, or exchangeable, in whole or in part,
into any one or more of the foregoing.
Section 3. Permitted Stock. The term "Permitted Stock," as set forth
in Section 1 of the Second Restated Purchase Agreement is hereby deleted in
its entirety and the following definition is substituted in lieu thereof:
Permitted Stock. This term shall mean (a) Warrant Shares, and
shares of the Company's Capital Stock issuable upon exercise thereof; (b)
Capital Stock of the Company issued as a dividend on shares of the Company's
Capital Stock or as a result of a stock split with respect thereto; (c)
options and warrants outstanding (or that the Company's Board of Directors has
approved for issuance to specific employees) as of the date hereof to purchase
the Company's Capital Stock, and shares of the Company's Capital Stock
issuable upon exercise thereof; (d) the Business Combination Options, and
shares of the Company's Capital Stock issuable upon exercise thereof; (e)
options to be granted after the Original Closing Date to employees of the
Company and its Subsidiaries to purchase up to 335,286 shares of Common Stock
of the Company, at an exercise price not less than the Fair Market Value at
the time of issuance of such options, and shares of the Company's Capital
Stock issuable upon exercise thereof; (f) shares of Series A Preferred Stock
issued or issuable pursuant to the Original Purchase Agreement or the First
Restated Purchase Agreement; (g) shares of Series B Preferred Stock issued or
issuable pursuant to the First Restated Purchase Agreement or the Second
Restated Purchase Agreement; (h) shares of Common Stock issuable upon
conversion of Series B Preferred Stock (i) 29,516 shares of Common Stock
issued to FF-ITP on the Third Amendment Closing Date; (j) 103,093 shares of
Common Stock issued to ▇▇▇▇▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (jointly) at an
aggregate purchase price of $200,000; (k) 29,516 shares of Common Stock issued
to ▇▇▇▇▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (jointly) at an aggregate purchase price
of $100,000; (l) 14,758 shares of Common Stock issued to ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇
▇▇▇▇▇ (jointly) at an aggregate purchase price of $50,000; (m) 1,001 shares of
Common Stock issued to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at an aggregate purchase price of
$3,390; (n) options granted to FBD Consulting, Inc. ("FBD") to purchase up to
2,400 shares of Common Stock of the Company, at an exercise price of not less
than $5.60 per share, and shares of the Company's Capital Stock issuable upon
exercise thereof; (o) options granted to Doig, Elliott, Schur, Inc. ("DES") to
purchase up to 18,304 shares of Common Stock of the Company, at an exercise
price of $5.60 per share, and shares of the Company's Capital Stock issuable
upon excercise thereof; (p) up to 700 shares of Series C Preferred Stock
issued to FBR Business Development Capital pursuant to the Series C Purchase
Agreement; (q) up to 300 shares of Series C Preferred Stock to be issued to
Wachovia; and (r) shares of the Company's Capital Stock issuable upon
redemption of the Series C Preferred Stock. The limits in clauses (e), (i)
(j), (k), (l) and (m) shall be proportionately
adjusted for dividends and other distributions payable in and for subdivisions
and combinations of shares of Common Stock.
Section 4. Series C Preferred Stock. Section 1 of the Second Restated
Purchase Agreement is hereby amended by adding following the definition of
"Series B Preferred Stock" a new definition of "Series C Preferred Stock" as
follows:
Series C Preferred Stock. 12% Series C Senior Redeemable
Preferred Stock, $.01 par value, of the Company having the rights,
restrictions, privileges and preferences of the series of preferred stock
designated as "12% Series C Senior Redeemable Preferred Stock" set forth in
the Certificate.
Section 5. Series C Purchase Agreement. Section 1 of the Second
Restated Purchase Agreement is hereby amended by adding following the
definition of "Series C Preferred Stock" a new definition of "Series C
Purchase Agreement" as follows:
Series C Purchase Agreement. This term shall mean the 12% Series
C Senior Redeemable Preferred Stock Purchase Agreement, dated as of July 27,
1998, among Company and FBR Business Development Capital (as such may be
amended, restated, supplemented or otherwise modified from time to time).
Section 6. Waiver of Rights under Section 2.08(e). In connection
with
and solely with respect to the execution, delivery and performance of the
Series C Purchase Agreement, the issuance of the Series C Preferred Stock to
FBR and Wachovia and the issuance of Common Stock as a dividend upon
redemption of the Series C Preferred Stock, each of the Holders hereby waives
forever the restrictions under Section 2.08(e) on the Company's ability to
issue any Capital Stock other than Common Stock and Common Stock Equivalents.
Section 7. Waiver of Certain Notice Requirements. In connection with
the execution, delivery and performance of the Series C Purchase Agreement,
the issuance of the Series C Preferred Stock and the issuance of Common Stock
as a dividend upon redemption of the Series C Preferred Stock, each of the
Holders hereby (i) acknowledges that it has received satisfactory notice under
the provisions of Section 4.04(a) of the Second Restated Purchase Agreement
and (ii) waives forever any right to claim any insufficiency of such notice
under the provisions of Section 4.04(a).
Section 8. Consent to and Waiver of Certain Actions. Each of FF-ITP
and, in the case of subsections 4.06(a), (b), (d), (e), and (p) of the Second
Restatement to Purchase Agreement, the holders of the outstanding shares of
Series B Preferred Stock (other than a
Regulated Holder), hereby (i) consents to the execution, delivery and
performance of the Series C Purchase Agreement and the Certificate of
Designation, and the transactions contemplated thereby, the issuance of the
Series C Preferred Stock to FBR and Wachovia and the issuance of Common Stock
as a dividend upon redemption of the Series C Preferred Stock; and (ii) solely
with respect to execution, delivery and performance of the Series C Purchase
Agreement, the issuance of the Series C Preferred Stock to FBR and Wachovia
and the issuance of Common Stock as a dividend upon redemption of the Series C
Preferred Stock, each of the Holders hereby waives forever the following
provisions of Section 4.06 of the Second Restated Purchase Agreement:
(a) The restrictions under Section 4.06(a) on the Company's
ability to amend its certificate of incorporation to provide for the Series C
Preferred Stock;
(b) The restrictions under Section 4.06(b)(i) on the Company's
ability to pay dividends on, or redeem, the Series C Preferred Stock, in each
case in accordance with the Certificate of Designation for the Series C
Preferred Stock;
(c) The restrictions under Section 4.06(b)(ii) (restrictions on
the Company's ability to pay any professional consulting or management fees to
any shareholder of the Company) with respect to the retention of Friedman,
Billings, ▇▇▇▇▇▇ & Co., Inc. as lead underwriter for the initial public
offering of the Company;
(d) The prohibition under Section 4.06(d) on the issuance of the
Series C Preferred Stock or shares of Common Stock issuable as a dividend upon
redemption of the Series C Preferred Stock;
(e) The requirement under Section 4.06(e) that FBR become a
party to the Amended and Restated Stockholder Agreement dated March 31, 1998,
as amended, among the Company and the other parties thereto;
(f) The restrictions under Section 4.06(g) with respect to the
retention of Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. as lead underwriter for
the initial public offering of the Company;
(g) The prohibitions under Section 4.06(p) on making the Series
C Preferred Stock senior to the Series A Preferred Stock;
(h) The prohibitions under Section 4.06(q) on issuances of the
Company's equity securities at a price per share of less than Fair Market
Value, that may be applicable to the issuance of the Series C Preferred Stock,
and the Common Stock issuable as a dividend upon redemption of the Series C
Preferred Stock; and
(i) The prohibitions under Section 4.06(r) on the Company from
obligating itself to agree to take, permit or enter into any of the events
described in subsections 4.06(a) through (q).
Section 9 Representations and Warranties. The Company hereby
represents and warrants to the Stockholders as follows:
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, has the
corporate power and authority to conduct its business as presently conducted
and as intended to be conducted, has the corporate power and authority to
execute and deliver this Second Amendment to Second Restatement, has the
corporate power and authority and legal right to own and lease its properties
and is duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the conduct of its business requires such qualification,
except where failure to be so qualified could not be reasonably expected to
have a material adverse effect on the business, properties, financial
condition or results of operations of the Company and its Subsidiaries taken
as a whole.
(b) The execution, delivery and performance by the Company of this Second
Amendment to Second Restatement have been duly authorized by all necessary
corporate action and do not and will not violate, or result in a breach of, or
constitute a default under, or require any consent under, or result in the
creation of any lien, charge or encumbrance upon the assets of the Company
pursuant to, any law, statute, ordinance, rule, regulation, order or decree of
any court, governmental body or regulatory authority or administrative agency
having jurisdiction over the Company or its Subsidiaries or the Company's
Certificate of Incorporation or any contract, mortgage, loan agreement, note,
lease or other instrument binding upon the Company or its Subsidiaries or by
which their properties are bound.
(c) This Second Amendment to Second Restatement has been duly executed and
delivered by the Company and constitutes a legal, valid, binding and
enforceable obligation of the Company.
(d) As of the date hereof, and giving effect to all issuances on such date
of shares of Series C Preferred Stock and FBR Warrants, the authorized capital
stock of Company consists of (i) 20,000,000 shares of Common Stock of which
8,279,658 shares are issued and outstanding; and (ii) 6,000,000 shares of
Preferred Stock, of which 600,000 shares have been designated Series A
Preferred Stock, 347,230 of which are issued and outstanding; 5,000,000 shares
have been designated Series B Preferred Stock, 1,387,448 of which are issued
and outstanding; and _____
shares have been designated Series C Preferred Stock, 700 of which will be
issued and outstanding upon the closing of the Series C Purchase Agreement.
An aggregate of 4,000,000 shares of Common Stock are reserved for issuance on
the exercise of the Warrants and the Loan Warrants and conversion of the
Series B Preferred Stock, and 2,000,000 shares of Series B Preferred Stock are
reserved for issuance on exercise of the Warrants and the Loan Warrants. As
of the date hereof, an aggregate of 1,000,000 shares of Common Stock are
reserved for issuance to employees of the Company and of Subsidiaries of the
Company. All of the issued and outstanding shares of Common Stock, Series A
Preferred Stock and Series B Preferred Stock are, and upon issuance and
payment therefor in accordance with the terms of the Series C Purchase
Agreement, all of the outstanding Series C Preferred Stock will be, validly
issued, fully paid and nonassessable. To the Company's best knowledge, other
than the Amended and Restated Stockholder Agreement dated March 31, 1998, as
amended (as further amended, restated, supplemented or otherwise modified from
time to time), there are no voting agreements, voting trusts, proxies or other
agreements or understandings with respect to the voting of any capital stock
of the Company or any Subsidiary.
Section 10. Expenses. The Company agrees to pay, immediately upon
demand by Creditanstalt, all costs, expenses, attorneys' fees, and other
charges and expenses incurred by Creditanstalt in connection with the
negotiation, preparation, execution and delivery of this Second Amendment to
Second Restatement and any other instrument, document, agreement or amendment
executed in connection with this Second Amendment.
Section 11. Limitation of Amendment. Except as expressly set forth
herein, this Second Amendment to Second Restatement shall not be deemed to
waive, amend or modify any term or condition of the Second Restated Purchase
Agreement, each of which is hereby ratified and reaffirmed and shall remain in
full force and effect, nor to serve as a consent to any matter prohibited by
the terms and conditions thereof.
Section 12. Counterparts. This Second Amendment to Second Restatement
may be executed in any number of counterparts and any party hereto may execute
any counterpart, each of which when executed and delivered will be deemed to
be an original and all of which, taken together, will be deemed but one and
the same agreement.
Section 13. Choice of Law. THIS AGREEMENT WILL BE INTERPRETED AND THE
RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED
STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF DELAWARE
APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT
GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT
COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER
JURISDICTION.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to Second Restatement under seal as of the date and year first above
written.
COMPANY:
IT PARTNERS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive Officer
CREDITANSTALT:
CREDITANSTALT CORPORATE FINANCE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Associate
FF-ITP:
FF-ITP, L.P.
By: FSFC Associates, L.P.,
its General Partner
By: Franklin Capital, L.L.C.,
its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Manager
INDOSUEZ I:
INDOSUEZ IT PARTNERS
By: Indosuez ▇▇ ▇▇, Inc.
Managing General Partner
By:/s/
Title:
By:/s/
Title:
INDOSUEZ II:
INDOSUEZ IT PARTNERS II
By:/s/ Les Liemberman
Title: Executive Vice President
WACHOVIA:
WACHOVIA CAPITAL ASSOCIATES, INC.
By:
Title:
STOCKHOLDERS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇