EXHIBIT 99.6
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AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
NETVOICE TECHNOLOGIES CORPORATION,
BG MEDIA INTERMEDIATE FUND L.P.,
NV INVESTMENTS, L.P.,
PARIBAS NORTH AMERICA, INC.
AND THE OTHER INVESTORS LISTED ON THE SCHEDULES HERETO
Dated as of July 28, 2000
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SECURITIES PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
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SECTION 1. Definitions.. . . . . . . . . . . . . . . . . . . . . . .1
SECTION 2. Authorization of the Series A Preferred Shares and
Warrants and Reservation of Reserved Shares . . . . . . .7
SECTION 3. Issuance of the Series A Preferred Shares and Warrants. .7
SECTION 4. Closing; Delivery.. . . . . . . . . . . . . . . . . . . .8
4.1. Time and Place. . . . . . . . . . . . . . . . . . . . . .8
4.2. Delivery. . . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 5. Representations and Warranties of the Corporation.. . . .8
5.1. Organization. . . . . . . . . . . . . . . . . . . . . . .9
5.2. Capitalization; Ownership of Shares of Common Stock;
Rights of Others. . . . . . . . . . . . . . . . . . . . .9
5.3. Equity Investments. . . . . . . . . . . . . . . . . . . 11
5.4. Financial Information and SEC Reports.. . . . . . . . . 11
5.5. Absence of Undisclosed Liabilities. . . . . . . . . . . 12
5.6. Absence of Changes. . . . . . . . . . . . . . . . . . . 12
5.7. Tax Matters.. . . . . . . . . . . . . . . . . . . . . . 13
5.8. Property. . . . . . . . . . . . . . . . . . . . . . . . 14
5.9. Intellectual Property Rights. . . . . . . . . . . . . . 14
5.10 Litigation. . . . . . . . . . . . . . . . . . . . . . . 17
5.11. No Defaults.. . . . . . . . . . . . . . . . . . . . . . 17
5.12. Labor Agreements and Actions. . . . . . . . . . . . . . 17
5.13. Compliance. . . . . . . . . . . . . . . . . . . . . . . 18
5.14. Insurance.. . . . . . . . . . . . . . . . . . . . . . . 18
5.15. Authorization; No Breach. . . . . . . . . . . . . . . . 18
5.16. Authorization of Series A Preferred Shares and Reserved
Shares. . . . . . . . . . . . . . . . . . . . . . . . . 19
5.17. Offering Exemption. . . . . . . . . . . . . . . . . . . 19
5.18. No Governmental Consent or Approval Required. . . . . . 19
5.19. Agreements. . . . . . . . . . . . . . . . . . . . . . . 20
5.20. Offering of the Series A Preferred Shares.. . . . . . . 20
5.21. Brokers.. . . . . . . . . . . . . . . . . . . . . . . . 20
5.22. Employee Benefits; ERISA. . . . . . . . . . . . . . . . 21
5.23. Environmental Matters.. . . . . . . . . . . . . . . . . 22
5.24. Disclosure. . . . . . . . . . . . . . . . . . . . . . . 22
5.25. Registration Requirements.. . . . . . . . . . . . . . . 22
5.26. No Solicitation.. . . . . . . . . . . . . . . . . . . . 22
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5.27. Integration . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 6. Representations, Warranties and Covenants of the
Investors. . . . . . . . . . . . . . . . . . . . . . . .23
6.1. General . . . . . . . . . . . . . . . . . . . . . . . . 23
6.2. Additional Representation by Accredited Investors . . . 24
SECTION 7. Conditions to Initial Closing . . . . . . . . . . . . . 24
7.1. Conditions Precedent to Initial Investors' Obligations. 24
7.2. Conditions Precedent to Subsequent Investors'
Obligations . . . . . . . . . . . . . . . . . . . . . . 26
7.3. Conditions Precedent to the Corporation's Obligations . 27
SECTION 8. Covenants.. . . . . . . . . . . . . . . . . . . . . . . 28
8.1. Access to Information . . . . . . . . . . . . . . . . . 28
8.2. Financial Reports . . . . . . . . . . . . . . . . . . . 28
8.3. Conduct of Business . . . . . . . . . . . . . . . . . . 29
8.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . 29
8.5. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 30
8.6. Reserve for Reserved Shares . . . . . . . . . . . . . . 30
8.7. Maintenance of Reporting Status; Supplemental
Information . . . . . . . . . . . . . . . . . . . . . . 30
8.8. Rule 144. . . . . . . . . . . . . . . . . . . . . . . . 31
8.9. Notice of Events of Default; Litigation.. . . . . . . . 31
8.10. Maintenance of Existence; Properties and Franchises;
Compliance with Law; Taxes; Insurance.. . . . . . . . . 31
8.11. Compliance with Agreements. . . . . . . . . . . . . . . 32
8.12. Further Assurances. . . . . . . . . . . . . . . . . . . 32
8.13. Best Efforts. . . . . . . . . . . . . . . . . . . . . . 32
8.14. Public Announcements. . . . . . . . . . . . . . . . . . 33
8.15. Preemptive Rights.. . . . . . . . . . . . . . . . . . . 33
8.16. Election of the BG Media Director.. . . . . . . . . . . 33
8.17. Committee and Subsidiary Representation.. . . . . . . . 34
8.18. Covenant to Vote. . . . . . . . . . . . . . . . . . . . 34
8.19. Inconsistency with Articles of Incorporation or Bylaws;
Termination of Provisions.. . . . . . . . . . . . . . . 34
8.20. NASDAQ Listing; Directors and Officers Insurance. . . . 35
8.21. Completion of the IPO.. . . . . . . . . . . . . . . . . 35
8.22. Intellectual Property.. . . . . . . . . . . . . . . . . 35
8.23. Share Certificates. . . . . . . . . . . . . . . . . . . 36
SECTION 9. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 10. Exchanges; Lost, Stolen or Mutilated Certificates or
Instruments.. . . . . . . . . . . . . . . . . . . . . . 37
SECTION 11. Survival of Representations, Warranties and Agreements,
Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 37
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SECTION 12. Indemnification.. . . . . . . . . . . . . . . . . . . . 38
12.1. The Corporation's Obligations to Indemnify. . . . . . . 38
12.2. Notice and Opportunity to Defend. . . . . . . . . . . . 38
12.3. Procedures for Claims by Parties. . . . . . . . . . . . 39
SECTION 13. Appointment of Representative.. . . . . . . . . . . . . 40
SECTION 14. Successors and Assigns; Parties in Interest.. . . . . . 42
SECTION 15. Entire Agreement. . . . . . . . . . . . . . . . . . . . 42
SECTION 16. Notices.. . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 17. Remedies. . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 18. Changes.. . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 19. Counterparts. . . . . . . . . . . . . . . . . . . . . . 44
SECTION 20. Headings. . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 21. Nouns and Pronouns. . . . . . . . . . . . . . . . . . . 44
SECTION 22. Governing Law.. . . . . . . . . . . . . . . . . . . . . 44
SECTION 23. Severability. . . . . . . . . . . . . . . . . . . . . . 44
SECTION 24. Jurisdiction. . . . . . . . . . . . . . . . . . . . . . 44
SECTION 25. Waiver of Trial by Jury.. . . . . . . . . . . . . . . . 45
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Exhibits:
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EXHIBIT A Certificate of Designation
EXHIBIT B Form of EBITDA Warrant
EXHIBIT C Form of NASDAQ Warrant
EXHIBIT D Registration Rights Agreement
EXHIBIT E Regulated Investor Letter Agreement
EXHIBIT F Form of Opinion of Locke Liddell & Sapp, counsel for
the Corporation
Schedules:
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SCHEDULE 1 Names and Addresses of BG Media Related Investors
SCHEDULE 2 Names of Investors/Purchase Price
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AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
THIS AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (the
"AGREEMENT") is made as of this 28th day of July, 2000, by and among
NETVOICE TECHNOLOGIES CORPORATION, a Nevada corporation (the
"CORPORATION"), BG MEDIA INTERMEDIATE FUND L.P., a Delaware limited
partnership ("BG MEDIA"), the investors listed on SCHEDULE I hereto as the
Initial BG Media Related Investors (the "INITIAL BG MEDIA RELATED
INVESTORS"), the Investors listed on Schedule I hereto as the Subsequent BG
Media Related Investors (the "SUBSEQUENT BG MEDIA RELATED INVESTORS", and
together with the Initial BG Media Related Investors , the "BG MEDIA
RELATED INVESTORS"), NV INVESTMENTS, L.P., a Texas limited partnership ("NV
INVESTMENTS"), and PARIBAS NORTH AMERICA, INC., a Delaware corporation
("PARIBAS" and, together with BG Media, the BG Media Related Investors and
NV Investments, and their respective transferees, the "INVESTORS").
WITNESSETH:
WHEREAS, the Corporation has issued to BG Media, the Initial BG
Media Related Investors and NV Investments (the "INITIAL INVESTORS"), and
the Initial Investors have purchased, the Initial Series A Preferred Shares
(as hereinafter defined), subject to the terms and conditions of the
Securities Purchase Agreement dated as of June 30, 2000 (the "ORIGINAL
AGREEMENT") among the Corporation and the Initial Investors;
WHEREAS, the Corporation intends to issue to Paribas and the
Subsequent BG Media Related Investors (the "SUBSEQUENT INVESTORS"), and the
Subsequent Investors desire to purchase, the Subsequent Shares (as
hereinafter defined), subject to the terms and conditions contained herein; and
WHEREAS, the Corporation and the Initial Investors desire to
amend and restate the Original Agreement.
NOW, THEREFORE, in consideration of the premises contained herein
and other good and valuable consideration, receipt of which is mutually
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used in this
Agreement shall have the meanings assigned to them elsewhere in this
Agreement or as specified below:
"ACTION" shall have the meaning set forth in Section 5.10 hereof.
"AMENDMENT" shall mean the Amendment to the Certificate of
Designation filed July 26, 2000 with the Secretary of State of the State of
Nevada.
"AMENDED CERTIFICATE OF DESIGNATION" shall mean the Certificate
of Designation, as amended by the Amendment.
"ASSERTED LIABILITY" shall have the meaning set forth in Section
12.2(a) hereof.
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"AUDITED BALANCE SHEET" shall have the meaning set forth in
Section 5.5 hereof.
"BG MEDIA INVESTORS" shall mean BG Media, the BG Media Related
Investors and any Person or Persons (including subsequent transferees of
such Person or Persons) to whom BG Media or the BG Media Related Investors
subsequently transfer any of their respective Shares.
"CERTIFICATE OF DESIGNATION" shall mean the Certificate of
Designation and Preferences of the Corporation establishing the terms and
relative rights and preferences of the Series A Preferred Stock in the form
attached hereto as EXHIBIT A and filed with the Secretary of State of the
State of Nevada on June 29, 2000 as in effect prior to the filing and
effectiveness of the Amendment.
"CLAIM RESPONSE" shall have the meaning set forth in Section 12.3
hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"COMMON STOCK" shall mean (a) the Corporation's Common Stock, par
value $0.001 per share, as authorized under the Corporation's Articles of
Incorporation, (b) any other capital stock of any class or classes (however
designated) of the Corporation, authorized on or after the date of the
Initial Closing, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating distributions after the payment of
dividends and distributions on any shares entitled to preference under the
Articles of Incorporation (as the same may be further amended from time to
time after the Initial Closing), and (c) any other securities into which or
for which any of the securities described in clause (a) or (b) of this
definition may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
"CONVERTIBLE SECURITIES" shall mean any option (other than any
option issued pursuant to the Corporation's stock option plans), warrant or
share in the capital of the Corporation or any other security, including
debt securities, which is convertible into, or exercisable or exchangeable
for, shares of Common Stock, including the Series A Preferred Shares.
"DESIGNATED PERSONS" shall mean the former and present directors,
officers and employees of, and consultants to, the Corporation.
"EBITDA WARRANTS" shall mean the Corporation's contingent
warrants issued hereunder for Series A Preferred Stock or Common Stock in
connection with the Initial Investment and the Subsequent Investment,
substantially in the form attached hereto as EXHIBIT B.
"EMPLOYEE BENEFIT PLAN" shall have the meaning set forth in
Section 5.22(a) hereof.
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"ENCOM ACQUISITION" shall have the meaning set forth in Section
7.1(p) hereof.
"ENVIRONMENTAL LAWS" shall have the meaning set forth in Section
5.13 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean (i) any corporation included with
the Corporation in a controlled group of corporations within the meaning of
Section 414(b) of the Code; (ii) any trade or business (whether or not
incorporated) which is under common control with the Corporation within the
meaning of Section 414(c) of the Code; (iii) any member of an affiliated
service group of which the Corporation is a member within the meaning of
Section 414(m) of the Code; or (iv) any other person or entity treated as
an affiliate of the Corporation under Section 414(o) of the Code.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect at the time.
"EXERCISED OPTIONS" shall have the meaning set forth in Section
7.1(q) hereof.
"EXERCISING OPTION HOLDERS" shall mean William Bedri, William D.
Yotty and Jim Chambas.
"EXECUTIVE COMPENSATION PLAN" shall have the meaning set forth in
Section 5.22(b) hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States, consistently applied.
"HAZARDOUS SUBSTANCES" shall mean any substance regulated under
any federal, state or local environmental law or regulation.
"INDEBTEDNESS" means at a particular time, without duplication,
(i) any indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (ii) any indebtedness
evidenced by any note, bond, debenture or other debt security, (iii) any
indebtedness for the deferred purchase price of property or services with
respect to which a Person is liable, contingently or otherwise, as obligor
or otherwise (other than trade payables and other current liabilities
incurred in the ordinary course of business), (iv) any commitment by which
a Person assures a creditor against loss (including, without limitation,
contingent reimbursement obligations with respect to letters of credit),
(v) any indebtedness guaranteed in any manner by a Person (including,
without limitation, guarantees in the form of an agreement to repurchase or
reimburse), (vi) any obligations under capitalized leases with respect to
which a Person is liable, contingently or otherwise, as obligor, guarantor
or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (vii) any indebtedness secured by a Lien on a
Person's assets and (viii) any unsatisfied obligation for "withdrawal
liability" to a "multiemployer plan" as such terms are defined under ERISA.
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"INDEMNIFIED PARTY" shall have the meaning set forth in Section
12.1 hereof.
"INITIAL CLOSING" shall have the meaning set forth in Section 4.1
hereof.
"INITIAL INVESTMENT" shall have the meaning set forth in Section
3 hereof.
"INITIAL SHARES" shall mean the shares of Series A Preferred
Stock issued in connection with the Initial Investment.
"INTELLECTUAL PROPERTY" shall mean all industrial and
intellectual property, including without limitation, Proprietary
Information, patents, patent applications, patent rights, mask works, mask
work applications, trademarks, trademark applications, trade names, trade
dress, domain names, service marks, service mark applications, copyrights,
copyright applications, industrial design rights and registrations and
applications for registration of industrial designs, know-how, certificates
of public convenience and necessity, franchises, licenses, trade secrets,
proprietary processes and formulae.
"INVESTMENT" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, stock, securities or ownership interest
(including partnership interests and joint venture interests) of any other
Person and (ii) any capital contribution by such Person to any other
Person.
"IPO" shall mean an initial public offering by the Corporation of
its shares of Common Stock after the date of the Original Agreement
yielding net proceeds to the Corporation of at least $25,000,000
"KEY EMPLOYEE" shall mean individuals with whom the Corporation
maintains, on the specified date, an employer-employee relationship and who
are employed by the Corporation in any of the following capacities: the
chairman of the board of directors, president, vice president, chief
financial officer, treasurer, controller, secretary, any other executive
officer of the Corporation, any position in which such an individual
develops any intellectual property or has access to Proprietary Information
or any other key employee of the Corporation, as designated by the Board of
Directors.
"LEASED REAL PROPERTY" shall have the meaning set forth in
Section 5.8(a) hereof.
"LEASES" shall have the meaning set forth in Section 5.8(a) hereof.
"LIENS" shall mean any claim, lien, security interest, pledge,
charge, conditional sale or other title retention agreement, lease,
preemptive right, right of first refusal, option, restriction, license or
other encumbrance of any kind.
"LITIGATION CONDITIONS" shall have the meaning set forth in
Section 12.2(b) hereof.
"LOSSES" shall have the meaning set forth Section 12.1 hereof.
"MATERIAL ADVERSE EFFECT" shall mean any change, effect or
circumstance that, individually or when taken together with all other such
changes, effects or circumstances that
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have occurred prior to the date of determination of the occurrence of a
Material Adverse Effect, has or is reasonably likely to have, any material
adverse effect on (i) the assets, liabilities, operations, business,
prospects, results of operations, or condition (financial or otherwise) of
the Corporation and its Subsidiaries taken as a whole, (ii) the ability of
the Corporation to consummate the transactions contemplated hereby or (iii)
the ability of the Corporation or any subsidiary to continue to operate its
business immediately after the Initial Closing or the Subsequent Closing in
substantially the same manner as such business is conducted prior to the
Initial Closing or the Subsequent Closing, as the case may be.
"NASDAQ WARRANTS" shall mean the Corporation's contingent
warrants issued hereunder for Series A Preferred Stock or Common Stock in
connection with the Initial Investment and the Subsequent Investment,
substantially in the form attached hereto as EXHIBIT C.
"NEW SECURITIES" means (i) any capital stock of the Corporation
or its Subsidiaries issued after the date of the Original Agreement,
including shares of Common Stock and Convertible Securities, or any other
securities or other obligations of the Corporation or its Subsidiaries,
including any equity or profit participation rights, whether now authorized
or not, (ii) any rights, options, or warrants to purchase any such capital
stock or rights, or to purchase any securities of any type whatsoever that
are, or may become, convertible into any such capital stock, and (iii) any
securities of any type whatsoever that are, or may become convertible into
any such capital stock; PROVIDED, HOWEVER, that "NEW SECURITIES" will not
include (A) securities offered to the public pursuant to a registration
statement under the Securities Act, (B) shares of Common Stock and options
to purchase such shares in an aggregate amount up to the greater of (1)
2,000,000 or (2) 10% of the outstanding shares of Common Stock of the
Corporation, issued to officers, directors, employees or former employees
of the Corporation or any of its Subsidiaries pursuant to any equity
incentive plan, agreement or other arrangement, such number and amount to
be appropriately adjusted in the event the Common Stock is subdivided into
a greater number or combined into a lesser number, (C) the Series A
Preferred Shares, (D) the Reserved Shares, (E) the EBITDA Warrants and the
NASDAQ Warrants, and (F) securities issued for fair value and in connection
with the acquisition of another entity by the Corporation or its
Subsidiaries by merger, purchase of all or substantially all of such other
entity's assets (or its division's) or by other similar reorganization.
"NON-ACCREDITED INVESTORS" shall mean those Investors who are not
"accredited investors" within the meaning of Rule 501(a) under the
Securities Act and who are designated on Schedule I as "Non-Accredited
Investors."
"PERSON" shall mean and include an individual, a corporation, a
partnership, a limited liability company, a trust, an unincorporated
organization, a government or any department, agency or political
subdivision thereof and any other entity.
"PRINCIPAL INVESTOR" shall mean any Investor holding at the time
of determination Shares with an initial purchase price hereunder of at
least $1,000,000.
"PROPRIETARY INFORMATION" shall mean all customer lists, source
and object code, other software, databases and other collections and
compilations of data, algorithms,
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architecture, structure, display screens, layouts, processes, inventions
and technology (whether or not patentable), trade secrets, know-how,
development tools and other proprietary rights owned by the Corporation
and/or its Subsidiaries pertaining to any product or service manufactured,
marketed or sold, or proposed to be manufactured, marketed or sold (as the
case may be), by the Corporation or any of its Subsidiaries or used,
employed or exploited in the development, license, sale, marketing or
distribution or maintenance thereof, any other confidential and/or
proprietary information, and all documentation and media constituting,
describing or relating to the above, including without limitation, manuals,
memoranda, know-how, notebooks, records and disclosures.
"REGISTER", "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Amended and
Restated Registration Rights Agreement among the Corporation and the other
parties named therein, substantially in the form attached hereto as EXHIBIT D.
"REGULATED INVESTOR" shall mean Paribas and any other Investor
which is subject to the provisions of Regulation Y promulgated by the Board
of Governors of the Federal Reserve, or any successor thereto.
"REGULATED INVESTOR LETTER AGREEMENT" shall mean the Letter
Agreement among the Corporation and the other parties named therein in the
form attached hereto as EXHIBIT E.
"RESERVED SHARES" shall mean the shares of Common Stock or Series
A Preferred Stock, as the case may be, reserved for issuance upon
conversion of the Series A Preferred Shares or exercise of the Warrants.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect at the time.
"SERIES A PREFERRED SHARES" shall mean the 4,398,658 shares of
Series A Preferred Stock to be issued hereunder, as either Initial Shares
or Subsequent Shares.
"SERIES A PREFERRED STOCK" shall mean the Corporation's Series A
Convertible Preferred Stock, par value $0.001 per share, having the
designations, rights, preferences and privileges and qualifications,
limitations and restrictions of preferred stock set forth in the
Certificate of Designation prior to July 26, 2000 and in the Amended
Certificate of Designation on and after July 26, 2000.
"SHARES" shall mean (i) shares of Common Stock and Series A
Preferred Stock issued to the Investors hereunder and (ii) any other shares
in the capital of the Corporation hereafter acquired by an Investor,
including shares issued upon conversion or exercise of any Convertible
Security including the Series A Preferred Shares.
"SUBSEQUENT CLOSING" shall have the meaning set forth in Section
4.1 hereof.
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"SUBSEQUENT INVESTMENT" shall have the meaning set forth in
Section 3 hereof.
"SUBSEQUENT SHARES" shall mean the shares of Series A Preferred
Stock issued in connection with the Subsequent Investment.
"SUBSIDIARY" shall mean with respect to any entity, any
corporation, partnership, association or other business entity of which (i)
if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in
the election of directors thereof is at the time owned or controlled,
directly or indirectly, by that entity or one or more of the other
Subsidiaries of that entity or a combination thereof, or (ii) if a
partnership, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by that entity or one or more
Subsidiaries of that entity or a combination thereof. For purposes hereof,
an entity or entities shall be deemed to have a majority ownership interest
in a partnership, association or other business entity if such entity or
entities shall be allocated a majority of partnership, association or other
business entity gains or losses or shall be or control the managing
director or a general partner of such partnership, association or other
business entity.
"TAXES" shall mean all taxes, charges, imposts, tariffs, fees,
levies or other similar assessments or liabilities, including without
limitation income taxes, ad valorem taxes, excise taxes, withholding taxes
or other taxes of or with respect to gross receipts, premiums, real
property, personal property, windfall profits, sales, use, transfers,
licensing, employment, payroll and franchises imposed by or under any law
or other taxes, fees, assessments or charges of any kind whatsoever; and
such terms shall include any interest, fines, penalties, assessments or
additions to tax.
"WARRANTS" shall mean the Corporation's EBITDA Warrants and
NASDAQ Warrants.
SECTION 2. AUTHORIZATION OF THE SERIES A PREFERRED SHARES AND
WARRANTS AND RESERVATION OF RESERVED SHARES. Subject to the terms and
conditions hereof, the Corporation has authorized the issuance of the
Series A Preferred Shares and the Warrants. The Corporation has also
authorized the reservation of the Reserved Shares, for issuance upon
conversion of the Series A Preferred Shares and exercise of the Warrants.
SECTION 3. ISSUANCE OF THE SERIES A PREFERRED SHARES AND WARRANTS.
Subject to the terms and conditions hereof and in reliance upon
the representations, warranties and agreements contained herein, (i) at the
Initial Closing, the Corporation issued and sold to the Initial Investors
in the aggregate 3,578,349 Series A Preferred Shares, 237,569 EBITDA
Warrants and 201,020 NASDAQ Warrants upon payment of the aggregate purchase
price therefor in the amount of $10,690,626.25 (the "INITIAL INVESTMENT")
and (ii) at the Subsequent Closing, the Corporation shall issue and sell to
the Subsequent Investors in the aggregate 820,309 Series A Preferred
Shares, 46,106 EBITDA Warrants and 39,012 NASDAQ Warrants upon payment of
the aggregate purchase price therefor in the amount of $2,606,001.50 (the
"SUBSEQUENT INVESTMENT"), in each case as set forth on SCHEDULE 2. Such
4,398,658 shares of Series A Preferred Stock issued in connection with the
Initial Investment and
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the Subsequent Investment represent, in the aggregate, 21.3% (the "SERIES
A PERCENTAGE") of the voting stock of the Corporation on a fully-diluted
as-if-converted basis (i.e., 21.3% of all shares of Common Stock
outstanding immediately after the Subsequent Closing and all shares of
Common Stock underlying options, warrants (other than the Warrants),
preferred shares or other interests outstanding immediately after the
Subsequent Closing which are exercisable, convertible or exchangeable for
shares of Common Stock or securities convertible into Common Stock). In the
event that such 4,398,658 shares do not equal the Series A Percentage
immediately after the Subsequent Closing as a result of the existence of
any shares of Common Stock (or options or other interests exercisable,
convertible or exchangeable for shares of Common Stock) prior to the
Subsequent Closing which are not disclosed on SCHEDULE 5.2, the Series A
Preferred Shares issued and to be issued pursuant to this Section 3 shall
be automatically increased (pro rata to each Investor and without any
further action by the Investors) by that number of Series A Preferred
Shares that when added to the Series A Preferred Shares which would
otherwise be issued to the Investors pursuant to this Section 3 shall equal
an amount of Series A Preferred Shares which represents the Series A
Percentage immediately after the Subsequent Closing. Any such adjustment
shall be made promptly upon determination of the discrepancy with the
Series A Percentage, whether such determination is made before or after the
Initial Closing or the Subsequent Closing.
SECTION 4. CLOSING; DELIVERY.
4.1. TIME AND PLACE. The initial closing of the transactions
contemplated under this Agreement, at which the Initial Investment was made
(the "INITIAL CLOSING"), took place at the offices of Locke Liddell & Sapp
LLP, 2200 Ross Avenue, Suite 2200, Dallas Texas 75201, at 10:00 a.m. on
June 30, 2000. The subsequent closing of the transactions contemplated
under this Agreement, at which the Subsequent Investment shall be made (the
"SUBSEQUENT CLOSING" and, together with the Initial Closing, the
"CLOSINGS") shall take place at such offices of Locke Liddell & Sapp LLP at
10:00 a.m. a date mutually agreed to by the parties hereto, but in any
event not later than July 31, 2000, unless otherwise mutually agreed to by
the parties hereto.
4.2. DELIVERY. At the Closings, the Corporation delivered and
shall deliver, as the case may be, to each Investor (a) certificates
registered in its name and for the number of Series A Preferred Shares set
forth opposite such Investor's name on SCHEDULE 2 hereto and
(b) certificates registered in its name for the number of EBITDA Warrants
and NASDAQ Warrants, if any, in each case as set forth opposite such
Investor's name on SCHEDULE 2, against payment of the aggregate purchase
price, net of fees and expenses as set forth in Section 9 hereof, by wire
transfer in immediately available funds to a single account designated by
the Corporation, in each case as set forth on SCHEDULE 1. Notwithstanding
the foregoing, all EBITDA Warrants and NASDAQ Warrants issued and issuable
to those BG Media Investors receiving Warrants hereunder were and shall be
issued in global certificates in the name of BG Media on behalf of such BG
Media Investors. In the event that any such Warrants become exercisable,
the Corporation shall, at the request of any individual BG Media Related
Investor, issue an individual warrant certificate to such BG Media Related
Investor for the number of EBITDA Warrants or NASDAQ Warrants, as the case
may be, if any, set forth opposite such BG Media Related Investor's name on
SCHEDULE 2.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
The Corporation hereby represents and warrants to the Investors as follows
(with all references below to "the Corporation" being deemed to also be
references to the Subsidiaries of the Corporation, except in Sections 5.1,
5.2, 5.3, 5.4, 5.15, 5.16, 5.17 or 5.18):
5.1. ORGANIZATION. The Corporation (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada, (b) has all requisite corporate power and authority and
all material licenses, permits and authorizations necessary to own, lease
and operate its properties and to carry on its business as presently
conducted and (c) is duly qualified as a foreign corporation and in good
standing to do business in all such jurisdictions, if any, in which the
conduct of its business or its ownership, leasing or operation of property
requires such qualification, except for those jurisdictions in which
failure to so qualify would not have a Material Adverse Effect. Each
subsidiary of the Corporation (a) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (b) has all requisite corporate power and authority and all
material licenses, permits and authorizations necessary to own, lease and
operate its properties and to carry on its business as presently conducted
and (c) is duly qualified as a foreign corporation and in good standing to
do business in all such jurisdictions, if any, in which the conduct of its
business or its ownership, leasing or operation of property requires such
qualification, except for those jurisdictions in which failure to so
qualify would not reasonably be expected to have a Material Adverse Effect.
5.2. CAPITALIZATION; OWNERSHIP OF SHARES OF COMMON STOCK; RIGHTS
OF OTHERS. (a) The authorized, issued and outstanding capital stock of
the Corporation as of the date of the Initial Closing, before giving effect
to the transactions contemplated hereby (including the Initial Investment),
but after filing the Certificate of Designation, consisted of:
(i) 50,000,000 shares of preferred stock, of which
5,250,000 shares were designated Series A Preferred Stock and no shares
were issued; and
(ii) 100,000,000 shares of Common Stock, of which (x)
13,285,558 shares were duly authorized, validly issued and outstanding
(prior to taking into account the exercise of the Exercised Options), and
fully paid and nonassessable, and (y) 2,997,542 shares were duly reserved
for issuance in connection with the exercise of outstanding warrants,
options and other convertible instruments, including the Exercised Options
but excluding the convertible note issued in connection with the Encom
Acquisition.
(b) The authorized capital stock of the Corporation, immediately
upon the consummation of the transactions contemplated hereby at the
Initial Closing, and giving effect thereto, consisted of:
(i) 50,000,000 shares of Preferred Stock, of which
5,250,000 shares were designated Series A Preferred Stock, consisting of
(x) 3,578,349 shares which were duly authorized and validly issued to the
Investors at the Initial Closing and were outstanding, fully paid and
nonassessable and (y) 438,589 shares which were duly reserved for issuance
in connection with the exercise of the Warrants; and
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(ii) 100,000,000 shares of Common Stock, of which (w)
14,785,558 were duly authorized and validly issued and were outstanding
(after taking into account the exercise of the Exercised Options), fully
paid and nonassessable, (x) 4,904,309 shares were duly reserved for
issuance in connection with the conversion of the Series A Preferred
Shares, (y) 615,384 shares were duly reserved for issuance in connection
with the exercise of the Warrants, and (z) 1,407,542 shares were duly
reserved for issuance in connection with the exercise of outstanding
warrants, options and convertible instruments (after taking into account
the exercise of the Exercised Options and the issuance of the convertible
note in connection with the Encom Acquisition) other than Series A
Preferred Stock and the Warrants.
(c) The authorized capital stock of the Corporation, immediately
upon the consummation of the transactions contemplated hereby at the
Subsequent Closing, and giving effect thereto, shall consist of:
(i) 50,000,000 shares of Preferred Stock, of which
5,250,000 shares have been designated Series A Preferred Stock, consisting
of (x) 4,398,658 shares which shall have been duly authorized and validly
issued to the Investors and shall be outstanding, fully paid upon receipt
of the purchase price pursuant to Section 4 hereof and nonassessable and
(y) 523,707 shares which shall have been duly reserved for issuance in
connection with the exercise of the Warrants; and
(ii) 100,000,000 shares of Common Stock, of which (w)
14,785,558 shares shall have been duly authorized and validly issued and
will be outstanding, fully paid and nonassessable, (x) 4,398,658 shares
shall have been duly reserved for issuance in connection with the
conversion of the Series A Preferred Shares, (y) 523,707 shares shall have
been duly reserved for issuance in connection with the exercise of the
Warrants, and (z) 1,245,166 shares shall have been duly reserved for
issuance in connection with the exercise of outstanding warrants, options
and convertible instruments other than Series A Preferred Stock and the
Warrants.
Other than as set forth above, there are no other shares of capital stock
of the Corporation authorized or issued. None of the outstanding shares of
the Corporation's capital stock have been issued in violation of any
preemptive rights of stockholders and all such shares have been offered and
sold pursuant to a valid exemption from registration under the Securities
Act and otherwise in compliance with the Securities Act. SCHEDULE 5.2
attached hereto contains a list of all outstanding warrants, options,
agreements, convertible securities or other commitments (contingent or
otherwise) pursuant to which the Corporation is or may become obligated to
issue any shares of its capital stock or other securities of the
Corporation or any securities with profit participation features or any
stock appreciation rights or phantom stock plans, which names all persons
entitled to receive such shares or other securities and the shares of
capital stock or other securities required to be issued thereunder. Except
as set forth on SCHEDULE 5.2 attached hereto, (x) there are no preemptive
or similar rights to purchase or otherwise acquire shares of capital stock
of the Corporation pursuant to any provision of law, the Articles of
Incorporation or Bylaws or any agreement or instrument to which the
Corporation is a party, or otherwise, except as provided for by this
Agreement, and (y) there is no agreement, restriction or encumbrance (such
as a right of first refusal, right of first offer, proxy, voting agreement,
etc.) with respect to the sale or voting of any shares of capital stock of
the Corporation (whether outstanding or
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issuable upon conversion or exercise of outstanding securities) to which
the Corporation is a party, or, to the Corporation's knowledge, to which
any other Person is a party except as provided for by this Agreement or the
Registration Rights Agreement. Except as provided for by this Agreement
and the Registration Rights Agreement, no Person has any right to cause the
Corporation to effect the registration under the Securities Act of any
shares of Common Stock or any other securities (including without
limitation, debt securities) of the Corporation.
(d) Except pursuant to this Agreement, the Registration Rights
Agreement or as set forth on SCHEDULE 5.2 hereto, neither the Corporation,
nor, to the knowledge of the Corporation, any stockholder of the
Corporation nor any of his or her affiliates is a party to, or bound by,
any arrangement, agreement, instrument or order (i) relating to the
transfer of any capital stock or equity securities of the Corporation, (ii)
relating to the dividend or voting rights of any capital stock or equity
securities of the Corporation or (iii) relating to rights to registration
under the Securities Act of any capital stock or equity securities of the
Corporation.
(e) No stockholder of the Corporation enjoys rights with respect
to his or its securities of the Corporation in the nature of rights of
first refusal, pre-emptive rights, tag-along rights, drag-along rights,
rights to elect directors or other rights customarily contained in a
stockholders agreement that are more favorable than those provided to the
Investors hereunder, other than rights of transferability enjoyed by
holders of non-restricted securities.
5.3. EQUITY INVESTMENTS. Except as set forth on SCHEDULE 5.3
hereto, the Corporation has never had, nor does it presently have, any
Subsidiaries, nor has it owned, nor does it presently own or have any
obligation or right to acquire, any capital stock or other proprietary
interest or other voting control, directly or indirectly, in any
corporation, association, trust, partnership, limited liability company,
joint venture or other entity. The Subsidiaries are incorporated in the
jurisdictions set forth on SCHEDULE 5.3 and are wholly-owned by the
Corporation. Except as set forth on SCHEDULE 5.3, there are no outstanding
warrants, options, agreements, convertible securities, preemptive rights or
other commitments pursuant to which any shares or other securities of such
Subsidiaries may be issued. All of the outstanding shares of capital stock
of each subsidiary are validly issued, fully paid and nonassessable, and,
except as set forth on SCHEDULE 5.3, all such shares are directly or
indirectly owned by the Corporation free and clear of any Lien and not
subject to any option or right to purchase any such shares.
5.4. FINANCIAL INFORMATION AND SEC REPORTS. The Corporation has
timely filed all forms, reports and documents with the Commission required
to be filed by it under the Exchange Act through the date hereof (all of
the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other
than exhibits) incorporated by reference therein, being referred to herein
collectively as the "SEC REPORTS"). The Corporation has delivered to the
Investors true and complete copies of the SEC Reports, including the
exhibits and incorporated documents. Such SEC Reports, at the time filed,
complied in all material respects with the requirements of the Exchange Act
and the rules and regulations of the Commission thereunder applicable to
such SEC Reports. None of the SEC Reports, including without limitation,
any financial statements or schedules included therein (the "FINANCIAL
STATEMENTS", contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading.
There has been no Material Adverse Effect since the date of the
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Corporation's Report on Form 10-KSB for the fiscal year ended December 31,
1999, which has not been disclosed in the Corporation's SEC Reports or to
the Investors in writing and, to the Corporation's knowledge, no fact or
condition exists which might reasonably be expected to result in a Material
Adverse Effect in the future. The audited and unaudited consolidated
balance sheets of the Corporation and its Subsidiaries contained in the SEC
Reports, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the periods then ended,
including the footnotes thereto, except as indicated therein, (i) complied
in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto,
(ii) have been prepared in accordance with GAAP consistently applied
throughout the periods indicated, except that the unaudited financial
statements do not contain notes and may be subject to normal audit
adjustments and normal annual adjustments. Such financial statements are
complete and correct in all material respects and fairly present the
financial condition of the Corporation and its Subsidiaries at the dates
indicated and the consolidated results of their operations and cash flows
for the periods then ended and, except as indicated therein, reflect all
claims against and all Indebtedness and liabilities of the Corporation and
its Subsidiaries, fixed or contingent.
5.5. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
the face (i.e., not in the notes) of the Financial Statements, (a) the
Corporation has no material liability of any nature (matured or unmatured,
fixed or contingent) and (b) all liability reserves established by the
Corporation are consistent with GAAP. There are no loss contingencies (as
such term is used in Statement of Financial Accounting Standards No. 5
issued by the Financial Accounting Standards Board in March 1975) that have
not been provided for consistent with GAAP on the December 31, 1999 balance
sheet ("AUDITED BALANCE SHEET") contained in the Financial Statements.
5.6. ABSENCE OF CHANGES. Since December 31, 1999, there have
been no material changes in the Corporation's accounting practice,
procedures or policies. Except as and to the extent set forth on SCHEDULE
5.6 or as contemplated hereby, since December 31, 1999, there has not been
(a) any Material Adverse Effect or any change or occurrence which could
reasonably be expected to have a Material Adverse Effect, (b) any borrowing
or agreement to borrow any funds or any material liability or obligation of
any nature whatsoever (contingent or otherwise) incurred by the
Corporation, other than current liabilities or obligations incurred in the
ordinary course of business, (c) any asset or property of the Corporation
made subject to a Lien, (d) any waiver of any material right of the
Corporation, or the cancellation of any material debt or claim held by the
Corporation, (e) any payment of dividends on, or other distributions with
respect to, or any direct or indirect redemption or acquisition of, any
shares of the capital stock (including, without limitation, any warrants,
options or other rights to acquire its capital stock or other equity
securities) of the Corporation, or any agreement or commitment therefor,
(f) any issuance of any stocks, bonds or other securities of the
Corporation or options, warrants or rights or agreements or commitments to
purchase or issue such securities or grant such options, warrants or
rights, (g) any mortgage, pledge, sale, assignment or transfer of any
tangible or intangible assets of the Corporation, except with respect to
tangible assets in the ordinary course of business, (h) any loan or advance
by the Corporation to, or guarantee for the benefit of, any Persons in
excess of $25,000 in the aggregate, or any agreement or commitment therefor
or any other transaction entered into or payment made by the Corporation
with or to an officer, director, employee, stockholder (or any of their
affiliates or relatives) or other affiliate of the Corporation,
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whether directly or indirectly, (i) any damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting the
assets, property or business of the Corporation, (j) any change in any
assumptions underlying or methods of calculating, any bad debt,
contingency, tax r other reserves or any change in the accounting methods
or practices followed by the Corporation, (k) any material change in the
manner or timing of collecting accounts receivable or satisfying accounts
payable, (l) any writing down of the value of any assets except in
accordance with the Corporation's historical depreciation policy as
reflected in the Financial Statements, consistently applied in accordance
with past practice, (m) any acquisition of any material assets, securities
or any business of any Person, (n) any entry by the Corporation into a
transaction outside of the ordinary course of business of the Corporation,
(o) any material adverse change or threat of any material adverse change in
its relations with, or any loss or threat of loss of, any of its important
suppliers, clients, distributors, brokers, employees, customers or
subscribers, (p) any termination, cancellation or breach of any Contract
(as defined in Section 5.18 hereof), whether by the Corporation or any
other party thereto (other than a breach which could not reasonably be
expected to materially impact the Corporation's rights or obligations under
such Contract), (q) any grant of any material discounts or rebates or any
lowering or reduction of the prices of any of its services, (r) any
discharge or satisfaction of any Lien or payment of any obligation or
liability, other than current liabilities paid in the ordinary course of
business; (s) any sale, assignment or transfer of any of its tangible
assets, except in the ordinary course of business, or any cancellation of
any debts or claims; (t) any sale, assignment or transfer of any patents or
patent applications, trademarks, service marks, trade names, corporate
names, copyrights or copyright registrations, trade secrets or other
intangible assets, or any disclosure of any proprietary confidential
information to any Person other than disclosure subject to customary non-
disclosure agreements; (u) any Investment in or any steps taken to
incorporate any subsidiary; or (v) any commitment (contingent or otherwise)
to do any of the foregoing.
5.7. TAX MATTERS. The Corporation has filed all foreign,
federal, state, county and local reports and returns or extensions with
respect to Taxes required to be filed with the appropriate governmental
agencies in all jurisdictions in which such reports and returns are
required to be filed and all such reports and returns are true, correct and
complete in all material respects as filed. All Taxes required to have
been paid or accrued by the Corporation for any tax period ended on or
before December 31, 1999 have been fully paid or are adequately provided
for on the Audited Balance Sheet as of December 31, 1999. Since December
31, 1999, the Corporation has not incurred any liability for Taxes other
than as a result of the operation of its business in the ordinary course,
consistent with past practice. To the Corporation's knowledge, no issues
have been raised which are currently pending by the Internal Revenue
Service or any other taxing authority concerning the Corporation's
liability for Taxes, or the liability of any person whose liability for
Taxes is determined by reference to the taxable income of the Corporation,
and no waivers of statutes of limitations have been given or requested with
respect to the Corporation or any such person. There is no tax lien of any
kind outstanding against the assets, property, or business of the
Corporation. All deficiencies asserted or assessments made by the Internal
Revenue Service or by any other taxing authorities with respect to Taxes
with respect to the Corporation have been fully paid or are adequately
provided for on the Audited Balance Sheet as of December 31, 1999 and no
proposed (but unassessed) additional Taxes have been asserted and the
Corporation does not know of any set of circumstances which exists that
could give rise to any claim for Taxes with respect to any period ending on
or before the Closing Date. Since January 1, 1997, there have been no
audits of the Corporation conducted by the
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Internal Revenue Service. The Corporation: (i) has not elected to be
treated as a collapsible corporation pursuant to Section 341(f) of the
Code; and (ii) has not made any other elections pursuant to the Code (other
than elections that relate solely to matters of accounting, depreciation,
or amortization) that would have a Material Adverse Effect. The
Corporation has not made any material payments, is not obligated to make
any material payments and is not a party to any agreement that under
certain circumstances could obligate it to make any material payments that
will not be deductible under Section 280G of the Code. The Corporation is
not a party to any tax allocation or sharing agreement. The Corporation
(i) has not been a member of an affiliated group filing a consolidated
federal income tax return (other than a group the common parent of which
was the Corporation), and (ii) does not have any liability for the Taxes of
any entity (other than the Corporation) under Treasury Regulation 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee
or successor, by contract, or otherwise.
5.8. PROPERTY.
(a) The Corporation does not own any real property. The
Corporation has (and will continue to have immediately after the Subsequent
Closing) (i) good, valid and indefeasible: (A) title to the leasehold
estates conveyed under the leases (the "LEASES") of real property described
in the SEC Reports (the "LEASED REAL PROPERTY") and (B) leasehold title to
the Leased Real Property, and (ii) good and valid title to the other
material assets and properties the Corporation purports to own, tangible
and intangible, in each case free and clear of any Liens except as listed
on SCHEDULE 5.8.
(b) All of the material assets, tangible and intangible, used or
necessary to be used in the operation of the business of the Corporation
are owned, licensed or leased by the Corporation and, as of the Initial
Closing and the Subsequent Closing, will continue to be owned, licensed or
leased by the Corporation. All of the material tangible assets used or
necessary to be used in the operation of the business of the Corporation as
of the date hereof are and as of the Subsequent Closing, will be in good
condition and repair, have been well maintained and comply with all
applicable laws, ordinances and regulations.
(c) The Corporation is in actual, exclusive possession of all
the Leased Real Property. The basic rent and all additional rent payable
under the Leases have been paid to date and not more than one month in advance.
(d) All Leases to which the Corporation is a party are in full
force and effect, and the Corporation is not in default under any Lease,
nor, to the knowledge of the Corporation, is any other party thereto in
default thereunder. No event has occurred which with notice or lapse of
time or both could cause default under any of the Leases.
5.9. INTELLECTUAL PROPERTY RIGHTS. (a) Attached hereto as
SCHEDULE 5.9(a) is a complete and correct list of the Intellectual Property
used or held for use by the Corporation and/or any of its Subsidiaries in
the conduct of its business setting forth as to each, as applicable: (i)
the owner of each such item, (ii) the jurisdictions in which the item is
issued or registered, or in which any application for issuance or
registration is filed, (iii) the respective issuance, registration or
application number of each such item; and (iv) the date of application and
issuance or registration of each such item. The Corporation and/or the
applicable Subsidiaries of
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the Corporation, as applicable, has adequate and sufficient rights, whether
registered or unregistered, to use all Intellectual Property as currently
used in its business and as proposed to be used in its business, free and
clear of any Lien or competing rights or interests of others which would
preclude or otherwise impair the use by the Corporation and/or applicable
Subsidiary(ies).
(b) The Corporation or the applicable Subsidiary of the
Corporation, as applicable, own(s) or is licensed or otherwise has the
exclusive right to use, and has the right to bring actions for the
infringement, dilution, misappropriation, or other violation of all
patents, industrial design rights, trademarks, service marks, trade names,
trade dress, copyrights, mask works, inventions, technology, know-how,
designs, formulae, trade secrets, confidential and proprietary information,
computer software programs (other than standard, commercially available
programs), domain names, and other Intellectual Property necessary for the
operation of business of the Corporation and any applicable Subsidiary of
the Corporation as it is currently conducted or currently proposed to be
conducted. To the extent that any works of authorship, materials,
products, technology or software have been developed or created
independently or jointly by any person other than the Corporation or any
applicable Subsidiary of Corporation for which the Corporation or any
applicable Subsidiary of Corporation has, directly or indirectly, paid, the
Corporation or the applicable Subsidiary has a written agreement with such
person with respect thereto, and the Corporation or the applicable
Subsidiary of Corporation thereby has obtained ownership of, and is the
exclusive owner of, all Intellectual Property therein or thereto by
operation of law or by valid assignment. In each case in which either the
Corporation or any applicable Subsidiary of Corporation has acquired any
Intellectual Property from any person, the Corporation or the applicable
Subsidiary has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Intellectual Property (including
the right to seek past and future damages with respect thereto) to the
Corporation or the applicable Subsidiary and, to the maximum extent
provided for by, and in accordance with, any applicable laws and
regulations, the Corporation or the applicable Subsidiary has recorded each
such assignment with the relevant governmental authorities, including the
U.S. Patent and Trademark Office, the U.S. Copyright Office, or their
respective equivalents in any relevant foreign jurisdiction.
(c) SCHEDULE 5.9(c) contains a complete and accurate list of all
material licenses, sublicenses, consents and other agreements (whether
written or otherwise) (i) pertaining to any patents, industrial design
rights, trademarks, service marks, trade names, trade dress, copyrights,
mask works, trade secrets, computer software programs (other than standard,
commercially available programs), or other Intellectual Property used by
the Corporation or any Subsidiary of the Corporation in the conduct of its
business, and (ii) by which the Corporation or the applicable Subsidiary
licenses or otherwise authorizes a third party to use such Intellectual
Property. None of the Corporation, any Subsidiary of the Corporation or,
to the knowledge of the Corporation, any other party is in breach of or
default under any such license, sublicense, consent or other agreement and
each such license, sublicense, consent or other agreement is now and
immediately following the Closing shall be valid and in full force and
effect. Except as explicitly indicated in SCHEDULE 5.9(c), no person who
has licensed any Intellectual Property to the Corporation or any Subsidiary
of the Corporation has ownership rights or license rights to improvements
or modifications made by the Corporation or any Subsidiary of the
Corporation in or with respect to such Intellectual Property or any works
of authorship, materials, products, technology or software embodying such
Intellectual Property. Except as explicitly indicated in
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SCHEDULE 5.9(c), there are no contracts, licenses or agreements between the
Corporation or any Subsidiary of the Corporation and any other person with
respect to Intellectual Property of the Corporation or any Subsidiary of
the Corporation under which there is any dispute known to the Corporation
or any of its Subsidiaries regarding the scope of such agreement, or
performance under such agreement including with respect to any payments to
be made or received by the Corporation or any Subsidiary of the Corporation
thereunder.
(d) All of the patents, trademark and service mark
registrations, and copyright registrations listed on SCHEDULE 5.9(a) are
valid and in full force, are held of record in the name of the Corporation,
and are not the subject of any cancellation, reexamination opposition,
extension of time to oppose, interference, rejection, refusal to register
or any other proceeding challenging their extent or validity, and all
necessary registration, maintenance and renewal fees in connection with
such patents and registrations have been paid and all necessary documents
and certificates in connection with such patents and registrations have
been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may
be, for the purposes of maintaining such patents and registrations. With
respect to the Intellectual Property of the Corporation and its
Subsidiaries, the Corporation or the applicable Subsidiary of the
Corporation is the assignee in all patent applications, and the Corporation
or the applicable Subsidiary is the applicant of record for all
applications for trademark, service mark, and copyright registration.
There are no actions that must otherwise be taken by the Corporation or any
of its Subsidiaries within sixty (60) days of the Closing Date, including
the payment of any registration, maintenance or renewal fees or the filing
of any documents, applications or certificates for the purposes of
maintaining, perfecting or preserving or renewing any rights in any
Intellectual Property owned or used by the Corporation or any Subsidiary of
the Corporation. No patents are held in the names of individual inventors.
No order, holding, decision or judgment has been rendered by any
governmental authority, and no agreement, consent or stipulation exists,
which would limit the Corporation's or any of the Subsidiaries' use of any
of its Intellectual Property rights or any advertising or promotional claim
or campaign.
(e) The business operations of the Corporation and any
Subsidiary of the Corporation do not infringe, dilute, misappropriate or
otherwise violate the patents, industrial design rights, trademarks,
service marks, trade names, trade dress, copyrights, mask works, trade
secrets or other Intellectual Property rights of any third party, or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and, except as set forth on SCHEDULE 5.9(e), to the knowledge
of the Corporation and each Subsidiary of the Corporation, no claim has
been made, notice given, or dispute arisen to that effect. Neither the
Corporation nor any of its Subsidiaries have any pending claims that a
third party has infringed, diluted, misappropriated or otherwise violated
any Intellectual Property owned or used by the Corporation or any or the
Corporation's Subsidiaries, and neither the Corporation nor any of its
Subsidiaries are aware of any basis for such a claim. The Corporation has
not given any indemnification to any third party against infringement of
such Intellectual Property rights. Except as explicitly indicated in
SCHEDULE 5.9(e), neither the Corporation nor any of its Subsidiaries has
agreed to, or assumed, any obligation or duty to indemnify, reimburse, hold
harmless, guaranty or otherwise assume or incur any obligation or liability
or provide a right of rescission to any third party with respect to the
infringement, dilution, misappropriation or other violation of the
Intellectual Property of that or any other third party. Except as
explicitly indicated in SCHEDULE 5.9(e), no Intellectual
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Property owned or used by the Corporation or any of its Subsidiaries is
subject to any outstanding decree, order, judgment, settlement agreement or
stipulation that restricts in any manner the use, transfer or licensing
thereof by the Corporation or any of its Subsidiaries.
(f) The Corporation and each of its Subsidiaries have taken all
reasonable steps that are required to protect the rights of the Corporation
and its Subsidiaries in all material trade secrets, know-how or other
confidential or proprietary information (including, without limitation,
source code) of the Corporation and any Subsidiary or provided by any other
person to the Corporation or any of its Subsidiaries. To the knowledge of
the Corporation and its Subsidiaries, none of the material trade secrets,
know-how or other confidential or proprietary information of the
Corporation or any of its Subsidiaries has been disclosed to any person
unless such disclosure was necessary, and was made pursuant to an
appropriate confidentiality agreement.
(g) The Corporation and each applicable Subsidiary of the
Corporation has sole and exclusive ownership free and clear of any liens,
encumbrances and other claims of all customer lists, customer contact
information, customer correspondence and customer licensing and purchasing
histories relating to its current and former customers (the "Customer
Information"). No person other than the Corporation or the applicable
Subsidiary of the Corporation possesses any claims or rights with respect
to use of the Customer Information.
5.10. LITIGATION. Except as set forth on SCHEDULE 5.10 hereof,
there is no material action, suit, proceeding, claim, arbitration or
investigation ("ACTION") pending against (or, to the knowledge of the
Corporation, currently threatened against or affecting) the Corporation,
its activities, properties or assets or, to the knowledge of the
Corporation, against any Designated Person in connection with such
Designated Person's relationship with, or actions taken on behalf of, the
Corporation that could reasonably be expected to have a Material Adverse
Effect. To the best of the Corporation's knowledge, there is no factual or
legal basis for any such Action that might reasonably be expected to
result, individually or in the aggregate, in a Material Adverse Effect.
The Corporation is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government
agency or instrumentality and there is no material Action by the
Corporation currently pending or which the Corporation intends to initiate.
5.11. NO DEFAULTS. The Corporation is not in default (a) under
its Articles of Incorporation or Bylaws, or under any note, indenture,
mortgage, or any material lease, purchase or sales order, or any other
material contract, agreement or instrument to which it is a party or by
which it or any of its property is bound or affected or (b) with respect to
any order, writ, injunction, judgment or decree of any court or any
federal, state, municipal or other domestic or foreign governmental
department, commission, board, bureau, agency or instrumentality. To the
knowledge of the Corporation, there exists no condition, event or act which
constitutes, or which after notice, lapse of time or both, would
constitute, a default under any of the foregoing.
5.12. LABOR AGREEMENTS AND ACTIONS. The Corporation is not
bound by or subject to any contract, commitment or arrangement with any
labor union, and to the knowledge of the Corporation, no labor union has
requested, sought or attempted to represent any employees, representatives
or agents of the Corporation. There is no strike or other labor dispute
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involving the Corporation pending nor, to the knowledge of the Corporation,
threatened, nor is the Corporation aware of any labor organization activity
involving its employees. The Corporation is not aware that any officer or
key employee intends to terminate his or her employment with the
Corporation nor does the Corporation have any present intention to
terminate the employment of any of its officers or key employees.
5.13. COMPLIANCE. The Corporation (a) has complied in all
material respects with all federal, state, local and foreign laws,
ordinances, rules, regulations and orders applicable to its business or the
ownership of its assets (including, without limitation, those relating to
the use, disposal or release of Hazardous Substances or relating to the
protection or restoration of the environment or exposure to such substances
("ENVIRONMENTAL LAWS")), and the Corporation has not received written
notice of any claimed default with respect to such laws, ordinances, rules,
regulations and orders; and (b) has obtained all federal, state, local and
foreign governmental licenses and permits necessary or required to enable
it to carry on its business as now conducted, except where the failure to
obtain such license or permit would not reasonably be expected to have a
Material Adverse Effect. Such licenses and permits are in full force and
effect, no violations have been recorded in respect of any such licenses or
permits, and no proceeding is pending or, to the knowledge of the
Corporation, threatened to revoke or limit any thereof. None of the
aforesaid licenses and permits shall be affected in any material adverse
respect by this Agreement.
5.14. INSURANCE. The Corporation maintains, with financially
sound and reputable insurance companies, insurance in at least such amounts
and against such risks usually insured against by Persons operating similar
businesses and operating similar properties and such that any uninsured
loss would not have a Material Adverse Effect. All insurance coverages of
the Corporation are in full force and effect and there are no past due
premiums in respect of any such insurance.
5.15. AUTHORIZATION; NO BREACH. The Corporation has full
corporate power and authority to execute and deliver this Agreement, the
Registration Rights Agreement and each other document or instrument
contemplated hereby and thereby, to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by the Corporation of
this Agreement, the Registration Rights Agreement and each other document
or instrument contemplated hereby and thereby, and the filing of the
Certificate of Designation and the Amendment have been duly authorized by
all requisite corporate action by the Corporation. This Agreement has
been, and the Registration Rights Agreement and each other document or
instrument to be executed by the Corporation in connection herewith or
therewith will be, duly executed and delivered by the Corporation and
constitutes, or will constitute, a legal, valid and binding obligation of
the Corporation, enforceable in accordance with their terms. The execution
and delivery of this Agreement, the Registration Rights Agreement and each
other document or instrument contemplated hereby and thereby, the filing of
the Certificate of Designation and the Amendment, the consummation of the
transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof by the Corporation, and the issuance, sale
and delivery of the Series A Preferred Shares and the Reserved Shares by
the Corporation, will not (a) violate any provision of law, statute, rule
or regulation, or any ruling, writ, injunction, order, judgment or decree
of, require any authorization, consent, approval, exemption or other action
by or notice of declaration to, or
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filing with, any court, administrative agency or other governmental body
applicable to the Corporation or any subsidiary of the Corporation, or (b)
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, the Articles of Incorporation of the Corporation and
the Amended Certificate of Designation, or Bylaws, or under any note,
indenture, mortgage, lease, purchase or sales order or other contract,
agreement or instrument to which the Corporation or any subsidiary of the
Corporation is a party or by which it or any of its property is bound or
affected, or (c) result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the
Corporation or any subsidiary of the Corporation. None of the Subsidiaries
are subject to any restrictions upon making loans or advances or paying
dividends to, transferring property to, or repaying any Indebtedness owed
to, the Corporation or another subsidiary.
5.16. AUTHORIZATION OF SERIES A PREFERRED SHARES AND RESERVED
SHARES. The Corporation has full corporate power and authority to
designate, issue, sell and deliver the Series A Preferred Shares, to issue,
sell and deliver the Warrants, to reserve the Reserved Shares for issuance
and to issue and deliver the Reserved Shares upon conversion of the Series
A Preferred Shares or exercise of the Warrants. The designation, issuance,
sale and delivery of the Series A Preferred Shares, the issuance, sale and
delivery of the Warrants and the reservation, issuance, sale and delivery
of the Reserved Shares, have been duly authorized by all requisite
corporate action of the Corporation, and when issued, sold and delivered in
accordance with this Agreement, the Series A Preferred Shares, the Warrants
and Reserved Shares will be duly and validly issued and outstanding, fully
paid and nonassessable, and not subject to preemptive or any other similar
rights of the stockholders of the Corporation or others. The designations,
powers, preferences and rights and the qualifications, limitations and
restrictions of the Series A Preferred Shares are as stated in the
Certificate of Designation prior to July 26, 2000 and in the Amended
Certificate of Designation on and after July 26, 2000.
5.17. OFFERING EXEMPTION. The Corporation has not violated any
applicable federal or state securities laws in connection with the offer,
sale or issuance of any of its capital stock, and the offering and sale of
the Series A Preferred Shares and the Warrants and the sale of the Reserved
Shares upon conversion of the Series A Preferred Shares or exercise of the
Warrants, as the case may be, are each exempt from registration under the
Securities Act. The Corporation has satisfied all requirements of
Regulation D under the Securities Act in connection with the offer and sale
of the Series A Preferred Shares and the Warrants, including without
limitation furnishing to all Non-Accredited Investors the financial and
non-financial information required to be furnished by the Corporation
pursuant to Rule 502(b)(2)(ii) of the Securities Act. The aforesaid
offering and sale are also exempt from registration under applicable state
securities and "blue sky" laws or will be exempt upon the timely filing of
notices with the appropriate states, which notices have been or will be
timely filed by the Corporation.
5.18. NO GOVERNMENTAL CONSENT OR APPROVAL REQUIRED. Except for
the filing of any notice subsequent to the Initial Closing or the
Subsequent Closing, as the case may be, that may be required under
applicable federal and/or state securities laws (which, if required, shall
be filed on a timely basis as may be so required), no consent, approval or
authorization of, or declaration to, or filing with, any Person
(governmental or private) is required for the valid authorization,
execution, delivery and performance by the Corporation of this Agreement or the
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Registration Rights Agreement or for the valid authorization, designation,
issuance, sale and delivery of the Series A Preferred Shares, the valid
authorization, issuance, sale and delivery of the Warrants or for the valid
authorization, reservation, issuance, sale and delivery of the Reserved
Shares.
5.19. AGREEMENTS. Each of the contracts and agreements included
in Exhibit 10 of the Corporation's Report on Form 10-KSB for the year ended
December 31, 1999 or in Exhibit 10 of the Corporation's Registration
Statement on Form 10-SB/A4 or listed on SCHEDULE 5.19 ("CONTRACTS") is in
full force and effect and constitutes the legal, valid, binding and
enforceable obligation of the Corporation, and, to the knowledge of the
Corporation, the other parties thereto in accordance with its terms. The
Contracts represent all material contracts, commitments, obligations and
agreements, oral or written, to which the Corporation is a party. The
Corporation is not in default under and has not breached any of the
Contracts or any other contracts of the Corporation and no act or omission
has occurred which, with notice or lapse of time or both, would constitute
a breach or default under any term or provision of any such Contract (other
than breaches and technical defaults that could reasonably be expected not
to adversely impact the Corporation's rights and obligations under such
Contract). To the knowledge of the Corporation, no other party is in
breach or default under any of such Contracts and no act or omission has
occurred by any other party thereto which, with notice or lapse of time or
both, would constitute such a breach or default under any term or provision
thereof. The Corporation does not have any present expectation or any
intention of not fully performing all such obligations, or any knowledge of
any anticipated breach by the other parties to any Contract. The Contracts
will remain in full force and effect (without any breach or default or
modification thereunder, or event which could give rise to a breach,
default or modification) for the benefit of the Corporation following the
Closing.
5.20. OFFERING OF THE SERIES A PREFERRED SHARES. Neither the
Corporation, nor any Person authorized or employed by the Corporation as
agent, broker, dealer or otherwise in connection with the offering or sale
of the Series A Preferred Shares or the Warrants or any security of the
Corporation similar to the Series A Preferred Shares or the Warrants has
offered the Series A Preferred Shares or the Warrants or any such similar
security for sale to, or solicited any offer to buy the Series A Preferred
Shares or the Warrants or any such similar security from, or otherwise
approached or negotiated with respect thereto with, any Person or Persons,
and neither the Corporation nor any Person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Corporation under circumstances
which might require the integration of such security with the Series A
Preferred Shares under the Securities Act), in either case so as to subject
the offering, issuance or sale of the Series A Preferred Shares or the
Warrants to the registration provisions of the Securities Act.
5.21. BROKERS. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement
binding upon the Corporation or any subsidiary. The Corporation shall pay,
and hold each Investor harmless against, any liability, loss or expense
(including, without limitation, reasonable attorneys' fees and out-of-pocket
expenses) arising in connection with any such claim.
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5.22. EMPLOYEE BENEFITS; ERISA.
(a) SCHEDULE 5.22(a) sets forth a true and complete list of each
Employee Benefit Plan covering employees of the Corporation. "EMPLOYEE
BENEFIT PLAN" means any employee pension benefit plan (as defined in
Section 3(2) of ERISA), any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) and any other employee benefit plan, program or
arrangement, including, without limitation, any bonus, stock, stock option,
stock purchase, incentive, deferred compensation, retirement, supplemental
retirement, vacation, severance and other similar fringe or employee
benefit plan, program, contract, policy, practice or arrangement (whether
written or unwritten, qualified or unqualified, funded or unfunded and
including any that have been frozen or that have, within the five-year
period concluding on June 30, 2000, been terminated), in each case that (i)
is maintained, contributed to or required to be contributed to by the
Corporation, (ii) was formerly maintained, contributed to or required to be
contributed to by the Corporation, and under which the Corporation is
reasonably expected to incur a material liability, or (iii) is maintained,
contributed to or required to be contributed to, or was formerly
maintained, contributed to or required to be contributed to, by any ERISA
Affiliate but only if the Corporation is reasonably expected to incur a
material liability with respect to such a plan. "Employee Benefit Plan"
specifically excludes any "Executive Compensation Plan" as defined in
Section 5.22(b) below.
(b) Set forth on SCHEDULE 5.22(b) is a true and complete list of
each Executive Compensation Plan. "EXECUTIVE COMPENSATION PLAN" means any
(i) employment or consulting agreement, arrangement or other understanding
that is currently in effect to which the Corporation is a party, by which
the Corporation is bound or pursuant to which the Corporation is an obligor
or a beneficiary, (ii) agreement, arrangement or other understanding that
could result in any severance payment or severance benefit payable by the
Corporation whether as a result of the Corporation's execution of, and
performance of the transactions contemplated by this Agreement or
otherwise, to any employee, former employee, director, or officer of the
Corporation or (iii) any agreement, arrangement or other understanding that
could reasonably be expected to result in a "parachute payment" as defined
in section 280G of the Code, whether as a result of the Corporation's
execution of, and performance of the transactions contemplated by this
Agreement or otherwise. "Executive Compensation Plan" specifically
excludes any "Employee Benefit Plan" as defined in Section 5.22(a) above.
(c) The Corporation has delivered to the Investors true and
complete copies of all Employee Benefit Plan and Executive Compensation
Plan documents (including all amendments and modifications thereof) or, in
the case of an unwritten Plan a written description thereof, and in either
case all material agreements related to each such plan.
(d) There are no: (i) currently pending audits or
investigations by any governmental agency involving any Employee Benefit
Plan or any Executive Compensation Plan; (ii) currently pending or, to the
knowledge of the Corporation, threatened, claims (except for individual
claims for benefits payable in the normal operation of any Employee Benefit
Plan or any Executive Compensation Plan), suits or proceedings involving
any Employee Benefit Plan or any Executive Compensation Plan, any fiduciary
thereof or service provider thereto; and (iii) to the knowledge of the
Corporation, circumstances which exist that could reasonably be expected to
give rise to any such claim, suit or proceeding.
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(e) Each Employee Benefit Plan and each Executive Compensation
Plan has been maintained in substantial compliance with its terms and with
the material requirements prescribed by all applicable law, and all
required contributions or payments relating to any such plan for any period
up to and including the Closing date shall have been paid, or accrued and
booked, on or before the Closing date.
5.23. ENVIRONMENTAL MATTERS. No Hazardous Substances have been
used, handled, generated, processed, treated, stored, transported to or
from, released, discharged or disposed of by the Corporation or to the
knowledge of the Corporation any third party on, about or beneath any real
property owned or leased by the Corporation. The Corporation does not
contract or arrange for the removal of Hazardous Substances, including
asbestos or lead paint, or for the remediations of contamination on behalf
of any of its clients. The Corporation does not engage in any activities
or provide any services to its clients which have resulted in or are
reasonably likely to result in any claims against the Corporation alleging
that the Corporation has arranged for the disposal or release of any
Hazardous Substances, and no such claims are, to the best of the
Corporation's knowledge, currently threatened. If any of the foregoing
claims are asserted or threatened, the Corporation has insurance which
would cover such claims.
5.24. DISCLOSURE. Neither this Agreement nor any other written
document, certificate, instrument or statement or other item furnished or
made to the Investors by or on behalf of the Corporation in connection with
the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
each statement contained herein or therein not misleading in light of the
circumstances under which they were made.
5.25. REGISTRATION REQUIREMENTS. Assuming the accuracy of the
Investors' representations contained herein and the Investor's compliance
with their agreements hereunder, the offer and sale of the Series A
Preferred Shares and the Warrants will be exempt from the registration
requirements of the Securities Act.
5.26. NO SOLICITATION. No form of general solicitation or
general advertising was used by the Corporation or, to the best of its
knowledge, any other Person acting on behalf of the Corporation, in respect
of the Series A Preferred Shares and the Warrants or in connection with the
offer and sale of the Series A Preferred Shares and the Warrants. Neither
the Corporation nor, to its knowledge, any Person acting on behalf of the
Corporation has, either directly or indirectly, sold or offered for sale to
any Person any of the Series A Preferred Shares or the Warrants or, within
the six months prior to the date of the Initial Closing or the Subsequent
Closing, any other similar security of the Corporation, except as
contemplated by this Agreement, and the Corporation represents that neither
the Corporation nor any Person authorized to act on its behalf will sell or
offer for sale any such security to, or solicit any offers to buy any such
security from, or otherwise approach or negotiate in respect thereof with,
any Person so as thereby to cause the issuance or sale of any of the Series
A Preferred Shares or the Warrants to be in violation of any of the
provisions of Section 5 of the Securities Act.
5.27. INTEGRATION. The Corporation has not sold, offered to
sell, solicited offers to buy or otherwise negotiated in respect of any
"security" (as defined in the Securities Act) that is or could reasonably
be expected to be integrated with the sale of the Series A Preferred Shares
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or the Warrants in a manner that would require the registration of the
Series A Preferred Shares or the Warrants under the Securities Act.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
INVESTORS.
6.1. GENERAL. Each of the Investors hereby represents and
warrants to the Corporation that:
(a) he or it has full corporate or partnership power and
authority (or, in the case of an individual Investor, legal capacity) to
execute and deliver this Agreement, the Registration Rights Agreement and
each other document or instrument contemplated hereby and thereby, to
perform his or its obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby;
(b) the execution, delivery and performance of this Agreement,
the Registration Rights Agreement and each other document or instrument
contemplated hereby and thereby have been duly authorized by all requisite
action of such Investor;
(c) this Agreement has been, and the Registration Rights
Agreement and each other document or instrument to be executed by such
Investor in connection herewith or therewith will be, duly executed and
delivered by such Investor, and constitutes, or will constitute, a legal,
valid and binding obligation of such Investor, enforceable in accordance
with their terms;
(d) he or it is acquiring the Series A Preferred Shares and the
Warrants and, in the event that he or it should acquire Reserved Shares
upon conversion of the Series A Preferred Shares or upon exercise of the
Warrants, he or it will be acquiring the Reserved Shares, for his or its
own account, for investment and not with a view to the distribution thereof
within the meaning of the Securities Act;
(e) he or it understands that the Series A Preferred Shares and
the Warrants have not been, and the Reserved Shares will not be, registered
under the Securities Act, by reason of their issuance by the Corporation in
a transaction exempt from the registration requirements of the Securities
Act; and that the Series A Preferred Shares, the Warrants and the Reserved
Shares must be held by him or it indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or is exempt
from registration;
(f) he or it or with his or its purchaser representative has
such knowledge and experience in financial and business matters that he or
it is capable of evaluating the merits and risks of his or its investment
in the Series A Preferred Shares and the Warrants;
(g) he or it has received, prior to the date of the Initial
Closing or the Subsequent Closing, as the case may be, the financial and
non-financial information required to be furnished by the Corporation
pursuant to Rule 502(b)(2)(iii) of the Securities Act;
(h) he or it has not employed any broker or finder in connection
with the transactions contemplated by this Agreement; and
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(i) he or it has had an opportunity to ask questions of the
officers of the Corporation regarding the Corporation's business,
management and financial affairs and has received all information as he or
it has deemed necessary or appropriate as a prudent and knowledgeable
investor in evaluating the purchase of the Series A Preferred Shares and
the Warrants.
6.2. ADDITIONAL REPRESENTATION BY ACCREDITED INVESTORS. In
addition to the representations and warranties contained in Section 6.1,
each of the Investors other than the Non-Accredited Investors hereby
represents and warrants to the Corporation that he or it is an accredited
investor as defined in Rule 501(a) promulgated under the Securities Act.
SECTION 7. CONDITIONS TO INITIAL CLOSING.
7.1. CONDITIONS PRECEDENT TO INITIAL INVESTORS' OBLIGATIONS.
Each Initial Investor's obligation to consummate the transactions
contemplated hereby shall be subject to the fulfillment of each of the
following conditions, any one or more of which may be waived in writing by
any Initial Investor with respect to that Initial Investor:
(a) The Corporation shall have performed in all material
respects its obligations under this Agreement required to be performed on
or prior to the Initial Closing pursuant to the terms hereof;
(b) The representations and warranties of the Corporation
contained in this Agreement that are not qualified by materiality shall be
true and correct in all material respects, and the representations and
warranties of the Corporation contained in this Agreement that are
qualified by materiality shall be true and correct in all respects, as of
the date of the Initial Closing (irrespective of any notice delivered to
the Initial Investor after the date of the Original Agreement), with the
same force and effect as though such representations and warranties had
been made as of the date of the Initial Closing;
(c) There shall not have been after the date of the Original
Agreement any Material Adverse Effect on the Corporation;
(d) The Initial Investors shall have received a certificate of
the Corporation (duly executed by the Secretary or an Assistant Secretary
of the Corporation), dated the date of the Initial Closing, certifying to
the fulfillment of the conditions set forth in clauses (a), (b) and (c)
above and (i), (j), (k),(l), (m), (n), (p), (q) and (r) below and, to the
extent of its execution and compliance with the terms and conditions of the
agreements referenced therein, (g) and (h) below;
(e) The Initial Investors shall have received a certificate of
the Corporation's organization, valid existence and good standing as a
domestic corporation in the state of its incorporation as of a date no more
than three (3) days prior to the date of the Initial Closing;
(f) The Investors shall have received from Locke Liddell & Sapp
LLP, counsel for the Corporation, an opinion dated the date of the Initial
Closing substantially in the form attached hereto as EXHIBIT F;
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(g) The Registration Rights Agreement shall have been executed
and delivered by the Corporation and such other parties named therein, and
the Corporation and such parties shall have complied with all of the terms
and conditions of the Registration Rights Agreement and such agreement
shall be in full force and effect as of the Initial Closing;
(h) The Corporation shall have received (and furnished to the
Initial Investors evidence thereof reasonably satisfactory to the Initial
Investors) all necessary approvals and consents from third parties and
governmental authorities (and such approvals and consents shall not have
expired or been withdrawn as of the date of the Initial Closing);
(i) The Corporation shall have duly adopted, executed and filed
with the Secretary of State of the State of Nevada the Certificate of
Designation, and the Corporation shall not have adopted or filed any other
document designating terms, relative rights or preferences of its preferred
stock. The Certificate of Designation shall be in full force and effect as
of the Initial Closing under the laws of Nevada and shall not have been
amended or modified;
(j) No order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been enacted, entered,
promulgated or enforced by any court, governmental authority or regulatory
body which restrains, prohibits or prevents the consummation of the
transactions contemplated hereby;
(k) Those directors, officers and 5% stockholders of the
Corporation designated by the Initial Investors shall have executed and
delivered to the Corporation a letter agreement agreeing to certain matters
set forth in Sections 8.16, 8.17, 8.18 and 8.19 hereof.
(l) The Corporation shall have delivered for simultaneous sale
to each Initial Investor the Series A Preferred Shares to be purchased by
such Initial Investor hereunder at the Initial Closing and each Initial
Investor shall have delivered therefor payment in full;
(m) The Corporation shall have made all filings under all
applicable federal and state securities laws necessary prior to Initial
Closing to consummate the issuance of the Initial Shares pursuant to this
Agreement in compliance with such laws;
(n) The Corporation shall have delivered to each Initial
Investor certified copies of the resolutions duly adopted by the
Corporation's board of directors authorizing the execution, delivery and
performance of this Agreement, the Registration Rights Agreement, the
Warrants and each of the other agreements contemplated hereby, the filing
of the Certificate of Designation, the issuance and sale of the Initial
Shares, the reservation of the Reserved Shares and the consummation of all
other transactions contemplated by this Agreement;
(o) Spencer Grimes shall have been appointed to the Board of
Directors of the Corporation;
(p) The Corporation shall have consummated the acquisition from
World Access Telecommunications Group, Inc. of its Encom Division pursuant
to the Asset Purchase Agreement dated June 30, 2000 among the Corporation,
NetVoice Encom LP and World Access Telecommunications Group, Inc. (the
"ENCOM ACQUISITION")
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(q) The Exercising Option Holders shall have exercised options
to purchase an aggregate of 1,800,000 shares of Common Stock (the
"EXERCISED OPTIONS") and entered into "lock-up" agreements in form and
substance reasonably satisfactory to the Initial Investors; and
(r) All corporate and other proceedings taken or required to be
taken by the Corporation in connection with the transactions contemplated
hereby to be consummated at or prior to the Initial Closing and all
documents incident thereto shall be satisfactory in form and substance to
each Initial Investor and its special counsel.
7.2. CONDITIONS PRECEDENT TO SUBSEQUENT INVESTORS' OBLIGATIONS.
Each Subsequent Investor's obligation to consummate the transactions
contemplated hereby shall be subject to the fulfillment of each of the
following conditions, any one or more of which may be waived in writing by
any Subsequent Investor with respect to that Subsequent Investor:
(a) The Corporation shall have performed in all material
respects its obligations under this Agreement required to be performed on
or prior to the Subsequent Closing pursuant to the terms hereof;
(b) The representations and warranties of the Corporation
contained in this Agreement that are not qualified by materiality shall be
true and correct in all material respects, and the representations and
warranties of the Corporation contained in this Agreement that are
qualified by materiality shall be true and correct in all respects, as of
the date of the Subsequent Closing (irrespective of any notice delivered to
the Subsequent Investor after the date hereof), with the same force and
effect as though such representations and warranties had been made as of
the date of the Subsequent Closing;
(c) There shall not have been after the date hereof any Material
Adverse Effect on the Corporation;
(d) The Subsequent Investors shall have received a certificate
of the Corporation (duly executed by the Secretary or an Assistant
Secretary of the Corporation), dated the date of the Subsequent Closing,
certifying to the fulfillment of the conditions set forth in clauses (a),
(b) and (c) above and (i), (j), (k),(l), (m) and (n) below and, to the
extent of its execution and compliance with the terms and conditions of the
agreements referenced therein, (g) and (h) below;
(e) The Subsequent Investors shall have received a certificate
of the Corporation's organization, valid existence and good standing as a
domestic corporation in the state of its incorporation as of a date no more
than three (3) days prior to the date of the Subsequent Closing;
(f) The Investors shall have received from Locke Liddell & Sapp
LLP, counsel for the Corporation, an opinion dated the date of the
Subsequent Closing substantially in the form attached hereto as EXHIBIT F;
(g) The Registration Rights Agreement shall have been executed
and delivered by the Corporation and such other parties named therein, and
the Corporation and such
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such parties shall have complied with all of the terms and conditions of the
Registration Rights Agreement and such agreement shall be in full force and
effect as of the Subsequent Closing;
(h) The Corporation shall have received (and furnished to the
Subsequent Investors evidence thereof reasonably satisfactory to the
Subsequent Investors) all necessary approvals and consents from third
parties and governmental authorities (and such approvals and consents shall
not have expired or been withdrawn as of the date of the Subsequent Closing);
(i) The Corporation shall have duly adopted, executed and filed
with the Secretary of State of the State of Nevada the Amendment, and the
Corporation shall not have adopted or filed any other document designating
terms, relative rights or preferences of its preferred stock. The Amended
Certificate of Designation shall be in full force and effect as of the
Subsequent Closing under the laws of Nevada and shall not have been amended
or modified;
(j) No order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been enacted, entered,
promulgated or enforced by any court, governmental authority or regulatory
body which restrains, prohibits or prevents the consummation of the
transactions contemplated hereby;
(k) The Corporation shall have delivered for simultaneous sale
to each Subsequent Investor the Series A Preferred Shares to be purchased
by such Subsequent Investor hereunder at the Subsequent Closing and each
Subsequent Investor shall have delivered therefor payment in full;
(l) The Corporation shall have made all filings under all
applicable federal and state securities laws necessary prior to Subsequent
Closing to consummate the issuance of the Subsequent Shares pursuant to
this Agreement in compliance with such laws;
(m) The Corporation shall have delivered to each Subsequent
Investor certified copies of the resolutions duly adopted by the
Corporation's board of directors authorizing the execution, delivery and
performance of this Agreement, the Registration Rights Agreement, the
Warrants and each of the other agreements contemplated hereby, the filing
of the Amendment, the issuance and sale of the Subsequent Shares, the
reservation of the Reserved Shares and the consummation of all other
transactions contemplated by this Agreement;
(n) The Regulated Investor Letter Agreement shall have been
executed and delivered by the Corporation and such other parties named
therein, and such agreement shall be in full force and effect.
(o) All corporate and other proceedings taken or required to be
taken by the Corporation in connection with the transactions contemplated
hereby to be consummated at or prior to the Subsequent Closing and all
documents incident thereto shall be satisfactory in form and substance to
each Subsequent Investor and its special counsel.
7.3. CONDITIONS PRECEDENT TO THE CORPORATION'S OBLIGATIONS. The
Corporation's obligation to consummate the transactions contemplated hereby
shall be subject to the fulfillment of each of the following additional
conditions, any one or more of which may be waived in writing by the
Corporation:
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(a) Each of the Investors shall have performed in all material
respects its obligations under this Agreement required to be performed on
or prior to the Initial Closing or the Subsequent Closing, as the case may
be, pursuant to the terms hereof;
(b) The representations and warranties of the Investors
contained in this Agreement that are not qualified by materiality shall be
true and correct in all material respects, and the representations and
warranties of the Investors contained in this Agreement that are qualified
by materiality shall be true and correct, on and as of the date of the
Initial Closing or the Subsequent Closing, as the case may be (irrespective
of any notice delivered to the Corporation after the date hereof), with the
same force and effect as though such representations and warranties had
been made on and as of the date of the Initial Closing or the Subsequent
Closing, as the case may be;
(c) No order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been enacted, entered,
promulgated or enforced by any court, governmental authority or regulatory
body which restrains, prohibits or prevents the consummation of the
transactions contemplated hereby.
SECTION 8. COVENANTS.
8.1. ACCESS TO INFORMATION. Both prior to and subsequent to the
Initial Closing and the Subsequent Closing, the Corporation shall give the
Principal Investors and their authorized representatives (including without
limitation accountants, environmental auditors and legal counsel) free and
full access, during normal business hours, and with reasonable prior
notice, to all of the books, records (and to make copies thereof and
extracts therefrom) and properties of the Corporation and its Subsidiaries
and to all officers, employees and accountants or auditors of the
Corporation for purposes of conducting their due diligence review (or
continued monitoring) of the Corporation. The Investors shall maintain the
confidentiality of any confidential and Proprietary Information so obtained
by them which is not otherwise available from other sources that are free
from similar restrictions; PROVIDED, HOWEVER, that the foregoing, shall in
no way limit or otherwise restrict the ability of the Investors or such
authorized representatives to disclose any such information concerning the
Corporation and its Subsidiaries which they may be required to disclose (a)
to their partners, board members or stockholders, to the extent required to
satisfy their fiduciary obligations to such persons, or (b) otherwise
pursuant to or as required by law.
8.2. FINANCIAL REPORTS. The Corporation covenants and agrees
that it shall furnish the Principal Investors with the following:
(a) SEC FILINGS. Promptly upon filing thereof, copies of all
registration statements, reports on Forms 10-KSB, 10-QSB and 8-K and all
other reports or other filings filed with the Commission by the
Corporation.
(b) AUDITOR'S LETTERS. Promptly following receipt by the
Corporation, each audit response letter, accountant's management letter and
other written report submitted to the Corporation by its independent public
accountants in connection with an annual or interim audit of the books of
the Corporation.
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(c) NO DEFAULT CERTIFICATE. With the reports on Forms 10-KSB
and 10-QSB referred to in Section 8.2(a), the Corporation shall deliver to
the Principal Investors a certificate executed by the Chairman, President
or Chief Financial Officer of the Corporation to the effect that no
knowledge has been obtained of any violation or default by the Corporation
or any of its Subsidiaries in the performance of its agreements or
covenants contained herein, in the Articles of Incorporation, in the
Amended Certificate of Designation, the Registration Rights Agreement or in
any other material agreement to which the Corporation or any of its
Subsidiaries is a party or of the occurrence of any condition, event or act
which, with or without notice or lapse of time, or both, would constitute
a violation or an event of default, or, if such officer shall have obtained
knowledge of any such violation, condition, event or act, he or she shall
specify in such certificate all such violations, conditions, events and
acts and the nature and status thereof.
(d) OTHER INFORMATION. Promptly, from time to time, such other
information regarding the business, prospects, financial condition,
operations, property or affairs of the Corporation as the Principal
Investors reasonably may request, and immediate notice of any projected
shortfall in the Corporation's cash flow below that necessary to meet its
operating expenses and other liabilities as they become due.
8.3. CONDUCT OF BUSINESS. Except as contemplated by this
Agreement, during the period from the date of the Original Agreement to the
date of the Initial Closing, the Corporation shall, and shall cause its
Subsidiaries to, conduct the operations of the Corporation and its
Subsidiaries in the ordinary course of business and consistent with past
practice, and shall use best efforts to preserve intact its business
organization, keep available the services of their officers and key
employees, and maintain satisfactory relationships with material customers,
suppliers, contractors, distributors, licensors, licensees and others
having business relationships with the Corporation and its Subsidiaries.
During the period from the date of the Original Agreement to the date of
the Initial Closing, the Corporation will not take any action reasonably
within its control, or omit to take any action reasonably within its
control, which would cause any of the representations and warranties in
Section 5 hereof to become untrue in any material respect.
8.4. INSURANCE. Both prior to and subsequent to the Initial
Closing and the Subsequent Closing, each of the Corporation and its
Subsidiaries shall be insured at all times to such extent and against such
risks, including fire, business interruption and other risks insured
against by extended coverage, as is customary with companies of comparable
size and financial condition in the same or similar businesses; maintain in
full force and effect product liability insurance and public liability
insurance against claims for personal injury or death or property damage
occurring upon, in, about or in connection with the use of any properties
owned, occupied or controlled by the Corporation and its Subsidiaries, in
such amount as the Corporation shall reasonably deem necessary; maintain in
full force and effect liability insurance against claims for personal
injury or death or property insurance occurring in connection with its
clients' use of any contractors selected or referred by the Corporation (or
insure that such contractors maintain adequate insurance therefor); and
maintain workers' compensation insurance and such other insurance as may be
required by law. In addition, all of the foregoing insurance maintained by
the Corporation and its Subsidiaries shall be of types and in amounts such
that the Corporation and its Subsidiaries at all times will be in
compliance in all material
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respects with all federal, state, local and foreign laws, ordinances,
regulations and orders applicable to its business that govern such insurance.
8.5. USE OF PROCEEDS. The net cash proceeds received by the
Corporation from the sale of the Series A Preferred Shares shall be used by
the Corporation for the following corporate purposes: consummating the
Encom Acquisition and related costs, working capital and general corporate
purposes. Pending such use thereof, such proceeds will be deposited in
interest bearing accounts.
8.6. RESERVE FOR RESERVED SHARES. The Corporation shall at all
times reserve and keep available (i) out of its authorized but unissued
shares of Common Stock such number of shares of Common Stock as shall be
sufficient to effect the conversion of the Series A Preferred Shares and
the exercise of the Warrants or otherwise to comply with the terms of this
Agreement and (ii) out of its authorized but unissued shares of Series A
Preferred Stock such number of shares of Series A Preferred Stock as shall
be sufficient to effect the exercise of the Warrants. All shares of Common
Stock or Series A Preferred Stock, as the case may be, which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation
shall take all such actions as may be necessary to assure that all such
shares of Common Stock or Series A Preferred Stock, as the case may be, may
be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon
which shares of Common Stock or Series A Preferred Stock, as the case may
be, may be listed (except for official notice of issuance which shall be
immediately transmitted by the Corporation upon issuance). If at any time
the number of authorized but unissued shares of Common Stock or Series A
Preferred Stock, as the case may be, shall not be sufficient to effect the
conversion of the Series A Preferred Shares or the exercise of the Warrants
or otherwise to comply with the terms of this Agreement, the Corporation
forthwith will take such corporate action as may be necessary to increase
its authorized but unissued shares of Common Stock or Series A Preferred
Stock, as the case may be, to such number of shares as shall be sufficient
for such purposes. The Corporation will obtain any authorization, consent,
approval or other action by or make any filing with any court or
administrative body that may be required under applicable state securities
laws in connection with the issuance of shares of Common Stock or Series A
Preferred Stock, as the case may be, upon conversion of the Series A
Preferred Shares or the exercise of the Warrants.
8.7. MAINTENANCE OF REPORTING STATUS; SUPPLEMENTAL INFORMATION.
So long as there are outstanding any Series A Preferred Shares, any
Warrants or any Reserved Shares, the Corporation shall timely file all
reports required to be filed with the Commission pursuant to the Exchange
Act. The Corporation shall not terminate its status as an issuer required
to file reports under the Exchange Act, even if the Exchange Act or the
rules and regulations thereunder would permit such termination. The
Corporation shall, at all times during which it is neither subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act,
provide in writing, upon the written request of an Investor or a
prospective buyer of Series A Preferred Shares or the Reserved Shares from
an Investor all information required by Rule 144A(d)(4)(i) of the General
Regulations promulgated by the Commission under the Securities Act ("RULE
144A INFORMATION"). The Corporation also shall, upon the written request
of any Principal Investor,
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cooperate with and assist the Investors or any member of the National
Association of Securities Dealers, Inc. PORTAL system in applying to
designate and thereafter maintain the eligibility of the Series A Preferred
Shares or the Reserved Shares, as the case may be, for trading through PORTAL.
8.8. RULE 144. The Corporation covenants that (i) at all times
while it is subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, the Corporation will use its best efforts to comply with
the current public information requirements of Rule 144(c)(1) under the
Securities Act, (ii) at all times while it is not subject to such reporting
requirements, the Corporation will use its best efforts to make publicly
available the information required by Rule 144(c)(2), and (iii) at all such
times as Rule 144 is available for use by the holders of the Series A
Preferred Shares and the Reserved Shares, the Corporation will furnish each
such holder upon request with all information within the possession of the
Corporation required for the preparation and filing of Form 144.
8.9. NOTICE OF EVENTS OF DEFAULT; LITIGATION. Promptly, but in
any event within ten (10) days after notice thereof is received by the
Corporation, the Corporation will deliver to each holder of Series A
Preferred Shares any notice of (i) a default by the Corporation or any of
its Subsidiaries in the observance or performance of any material contract
or agreement to which the Corporation or any of it Subsidiaries is a party,
including, but not limited to, this Agreement and the Registration
Agreement, and (ii) the commencement of any investigation, action or
proceeding at law or in equity or before any federal or state court or
governmental agency to which the Corporation or any of its Subsidiaries is
a party an adverse result of which could, either individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
business or financial condition of the Corporation and its Subsidiaries,
taken as a whole.
8.10. MAINTENANCE OF EXISTENCE; PROPERTIES AND FRANCHISES;
COMPLIANCE WITH LAW; TAXES; INSURANCE. The Corporation will, and will
cause each Subsidiary to:
(a) maintain their respective corporate existences, rights, all
material licenses, authorizations and permits necessary for the conduct of
its business and other franchises in full force and effect; PROVIDED, that
the Corporation may terminate the corporate existence of any Subsidiary, or
permit the termination or abandonment of rights or other franchises, if in
the opinion of the Corporation it is no longer in the Corporation's best
interests to maintain such existence, rights or other franchises and such
termination or abandonment will not be prejudicial in any material respect
to the holders of the Series A Preferred Shares;
(b) maintain their respective tangible assets in good repair,
working order and condition, ordinary wear and tear excepted, so far as
necessary to the proper carrying on of their respective businesses;
(c) comply with each provision of all material leases to which
any of them occupies real or personal property if the breach of such
provision would reasonably be expected to have a Material Adverse Effect;
(d) comply with all applicable laws and with all applicable
orders, rules, rulings, certificates, licenses, regulations, demands,
judgments, writs, injunctions and decrees,
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the violation of which would reasonable be expected to have a Material
Adverse Effect, PROVIDED, that such compliance shall not be necessary so
long as the applicability or validity of any such law, order, rule, ruling,
certificate, license, regulation, demand, judgment, writ, injunction or
decree shall be contested in good faith by appropriate proceedings;
(e) pay when due all taxes, fees, assessments and other
government charges imposed upon their respective properties, assets or
income (in each case before the same becomes delinquent and before
penalties accrue thereon) and all claims or indebtedness (including, but
not limited to, materialmen's, vendor's, workmen's and like claims) prior
to such claims becoming a lien upon such properties or assets; PROVIDED,
that payment of any such tax, fee, assessment, charge, claim or
indebtedness shall not be necessary so long as (i) the applicability or
validity thereof shall be contested in good faith by appropriate
proceedings and a reserve, if appropriate as determined pursuant to GAAP,
shall have been established with respect thereto and (ii) failure to make
such payment will not have a Material Adverse Effect;
(f) comply with all other obligations which it incurs pursuant
to any contract or agreement, whether oral or written, express or implied,
as such obligations become due, unless and to the extent that the same are
being contested in good faith and by appropriate proceedings and adequate
reserves (as determined in accordance with GAAP) have been established on
its books with respect thereto;
(g) maintain proper books of record and account which present
fairly in all material respects its financial condition and results of
operations and make provisions on its financial statements for all such
proper reserves as in each case are required in accordance with GAAP; and
(h) enforce any and all rights under the "lock-up" agreements
delivered pursuant to Section 7.1(q) hereof, and not waive any of such
rights without the consent of holders of at least a majority of the Series
A Preferred Shares.
8.11. COMPLIANCE WITH AGREEMENTS. The Corporation shall perform
and observe (i) all of its obligations to each holder of Series A Preferred
Shares set forth in the Articles of Incorporation, the Amended Certificate
of Designation and the Corporation's Bylaws, (ii) all of its obligations to
each holder of Registrable Shares (as defined and set forth in the
Registration Rights Agreement) and (iii) all of its obligations to each
Regulated Investor under the Regulated Investor Letter Agreement.
8.12. FURTHER ASSURANCES. The Corporation, on the one hand, and
the Investors, on the other hand, agree that at or subsequent to the
Initial Closing or the Subsequent Closing, at the request of the other
party, they will execute and deliver, or cause to be executed and
delivered, to the other party such further instruments and take such other
action as may be necessary to carry out the transactions contemplated by
this Agreement.
8.13. BEST EFFORTS. Each of the parties hereto will use its
reasonable best efforts to cause the conditions to Initial Closing and the
Subsequent Closing set forth herein to be satisfied as soon as reasonably
practicable.
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8.14. PUBLIC ANNOUNCEMENTS. The Corporation shall not issue any
press release nor make any public announcement with respect to this
Agreement or the transactions contemplated hereby, including without
limitation, naming the Investors or their affiliates, except as required by
law or any governmental authority or except as each Investor shall have
expressly approved in writing as to the use of such Investor's name.
8.15. PREEMPTIVE RIGHTS.
(a) In the event that the Corporation shall at any time and from
time to time prior to December 1, 2000 propose to sell and issue any New
Securities (a "PROPOSED ISSUANCE"), each Investor shall have the right to
purchase his or its proportionate number, or any lesser number, of any of
such New Securities which the Corporation is proposing to sell and issue.
For purposes of this Section 8.15, each such Investor's "proportionate
number" means the product obtained by multiplying the number of New
Securities proposed to be sold and issued by a fraction, the numerator of
which will be the number of shares of Common Stock issued or issuable to an
Investor upon the conversion of the Series A Preferred Shares or exercise
of the Warrants (and subsequent conversion to Common Stock in the case of
a Warrant which is exercisable for Series A Preferred Stock) and the
denominator of which will be the total number of fully-diluted shares of
Common Stock of the Corporation (in each case immediately prior to the
issuance of New Securities).
(b) In the event that the Corporation proposes to undertake an
issuance of New Securities, it will give each Investor written notice of
its intention to do so, describing the New Securities and the price and
terms upon which the Corporation proposes to issue the same, and setting
forth the number of shares which such Investor is entitled to purchase and
the aggregate purchase price therefor. The Investors will have 15 days
from the date of receipt of any notice to agree to purchase the New
Securities, for the price and upon the terms specified in the notice by
giving written notice to the Corporation (the "ELECTION NOTICE") and
stating therein the quantity of New Securities to be purchased. If more
than one type of security is issued, each Investor shall, if it exercises
its rights pursuant to this Section 8.15, purchase such securities in the
same ratio as issued. If any of the Investors has elected to purchase any
New Securities pursuant to this Section 8.15, the sale of such shares shall
be consummated as soon as practical (but in any event within 20 business
days, subject to any additional time reasonably necessary to comply with
any federal, state, local or foreign regulatory requirements) after the
delivery of the Election Notice.
8.16. ELECTION OF THE BG MEDIA DIRECTOR. For so long as at
least 25% of the Series A Preferred Shares remain outstanding, the
Corporation and the Investors agree that the BG Media Investors shall be
entitled to nominate and elect one (1) Director (the "BG MEDIA DIRECTOR")
who shall be Spencer Grimes, or other designee of the BG Media Investors.
The BG Media Director shall be removed from the Board or any committee
thereof (with or without cause) only at the written request of the BG Media
Investors or by the Board for "cause" and under no other circumstances. In
the event that the BG Media Director (the "WITHDRAWING DIRECTOR")
designated in the manner provided above is unable to serve, or once having
commenced to serve, is removed by the BG Media Investors or by the Board
for "cause" or withdraws from the Board, such Withdrawing Director's
replacement (the "SUBSTITUTE DIRECTOR") on the Board will be designated by
the BG Media Investors; PROVIDED, HOWEVER, that until a
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Substitute Director has been elected, the BG Media Investors shall have the
right to have a representative attend all meetings of the Board, but such
representative shall not be a Director and shall not have the right to vote
at any such meeting. In the event the BG Media Investors choose not to
designate a Director, such directorship shall remain vacant.
8.17. COMMITTEE AND SUBSIDIARY REPRESENTATION. For so long as
the BG Media Investors have the right to elect a BG Media Director pursuant
to Section 8.16, the Corporation and the Investors agree that the BG Media
Investors shall be entitled to nominate and elect one member to each
committee of the Board and any board of directors or committee of the board
of any Subsidiary; provided that any member nominated by the BG Media
Investors to serve on any audit committee shall satisfy any applicable
standards mandated by the Commission or by the National Association of
Securities Dealers, Inc. Approval by the BG Media Director of a committee
or subsidiary board whose composition does not reflect the foregoing
entitlements shall constitute a one-time waiver thereof, although such
entitlement shall remain enforceable.
8.18. COVENANT TO VOTE. For so long as the BG Media Investors
have the right to elect a BG Media Director pursuant to Section 8.16, each
Investor shall vote (including, if applicable, pursuant to written consent)
the Shares owned or controlled by such Investor upon all matters submitted
to a vote of the stockholders of the Corporation and shall take all other
necessary or desirable actions within such Investor's control (whether in
such Investor's capacity as a stockholder, director, member of a board
committee or officer of the Corporation or otherwise, and including,
without limitation, attendance at meetings in person or by proxy for
purposes of obtaining a quorum) in conformity with the specified terms and
provisions of this Agreement. Without limiting the foregoing, each
Investor shall vote the Shares owned or controlled by such Investor (i) at
each annual or special meeting of stockholders called for the purpose of
voting on the election or removal of directors and (ii) by consensual
action of stockholders with respect to the election or removal of
directors, in favor of the election or removal of the director designated
in accordance with Section 8.16.
8.19. INCONSISTENCY WITH ARTICLES OF INCORPORATION OR BYLAWS;
TERMINATION OF PROVISIONS.
(a) In the event that any provision of the Corporation's bylaws
or articles of incorporation is inconsistent with any provision of this
Agreement, including without limitation Section 8.16, 8.17 or 8.18, the
Corporation and the Investors shall take such action as may be necessary to
amend any such provision in the Corporation's bylaws or articles of
incorporation to remedy such inconsistency.
(b) The provisions of Sections 8.16, 8.17 and 8.18 and the
transactions contemplated pursuant thereto shall terminate in any of the
following ways:
(i) automatically with respect to any Investor upon
transfer by such Investor of all of its Shares; provided, however, that no
such termination shall relieve any Investor from any liability arising from
any breach of this Agreement by such Investor prior to such termination;
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(ii) upon the dissolution or liquidation (voluntary or in
bankruptcy) of the Corporation; or
(iii) upon the consent of the Investors holding a majority
of the Series A Preferred Shares.
8.20. NASDAQ LISTING; DIRECTORS AND OFFICERS INSURANCE.
(a) The Corporation agrees to use its best efforts to effect the
listing of the Common Stock on the NASDAQ National Market System ("NMS").
Such efforts shall include, without limitation, diligently complying with
all requests of the National Association of Securities Dealers, Inc. In
the event that listing on the NMS is not achieved by October 1, 2000, the
Corporation shall comply with all lawful requests and suggestions that the
Investors may make with regard to effecting the NMS listing.
(b) The Corporation will obtain and maintain, at all times while
the Common Stock is listed on the NMS or any national securities exchange,
directors and officers insurance from a reputable insurance company in such
amount and with coverage customary in the industry.
8.21. COMPLETION OF THE IPO. The Corporation agrees that the
Investors and their designees shall have the right, on a pro rata basis
based on the number of shares of Common Stock issued or issuable upon
conversion of the Series A Preferred Shares and subject to the approval of
the Corporation's underwriters, to purchase up to 5% of the shares of
Common Stock offered in the IPO at the price per share so offered, provided
that the value of such Common Stock purchased shall not exceed $10,000,000
in the aggregate. In the event the Corporation proposes to undertake an
IPO, it will give each Investor written notice of its intention to do so,
describing the IPO and the approximate price upon which the Corporation
proposes to issue shares of Common Stock in the IPO, and setting forth the
approximate number of shares which such Investor is entitled to purchase
and the aggregate purchase price therefor. Each Investor will have 20
business days from the date of receipt of any notice to agree to purchase
the shares in the IPO by giving written notice to the Corporation and
stating therein the quantity of shares to be purchased, including any
shares that it desires to purchase in excess of its pro rata share. In the
event one or more Investors shall desire to purchase shares in excess of
its pro rata share, such excess shall be allocated pro rata among such
Investors, and such allocation shall continue until all the shares in the
IPO that such Investors desire to purchase in accordance with the
provisions hereof have been allocated.
8.22. INTELLECTUAL PROPERTY. The Corporation agrees to use its
best efforts to execute, or cause the applicable Subsidiary of the
Corporation to execute, within 45 days after the date of the Initial
Closing, agreements with each of its Key Employees containing
confidentiality provisions consistent with industry standards and by which
such employees shall agree that any works created while employees of the
Corporation or the applicable Subsidiary of the Corporation and in
furtherance of their responsibilities to the Corporation and/or the
applicable Subsidiary(ies) shall be deemed "works made for hire" for the
Corporation or the applicable Subsidiary of the Corporation, as applicable,
in which the Corporation or the applicable Subsidiary owns or will own all
right, title and interest. To the extent any such work
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is not a "work made for hire", the Corporation agrees to execute, or cause
the applicable Subsidiary of the Corporation to execute, not later than 45
days after the date of the Initial Closing, agreements with each of its Key
Employees whereby such employees will irrevocably transfer and assign to
the Corporation or the applicable Subsidiary all rights in and to such
works, including but not limited to all rights of invention, patent, trade
secret, copyright, know-how, process or technology, and all renewals
thereof, and whereby such employees will agree to execute and deliver to
the Corporation and/or the applicable Subsidiary(ies) of the Corporation
any further assignments of such rights as the Corporation and/or the
applicable Subsidiary(ies) may deem necessary or convenient. The
Corporation agrees to adopt, and cause each Subsidiary of the Corporation
to adopt, within 45 days of the date of the Initial Closing, and thereafter
enforce, a policy requiring each employee, consultant and contractor to
execute proprietary information, confidentiality and assignment agreements
substantially in the Corporation's standard forms with respect to the
protection of the rights of the Corporation and its Subsidiaries in the
intellectual property, including without limitation, material trade
secrets, know-how or other confidential or proprietary information
(including, without limitation, source code) of the Corporation and any
Subsidiary or provided by any other person to the Corporation or any of its
subsidiaries.
8.23. SHARE CERTIFICATES. Each certificate representing the
Shares now or hereafter held by an Investor shall be stamped with a legend
in substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR REGULATION
S UNDER SUCH ACT OR THE ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE ISSUER,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT. HEDGING TRANSACTIONS INCLUDING THE COMMON SHARES OF THE
COMPANY MAY NOT BE CONDUCTED EXCEPT IN COMPLIANCE WITH SUCH ACT. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY BE SUBJECT TO [A SECURITIES
PURCHASE AGREEMENT DATED AS OF JUNE 30, 2000/AN AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT DATED AS OF JULY 28, 2000], A COPY OF
WHICH IS ON FILE AT THE OFFICE OF THE ISSUER AND WILL BE FURNISHED TO
ANY PROSPECTIVE PURCHASERS ON REQUEST. SUCH SECURITIES PURCHASE
AGREEMENT MAY PROVIDE, AMONG OTHER THINGS, FOR CERTAIN RESTRICTIONS ON
THE SALE, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE."
Each Investor agrees to deliver all certificates for Shares owned by such
Investor to the Company for the purpose of affixing such legend thereto.
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SECTION 9. FEES. The Corporation shall bear its own expenses
and legal fees incurred on its behalf with respect to this Agreement, the
Registration Rights Agreement and the transactions contemplated hereby and
thereby, and the Corporation shall, whether or not the transactions
contemplated by this Agreement are consummated, promptly pay or reimburse
up to $100,000 ($85,000 of which was paid at the Initial Closing) of the
documented fees, charges and disbursements incurred by Investors (and their
advisers, counsel, accountants and other representatives) in connection
with this Agreement, the Registration Rights Agreement and the transactions
contemplated hereby and thereby.
The Corporation shall be responsible for paying any stamp duty,
transfer taxes or other similar duties, taxes or charges, if any, that are
payable in connection with the issuance and sale of the Series A Preferred
Shares to the Investors. All payments made by the Corporation pursuant to
this Section 9 shall be made free and clear of all deductions or
withholdings unless such deduction or withholding is required by law, in
which event the Corporation shall pay to each Investor such additional
amount as shall be required to ensure that the net amount received by such
Investor will equal the full amount which would have been received by it
had no such deduction or withholding been made; PROVIDED, HOWEVER, that if
the amount of any such deduction or withholding (having been first paid by
the Corporation to such Investor) is reimbursed to such Investor by any
taxation authority, such Investor shall inform the Corporation of such
reimbursed amount and pay to the Corporation such amount.
SECTION 10. EXCHANGES; LOST, STOLEN OR MUTILATED CERTIFICATES OR
INSTRUMENTS. Upon surrender by an Investor to the Corporation of any
certificate representing the Series A Preferred Shares or the Reserved
Shares, the Corporation at its expense shall issue in exchange therefor,
and deliver to such Investor, a new certificate or certificates
representing such shares, in such denominations as may be requested by such
Investor. Upon receipt of evidence satisfactory to the Corporation of the
loss, theft, destruction or mutilation of any certificate representing any
Series A Preferred Shares or Reserved Shares, and in case of any such loss,
theft or destruction, upon delivery of any indemnity agreement satisfactory
to the Corporation, or in case of any such mutilation, upon surrender and
cancellation of such certificate, the Corporation at its expense shall
issue and deliver to such Investor a new certificate for such Series A
Preferred Shares or Reserved Shares of like tenor, in lieu of such lost,
stolen or mutilated certificate.
SECTION 11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS, ETC.. The provisions set forth in Section 9 of this Agreement
shall expressly survive the termination or abandonment of this Agreement.
Except as expressly provided to the contrary, all covenants and agreements
contained in this Agreement shall survive the Initial Closing and the
Subsequent Closing in perpetuity and shall remain in full force and effect.
Notwithstanding the foregoing, the covenants and agreements contained in
Section 8 of this Agreement (other than in Sections 8.6, 8.7, 8.8, 8.20,
8.21, 8.22 and 8.23) shall terminate at such time that less than 10% of the
Series A Preferred Shares remain outstanding. The representations and
warranties hereunder shall survive the Initial Closing for a period of four
years, except (a) the representations and warranties in Sections 5.7, 5.22
and 5.23 shall survive until the date which is 60 days after the expiration
of the statute of limitations applicable to such matters, (b) the
representations and warranties in Sections 5.1, 5.2, 5.3, 5.11, 5.15 and
5.16 shall survive the Initial Closing and the Subsequent Closing in
perpetuity, and (c) the foregoing time limitations shall not apply to any
claims which have been the subject of a written notice prior to expiration
of the applicable time
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period. All statements contained in any certificate or other instrument
delivered by the Corporation or by an officer on behalf of the Corporation
through the date hereof pursuant to this Agreement or in connection with
the transactions contemplated by this Agreement shall constitute
representations and warranties by the Corporation under this Agreement. No
right of indemnification hereunder shall be limited by reason of any
investigation or audit conducted before or after the Initial Closing or the
Subsequent Closing or the knowledge of any party of any breach of a
representation, warranty, covenant or agreement by the other party at any
time, or the decision of any party to complete the Initial Closing or the
Subsequent Closing.
SECTION 12. INDEMNIFICATION.
12.1. THE CORPORATION'S OBLIGATIONS TO INDEMNIFY. Subject to
the procedures contained in this Section 12, the Corporation shall
indemnify, defend and hold harmless each of the Investors, its affiliates
and its partners, directors, officers, employees and representatives (each,
an "INDEMNIFIED PARTY"), from and against any and all claims, losses,
settlements, fines, liabilities, damages, deficiencies, costs or expenses
(including interest, penalties and reasonable attorneys' fees and
disbursements) (collectively, "LOSSES") suffered, sustained, incurred or
required to be paid by any such Indemnified Party due to, based upon,
arising out of or otherwise in respect of (i) any inaccuracy in, or any
breach of, any representation or warranty of the Corporation contained in
this Agreement (or any schedule hereto or any certificate or other document
delivered on behalf of the Corporation hereunder), (ii) any breach of any
covenant or agreement of the Corporation contained in this Agreement and
(iii) the enforcement by any Indemnified Party of its rights under this
Agreement. Notwithstanding any other provision herein to the contrary, no
claims for Losses under Section 12.1(i) may be asserted by an Indemnified
Party until the aggregate amount of all Losses by the Indemnified Parties
exceeds $50,000, at which time the party seeking indemnification shall be
entitled to recover all amounts in respect of Losses, not just those in
excess of $50,000; provided, however, that claims based upon Section
12.1(i) with respect to Sections 5.1, 5.2, 5.3, 5.16, 5.17, 5.25, 5.26 and
5.27 shall not be subject to the limitations contained in this sentence.
12.2. NOTICE AND OPPORTUNITY TO DEFEND. The obligations and
liabilities of any party hereto against which indemnification is sought
hereunder with respect to claims resulting from the assertion of liability
by third parties shall be subject to this Section 12.2.
(a) Promptly after receipt by any Indemnified Party of notice of
any demand or claim or the commencement (or threatened commencement) of any
action, proceeding or investigation (an "ASSERTED LIABILITY") that could
reasonably be expected to result in a Loss, the Indemnified Party shall
give notice thereof (a "CLAIMS NOTICE") to the Corporation. Each Claims
Notice shall describe the Asserted Liability in reasonable detail, and
shall indicate the amount (estimated, if necessary) of the Loss that has
been or may be suffered by the Indemnified Party. The rights of any
Indemnified Party to be indemnified hereunder shall not be adversely
affected by its failure to give, or its failure to timely give, a Claims
Notice with respect thereto unless, and if so, only to the extent that, the
Corporation is materially prejudiced thereby.
(b) The Corporation may elect to compromise or defend, at its
own expense and by its own counsel, any Asserted Liability if (i) the claim
involves (and continues to involve) solely monetary damages and the
Corporation's assumption of the defense or settlement of such
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claim will not have a material adverse effect on the Indemnified Party's
business, (ii) the Corporation expressly agrees in writing to the
Indemnified Party that, as between the two, the Corporation is solely
obligated to satisfy and discharge the claim, and (iii) the Corporation
makes reasonably adequate provision to satisfy the Indemnified Party of the
Corporation's ability to satisfy and discharge the claim (the foregoing
collectively, the "LITIGATION CONDITIONS"); PROVIDED, HOWEVER, that if the
parties in any action shall include both the Corporation and an Indemnified
Party, and the Indemnified Party shall have reasonably concluded that
counsel selected by the Corporation has a conflict of interest because of
the availability of different or additional defenses to the Indemnified
Party, the Indemnified Party shall have the right to select separate
counsel to participate in the defense of such action on its behalf, at the
expense of the Corporation; and PROVIDED FURTHER, however, that the
Corporation shall forfeit the right to control the defense or settlement of
any such claim if, at any time after assuming the defense or settlement
thereof, the Corporation no longer satisfies the Litigation Conditions.
Subject to the foregoing, if the Corporation elects to compromise or defend
such Asserted Liability, it shall within thirty (30) days (or sooner, if
the nature of the Asserted Liability so requires) notify the Indemnified
Party of its intent to do so, and the Indemnified Party shall cooperate, at
the expense of the Corporation, in the compromise of, or defense against,
such Asserted Liability. If the Corporation elects not to compromise or
defend the Asserted Liability, fails to notify the Indemnified Party of its
election as herein provided, or fails to satisfy the Litigation Conditions,
the Indemnified Party may pay, compromise or defend such Asserted
Liability. The Indemnified Party and the Corporation may participate, at
their own expense, in the defense of such Asserted Liability. If the
Corporation chooses to defend any claim, the Indemnified Party shall,
subject to receipt of a reasonable confidentiality agreement, make
available to the Corporation any books, records or other documents within
its control, and the reasonable assistance of its employees, for which the
Corporation shall be obliged to reimburse the Indemnified Party the
reasonable out-of-pocket expenses of making them available.
Notwithstanding anything to the contrary herein, the Corporation shall not
settle or compromise any Asserted Liability unless such settlement includes
a release of each Indemnified Party against which such liability is
asserted. If there shall be more than one Indemnified Party with respect
to any Asserted Liability, the Corporation shall be obligated to pay for
only one counsel for all such Indemnified Parties unless there shall be a
conflict of interest among the Indemnified Parties because of the
availability of different or additional defenses to such Indemnified Parties.
12.3. PROCEDURES FOR CLAIMS BY PARTIES. In the event that any
Indemnified Party incurs or suffers any Losses with respect to which
indemnification may be sought by such party pursuant to Section 12.1 (other
than in respect of third party claims), the Indemnified Party must assert
the claim by a Claims Notice to the Corporation. The Claims Notice must
state the nature and basis of the claim in reasonable detail based on the
information available to the Indemnified Party. The Corporation shall
respond to any Indemnified Party that has given a Claims Notice (a "CLAIM
RESPONSE") within thirty (30) days (the "RESPONSE PERIOD") after the date
that the Claims Notice is given. Any Claim Response shall specify whether
or not the Corporation disputes the claim described in the Claims Notice.
If the Corporation fails to give a Claim Response within the Response
Period, the Corporation shall be deemed not to dispute the claim described
in the related Claims Notice. If the Corporation elects not to dispute a
claim described in a Claims Notice, whether by failing to give a timely
Claim Response or otherwise, then the amount of such claim shall be
conclusively deemed to be an obligation of such Indemnifying Party. If the
Corporation shall be obligated to indemnify an Indemnified Party hereunder,
the Corporation
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shall pay to such Indemnified Party within thirty (30) days after the last
day of the applicable Response Period the amount to which such Indemnified
Party shall be entitled. If there shall be a dispute as to the amount or
manner of indemnification under this Agreement, the Corporation and the
Indemnified Party shall seek to resolve such dispute through negotiations
and, if such dispute is not resolved within twenty (20) days, the
Indemnified Party may pursue whatever legal remedies may be available for
the recovery of the Losses claimed from the Corporation. If the
Corporation fails to pay all or any part of any indemnification obligation
on or before the later to occur of (y) thirty (30) days after the last day
of the applicable Response Period, and (z) if the Claims Notice relates to
Losses that have not been liquidated as of the date of the Claims Notice,
the date on which all or any part of such Losses shall have become
liquidated and determined, then the Corporation shall also be obligated to
pay to the Indemnified Party interest on the unpaid amount for each day
during which the obligation remains unpaid at an annual rate equal to the
rate of interest from time to time announced by Citibank, N.A. as its base
rate in New York City in effect from time to time during which the
obligation remains unpaid. Such interest shall bepayable at the same time
as the payment to which it relates and shall be calculated daily on the
basis of a year of three hundred sixty-five (365) days and the actual
number of days elapsed.
SECTION 13. APPOINTMENT OF REPRESENTATIVE.
(a) Each of the BG Media Related Investors hereby irrevocably
constitutes and appoints BG Media as its representative (the
"REPRESENTATIVE") and its lawful agent and attorney-in-fact for the purpose
of performing and consummating the transactions contemplated by this
Agreement, the Registration Rights Agreement, the Certificate of
Designation, the Amended Certificate of Designation, the Warrants or any
other agreement, document or instrument entered into in connection herewith
or therewith (the "TRANSACTION DOCUMENTS") and the taking of any and all
actions and the making of any and all decisions hereunder and thereunder.
The appointment of BG Media as the Representative is coupled with an
interest and all authority hereby conferred shall be irrevocable and shall
not be terminated by any or all of the BG Media Related Investors without
the consent of the Representative, which consent may be withheld for any
reason, and the Representative is hereby authorized and directed to perform
and consummate all of the transactions contemplated by the Transaction
Documents. The Corporation shall be entitled to rely on the provisions of
this Section 13 in dealing with the BG Media Investors. Notwithstanding
anything to the contrary contained herein, the BG Media Related Investors
shall retain the right to sell, transfer or otherwise dispose of any Shares
which have been registered under the Securities Act or which are freely
transferable under Rule 144 of the Securities Act. Not by way of limiting
the authority of the Representative, each and all of the BG Media Related
Investors, for themselves and their respective heirs, executors,
administrators, successors and assign, hereby authorize the Representative to:
(i) waive any provision of the Transaction Documents,
including conditions to the Initial Closing and the Subsequent Closing,
which the Representative deems necessary or desirable;
(ii) execute and deliver on their behalf any and all of the
Transaction Documents;
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<PAGE>
(iii) make and receive notices and other communications
pursuant to the Transaction Documents and service of process in any legal
action or other proceeding arising out of or related to the Transaction
Documents or any of the transactions hereunder or thereunder;
(iv) settle any dispute, claim, action, suit or proceeding
arising out of or related to the Transaction Documents or any of the
transactions hereunder or thereunder;
(v) enter into or consent to any modification, amendment or
termination of any Transaction Document;
(vi) take any action under the Transaction Documents,
including, without limitation, exercise of the Warrants or conversion of
any shares of Series A Preferred Stock;
(vii) appoint or provide for a successor Representative;
(viii) pay expenses incurred or which may be incurred by or
on behalf of the BG Media Related Investors in connection with the
Transaction Documents; and
(ix) take any other action necessary or appropriate in the
judgment of the Representative for the accomplishment of the foregoing.
(b) Any claim, action, suit or other proceeding, whether in law
or equity, to enforce any right, benefit or remedy granted to the BG Media
Related Investors under this Agreement may be asserted, brought, prosecuted
or maintained only by the Representative.
(c) The Representative shall not be liable to any BG Media
Related Investor for any acts or omissions of the Representative in
connection with its duties and obligations hereunder, except in the case of
the Representative's gross negligence or willful misconduct. The BG Media
Related Investors, jointly and severally, agree to indemnify and hold the
Representative harmless as to any liability incurred by it to any person by
reason of its having accepted the same or in carrying out any of the terms
hereof, and to reimburse the Representative for all of its costs and
expenses, including, among other things, reasonable attorneys' fees and
costs, incurred by reason of any matter as to which an indemnity is paid
under this Section 13; PROVIDED, HOWEVER, that no indemnity need be paid in
the case of the Representative's gross negligence or willful misconduct.
(d) The Representative is authorized and empowered to construe
the Transaction Documents and its reasonable construction made in good
faith shall be conclusive and binding upon the BG Media Related Investors
and upon all parties thereto. The Representative shall always be protected
and free from liability in acting upon any notice, request, consent,
certificate, declaration, fax, telegram, telex, guarantee, affidavit or
other paper or document or signature believed by it to be genuine and to
have been signed by the proper party or parties or by the party or parties
purporting to have signed the same. The Representative shall not be liable
for any error of judgment or for any act done or omitted, or for any
mistake of fact or law or for anything which it may do or refrain from
doing in good faith, nor shall the Representative have any accountability
hereunder, except for actual losses, if any, suffered by
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the BG Media Related Investors that are proximately caused by the
Representative's own gross negligence or willful misconduct. The
Representative may consult with legal counsel and any action under this
Agreement taken or suffered in good faith by the Representative in
accordance with the opinion of such counsel shall be conclusive upon the
parties hereto and the Representative shall be fully protected and be
subject to no liability with respect thereto. NOTWITHSTANDING ANY
PROVISIONS OF THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL THE
REPRESENTATIVE BE LIABLE FOR SPECIAL, INDIRECT, OR CONSEQUENTIAL, LOSS OR
DAMAGE OF ANY KIND WHATSOEVER (INCLUDING BUT NOT LIMITED TO LOST PROFITS)
EVEN IF THE REPRESENTATIVE HAS BEEN ADVISED OF THE LIKELIHOOD OF SUCH LOSS
OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION. This section shall survive
the termination of this Agreement.
(e) The Representative shall have the right to resign at any
time by giving not less than 10 days' advance written notice to each of the
BG Media Related Investors.
SECTION 14. SUCCESSORS AND ASSIGNS; PARTIES IN INTEREST. This
Agreement shall bind and inure to the benefit of (a) the Corporation, the
Investors and each other Person who shall become a registered holder of any
Series A Preferred Shares or Reserved Shares and (b) the respective
successors and assigns of the Corporation, the Investors and each such
other Person. The rights of the Investors in this Agreement are assignable
to any registered holder of the Series A Preferred Stock or the Reserved
Shares. The Corporation shall not assign any of its rights or obligations
hereunder without the written consent of a majority in interest of all the
Investors.
SECTION 15. ENTIRE AGREEMENT. This Agreement, the Registration
Rights Agreement, the Certificate of Designation (as amended from time to
time including by the Amendment) and the other writings referred to herein
and therein or delivered pursuant hereto or thereto which form a part
hereof (including the Schedules and Exhibits hereto) contain the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior and contemporaneous arrangement or understanding with
respect thereto.
SECTION 16. NOTICES. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person, transmitted by
telecopier (with confirmation of transmission having been received) or duly
sent by first class registered or certified mail, return receipt requested,
postage prepaid, addressed to such party at the address set forth below or
such other address as may hereafter be designated in writing by the
addressee to the addresser listing all parties:
If to the Corporation, to:
NetVoice Technologies Corporation
13747 Montfort Drive, Suite 250
Dallas, Texas 75240
Telecopy: (972) 788-2995
Attention: Jeff Rothell, President and
Nabil Lopez, Vice President
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with a copy to:
Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Telecopy: (214) 740-8800
Attention: Jack E. Jacobsen
If to NV Investments:
NV Investments, L.P.
1601 Elm Street
4000 Thanksgiving Tower
Dallas, Texas 75201
Telecopy: (214) 720-1662
Attention: President
If to the BG Media Investors:
BG Media Intermediate Fund L.P.
399 Park Avenue, 19th Floor
New York, New York 10022
Attention: Spencer Grimes
Telecopy: (212) 207-4605
with a copy to:
Dechert
30 Rockefeller Plaza
New York, New York 10112
Attention: Bruce J. Lieber
Telecopy: (212) 698-3599
If to Paribas:
Paribas North America, Inc.
787 Seventh Avenue
New York, New York 10019
Telecopy: (212) 841-2369
Attention: Gardner Horan
with a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Telecopy: (212) 354-8113
Attention: John M. Reiss
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<PAGE>
If to any other Investors, to the address set forth after such Investor's
name on Schedule 1 hereto.
All such notices, requests, consents and other communications shall be
deemed to have been received (a) in the case of personal delivery, or
confirmed transmittal by telecopy, on the date of such delivery or
transmittal by telecopy and (b) in the case of mailing, on the third day
after the posting thereof.
SECTION 17. REMEDIES. Each holder of Series A Preferred Shares
and Reserved Shares shall have all rights and remedies set forth in this
Agreement, the Articles of Incorporation and the Amended Certificate of
Designation and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
SECTION 18. CHANGES. The terms and provisions of this Agreement
may not be modified or amended, or any of the provisions hereof waived,
temporarily or permanently, except pursuant to the written consent of all
of the parties.
SECTION 19. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together shall
constitute but one agreement.
SECTION 20. HEADINGS. The headings of the sections of this
Agreement have been inserted for convenience of reference only and shall
not be deemed to be a part of this Agreement.
SECTION 21. NOUNS AND PRONOUNS. Whenever the context may
require, any pronouns used herein shall include the corresponding
masculine, feminine or neuter forms, and the singular form of names and
pronouns shall include the plural and vice-versa.
SECTION 22. GOVERNING LAW. The corporate law of the State of
Nevada shall govern all issues and questions concerning the relative rights
and obligations of the Corporation and its stockholders. All other issues
and questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to
conflict of laws.
SECTION 23. SEVERABILITY. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 24. JURISDICTION. The parties hereto agree that any
suit, action or proceeding instituted against one or more of them with
respect to this Agreement (including any exhibits hereto) shall be brought
in any federal or state court located in the State of New York. The
parties hereto, by the execution and delivery of this Agreement,
irrevocably waive any
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objection or defense to the institution of any action in New York based on
improper venue, the convenience of the forum or the jurisdiction of such
courts, or from the execution of judgments resulting therefrom, and the
parties hereto irrevocably accept and submit to the jurisdiction of the
aforesaid courts in any suit, action or proceeding and consent to the
service of process by certified mail at the address set forth in Section 16
hereof.
SECTION 25. WAIVER OF TRIAL BY JURY. Each party to this
Agreement waives all right to trial by jury of all claims, defenses,
counterclaims and suits of any kind directly or indirectly arising from or
relating to this Agreement, the Registration Rights Agreement and the
transactions contemplated hereby or thereby. Each party hereto agrees that
all such claims, defenses, counterclaims and suits shall be tried before a
judge of competent jurisdiction, without a jury.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed on their behalf.
NETVOICE TECHNOLOGIES CORPORATION
By:
-------------------------------------------
Name:
Title:
BG MEDIA INTERMEDIATE FUND L.P.*
By: BG MEDIA INTERMEDIATE INVESTORS L.L.C.,
its General Partner
By:
-------------------------------------------
J. William Grimes
Member
NV INVESTMENTS, L.P.
By: NV GP, L.L.C., its General Partner
By:
-------------------------------------------
Thomas J. Fowler
Manager
PARIBAS NORTH AMERICA, INC.
By:
-------------------------------------------
Name:
Title:
_______________
* On behalf of itself and as the Representative of John Backe, J.
William Grimes, Mike Walchonski, Karen Collins, Michael Weiskopf,
Spencer Grimes, Roberta Zipper, Adam Zipper, Al Siegel, William
Lilley, Russ Barry, Foster Devereux, Kevin McGrath, Bruce J. Lieber,
R. Coran Capshaw, Ryan Magrab, Mike Crothers, Paul Yeoham, Dan
Patterson and Roger Mulvihill
<PAGE>
[SIGNATURE PAGE TO AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT]
---------------------------------
Loren Stone
---------------------------------
Ken Barrett
---------------------------------
Bill Crothers
Laguna Frisco, Inc.
By:------------------------------
Mike Bailey, President
---------------------------------
Joel Wishnick
---------------------------------
Carlos Hamilton
---------------------------------
Suhair Bokobza
---------------------------------
Don A. Preston
<PAGE>
[SIGNATURE PAGE TO AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT]
---------------------------------
David Watts
---------------------------------
Johnny Berry
---------------------------------
Dennis Kutscherousky
---------------------------------
Charles Benaiah
---------------------------------
Stacey E. Glassman
<PAGE>
SCHEDULE I
NAMES AND ADDRESSES OF INITIAL BG MEDIA RELATED INVESTORS
John Backe 65 Govenors Lane, Princeton, NJ 08580
J. William Grimes BG Media Investors L.P., 399 Park Avenue, New York, NY 10021
Mike Walchonski BG Media Investors L.P., 399 Park Avenue, New York, NY 10021
Karen Collins BG Media Investors L.P., 399 Park Avenue, New York, NY 10021
Michael Weiskopf 250 West 57th Street, Apt. 420, New York, NY 10107
Spencer Grimes 6819 Jarmans Gap Road, Crozet, VA 22932
Roberta Zipper 48 Clover Lane, Roslyn Heights, NY 11577
Adam Zipper Salomon Smith Barney, 767 Fifth Avenue, 7th Floor, New
York, NY 10153
Al Siegel 271-7U Grand Central Parkway, Floral Park, NY 11005
William Lilley iMapdata, 1615 L Street NW, Suite 540, Washington, DC 20036
Russ Barry 16650 Ashley Oaks, Encino, CA 91436
Foster Devereux 234 Union Street, North Adams, MA 01247
Kevin McGrath Graubard Mollen and Miller, 600 Third Avenue, New York,
NY 10016-2097
Bruce J. Lieber c/o Dechert, 30 Rockefeller Plaza, New York, NY 10112
R. Coran Capshaw P.O. Box 1911, Charlottesville, VA 22903
Ryan Magrab 1101 Alvord Court, McLean, VA 22102
Mike Crothers c/o Best, Patteson & Crothers, Ltd., 2200 Ross Avenue,
Suite 3838, Dallas, TX 75201
Dan Patterson c/o Best, Patteson & Crothers, Ltd., 2200 Ross Avenue,
Suite 3838, Dallas, TX 75201
Paul Yeoham c/o Best, Patteson & Crothers, Ltd., 2200 Ross Avenue,
Suite 3838, Dallas, TX 75201
Roger Mulvihill c/o Dechert, 30 Rockefeller Plaza, New York, NY 10112
<PAGE>
NAMES AND ADDRESSES OF SUBSEQUENT BG MEDIA RELATED INVESTORS
Loren Stone 5001 LBJ Frwy, Dallas, TX 75244
Ken Barrett P.O. Box 2620, Whitney, TX 76692
Bill Crothers 5065 Westheimer, Suite 900E, Houston, TX 77056
Laguna Frisco, Inc. 1900 Preston Rd., Suite 267, PMB 316, Plano, TX 75093
Joel Wishnick 14580 E. Beltwood Pkwy, Suite 108, Dallas, TX 75244
Carlos Hamilton* 6127 Olympia, Houston, TX 77057
Suhair Bokobza* 5744 goliad Ave., Dallas, TX 75206
Don A. Preston* 2729 Ponderosa Pine, Flower Mound, TX 75028
David Watts 14580 E. Beltwood Pkwy, Suite 108, Dallas, TX 75244
Johnny Berry 13747 Montfort Drive, Suite 200, Dallas, TX 77056
Dennis Kutscherousky* 4116 Country Brook Rd., Dallas, TX 75287
Charles Benaiah* 300 East 59th Street, New York, NY 10022
Stacey E. Glassman* 177 East 77th Street, Apt. 3D, New York, NY 10021
Bill Hieatt* 13747 Montfort Drive, Suite 200, Dallas, TX 77056
_______________
* Non-Accredited Investor
<PAGE>
SCHEDULE 2
NAMES OF INVESTORS/PURCHASE PRICE
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF NUMBER OF
OF SERIES A EBITDA NASDAQ
INVESTORS CONSIDERATION PREFERRED STOCK WARRANTS WARRANTS
--------- ------------- --------------- -------- --------
<S> <C> <C> <C> <C>
BG Media $ 7,000,000.00 2,153,846 172,564(1) 146,015(2)
NV Investments 3,000,000.00 923,077 66,667 56,410
Paribas 2,000,000.00 615,385 44,444 37,607
John Backe 100,000.00 30,770 - -
J. William Grimes 50,001.25 15,385 - -
Mike Walchonski 3,250.00 1,000 - -
Karen Collins 19,500.00 6,000 - -
Michael Weiskopf 65,000.00 20,000 - -
Spencer Grimes 65,000.00 20,000 - -
Roberta Zipper 60,125.00 18,500 - -
Adam Zipper 35,750.00 11,000 - -
Al Siegel 3,250.00 1,000 - -
William Lilley 25,000.00 7,692 - -
Russ Barry 32,500.00 10,000 - -
Foster Devereux 50,000.00 15,385 - -
Kevin McGrath 50,000.00 15,385 - -
Bruce J. Lieber 8,125.00 2,500 - -
R. Coran Capshaw 65,000.00 20,000 - -
Ryan Magrab 50,000.00 15,385 - -
Mike Crothers (3) 102,462 None None
Dan Patterson (3) 102,462 None None
Paul Yeoham (3) 102,462 None None
</TABLE>
_______________
(1) Includes a proportionate number of EBITDA Warrants for each BG Media
Related Investor, other than those Investors for whom "None" is set
forth opposite their names on this table.
(2) Includes a proportionate number of NASDAQ Warrants for each BG Media
Related Investor, other than those Investors for whom "None" is set
forth opposite their names on this table.
(3) Shares received are in consideration of advisory services rendered or
to be rendered to the Corporation.
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF NUMBER OF
OF SERIES A EBITDA NASDAQ
INVESTORS CONSIDERATION PREFERRED STOCK WARRANTS WARRANTS
--------- ------------- --------------- -------- --------
<S> <C> <C> <C> <C>
Roger Mulvihill $ 8,125.00 2,500 - -
Loren Stone 100,002.50 30,770 None None
Ken Barrett 100,002.50 30,770 None None
Bill Crothers 20,000.50 6,154 None None
Laguna Frisco, Inc. 19,500.00 6,000 None None
Joel Wishnick 65,000.00 20,000 None None
Carlos Hamilton 24,999.00 7,692 None None
Suhair Bokobza 4,998.50 1,538 None None
Don A. Preston 13,000.00 4,000 None None
David Watts 9,750.00 3,000 None None
Johnny Berry 84,500.00 26,000 None None
Dennis Kutscherousky 19,500.00 6,000 None None
Charles Benaiah 48,750.00 15,000 - -
Stacey E. Glassman 26,000.00 8,000 - -
Bill Hieatt 69,998.50 21,538 None None
------------- --------- ---- ----
$13,296,627.75 4,398,658 283,675 240,032
</TABLE>
<PAGE>
EXHIBIT A
Certificate of Designation
--------------------------
<PAGE>
EXHIBIT B
Form of EBITDA Warrant
----------------------
<PAGE>
EXHIBIT C
Form of NASDAQ Warrant
----------------------
<PAGE>
EXHIBIT D
Form of Registration Rights Agreement
-------------------------------------
<PAGE>
EXHIBIT E
Form of Opinion of Counsel for the Corporation
----------------------------------------------
