SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JUNE 30, 1999
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@EBS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 2-96392-A 59-2493183
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(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
FORMATION)
1800 NW 49TH STREET, SUITE 100, FORT LAUDERDALE, FLORIDA 33309
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (954) 229-5100
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TRIANGLE IMAGING GROUP, INC.,
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(FORMER NAME OR FORMER ADDRESS, IF CHANGES SINCE LAST REPORT)
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ITEM 5. OTHER EVENTS
At a meeting of the shareholders of Triangle Imaging Group, Inc. (the
"Company') held on May 27, 1999, a majority of the Company's shareholders voted
in favor of an amendment to the Company's Articles of Incorporation to (i)
change the Company's name to "@ebs, inc.," and (ii) enable the Company's Board
of Director's to establish the preferences, limitations and relative rights with
respect to any class of unissued shares of capital stock. Accordingly, on June
30, 1999 the Company filed an amendment to the Company's Articles of
Incorporation effecting such changes to its Articles of Incorporation.
In addition, in connection with a private sale of its securities to
Waterside Capital Corporation, a small business investment company
("Waterside"), the Company established preferences, limitations and relative
rights with respect to Series C Preferred Stock and Series D Redeemable
Convertible Preferred Stock. The terms of each such series of Preferred Stock
are summarized below:
SERIES C PREFERRED STOCK
DESIGNATION AND AMOUNT; RANK. The shares of such series are designated as Series
C Preferred Stock and the number of shares constituting such series is 1,500,
all of which have been issued to Waterside. The Series C Preferred Stock has a
par value of $1,000 per share and rank senior to all series of preferred stock
and common stock.
DIVIDENDS. Holders of Series C Preferred Stock are entitled to receive a
quarterly cash dividend of $31.25 per share, commencing on April 15, 1999.
CONVERSION. Each share of Series C Preferred Stock is not convertible into any
other securities of the Company.
LIQUIDATION RIGHTS. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, each share of Series C
Preferred Stock shall have a liquidation preference of $1,000 plus unpaid
dividends that have accrued to the date of payment, if any.
VOTING RIGHTS. Each holder of Series C Preferred Stock shall not be entitled to
vote, except that (i) a majority of the holders of Series C Preferred Stock are
entitled to appoint one member to the Company's Board of Directors and (ii) the
Company may not effect any of the following actions without the prior written
consent of at least 66.67% of the shares of Series C Preferred Stock:
(a) alter or change the powers, rights, limitations,
preferences or restrictions of the Series C Preferred Stock;
(b) Create a class or series of capital stock having rights ,
preferences or privileges prior or superior to the Series C Preferred
Stock;
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(c) Increase or decrease the aggregate number of authorized
shares of Series C Preferred Stock, except for any decrease resulting
from any redemption, repurchase or other reacquisition, or effect an
exchange or reclassification of the shares of Series C Preferred Stock;
(d) Repurchase redeem or otherwise acquire any shares of the
Company's capital stock other than the Series C Preferred Stock if any
dividends on the Series C Preferred Stock which have accrued and are
payable remain outstanding at the time;
(e) Liquidate, dissolve or wind-up the affairs of the Company
or merge or consolidate the Corporation with any other entity or sell
or encumber all or substantially all of the Company's assets or issue
in one or a series of related transactions shares representing more
than fifty percent (50%) of the aggregate voting power of all classes
and series of the Company's voting stock if any dividends on the Series
C Preferred Stock which have accrued and are payable remain outstanding
at the time; or
(f) Declare or pay any dividend or other distribution with
respect to stock ranking junior to the Series C Preferred Stock if any
dividends on the Series C Preferred Stock which have accrued and are
payable remain outstanding at the time.
SERIES D REDEEMABLE CONVERTIBLE PREFERRED STOCK
DESIGNATION AND AMOUNT; RANK. The shares of such series are designated as Series
D Redeemable Convertible Preferred Stock and the number of shares constituting
such series is 700, all of which have been issued to Waterside. The Series D
Redeemable Convertible Preferred Stock has a par value of $1,000 per share and
rank senior to all series of preferred stock and common stock, except for shares
of Series C Preferred Stock which rank senior to the shares of Series D
Redeemable Convertible Preferred Stock.
DIVIDENDS. Holders of Series D Redeemable Convertible Preferred Stock are
entitled to receive a quarterly cash dividend of $31.25 per share, commencing on
October 15, 1999.
CONVERSION. Each share of Series D Redeemable Convertible Preferred Stock is
convertible at any time into 870 shares of the Company's common stock, subject
to anti-dilution protection.
LIQUIDATION RIGHTS. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, each share of Series D
Redeemable Convertible Preferred Stock shall have a liquidation preference of
$1,000 plus unpaid dividends that have accrued to date of payment, if any.
VOTING RIGHTS. Each holder of Series D Redeemable Convertible Preferred Stock
shall not be entitled to vote, except that the Company may not effect any of the
following actions without the prior written consent of at least 66.67% of the
shares of Series D Redeemable Convertible Preferred Stock:
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(a) alter or change the powers, rights, limitations,
preferences or restrictions of the Series D Redeemable Convertible
Preferred Stock;
(b) Create a class or series of capital stock having rights ,
preferences or privileges prior or superior to the Series D Redeemable
Convertible Preferred Stock (other than the Series C Preferred Stock);
(c) Increase or decrease the aggregate number of authorized
shares of Series D Redeemable Convertible Preferred Stock, except for
any decrease resulting from any redemption, repurchase or other
reacquisition, or effect an exchange or reclassification of the shares
of Series D Redeemable Convertible Preferred Stock;
(d) Repurchase redeem or otherwise acquire any shares of the
Company's capital stock other than the Series D Redeemable Convertible
Preferred Stock if any dividends on the Series D Redeemable Convertible
Preferred Stock which have accrued and are payable remain outstanding
at the time;
(e) Liquidate, dissolve or wind-up the affairs of the Company
or merge or consolidate the Corporation with any other entity or sell
or encumber all or substantially all of the Company's assets or issue
in one or a series of related transactions shares representing more
than fifty percent (50%) of the aggregate voting power of all classes
and series of the Company's voting stock if any dividends on the Series
D Redeemable Convertible Preferred Stock which have accrued and are
payable remain outstanding at the time; or
(f) Declare or pay any dividend or other distribution with
respect to stock ranking junior to the Series D Redeemable Convertible
Preferred Stock if any dividends on the Series D Redeemable Convertible
Preferred Stock which have accrued and are payable remain outstanding
at the time.
On June 30, 1999, the Company entered into a Series D Convertible
Preferred Stock Purchase Agreement with Waterside Capital Corporation, pursuant
to which Waterside paid an aggregate purchase price of $700,000 in immediately
available funds in exchange for the issuance of 700 shares of its Series D
Redeemable Convertible Preferred Stock and a Stock Purchase Warrant. The Warrant
entitles the holder to purchase up to 80,000 shares of Company's Common Stock at
an exercise price of $1.15 per share until June 30, 2009, so long as the Series
D Redeemable Preferred Stock remains outstanding. The right to exercise the
Warrant vests with respect to 20,000 shares on June 30, 1999 and with respect to
12,000 shares on each June 30th for the five year period commencing on June 30,
2000. Pursuant to the terms of an Investor Rights Agreement, the Company and
Harold S. Fischer granted Waterside the right to put the shares of Series D
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Redeemable Preferred Stock first, to the Company, and then, to Harold S.
Fischer, on the fifth anniversary of its issuance or earlier upon a Change of
Control (as defined) at a price of $1,000 per share plus accrued and unpaid
dividends. In exchange for Mr. Fischer's agreement to become obligated to
repurchase the Series D Redeemable Preferred Stock from Waterside (in the event
that the Company fails to do so), the Company issued to Mr. Fischer an option to
purchase 200,000 of the Company's Common Stock at an exercise price equal to
$.875 per share. In addition, under a Registration Rights Agreement, the Company
granted Waterside certain piggyback registration rights with respect to the
shares of Common Stock issuable upon the conversion of the Series D Redeemable
Convertible Preferred Stock and upon the exercise of the Warrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS.
(i) Series D Preferred Stock Purchase Agreement dated as of June 30,
1999 by and among the Company, Harold S. Fischer and Waterside Capital
Corporation.
(ii) Investor Rights Agreement dated as of June 30, 1999 by and among
the Company, Harold S. Fischer and Waterside Capital Corporation.
(iii) Registration Rights Agreement dated as of June 30, 1999 by and
between the Company and Waterside Capital Corporation.
(iv) Stock Purchase Warrant dated as of June 30, 1999 by and between
the Company and Waterside Capital Corporation.
(v) Articles of Amendment to the Articles of Incorporation of the
Company filed on June 30, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly authorized and caused the undersigned to sign this
Report on the Registrant's behalf.
TRIANGLE IMAGING GROUP, INC.
By: /s/ HAROLD S. FISCHER
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Harold S. Fischer
Chief Executive Officer and President
Dated: July 14, 1999
TRIANGLE IMAGING GROUP, INC.
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SERIES D CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
JUNE 30, 1999
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TABLE OF CONTENTS
ARTICLE 1 AUTHORIZATION AND SALE OF SHARES..................................1
Section 1.1 Authorization................................................1
1.1.1 Series D Preferred Stock........................................1
Section 1.2 Purchase and Sale of Purchased Shares........................1
1.2.1 Purchased Shares................................................1
1.2.2 The Closing.....................................................1
1.2.3 Use of Proceeds.................................................1
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................2
Section 2.1 Business; Organization, Corporate Power and Authority, etc...2
Section 2.2 Validity.....................................................2
Section 2.3 Capitalization; Status of Capital Stock......................2
Section 2.4 Taxes........................................................3
Section 2.5 Litigation...................................................3
Section 2.6 No Violations................................................4
Section 2.7 Compliance with Other Instruments; None Burdensome...........4
2.7.1 Other Agreements................................................4
2.7.2 Other Agreements of Officers, etc...............................4
Section 2.8 Governmental Consents, etc...................................4
Section 2.9 Transactions with Affiliates.................................4
Section 2.10 Compliance with Law.........................................5
Section 2.11 Financial Statements........................................5
Section 2.12 Absence of Undisclosed Liabilities..........................5
Section 2.13 Absence of Certain Changes or Events........................5
Section 2.14 Material Contracts..........................................6
Section 2.15 Title to Assets.............................................8
Section 2.16 Compliance with Securities Laws.............................8
Section 2.17 Intellectual Property.......................................8
2.17.1 Intellectual Property Assets...................................8
2.17.2 Agreements.....................................................9
2.17.3 Know-How Necessary for the Business............................9
2.17.4 Patents........................................................9
2.17.5 Trademarks....................................................10
2.17.6 Copyrights....................................................10
2.17.7 Trade Secrets.................................................11
Section 2.18 Environment and Safety Laws................................11
Section 2.19 Minute Books...............................................11
Section 2.20 Bankruptcy.................................................11
Section 2.21 No Guaranties..............................................11
Section 2.22 Insurance..................................................11
Section 2.23 Manufacturing and Marketing Rights.........................11
Section 2.24 Returns, Complaints and Warranties.........................12
Section 2.25 Financial Solvency.........................................12
Section 2.26 Disclosure.................................................12
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF INVESTOR.......................13
Section 3.1 Validity....................................................13
Section 3.2 Investment Intent...........................................13
Section 3.3 Resale Restrictions.........................................13
Section 3.4 Diligence...................................................14
Section 3.5 Reliance....................................................15
Section 3.6 Status......................................................15
ARTICLE 4 CONDITIONS OF PURCHASE...........................................15
Section 4.1 Investor Condition..........................................15
4.1.1 Certificate of Company.........................................15
4.1.2 Opinion of Counsel.............................................15
4.1.3 Authorization; Consents........................................15
4.1.4 Articles of Incorporation......................................15
4.1.5 Investor Rights Agreement......................................16
4.1.6 Registration Rights Agreement..................................16
4.1.7 Stock Purchase Warrant.........................................16
4.1.8 Board of Directors...............................................
4.1.9 All Proceedings Satisfactory...................................16
4.1.10 Approvals.....................................................16
4.1.11 Payment of Fees...............................................16
Section 4.2 Company's Conditions........................................16
4.2.1 Certificate of Investor........................................16
4.2.2 Full Purchase Price............................................16
4.2.3 SBA Compliance.................................................16
ARTICLE 5 COVENANTS OF THE COMPANY.........................................16
Section 5.1 Financial Statements........................................17
Section 5.2 Conduct of Business.........................................17
Section 5.3 Public Announcements........................................17
Section 5.4 Insurance...................................................17
Section 5.5 Maintenance of Properties...................................17
Section 5.6 Affiliated Transactions.....................................17
Section 5.7 Inspection..................................................17
Section 5.8 Board of Directors Meetings.................................18
Section 5.9 Dividends...................................................18
Section 5.10 Loans and Advances.........................................18
Section 5.11 Indebtedness...............................................18
Section 5.12 "C"Corporation.............................................18
Section 5.13 Maintenance of Intellectual Property Assets................18
Section 5.14 Legal Opinion..............................................18
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ARTICLE 6 COVENANTS OF THE INVESTOR........................................19
Section 6.1 Right of First Offer........................................19
Section 6.1 Confidentiality.............................................19
ARTICLE 7 INDEMNIFICATION..................................................19
Section 7.1 Investor Indemnification....................................19
Section 7.2 Company Indemnification.....................................19
Section 7.3 Indemnification Generally...................................19
Section 7.4 Final Adjudication..........................................20
ARTICLE 8 MISCELLANEOUS....................................................20
Section 8.1 Broker's Fee................................................20
Section 8.2 SBA Compliance..............................................20
Section 8.3 Amendments And Waivers......................................20
Section 8.4 Survival of Covenants; Assignability of Rights..............21
Section 8.5 Governing Law/Enforcement...................................21
Section 8.6 Jurisdiction and Venue; Waiver of Jury Trial................21
Section 8.7 Section Headings............................................21
Section 8.8 Counterparts................................................21
Section 8.9 Notices and Demands.........................................21
Section 8.10 Severability...............................................22
Section 8.11 Definitions of Terms.......................................22
Section 8.12 Expenses...................................................23
Section 8.13 Entire Agreement...........................................24
EXHIBITS
Exhibit A.........Articles of Incorporation
Exhibit C.........Opinion of Counsel
Exhibit D.........Investor Rights Agreement
Exhibit E.........Registration Rights Agreement
Exhibit F.........Stock Purchase Warrant
DISCLOSURE SCHEDULE
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SERIES D CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
AGREEMENT made as of this 30th day of June, 1999, by and among TRIANGLE
IMAGING GROUP, INC. (the "Company"), a Florida corporation, with its current
principal place of business at 1800 NW 49th Street, Suite 100, Fort Lauderdale,
Florida 33309, WATERSIDE CAPITAL CORPORATION (the "Investor"), and Harold S.
Fischer, the Company's Chief Executive Officer and a principal shareholder (the
"Principal Shareholder").
ARTICLE 1
AUTHORIZATION AND SALE OF SHARES
SECTION 1.1. AUTHORIZATION .
1.1.1. SERIES D PREFERRED STOCK. The Company has
authorized the issuance and sale to the Investor of 700 shares (the "Purchased
Shares") of its authorized, but unissued shares of Series D Convertible
Preferred Stock (the "Series D Preferred Stock") having the designations, rights
and preferences and other terms and conditions as set forth in the Articles of
Amendment attached hereto as EXHIBIT A (the "Articles of Incorporation").
SECTION 1.2. PURCHASE AND SALE OF PURCHASED SHARES.
1.2.1. PURCHASED SHARES. On the terms and subject to
the conditions set forth in this Agreement, the Company will issue and sell to
the Investor, and the Investor will buy from the Company the Purchased Shares at
a price of $1,000 per share for an aggregate purchase price of $700,000.
1.2.2. THE CLOSING. The purchase and sale shall take
place at a closing (the "Closing") to be held at the office of Williams, Mullen,
Clark & Dobbins, P.C., 900 One Columbus Center, Virginia Beach, Virginia 23462
at 4:00 p.m. on June 30, 1999, or on such other date and at such time as may be
mutually agreed upon by the Company and the Investor, (the "Closing Date"). At
the Closing, the Company will deliver to the Investor a certificate for the
Purchased Shares against delivery to the Company of a receipt of a wire
transfer, or of a certified check in payment of the full purchase price
therefor.
1.2.3. USE OF PROCEEDS. The Company shall use the
proceeds from the sale of the Purchased Shares for the purpose of paying
Williams, Mullen, Clark & Dobbins the $23,000 of outstanding legal fees due them
by the Company, to retire certain existing debt and for general working capital
purposes, but only to the extent permitted by the rules and regulations
promulgated from time to time by the Small Business Administration (the "SBA").
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ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Investor to enter into this Agreement, except as
set forth in the Disclosure Schedule attached hereto, the Company represents and
warrants that:
SECTION 2.1. BUSINESS; ORGANIZATION, CORPORATE POWER AND AUTHORITY,
ETC. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida and has full corporate power and
authority to own and hold its properties and to carry on its business as
presently conducted. The Company is duly licensed or qualified and in good
standing as a foreign corporation authorized to do business in all jurisdictions
in which the character of property owned or leased, or the nature of the
activities conducted by it, makes such licensing or qualification necessary,
except where the failure to so qualify would not have a material adverse effect
on the business, prospects, assets or condition, financial or otherwise, or
operations of the Company and each subsidiary of the Company taken as a whole
("Material Adverse Effect"). Except as set forth in Section 2.1 of the
Disclosure Schedule, the Company has no Subsidiaries and does not own of record
or beneficially any shares of capital stock or securities convertible into
capital stock of, or any other proprietary interest in, any Person.
SECTION 2.2. VALIDITY. The Company has all necessary power and
authority, and has taken all action required to execute, deliver and perform
this Agreement, the Investor Rights Agreement referred to in Section 4.1.5
hereof (the "Investor Rights Agreement"), the Registration Rights Agreement
referred to in Section 4.1.6 hereof (the "Registration Rights Agreement") the
Stock Purchase Warrant referred to in Section 4.1.7 hereof (the "Stock Purchase
Warrant"), and to issue, sell and deliver the Purchased Shares. This Agreement,
the Purchased Shares, the Investor Rights Agreement, the Registration Rights
Agreement, the Stock Purchase Warrant and all other documents and instruments
executed by the Company pursuant hereto when delivered, are and will be duly
authorized, valid and binding obligations of the Company, enforceable against
the Company, in accordance with their respective terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors; equitable principles limiting rights to specific performance; and, with
respect to the enforceability of the provisions set forth in the Registration
Rights Agreement, applicable federal securities law. Upon the issuance, sale and
delivery of the Purchased Shares in accordance with the terms hereof, the
Purchased Shares will be validly issued, fully paid and non-assessable and will
be free and clear of all liens, charges, restrictions, claims and encumbrances
of any kind, subject to restrictions on transfer under federal and state
securities laws, this Agreement, the Investor Rights Agreement and the Company's
Articles of Incorporation.
SECTION 2.3. CAPITALIZATION; STATUS OF CAPITAL STOCK. The Company
has, or before the Closing will have, a total authorized capitalization
consisting of (i) 50,000,000 shares of Common Stock ("Common Stock"), of which
13,654,402 shares are issued and outstanding and (ii) 1,000,000 shares of
Preferred Stock ("Preferred Stock") of which 1,500 shares of Series C Preferred
Stock is issued and outstanding and of which 700 shares will be designated
Series D Preferred Stock. On the date hereof, without giving effect to the
transactions contemplated hereby, no shares of Preferred Stock are issued or
outstanding other than the 1,500 shares of Series C Preferred Stock. All of the
issued and outstanding shares of common stock have been duly authorized and
validly issued, are fully paid, and non-assessable, and were issued in
compliance with all applicable state and federal securities laws. Except as set
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forth in Section 2.3 of the Disclosure Schedule, the Company has no options or
rights to purchase shares of its capital stock, or securities convertible into
shares of its capital stock, authorized, issued or outstanding, nor is the
Company obligated in any manner to issue shares of its capital stock or
securities convertible into or evidencing any right to acquire shares of its
capital stock, or to distribute to holders of any of its capital stock any
evidence of indebtedness or assets; (b) no Person has any preemptive right,
right of first refusal or similar right to acquire additional shares of capital
stock in connection with the sale and purchase of the Purchased Shares pursuant
to this Agreement or otherwise; (c) there are no restrictions on the transfer of
the shares of capital stock of the Company, other than those imposed by relevant
state and federal securities laws or the Company's Articles of Incorporation
(other than those contained in the Investor Rights Agreement); (d) no Person has
any right to cause the Company to effect the registration under the Securities
Act of 1933, as amended (the "1933 Act"), of any shares of capital stock or any
other securities (including debt securities) of the Company (other than those
contained in the Registration Rights Agreement or in that certain registration
rights agreement by and between the Company and the Investor dated October 15,
1998); (e) the Company has no obligation (other than that contained in that
certain Series C Preferred Stock Purchase Agreement by and between the Company
and the Investor dated October 15, 1998) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein, or to pay any
dividend or make any other distribution in respect thereto; and (f) there are no
voting trusts, stockholders' agreements, or proxies relating to any securities
of the Company. The Company has heretofore delivered to the Investor true and
correct copies of its Articles of Incorporation and Bylaws, each as amended and
in effect on the date hereof and certified by the Company's Secretary.
SECTION 2.4. TAXES. The Company is a "C" corporation. The Company
has a fiscal year end of December 31 and has accurately prepared, to the best of
its knowledge, and timely filed, or has made provision for the timely filing of,
all federal, state and other tax returns that are required to be filed by it and
has paid or made provision for the payment of all taxes that have become due
pursuant to such returns and, to the best of the Company's knowledge, all other
taxes, assessments and governmental charges which have become due and payable,
including, without limitation, all taxes which the Company is obligated to
withhold from amounts owing to employees, creditors and third parties. No
deficiency assessment with respect to or proposed adjustment of the Company's
federal, state, or other taxes is pending or threatened in writing. There is no
tax lien, whether imposed by any Federal, state, or other taxing authority,
outstanding against the assets, properties or business of the Company. Neither
the Company nor any of its stockholders has ever filed a consent pursuant to
Section 341(f) of the Code, relating to collapsible corporations.
SECTION 2.5. LITIGATION. There is no action, suit, proceeding or
investigation pending or threatened in writing against or affecting the Company
which might result, either in any case or in the aggregate, in or have a
Material Adverse Effect, or which questions the validity of, or hinders the
enforceability or performance of this Agreement, the Investor Rights Agreement,
the Registration Rights Agreement, the Stock Purchase Warrant or the Purchased
Shares, or any action taken or to be taken pursuant hereto; nor, to the best of
the Company's knowledge, has there occurred any event or does there exist any
condition on the basis of which any litigation, proceeding or investigation
might properly be instituted which may have a Material Adverse Effect. The
Company is not in default with respect to any order, writ, injunction, decree,
ruling or decision of any court, commission, board or other government agency
that might result in or have, either in any case or in the aggregate, a Material
Adverse Effect.
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SECTION 2.6. NO VIOLATIONS. The execution, delivery and performance
of this Agreement, the Investor Rights Agreement, the Registration Rights
Agreement, the Stock Purchase Warrant and any documents or instruments
delivered, executed and performed in connection therewith, the consummation of
the transactions contemplated hereby (including the issuance, sale and delivery
of the Purchased Shares), and compliance with the provisions hereof, will not
violate any provision of law, the Articles of Incorporation or Bylaws, as
amended, of the Company, any order of any court or other agency of government or
indenture, agreement or other instrument to which the Company is bound, or
conflict with, result in the breach of or constitute (with due notice or lapse
of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company in each case which would have a Material
Adverse Effect.
SECTION 2.7. COMPLIANCE WITH OTHER INSTRUMENTS; NONE BURDENSOME.
2.7.1. OTHER AGREEMENTS. The Company is not a party
to or bound by any agreement, contract or commitment or subject to any charter,
bylaw or other corporate restriction, which has a Material Adverse Effect, or
which in the future has a reasonable possibility (so far as the Company can
reasonably foresee, assuming, in the case of any contract, agreement or
commitment, that it is performed in accordance with its terms by all parties
thereto) of having a Material Adverse Effect.
2.7.2. OTHER AGREEMENTS OF OFFICERS, ETC. To the best
of the Company's knowledge, no officer or Key Employee of the Company is a party
to or bound by any agreement, contract or commitment, or subject to any
restriction, which has a Material Adverse Effect, or which in the future has a
reasonable possibility (so far as the Company can reasonably foresee) of having
a Material Adverse Effect or question the right of any such Person to
participate in the affairs of the Company. To the best of the Company's
knowledge, no Key Employee of the Company has any present intention of
terminating his or her employment with the Company, and the Company has no
present intention of terminating any such employment.
SECTION 2.8. GOVERNMENTAL CONSENTS, ETC. No consents, approvals or
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any federal, state or local governmental authority on the part
of the Company are required as a condition precedent to the valid execution and
delivery of this Agreement, the Investor Rights Agreement, the Registration
Rights Agreement, the Stock Purchase Warrant or the valid offer, issue, sale and
delivery of the Purchased Shares.
SECTION 2.9. TRANSACTIONS WITH AFFILIATES. There are no loans,
leases or other continuing transactions between the Company and any director or
officer of the Company, or any member of such director's or officer's immediate
family, or any Person controlled by them, or such directors or officers or their
immediate families.
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SECTION 2.10. COMPLIANCE WITH LAW. The Company is currently in
compliance in all material respects with all federal and state laws, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services and has obtained all material licenses, permits,
approvals and authorizations necessary or required to conduct its business and
affairs as previously and currently conducted and as the Company intends to
conduct it in the future.
SECTION 2.11. FINANCIAL STATEMENTS. The Company has delivered to the
Investor its Form 10-QSB filed with the U.S. Securities and Exchange Commission,
for the quarter ending March 31, 1999 and the related statements of operations,
retained earnings and statement of cash flows for the year then ended, and the
unaudited balance sheet and unaudited statement of operations for the period
ending April 31, 1999, copies of which financial statements are contained in
Section 2.11 of the Disclosure Schedule (the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") which have been applied on a consistent basis
throughout the periods indicated. The Financial Statements fairly present the
financial condition and operating results of the Company as of the dates and
during the periods indicated therein, are correct and complete in all material
respects, and are consistent with the books and records of the Company (which
books and records are correct and complete in all material respects), subject to
(in the case of the unaudited statements) normal recurring year-end audit
adjustments which are neither individually nor in the aggregate material.
SECTION 2.12. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set
forth on the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to March 31, 1998 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under GAAP to be reflected in the Financial Statements, which, in both
cases, individually or in the aggregate, are not material to the financial
condition or operating results of the Company.
SECTION 2.13. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31,
1998, there has not been:
2.13.1. any change in the consolidated assets,
liabilities, prospects, condition (financial or otherwise), affairs, earnings,
business, or operations of the Company from that reflected in the balance sheet
as of March 31, 1998, referred to in Section 2.11 above;
2.13.2. any materially adverse change in the
contingent obligations of the Company by way of guaranty or any assurance of
performance or payment, endorsement, indemnity, warranty or otherwise, except
changes in the ordinary course of business which have not been, either in any
case or in the aggregate, materially adverse;
2.13.3. any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the properties of
the Company, taken as whole;
2.13.4. any waiver by the Company of a valuable right
or of a material debt owed to it;
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2.13.5. any loans made by the Company to the Company's
employees, officers or directors other than advances of expenses made in the
ordinary course of business or in connection with employee stock purchases;
2.13.6. any declaration or payment of any dividend or
other distribution of the assets of the Company or any direct or indirect
redemption, purchase or acquisition of any of the Company's securities;
2.13.7. any labor organization activity or labor
unrest;
2.13.8. any material increase in the compensation of
any of the Company's Key Employees, officers or directors;
2.13.9. any resignation or termination of employment
of any officer or Key Employee of the Company;
2.13.10. any agreement entered into by the Company to
do any of the foregoing matters covered by Sections 2.13.1 through 2.13.9; or
2.13.11. any other event or condition of any character
which has had a Material Adverse Effect (given in light of the disclosure
contained in the Financial Statements and the Company's Business Plan).
SECTION 2.14. MATERIAL CONTRACTS. Except for this Agreement, the
Investor Rights Agreement, the Registration Rights Agreement, the Stock Purchase
Warrant and the contracts of the Company set forth in Section 2.14 of the
Disclosure Schedule (collectively, the "Contracts"), the Company is not a party
to or otherwise bound by any written or oral:
2.14.1. contract or series of contracts with the same
Person for the purchase of machinery, equipment, goods or services, or the
furnishing of services, which contracts require the future expenditure by the
Company of more than $25,000;
2.14.2. contract with any labor union (and, to the
best of the Company's knowledge, no organizational effort is being made with
respect to any of their employees);
2.14.3. contract or other commitment with any supplier
containing any provision permitting any party other than the Company to
renegotiate the price or other terms, or containing any pay-back or other
similar provision, upon the occurrence of a failure by the Company to meet its
obligations under the contract when due or the occurrence of any other event;
2.14.4. contract for the future purchase of fixed
assets or for the future purchase of materials, supplies or equipment in excess
of the greater of $10,000 or its normal operating requirements;
2.14.5. contract for the employment of any Key
Employee, officer or other person on a full-time or consulting basis, which is
not terminable on notice without cost or liability to the Company, except normal
severance arrangements and accrued vacation pay;
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2.14.6. bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or other plan, contract
or understanding pursuant to which benefits are provided to any employee of the
Company (other than group insurance plans applicable to employees generally);
2.14.7. agreement or indenture relating to the
borrowing of money or to the mortgaging or pledging of, or otherwise placing a
lien or security interest on, any asset of the Company or any agreement or
instrument evidencing any guaranty by the Company of payment or performance by
any other Person;
2.14.8. voting trust or agreement, stockholders'
agreement, pledge agreement, buy-sell agreement or first refusal or preemptive
rights agreement relating to any securities of the Company other than the
Investor Rights Agreement and that certain investor rights agreement by and
between the Company and Investor dated October 15, 1998;
2.14.9. agreement or obligation (contingent or
otherwise) to issue, sell or otherwise distribute or to repurchase or otherwise
acquire or retire any shares of its capital stock or any of its other equity
securities;
2.14.10. agreement under which the Company has
advanced or agreed to advance money, or under which the Company has agreed to
lease any property as lessee or lessor for annual lease payments in excess of
$5,000;
2.14.11. agreement under which the Company has granted
any person any registration rights, other than the Registration Rights Agreement
and that certain registration rights agreement by and between the Company and
Investor dated October 15, 1998;
2.14.12. any agreement under which the Company has
limited or restricted its right to compete with any Person in any respect;
2.14.13. contract or other commitment involving more
than $5,000, and not in the ordinary course of the Company's business;
2.14.14. agreement providing for disposition of the
business, assets or shares of the Company, agreement of merger or consolidation
to which the Company is a party or letter of intent with respect to the
foregoing; or
2.14.15. agreement or letter of intent with respect to
the acquisition of the business, assets or shares of any other Person.
The Company has supplied to or made available for review by counsel to
the Investor copies of all of the Contracts to which it is a party that counsel
has requested in writing. The Company, and each other party thereto, have in all
material respects performed all material obligations required to be performed by
such Persons to date under the Contracts, have received no written notice of
default and are not in default under any of the Contracts, unless such default
or failure to perform would not have a Material Adverse Effect. The Company is
in compliance in all material respects with the terms and provisions of its
Articles of Incorporation and Bylaws, as amended and in effect on the date
hereof.
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SECTION 2.15. TITLE TO ASSETS. With the exception of those of its
properties which are under lease, the Company has good title to, all of its
properties and assets and, except as set forth in Section 2.15 of the Disclosure
Schedule, there are no liens or other security interests outstanding against any
of these properties and assets. The term "properties" as used herein shall
include all property of whatever nature used by the Company in the conduct of
its business. All leases pursuant to which the Company leases real or personal
property are in good standing and are valid and effective in accordance with
their respective terms and there exists no default on the part of the Company or
other occurrence or condition which could result in a default or termination
thereof.
SECTION 2.16. COMPLIANCE WITH SECURITIES LAWS. Based in part on the
representations of the Investor set forth in Section 3 below, the Company has
complied with all applicable United States federal and state securities laws in
connection with the offer, issuance and sale of the Purchased Shares concurrent
with the closing of this transaction. The Company has not either directly or
through any agent, offered any securities to, or otherwise approached,
negotiated or communicated in respect of any securities with, any Person so as
thereby to require that the offer or sale of the Purchased Shares be registered
pursuant to the provisions of Section 5 of the 1933 Act or the registration or
qualification provisions of the blue sky laws of any state. Based in part on the
representations of the Investor set forth in Section 3 below, the offer, sale
and issuance of the Purchased Shares in conformity with the terms of this
Agreement are exempt from the registration requirements of Section 5 of the 1933
Act and all applicable state securities laws.
SECTION 2.17. INTELLECTUAL PROPERTY.
2.17.1. INTELLECTUAL PROPERTY ASSETS. For purposes of
this Agreement, the term "Intellectual Property Assets" includes:
2.17.1.1. the name Triangle Imaging Group,
Inc., all fictional business names, trading names, registered and unregistered
trademarks, service marks, and applications (collectively, "Marks");
2.17.1.2. all patents, patent applications,
and inventions and discoveries that may be patentable (collectively, "Patents");
2.17.1.3. all copyrights in both published
works and unpublished works (collectively, "Copyrights");
2.17.1.4. all rights in mask works
(collectively, "rights in Mask Works");
2.17.1.5. all know-how, trade secrets,
confidential information, customer lists, software, technical information, data,
process technology, plans, drawings, and blue prints (collectively, "Trade
Secrets"); owned, used, or licensed by the Company as licensee or licensor.
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2.17.2. AGREEMENTS. Section 2.17.2 of the Disclosure
Schedule contains a complete and accurate list and summary description of all
contracts or agreements relating to the Intellectual Property Assets to which
the Company is a party or by which the Company is bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for commonly
available software programs with a value of less than $10,000 under which the
Company is the licensee. There are no outstanding and, to the Company's and the
Principal Shareholder's knowledge, no threatened disputes or disagreements with
respect to any such agreement.
2.17.3. KNOW-HOW NECESSARY FOR THE BUSINESS.
2.17.3.1. The Company is the owner of all right,
title, and interest in and to each of the Intellectual Property Assets necessary
for the operation of the Company's business as it is currently conducted or as
reflected in the Business Plan given to the Investor free and clear of all
liens, security interests, charges, encumbrances, equities, and other adverse
claims, and has the right to use without payment to a third party all of the
Intellectual Property Assets.
2.17.3.2. To the knowledge of the Company and
the Principal Shareholder, no employee of the Company has entered into any
contract or agreement that restricts or limits in any way the scope or type of
work in which the employee may be engaged or requires the employee to transfer,
assign, or disclose information concerning his work to anyone other than the
Company.
2.17.4. PATENTS.
2.17.4.1. Section 2.17.4 of the Disclosure
Schedule contains a complete and accurate list and summary description of all
Patents. The Company is the owner of all right, title, and interest in and to
each of the Patents, free and clear of all liens, security interests, charges,
encumbrances, entities, and other adverse claims.
2.17.4.2. All of the issued Patents are
currently in compliance with formal legal requirements (including payment of
filing, examination, and maintenance fees and proofs of working or use), are
valid and enforceable, and are not subject to any maintenance fees or taxes or
actions falling due within 90 days after the Closing Date.
2.17.4.3. No Patent has been or is now involved
in any interference, reissue, reexamination, or opposition proceeding. To the
Company's and the Principal Shareholder's knowledge, there is no potentially
interfering patent or patent application of any third party.
2.17.4.4. No Patent is infringed or has been
challenged or threatened in any way. None of the products manufactured and sold,
nor any process or know-how used, by the Company infringes or is alleged to
infringe any patent or other proprietary right of any other Person.
2.17.4.5. All products made, used, sold under
the Patents have been marked with the property patent notice.
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2.17.5. TRADEMARKS.
2.17.5.1. Section 2.17.5 of the Disclosure
Schedule contains a complete and accurate list and summary description of all
Marks. The Company is the owner of all right, title, and interest in and to each
of the Marks, free and clear of all liens, security interests, charges,
encumbrances, requires, and other adverse claims.
2.17.5.2. All Marks that have been registered
with the United States Patent and Trademark Office (which are listed on Section
2.17.5 of the Disclosure Schedule) are currently in compliance with all formal
legal requirements (including the timely post registration filing of affidavits
of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fee or taxes or actions
falling due within 90 days after the Closing Date.
2.17.5.3. No Mark has been or is now involved in
any opposition, invalidation, or cancellation nor, to the Company's and the
Principal Shareholder's knowledge, is any such action threatened with respect to
any of the Marks.
2.17.5.4. To the Company's and the Principal
Shareholder's knowledge, there is no potentially interfering trademark or
trademark application of any third party.
2.17.5.5. To the Company's and the Principal
Shareholder's knowledge, no Mark is infringed or has been challenged or
threatened in anyway. None of the Marks used by the Company infringes or is
alleged to infringe any trade name, trademark, or service mark of any third
party.
2.17.6. COPYRIGHTS.
2.17.6.1. Section 2.17.6 of the Disclosure
Schedule contains a complete and accurate list and summary description of all
Copyrights which are material to the conduct of the Company's business. The
Company is the owner of all right, title, and interest in and to each of the
Copyrights, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
2.17.6.2. All the Copyrights which are material
to the conduct of the Company's business have been registered and are currently
in compliance with formal legal requirements, are valid and enforceable, and are
not subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date.
2.17.6.3. No Copyrights which are material to
the conduct of the Company's business are infringed or, to the Company's or the
Principal Shareholder's knowledge, nor have any such Copyrights been challenged
or threatened in any way. None of the subject matter of any of the Copyrights
which are material to the conduct of the Company's business infringes or is
alleged to infringe any copyright of any third party or is a derivative work
based on the work of a third party.
2.17.6.4. All works encompassed by the
Copyrights which are material to the conduct of the Company's business have been
marked with the property copyright notice.
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2.17.7. TRADE SECRETS.
2.17.7.1. With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any individual.
2.17.7.2. The Company has taken reasonable
precautions calculated to protect the secrecy, confidentiality, and value of its
Trade Secrets.
2.17.7.3. The Company has good title and an
absolute (but not necessarily exclusive) right to use the Trade Secrets. The
Trade Secrets are not part of the public knowledge or literature, and, to the
Company's knowledge, have not been used, divulged, or appropriated either for
the benefit of any person or to the detriment of the Company. No Trade Secret is
subject to any adverse claim or has been challenged or threatened in any way.
SECTION 2.18. ENVIRONMENT AND SAFETY LAWS. To the knowledge of the
Company and having received no notice to the contrary, the Company is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety and no material expenditures are
or will be required in order to comply with any such existing or pending
statute, law or regulation.
SECTION 2.19. MINUTE BOOKS. The copy of the minute book of the Company
provided to the Investor's counsel contains (a) minutes of all meetings of
directors and all actions by written consent without a meeting by the directors
since the date of incorporation (and accurately reflects all actions by the
directors and any committee of the directors and stockholders with respect to
all transactions referred to in such minutes in all material respects), and (b)
a complete and correct copy of the Company's Articles of Incorporation, Bylaws,
and stock transfer ledger.
SECTION 2.20. BANKRUPTCY. The Company is not bankrupt or insolvent, nor
is it a party to any current or threatened bankruptcy, insolvency or similar
proceeding.
SECTION 2.21. NO GUARANTIES. The Company has not guaranteed the
obligations or liabilities of any other person, firm or corporation.
SECTION 2.22. INSURANCE. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace fully any of its
properties that might be damaged or destroyed. The Company has in full force and
effect products liability and errors and omissions insurance with coverage
limits as set forth in Schedule 2.22. Section 2.22 of the Disclosure Schedule
sets forth with respect to each insurance policy (i) the name of the insurance
carrier, and (ii) a description of the coverage.
SECTION 2.23. MANUFACTURING AND MARKETING RIGHTS. The Company has
neither granted rights to manufacture, produce, assemble, license, market, or
sell its products to any other Person nor has the Company derived its rights to
manufacture, produce, assemble, license, market or sell its products from any
other Person and, except as set forth on such schedule, is not bound by any
agreement that affects the Company's right to develop, manufacture, assemble,
distribute, market, or sell its products.
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SECTION 2.24. RETURNS, COMPLAINTS AND WARRANTIES. The Company has
received no customer complaints concerning alleged defects in its products (or
the design thereof) that, if true, would have a Material Adverse Effect. The
Company extends to its customers only those limited warranties set forth on
Section 2.24 of the Disclosure Schedule. The Company's limited warranty
obligations have never exceeded in any material amount the accruals the Company
makes for such obligations.
SECTION 2.25. FINANCIAL SOLVENCY. The Company is not entering into the
arrangements contemplated by this Agreement and the other documents contemplated
by this Agreement with actual intent to hinder, delay or defraud either present
or future creditors. On and as of the date hereof on a pro forma basis after
giving effect to the transactions contemplated by this Agreement:
2.25.1. The present fair salable value of the assets
of the Company (on a going concern basis) will exceed the probable liability of
the Company on its debts (including its contingent obligations);
2.25.2. The Company has not incurred, nor does it
intend to or believe that it will incur, debts (including contingent
obligations) beyond its ability to pay such debts as such debts mature (taking
into account the timing and amounts of cash to be received from any source, and
of amounts to be payable on or in respect of debts); and the amount of cash
available to the Company after taking into account all other anticipated uses of
funds is anticipated to be sufficient to pay all such amounts on or in respect
of debts, when such amounts are required to be paid; and
2.25.3. The Company will have sufficient capital with
which to conduct its present and proposed business and the property of the
Company does not constitute unreasonably small capital with which to conduct its
current business at present levels of operations.
For purposes of this Section 2.25, "debt" means any liability on a (i)
right to payment whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured; or (ii) right to an equitable remedy
for breach of performance if such breach gives rise to a payment, whether or not
such a right to an equitable remedy is reduced to judgment, fixed, contingent,
unmatured, disputed, undisputed, secured, or unsecured.
SECTION 2.26. DISCLOSURE.
2.26.1. Neither this Agreement, the Financial
Statements, the Company's public filings, the Business Plan, nor any
certificate, list, exhibit or written statement furnished by the Company to the
Investor or its counsel in connection herewith contains any untrue statement of
a material fact or, when read together, omits to state any material fact
necessary in order to make the statements contained therein not misleading to a
reasonable person in the light of the circumstances under which they are or were
made. There exists no fact or circumstances which has a Material Adverse Effect,
or which in the future has a reasonable possibility of having a Material Adverse
Effect, as the Company's business is presented currently and as it is presented
to be conducted in the future in the Business Plan, which has not been reflected
in the Financial Statements or as set forth in this Agreement or the Exhibits
and Disclosure Schedule hereto or fully disclosed in a written statement or
certificate furnished to the Investor by the Company pursuant to this Agreement.
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2.26.2. The projections contained in the Business Plan
or which have otherwise been delivered to the Investor for each of the fiscal
years ended December 31, 1999, and 2000, copies of which are contained in the
Disclosure Schedule of the Company have been prepared in good faith by the
principal financial officer of the Company using reasonable financial planning
assumptions which are disclosed in sufficient detail. The Company has no reason
to believe that such projections are incorrect or misleading in any material
respect. No representation is made as to whether the forecasted results will in
fact be realized; the Company's actual results in the future can be expected,
notwithstanding the accuracy of the representations contained in the preceding
two sentences, to vary from those forecasted, and such variations may be
material.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INVESTOR
In order to induce the Company and the Principal Shareholder to enter
into this Agreement, the Investor represents and warrants to the Company and the
Principal Shareholder that:
SECTION 3.1. VALIDITY. This Agreement, the Investor Rights Agreement,
the Registration Rights Agreement, the Stock Purchase Warrant and all other
documents and instruments executed by the Investor pursuant hereto, have each
been duly executed and delivered by the Investor and each is a legal, valid and
binding obligation of the Investor enforceable against the Investor in
accordance with its terms. All consents, approvals or authorizations of any
Person, and all qualifications, designations, declarations or filings with any
governmental authority, on the part of the Investor required as a condition
precedent to the valid execution and delivery of this Agreement, the Investor
Rights Agreement, the Registration Rights Agreement and the Stock Purchase
Warrant shall have been obtained or completed by the Investor prior to, and be
effective as of, the Closing.
SECTION 3.2. INVESTMENT INTENT. The Investor is acquiring the Purchased
Shares and the Stock Purchase Warrant for its own account, for investment, and
not with a view to any "distribution" thereof within the meaning of the 1933 Act
nor with any present intention of distributing or selling the same, or the
shares obtained upon conversion or exercise thereof, as the case may be; and,
except as contemplated by this Agreement, the Investor Rights Agreement, the
Registration Rights Agreement and the Stock Purchase Warrant and all the
documents and instruments executed by the Investor pursuant hereto, the Investor
has no present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof. The officers
of the Company have made available to the Investor any and all written
information which it has requested and have answered to the Investor's
satisfaction, all inquiries made by the Investor; the Investor has adequate net
worth and means of providing for its current needs and contingencies and to
sustain a complete loss of its investment in the Company. Nothing contained in
this Section 3.2 shall be construed as a waiver of any rights the Investor may
have under this Agreement or otherwise.
SECTION 3.3. RESALE RESTRICTIONS. The Investor understands that because
the Purchased Shares, the Stock Purchase Warrant, the shares of Common Stock
underlying the Stock Purchase Warrant (the "Warrant Stock"), and the shares
receivable upon conversion of the Purchased Shares (the "Conversion Stock") have
not been registered under the 1933 Act or any applicable state securities laws,
it cannot dispose of any or all of the Purchased Shares, the Stock Purchase
Warrant, Warrant Stock, or Conversion Stock unless the Purchased Shares, the
Stock Purchase Warrant, the Warrant Stock, or Conversion Stock are subsequently
registered under the 1933 Act and applicable state securities laws or exemptions
from such registration are available. The Investor acknowledges and understands
that, except as provided in the Registration Rights Agreement, it has no
independent right to require the Company to register the Purchased Shares, the
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Stock Purchase Warrant, Warrant Stock, or the Conversion Stock under the 1933
Act or any state securities law. The Investor understands that the Company may,
as a condition to the transfer of any of the Purchased Shares, the Stock
Purchase Warrant, Warrant Stock, or the Conversion Stock require that the
request for transfer be accompanied by opinion of counsel the identity of which
is deemed reasonably acceptable to the Company, in form and substance
satisfactory to the Company, to the effect that the proposed transfer does not
result in violation of the 1933 Act and applicable state securities laws, unless
such transfer is covered by an effective registration statement under the 1933
Act and applicable state securities laws. The Investor understands that each
Warrant certificate representing the Warrant Shares and the Purchased Shares
will bear both of the following legends or ones substantially similar thereto
and that each certificate representing the Warrant Stock and the Conversion
Stock will bear the first of the following legends:
These securities have not been registered
under the Securities Act of 1933 or under any
state securities laws. These securities have
been acquired for investment and not with a
view to distribution or resale, and may not
be sold, mortgaged, pledged, hypothecated or
otherwise transferred without an effective
registration statement for such shares under
the Securities Act of 1933 and any applicable
state securities act(s), or an opinion of
counsel for the corporation that registration
is not required under such acts.
The securities represented by this
certificate are subject to the terms and
conditions of an Investor Rights Agreement
dated as of June 30, 1999. A copy of such
agreement is on file at the principal
executive offices of Triangle Imaging Group,
Inc., which will furnish copies of such
agreement to the holder of this certificate
upon request and without charge.
SECTION 3.4. DILIGENCE. The Investor has carefully reviewed the
representations concerning the Company contained in this Agreement and all
scheduled exceptions thereto, has read the Business Plan, has made detailed
inquiry concerning the Company, its business and its personnel, including all of
the securities filings the Company has publicly filed with the Securities and
Exchange Commission in 1998 and 1999, and is knowledgeable and experienced in
the making of venture capital investments, is able to bear the economic risk of
loss of its investment in the Company, has been granted the opportunity to make
a thorough investigation of the affairs of the Company, and has availed itself
of such opportunity to the extent it has deemed necessary, either directly or
through its authorized representative.
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SECTION 3.5. RELIANCE. The Investor has been advised that the Purchased
Shares delivered hereunder have not been and are not being registered under the
1933 Act and that the Company in issuing the Purchased Shares is relying upon,
and will rely upon, among other things, the representations and warranties of
the Investor contained in this Section 3 in concluding that each such issuance
is a "private offering" and does not require compliance with the registration
provisions of the 1933 Act.
SECTION 3.6. STATUS. The Investor is an "accredited investor" as that
term is defined in Rule 501 of Regulation D under the 1933 Act.
ARTICLE 4
CONDITIONS OF PURCHASE
SECTION 4.1. INVESTOR CONDITION. The Investor's obligation to purchase
and pay for the Purchased Shares hereunder shall be subject to compliance, or
the waiver in writing by the Investor of compliance, by the Company and the
Principal Shareholder in all material respects with their agreements herein
contained and to the fulfillment on or before and at the Closing of the
following conditions:
4.1.1. CERTIFICATE OF COMPANY. The representations and
warranties of the Company contained in this Agreement, including but not limited
to the representations and warranties made in Section 2 shall be true and
correct in all material respects with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date; the
Company shall not have suffered an event resulting in a Material Adverse Effect
prior to the Closing; the conditions hereafter specified in this Article 4 shall
have been satisfied and the Investor shall have received a duly executed
certificate of the Chief Executive Officer of the Company, dated as of the
Closing Date, certifying such matters.
4.1.2. OPINION OF COUNSEL. The Investor shall have
received from legal counsel to the Company experienced in matters of Florida
corporate law, their opinion, dated the Closing Date, substantially in the form
attached as EXHIBIT C.
4.1.3. AUTHORIZATION; CONSENTS. The Board of Directors
and stockholders of the Company, to the extent necessary, shall have duly
adopted resolutions in form satisfactory to the Investor authorizing the Company
to consummate the transactions contemplated hereby to which it is a party in
accordance with the terms hereof, and the Investor shall have received a duly
executed certificate of the Secretary or an Assistant Secretary of the Company
dated the Closing Date setting forth a copy of such resolutions and such other
matters as may be requested by the Investor. The Company shall have obtained any
and all other consents, permits and waivers and made all filings necessary or
appropriate for consummation of the transactions contemplated by this Agreement.
4.1.4. ARTICLES OF INCORPORATION. The Articles of
Incorporation of the Company shall read as set forth in the Secretary's
certificate.
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4.1.5. INVESTOR RIGHTS AGREEMENT. The Company, the
Investor and the Principal Shareholder shall have executed and delivered a
Investor Rights Agreement, substantially in the form of EXHIBIT D.
4.1.6. REGISTRATION RIGHTS AGREEMENT. The Company and
the Investor shall have executed and delivered a Registration Rights Agreement,
substantially in the form of EXHIBIT E.
4.1.7. STOCK PURCHASE WARRANT. The Company and the
Investor shall have executed and delivered a Stock Purchase Warrant,
substantially in the form of EXHIBIT F.
4.1.8. ALL PROCEEDINGS SATISFACTORY. All corporate and
other proceedings taken prior to or at the Closing in connection with the
transactions contemplated by this Agreement, and all documents and evidences
incident thereto, shall be reasonably satisfactory in form and substance to the
Investor and the Investor shall receive such copies thereof and other materials
(certified, if requested) as they may reasonably request in connection
therewith.
4.1.9. APPROVALS. If necessary, the Company shall have
received the requisite approvals of the securities commissioners of the
Commonwealth of Virginia and the State of Florida and such approvals shall be in
full force and effect on the closing date.
4.1.10. PAYMENT OF FEES. The Company shall have paid
from the proceeds of the sale of the Preferred Stock a closing/professional fee
of $35,000 to the Investor, as well as the fees and disbursements of Williams,
Mullen, Clark & Dobbins, counsel to the Investor and SBA counsel.
SECTION 4.2. COMPANY'S CONDITIONS. The Company's obligation to issue
and sell the Purchased Shares hereunder shall be subject to compliance by the
Investor in all material respects with its agreements herein contained and to
the fulfillment on or before and at the Closing of the following conditions:
4.2.1. CERTIFICATE OF INVESTOR. The representations
and warranties of the Investor contained in this Agreement, including but not
limited to the representations and warranties made in Section 6, shall be true
and correct in all material respects with the same force and effect as those
such representations and warranties had been made on and as of the Closing Date.
4.2.2. FULL PURCHASE PRICE. The Investor shall have
delivered the entire amount of $700,000 in exchange for the Purchased Shares as
provided in this Agreement less the fees and expenses set forth in Section
4.1.10 and 1.2.3.
4.2.3. SBA COMPLIANCE. The terms and conditions of
this Agreement shall be in compliance with all statutes and regulations
governing the Investor as a small business investment company.
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<PAGE>
ARTICLE 5
COVENANTS OF THE COMPANY
Until none of the Purchased Shares are held by the Investor or its
Permitted Transferees, the Company shall comply with the following covenants:
SECTION 5.1. FINANCIAL STATEMENTS. The Company shall maintain a system
of accounts in accordance with generally accepted accounting principles, keep
full and complete financial records and furnish to the Investor on behalf of the
Investor the following reports: (i) no later than 120 days after the end of the
Company's fiscal year-end, audited Financial Statements certified by independent
public accountants of recognized standing (which shall be one of the five
largest independent public accounting firms in the United States, or such other
independent public accountants of recognized national or regional standing as
may be approved by the Investor, such approval not to be unreasonably withheld),
prepared in accordance with generally accepted accounting principles and
practices consistently applied; (ii) by the end of the second week after each
calendar quarter, its internally prepared Financial Statements which shall each
be prepared in a manner consistent with those prepared in the prior quarters.
SECTION 5.2. CONDUCT OF BUSINESS. The Company shall continue to engage
principally in the business described in its public securities filings and the
Business Plan The Company will keep in full force and effect its corporate
existence and will comply in all material respects with all applicable laws and
regulations in the conduct of its business.
SECTION 5.3. PUBLIC ANNOUNCEMENTS. The Company will deliver a copy of
any press release that refers in any way to the Investor prior to distribution
and to allow the Investor a reasonable period of time to provide comments on the
contents of the release. The Company shall promptly deliver to the Investor two
copies of any press releases within five business days after the publication of
such release or filing of such press release or form.
SECTION 5.4. INSURANCE. The Company shall keep its insurable properties
insured by financially sound and reputable insurers against the perils of
liability, casualty, fire and extended coverage in amounts of coverage at least
equal to those customarily maintained by companies in the same or a similar
business of similar size. The Company shall also maintain with such insurers
insurance against other hazards and risks and liability to persons and property,
to the extent and in the manner customary for corporations engaged in the same
or a similar business of similar size.
SECTION 5.5. MAINTENANCE OF PROPERTIES. The Company will maintain all
properties used or useful in the conduct of its business in good repair, working
order and condition as necessary to permit such business to be properly and
advantageously conducted in accordance with its Business Plan.
SECTION 5.6. AFFILIATED TRANSACTIONS. All transactions between the
Company and any officer, Key Employee, director or stockholder of the Company or
Persons controlled by or affiliated with such officer, Key Employee, director or
stockholder, shall be conducted on an arms-length basis, shall be on terms and
conditions no less favorable to the Company than could be obtained from
nonrelated Persons and shall be approved in advance by a majority of
disinterested Directors of the Company after full disclosure of the terms
thereof.
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SECTION 5.7. INSPECTION. The Company shall permit the director
nominated by the Investor to visit and inspect any of the properties of the
Company, including its books of account (and to make copies thereof and take
extracts therefrom), and to discuss its affairs, finances and accounts with the
Company's officers, administrative employees and independent accountants, all at
such reasonable times and as often as may be reasonably requested; provided that
all such information provided to the Investor by the Company will be maintained
as confidential by the Investor and not be disclosed to third parties, and
provided, further, that the Investor shall take all reasonable precautions to
cause the Investor's officers and employees to take all measures reasonably
practicable to maintain the confidentiality of such information.
SECTION 5.8. BOARD OF DIRECTORS MEETINGS. The Company shall cause one
nominee of the Investor, who shall initially be J. Alan Lindauer, to be elected
as a director at all meetings of stockholders, or consents in lieu thereof, for
such purpose during which any of the Preferred Stock is outstanding. The Company
will reimburse all direct out-of-pocket expenses reasonably incurred by the
director of the Company who is the nominee of the Investor in attending meetings
of the Board of Directors or any committee thereof. Any director nominated by
the Investor shall be entitled to the same reimbursement, whether in the form of
cash, stock, options, or stock equivalents, as other members of the Board, plus
reimbursement of all out-of-pocket expenses. The Company shall ensure that
meetings of its full Board of Directors are held no less than once a month in
the first quarter after issuance of the Preferred Stock and, following the
conclusion of the first quarter after issuance of the Preferred Stock, at its
discretion provided that meetings of the full Board shall be held not less than
quarterly each year thereafter. The Company's Articles of Incorporation and
Bylaws shall provide for indemnification and exculpation of directors from
personal liability, to the fullest extent permitted under applicable state law.
The Company shall obtain liability insurance for directors and officers
providing reasonable coverage and the payment of reasonable premiums.
SECTION 5.9. DIVIDENDS. The Company shall pay dividends on the
Purchased Shares pursuant to the terms of the Articles of Incorporation.
SECTION 5.10. LOANS AND ADVANCES. The Company will not make any loan or
advance to, or own any stock or other securities of, any Person (other than any
subsidiary of the Company) except for reasonable advances to employees in the
ordinary course of business.
SECTION 5.11. INDEBTEDNESS. Except for Indebtedness incurred by the
Company to shareholders on an arms length basis which has been approved by the
disinterested members of the Company's Board of Directors, the Company will not
create, incur, assume or suffer to exist any Indebtedness, or repay any
Indebtedness existing on the Closing Date, to its shareholders.
SECTION 5.12. "C" CORPORATION. The Company shall remain a "C"
Corporation.
SECTION 5.13. MAINTENANCE OF INTELLECTUAL PROPERTY ASSETS. At all
times, the Company shall maintain in good standing and take all action that may
be required to maintain all rights in its Intellectual Property Assets,
including, but not limited to, Patents, Trademarks, Copyrights and Trade
Secrets.
SECTION 5.14. KEY MAN LIFE INSURANCE. Within 120 days after the date of
this Agreement, the Company shall have obtained, and thereafter shall maintain
in full force and effect, a key man life insurance policy in the amount of
$700,000 on the life of Harold S. Fischer (the "Principal Shareholder") which
names the Investor as the sole beneficiary and loss payee.
18
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COVENANTS OF THE INVESTOR
SECTION 5.15. RIGHT OF FIRST OFFER. The Investor shall not sell or
transfer any Purchased Shares other than to any transferee who is an affiliate,
as that term is defined in the Investment Company Act of 1940, of the Investor
(including a shareholder of the Investor), unless the Investor first submits a
bona-fide written offer to the Company to purchase such Purchased Shares. The
Investor offer to the Company shall remain open and irrevocable for twenty (20)
business days. During the twenty (20) business day period commencing after the
receipt of such offer, the Company shall have the right to purchase all, but not
less than all, of such Purchased Shares upon such terms and conditions as are
specified in the offer. Promptly upon the expiration of such twenty (20)
business day period, any of such Purchased Shares not so purchased by the
Company may be sold by the Investor to a third party at the same price and upon
terms and conditions not materially less favorable to the Investor (taken as a
whole) than were offered the Company, but may not otherwise be sold without
again complying with this Section for a period of 90 days after expiration of
such twenty (20) business day period.
SECTION 5.16. CONFIDENTIALITY. The Investor and Investor's employees,
agents and representatives will keep confidential and will not disclose or
divulge (other than to Investor's Board of Directors) any confidential,
proprietary or secret information which Investor and/or its employees, agents
and representatives may obtain from the Company pursuant to Financial
Statements, reports, contracts and other materials submitted by the Company to
the Investor pursuant to this Agreement, or pursuant to visitation or inspection
rights granted under this Agreement unless such information is known or until
such information becomes known, to the public other than by action of the
Investor or its agents.
ARTICLE 6
INDEMNIFICATION
SECTION 6.1. INVESTOR INDEMNIFICATION. The Company shall indemnify the
Investor against all claims, losses, damages and liabilities, including legal
and other expenses reasonably incurred in investigating or defending against the
same, arising out of any breach of any representation, warranty or covenant made
by the Company and the Principal Shareholder in Articles 2 and 5 hereof.
SECTION 6.2. COMPANY INDEMNIFICATION. The Investor shall indemnify the
Company against all claims, losses, damages and liabilities, including legal and
other expenses reasonably incurred in investigating or defending against the
same, arising out of any breach of any representation, warranty or covenant made
in Articles 3 and 6 by the Investor.
SECTION 6.3. INDEMNIFICATION GENERALLY. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to this Article 6,
such person (the "Indemnified Party") shall promptly notify the person against
whom such indemnity may be sought (the "Indemnifying Party") in writing. No
indemnification provided for in Section 6.1 or 6.2 shall be available to any
party who shall fail to give notice as provided in this Section 6.3, but the
failure to give such notice shall not relieve the Indemnifying Party or parties
19
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from any liability which it or they may have to the Indemnified Party for
contribution or otherwise on account of the provisions of Section 6.1 or 6.2. In
case any such proceeding shall be brought against any Indemnified Party and it
shall notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such Indemnified Party and shall pay as incurred the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any Indemnified
Party shall have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the Indemnifying Party shall pay as incurred the
fees and expenses of the counsel retained by the Indemnified Party in the event
(i) the Indemnifying Party and the Indemnified Party shall have mutually agreed
to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the Indemnifying Party agrees
to indemnify the Indemnified Party from and against any loss or liability by
reason of such settlement or judgment.
SECTION 6.4. FINAL ADJUDICATION. In the event indemnification arises as
a result of a third party claim against the Indemnifying Party, no
indemnification shall be made effective pursuant to this Article 6 until such
time as the Indemnifying Party shall have been finally adjudicated or otherwise
bound to be liable hereunder to such third party.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. BROKER'S FEE. Each party will indemnify and hold harmless
the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 7.2. SBA COMPLIANCE. Should it be determined that any provision
of this Agreement is in violation of any statute or regulation governing small
business investment companies, the parties agree that any such offending
provision shall be modified or re-written as may be reasonably necessary to
comply with the applicable statute or regulation and effect the parties'
original intent under this Agreement.
SECTION 7.3. AMENDMENTS AND WAIVERS. This Agreement may not be amended
or modified, and no provisions may be waived, without the written consent of the
Company, the Principal Shareholder and the Investor.
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SECTION 7.4. SURVIVAL OF COVENANTS; ASSIGNABILITY OF RIGHTS.
7.4.1. All covenants, agreements, representations and
warranties of the Company and the Principal Shareholder made herein and in the
certificates, lists, exhibits, schedules or other written information delivered
or furnished in connection therewith and herewith shall be deemed material and
to have been relied upon by the Investor, and, except as provided otherwise in
this Agreement, shall survive the entry into of this Agreement for a period of
two (2) years and shall bind the Company's and the Principal Shareholder's
successors and assigns, whether so expressed or not, and, except as provided
otherwise in this Agreement, all such covenants, agreements, representations and
warranties shall inure to the benefit of the Investor's successors and assigns
and to permitted transferees of the Purchased Shares, whether so expressed or
not.
7.4.2. All covenants, agreements, representations and
warranties of the Investor made herein shall be deemed material and to have been
relied upon by the Company, and, except as provided otherwise in this Agreement,
shall survive the delivery of the Purchased Shares and shall bind each of the
Investor's successors and assigns, whether so expressed or not and, except as
provided otherwise in this Agreement, all such covenants, agreements,
representations and warranties shall inure to the benefit of the Company's
successors and assigns whether so expressed or not.
SECTION 7.5. GOVERNING LAW/ENFORCEMENT. This Agreement shall be
governed by and construed in accordance with the substantive laws of the
Commonwealth of Virginia.
SECTION 7.6. JURISDICTION AND VENUE; WAIVER OF JURY TRIAL. The Company
consents to the jurisdiction of the Circuit Court of the City of Norfolk,
Virginia, for the purpose of any suit, action or other proceeding arising out of
any of its obligations arising under this Agreement or with respect to the
transactions contemplated hereby, and expressly waives (a) any and all
objections it may have as to venue in such court and (b) the right to a trial by
jury.
SECTION 7.7. SECTION HEADINGS. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision hereof.
SECTION 7.8. COUNTERPARTS. This Agreement may be executed
simultaneously in any number of counterparts, each of which when so executed and
delivered shall be taken to be an original; but such counterparts shall together
constitute but one and the same document.
SECTION 7.9. NOTICES AND DEMANDS. Any notice or demand which, by any
provision of this Agreement or any agreement, document or instrument executed
pursuant hereto or thereto, except as otherwise provided therein, is required or
provided to be given shall be deemed to have been sufficiently given or served
for all purposes three days after being sent by first class mail, postage and
charges prepaid to the following addresses: if to the Company, at its mailing
address set out above, or at any other address designated by the Company to the
Investor in writing; if to the Principal Shareholder at the Company's address;
if to the Investor at its mailing address of 300 East Main Street, Suite 1380,
Norfolk, Virginia 23510, or at any other address (or facsimile number)
designated by the Investor to the Company in writing with a copy to John M.
Paris, Jr., Williams, Mullen, Clark & Dobbins, 900 One Columbus Center, Virginia
Beach, Virginia 23462; and if to an assignee of the Investor, to its address (or
facsimile number) as designated to the Company in writing. Any notice given by
facsimile pursuant to this Section 7.9 shall be followed by written notice
delivered by Federal Express or similar courier service. Any documents, reports
or other materials which are required to be delivered to the Investor shall be
deemed to have been delivered if delivered to the Investor at the address
indicated above.
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SECTION 7.10. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
SECTION 7.11. DEFINITIONS OF TERMS
SECTION
-------
1933 Act 2.3
Articles of Incorporation 1.1
Closing Date 1.2.2
Common Stock 2.2
Contracts 2.14
Copyright 2.17.1.3
Financial Statements 2.11
Intellectual Property Assets 2.17.1
Investor Rights Agreement 2.2
Marks 2.17.1.1
Mask Works 2.17.1.4
Material Adverse Change 2.5
Material Adverse Effect 2.1
Patents 2.17.1.2
Preferred Stock 2.3
Properties 2.15
Purchased Shares 1.1
Registration Rights Agreement 2.2
SBA 1.2.3
Series D Preferred Stock 1.1
Stock Purchase Warrant 2.2
Trade Secrets 2.17.1.5
Warrant Stock 3.3
BEST KNOWLEDGE. The term "best knowledge", or similar terms when
applied to the Company, means the actual knowledge of its respective Key
Employees and directors having conducted a reasonable independent investigation.
22
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BUSINESS PLAN. The term "Business Plan" means the disclosure contained
in the Company's public filings as well as the financial projections provided
the Investor (a copy of which is included as EXHIBIT C of Section 2.26 of the
Disclosure Schedule).
CERTIFIED. A Financial Statement shall be deemed to be "certified" only
if the person or firm certifying it shall unqualifiedly express the opinion that
it has been prepared in accordance with generally accepted accounting principles
and that the balance sheet included therein fairly presents the financial
position of the Company as at the date thereof and that the statements of income
and of changes in financial position included therein fairly present the results
of operations of the Company for the period indicated. If the person certifying
is a officer of the Company, the certificate shall also state that the Financial
Statements are true, correct and complete. If the person certifying is a member
of an accounting firm, the certificate shall also state that the examination
included such tests of accounting records and such other auditing procedures as
the accountant considered necessary in the circumstances.
INDEBTEDNESS. The term "Indebtedness" shall mean with respect to any
Person (i) all indebtedness or other obligations of such Person for borrowed
money or for the deferred purchase price of property or services, other than for
trade accounts payable incurred in the ordinary course of the Company's
business, (ii) all Indebtedness described in clause (i) of any other Person in
respect of which such Person is liable, contingently or otherwise, to pay or
advance money or property as guarantor, endorser or otherwise (except as
endorser for collection in the ordinary course of business), and (iii) all lease
obligations of such Person which are required, in accordance with generally
accepted accounting principles ("GAAP"), to be capitalized on the books of the
lessee.
KEY EMPLOYEES. The term "Key Employees" shall mean the named executive
officers of the Company, as such persons are determined in accordance with
Section 16 of the Securities Exchange Act of 1934.
PERMITTED TRANSFEREE. The term "Permitted Transferee" shall mean any
purchaser or transferee of Securities who at the time of transfer is an
affiliate, as that term is defined in the Investment Company Act of 1940, of the
Investor (including a shareholder of the Investor). Each such transferee shall
be deemed to be an "Investor" for purposes of this Agreement.
PERSON. The term "Person" shall mean any corporation, association,
partnership, joint venture, organization, business or individual.
SUBSIDIARY. The term "Subsidiary" shall mean any corporation of which a
Person at the applicable time owns or controls, directly or indirectly through
one or more Subsidiaries, a majority of the voting stock.
SECTION 7.12. EXPENSES. Each of the parties hereto shall bear their own
costs and expenses incurred with respect to the negotiation, execution, delivery
and performance of this Agreement.
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SECTION 7.13. ENTIRE AGREEMENT. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with respect to the subjects hereof and thereof.
IN WITNESS, the undersigned have executed this Series D Convertible
Preferred Stock Purchase Agreement as of the day and year first above written.
COMPANY:
TRIANGLE IMAGING GROUP, INC.
By: /s/ HAROLD S. FISCHER
----------------------------------------------------------
Harold S. Fischer, President
and Chief Executive Officer
PRINCIPAL SHAREHOLDER:
By: /s/ HAROLD S. FISCHER
----------------------------------------------------------
Harold S. Fischer, Individually
INVESTOR:
WATERSIDE CAPITAL CORPORATION
By: /s/ GERALD T. MCDONALD
----------------------------------------------------------
Gerald T. McDonald, Secretary/Treasurer
24
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") made as of this 30th
day of June, 1999, by and among TRIANGLE IMAGING GROUP, INC., a Florida
corporation (the "Company"), HAROLD S. FISCHER ("Stockholder"), and WATERSIDE
CAPITAL CORPORATION, a Virginia corporation (collectively, with its successors
and assigns, the "Investor"). (The Company, the Stockholder and the Investor are
each a "Party" and collectively, the "Parties".)
R E C I T A L S:
A. The Company has authorized Fifty Million (50,000,000) shares of
common stock (the "Common Stock");
B. The Company has also authorized One Million (1,000,000) Shares of
Preferred Stock, of which 700 have been designated Series D Convertible
Preferred Stock ("Series D Preferred Stock") with such terms as have been set
forth in the Corporation's Amended Articles of Incorporation ("Articles of
Incorporation");
C. Contemporaneously with the execution and delivery of this Agreement,
(i) the Investor is acquiring from the Company (1) Seven Hundred (700) shares of
Series D Convertible Preferred Stock (the "Preferred Shares") pursuant to a
Series D Convertible Preferred Stock Purchase Agreement dated as of the date
hereof, by and among the Investor, the Company and the Stockholder (the "Stock
Purchase Agreement") and (2) a stock purchase warrant (the "Warrant") to
purchase shares of Common Stock (the "Warrant Stock");
D. Harold S. Fischer is the beneficial owner of 3,691,500 shares of
Common Stock (consisting of 2,000,000 shares held of record by Mr. Fischer,
291,500 shares held by Mr. Fischer's wife, and 1,400,000 shares subject to
immediately exercisable stock options), which represent 24.52% of the issued and
outstanding shares of Common Stock on the date of this Agreement (after giving
effect to the exercise of the stock options). Mr. Fischer disclaims beneficial
ownership of the shares subject to that certain stockholders agreement set forth
in Section 2.3 of the Disclosure Schedule to the Purchase Agreement; and
E. One of the conditions to the investment by the Investor is the
execution and delivery of this Agreement by the Company and the Stockholder.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company, the Stockholder and the Investor
agree as follows:
ARTICLE 1
DEFINITIONS
Intentionally left blank.
ARTICLE 2
BOARD OF DIRECTORS
Section 2.1 INSURANCE. The Company shall maintain directors' and
officers' liability insurance coverage of a type and in an amount set forth in
Schedule 2.22 of the Series D Preferred Stock Purchase Agreement.
ARTICLE 3
PUT RIGHTS
Section 3.1 PUT RIGHTS GENERAL. In addition to such rights as are set
forth in the Articles of Incorporation, the Investor shall have the rights set
forth in this Article 3.
Section 3.2 PUT OF SERIES D PREFERRED STOCK.
3.2.1 At any time after the earlier of (a) a Change
of Control (as defined below) or (b) that date which is five (5) years after the
date of the issuance of the first share of Series D Preferred Stock, the
Investor shall have the right to require the Company to redeem or repurchase up
to all of the shares of Series D Preferred Stock. Following such notice, the
Company shall redeem or repurchase, within 45 days of receipt of such notice,
all of such outstanding shares of Series D Preferred Stock held by the Investor
by paying to the Investor an amount equal to the issuance price of such stock
plus an amount equal to all accrued or unpaid dividends. A "Change of Control"
shall be deemed to occur on (i) the date upon which the Stockholder shall cease
to be employed by the Company on a full-time basis as the Company's President
and Chief Executive Officer, (ii) the date the Stockholder shall cease to be a
director of the Company, (iii) the date the Company's current Chairman of the
Board ceases to be the Chairman of the Board, or (iv) any consolidation, merger,
reorganization or other similar transaction with or into any other corporation
or other entity or person, or any other corporate reorganization, in which the
shareholders of the Company immediately prior to such consolidation, merger or
reorganization, or any transaction or series of related transactions do not hold
shares possessing a majority of votes in the election of directors immediately
after such consolidation, merger or reorganization, or any transaction or series
of transactions.
3.2.2 In addition to the provisions of section 3.2.1,
at any time after the earlier of (a) a Change of Control or (b) that date which
is five years after the date of the issuance of the first share of Series D
Convertible Preferred Stock, the Investor shall have the right to cause the
Stockholder to purchase all 700 shares of Series D Convertible Preferred Stock,
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or such lesser number of shares of Series D Convertible Preferred Stock then
outstanding, by giving written notice thereof to the Stockholder. Following such
notice, the Stockholder shall immediately purchase such shares of Series D
Convertible Preferred Stock by paying to the Investor an amount equal to the
issuance price of such stock plus an amount equal to all accrued or unpaid
dividends thereof.
Section 3.3 REDEMPTION OF SERIES D PREFERRED STOCK. At any time and
from time to time, on not less than thirty (30) days notice to Investor or any
subsequent holder of the Series D Preferred Stock, the Series D Preferred Stock
or any portion thereof may be redeemed by the Company, at the option of the
Company, at a redemption price of $1,000.00 per share plus the payment of all
accrued and unpaid dividends and interest payments due on any unpaid dividends
attributable to the redeemed shares of Series D Preferred Stock.
3.3.1 If the Company desires to exercise its right of
redemption, it shall mail a notice of redemption to each of the registered
holders of the Series D Preferred Stock to be redeemed, first class, postage
prepaid, not later than the thirtieth day before the date fixed for redemption,
at their last address as shall appear on the records of the Company. Any notice
mailed in any manner provided herein shall be conclusively presumed to have been
duly given whether or not the registered holder receives such notice.
3.3.2 The notice of redemption shall specify (i) the
redemption price, (ii) the date fixed for redemption and (iii) the place where
the Series D Preferred Stock certificates shall be delivered and the redemption
price paid. The date fixed for redemption of the Series D Preferred Stock shall
be the "Redemption Date." On and after the Redemption Date, holders of Series D
Preferred Stock certificates provided timely notice of redemption shall have no
further rights except to receive, upon surrender of their Series D Preferred
Stock certificate(s), the Redemption Price.
3.3.3 From and after the Redemption Date specified
for, the Company shall, at the place specified in the notice of redemption, upon
presentation and surrender to the Company by or on behalf of the registered
Holders thereof of one or more certificates evidencing the Series D Preferred
Stocks to be redeemed, deliver or cause to be delivered to or upon the written
order of such registered holder a sum in cash equal to the Redemption Price of
each share of Series D Preferred stock being redeemed. Such cash payment may be
made, at the Company's option, in cash or by check or wire transfer. From and
after the Redemption Date and upon deposit or setting aside by the Company of a
sum sufficient to redeem all of the Series D Preferred shares called for
redemption, such Series D Preferred Shares shall expire and become void and all
rights thereunder, except for the right to receive payment of the Redemption
Price, shall cease.
3.3.4 If the Series D Preferred Stock is subdivided
or combined into a greater or smaller number of shares of Series D Preferred
Stock, the Redemption Price per share shall be proportionately adjusted by the
ratio which the total number of shares of Series D Preferred Stock outstanding
immediately prior to such event bears to the total number of shares of Series D
Preferred Stock outstanding immediately after such event.
3
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ARTICLE 4
DIVIDENDS
The Company shall pay dividends on the Preferred Shares, out of any
funds legally available therefor, as provided in the Articles of Incorporation
of the Company, as amended.
ARTICLE 5
TERMINATION
This Agreement, and the respective rights and obligations of the
parties hereto, shall terminate upon the purchase of the Preferred Shares by the
Company or the Stockholder, as the case may be.
ARTICLE 6
LEGEND
Any certificates representing the Preferred Shares shall bear on their
face the following legend prominently displayed:
THE SHARES REPRESENTED BY THIS CERTIFICATE, AND
THE TRANSFER THEREOF, ARE SUBJECT TO THE
PROVISIONS OF THAT CERTAIN INVESTOR RIGHTS
AGREEMENT, DATED AS OF JUNE 30, 1999, AMONG THE
CORPORATION, HAROLD S. FISCHER AND WATERSIDE
CAPITAL CORPORATION, A COPY OF WHICH IS ON FILE
AND MAY BE EXAMINED AT, THE PRINCIPAL OFFICE OF
THE CORPORATION.
ARTICLE 7
MISCELLANEOUS
Section 7.1 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given when delivered by
hand or mailed via a nationally recognized overnight delivery service, by first
class mail registered or certified mail (air mail if to or from outside the
United States), postage prepaid, facsimile transmission that is acknowledged as
received by the recipient, if to the Stockholder, at the Company's address, if
to the Investor, at 300 East Main Street, Suite 1380, Norfolk Virginia 23510, if
to the Company, at 1800 NW 49th Street, Suite 100, Fort Lauderdale, Florida
33309 or to such other address as the addressee shall have furnished to the
other parties hereto in the manner prescribed by this Section 7.1.
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Section 7.2 SPECIFIC PERFORMANCE. The rights of the parties under this
Agreement are unique and, accordingly, the parties shall have the right, in
addition to such other remedies as may be available to any of them at law or in
equity, to enforce their rights hereunder by actions for specific performance in
addition to any other legal or equitable remedies they might have to the extent
permitted by law.
Section 7.3 ENTIRE AGREEMENT. This Agreement, the Series D Preferred
Stock Purchase Agreement, the Stock Purchase Warrant and the Registration Rights
Agreement, and the documents contemplated thereby, constitute the entire
agreement among the parties with respect to the subject matters thereof and
supersedes all prior agreements and understandings between them or any of them
as to such subject matter.
Section 7.4 WAIVERS AND FURTHER AGREEMENTS. Any of the provisions of
this Agreement may be waived by an instrument in writing with the consent of the
party or parties whose rights are being waived.
Section 7.5 AMENDMENTS. This Agreement may be amended by and shall be
effective upon the receipt of the written consent of the Investor, the Company
and the Stockholder.
Section 7.6 ASSIGNMENT: SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, legal representatives, successors and permitted
transferees, except as may be expressly provided otherwise herein.
Section 7.7 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement and such invalid, illegal
and unenforceable provision shall be reformed and construed so that it will be
valid, legal, and enforceable to the maximum extent permitted by law.
Section 7.8 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.9 SECTION HEADINGS. The headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 7.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the substantive laws of the Commonwealth of
Virginia.
Section 7.11 JURISDICTION AND VENUE; WAIVER OF JURY TRIAL. The Company
consents to the jurisdiction of the Circuit Court of the City of Norfolk,
Virginia, for the purpose of any suit, action or other proceeding arising out of
any of its obligations arising under this Agreement or with respect to the
transactions contemplated hereby, and expressly waives any and all objections it
may have as to venue in such court and waives the right to a trial by jury.
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IN WITNESS WHEREOF, the undersigned have executed this Stockholders
Agreement as of the day and year first above written.
COMPANY:
TRIANGLE IMAGING GROUP, INC.,
a Florida corporation
By: /s/ HAROLD S. FISCHER
----------------------------------(SEAL)
Harold S. Fischer
President and Chief Executive Officer
STOCKHOLDER:
/s/ HAROLD S. FISCHER
----------------------------------
Harold S. Fischer
INVESTOR:
WATERSIDE CAPITAL CORPORATION
By: /s/ GERALD T. McDONALD
---------------------------------(SEAL)
Gerald T. McDonald
Secretary/Treasurer
6
REGISTRATION RIGHTS AGREEMENT
Agreement made as of this 30th day of June, 1999 between TRIANGLE
IMAGING GROUP, INC., a Florida corporation (the "Company") and WATERSIDE CAPITAL
CORPORATION, a Virginia corporation (the "Investor").
R E C I T A L S:
A. The Company and the Investor desire to enter into this Registration
Rights Agreement to provide for registration rights with respect to the common
stock of the Company purchasable by Investor under that certain stock purchase
warrant dated June 30, 1999 and the common stock capable of being converted
under the terms of the Company's Series D Convertible Preferred Stock (the
"Warrant").
1. CERTAIN DEFINITIONS.
Section 1. As used in this Agreement, the following terms shall have
the following meanings:
1.1. COMMISSION means the Securities and Exchange Commission,
or any other federal agency at the time administering the Securities Act and the
Exchange Act.
1.2. COMMON STOCK means (i) the Company's Common Stock, $0.001
par value, as authorized on the date of this Agreement (ii) any other securities
into which or for which any of the securities described in (i) may be converted
or exchanged pursuant to a plan of recapitalization, reorganization, merger,
sale of assets or otherwise.
1.3. EXCHANGE ACT means the Securities Exchange Act of 1934,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1.4. HOLDERS has the meaning set forth in Section 2.1.
1.5. PERSON means an individual, corporation, partnership,
limited liability company, joint venture, trust or unincorporated organization
or a government or any agency or political subdivision thereof.
1.6. PREFERRED SHARES means the shares of the Company's
Preferred Stock (as defined in the Purchase Agreement) purchased by the Investor
pursuant to the Purchase Agreement.
1.7. PURCHASE AGREEMENT means the Series D Convertible
Preferred Stock Purchase Agreement dated the date hereof among the Company and
the Investor.
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1.8. REGISTRABLE SECURITIES means any shares of Common Stock
issued upon exercise of the Warrant or upon the conversion of the Company's
Series D Convertible Preferred Stock owned by the Investor or its permitted
successors and assigns.
1.9. SECURITIES ACT means the Securities Act of 1933, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
2. REGISTRATION RIGHTS.
Section 2.1. PIGGYBACK REGISTRATION. If at any time or times after the
exercise of the Warrant or upon the Conversion of the Series D Convertible
Preferred Stock by Investor or its permitted successors or assigns, the Company
shall determine to register any of its Common Stock or securities convertible
into or exchangeable for Common Stock under the Securities Act whether in
connection with a public offering of securities by the Company (a "primary
offering"), a public offering thereof by stockholders (a "secondary offering"),
or both (but not in connection with a registration effected solely to implement
an employee benefit plan or a transaction to which Rule 145 or any other similar
rule of the Commission under the Securities Act is applicable), the Company will
promptly give written notice thereof to the holders of Registrable Securities
(the "Holders") then outstanding, and will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Holders may request in a writing delivered to the Company within 15 days after
the notice given by the Company; PROVIDED, HOWEVER that in the case of the
registration of Common Stock by the Company in connection with an underwritten
public offering, the Company shall not be required to register Registrable
Securities of the Holders in excess of the amount, if any, of Registrable
Securities which the principal underwriter of an underwritten offering shall
reasonably and in good faith agree can be included without jeopardizing the
success of the offering by the Company, and PROVIDED, FURTHER, that if any
Registrable Securities are not included for this reason, the Company will permit
the Holders of Registrable Securities who have requested participation and all
other holders of securities of the Company having a right to include securities
in such registration who have requested participation in the offering to
register the Registrable Securities proportionately in accordance with the
number of shares of Registrable Securities (in the case of the Investor) or
shares of Common Stock subject to such registration right (in the case of such
other holders) owned or obtainable by them, except that the Company shall first
exclude from such registration, in the following order, all shares of Common
Stock sought to be included therein by (i) any holder thereof not having any
such contractual, incidental registration rights (which the Holders acknowledge
may from time to time be granted by the Board of Directors of the Company to
directors and officers of the Company) and (ii) any holder thereof having
contractual, incidental registration rights subordinate and junior to the rights
of the Holders of Registrable Securities. Without in any way limiting the types
of registrations to which this Section 2.1 shall apply, in the event that the
Company shall effect a "shelf registration" under Rule 415 under the Securities
Act, or any other similar rule or regulation, the Company shall take all
necessary action, including, without limitation, the filing of post-effective
amendments, to permit the Investor to include its Registrable Securities in such
registration in accordance with the terms of this Section 2.1. In connection
with any offering under this Section 2.1 involving an underwriting, the Company
shall not be required to include any Registrable Securities in such underwriting
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<PAGE>
unless the Holders thereof accept the terms of the underwriting as agreed on
between the Company, the Holders and the underwriter selected by the Company.
The Company shall have the right to postpone or withdraw any registration
effective pursuant to the Section 2.1 without obligation to any Holder.
Section 2.2. REGISTRATION EXPENSES. In the event of a registration
described in Section 2.1, all reasonable expenses of registration and offering
of the Company and the Holders participating in the offering including, without
limitation, printing expenses, fees and disbursements of counsel and independent
public accountants, fees and expenses incurred in connection with complying with
state securities or "blue sky" laws, fees of the National Association of
Securities Dealers, Inc. or any stock exchange and fees of transfer agents and
registrars, shall be borne by the Company, except that the Holders shall bear
(i) underwriting commissions and discounts attributable to their Registrable
Securities being registered, (ii) selling commissions and (iii) the fees and
expenses of a selling Holders' own counsel.
Section 2.3. FURTHER OBLIGATIONS OF THE COMPANY. Whenever under the
preceding sections of this Agreement the Company is required to register
Registrable Securities, it shall also do the following:
2.3.1 Use its best efforts to diligently prepare for
filing with the Commission a registration statement and such amendments and
supplements to such registration statement and the related prospectus as are
necessary to keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the sale of securities covered
by such registration statement for the period necessary to complete the proposed
public offering;
2.3.2 Furnish to each selling Holder such copies of each
preliminary and final prospectus and such other documents as such holder may
reasonably request to facilitate the public offering of his Registrable
Securities;
2.3.3 Enter into any underwriting agreement with
provisions reasonably required by the proposed underwriter for the selling
Holders relating to the registration of the Registrable Securities, if any,
2.3.4 Use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under the
securities or "blue-sky" laws of such jurisdictions as any selling Holder of
Registrable Securities may reasonably request; provided that the Company shall
not be required to register in any states which shall require it to qualify to
do business or subject itself to general service of process as a condition of
such registration;
2.3.5 Notify the selling Holders (i) when a registration
statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any requests by the Commission or
any state securities authority for amendments and supplements to a registration
statement and prospectus or for additional information after the registration
statement has become effective, (iii) of the issuance by the Commission or any
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<PAGE>
state securities authority of any stop order suspending the effectiveness of a
registration statement or the initiation of any proceedings for that purpose,
(iv) if, between the effective date of a registration statement and the closing
of any sale of Registrable Securities covered thereby, the Company receives any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose, and (v) of the happening of any event known to the
Company that occurs during the period the registration statement is effective
and which makes any statement made in such registration statement or the related
prospectus untrue in any material respect or which requires the making of any
changes in such registration statement or prospectus in order to make the
statements therein not misleading;
2.3.6 Make reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of a registration statement;
2.3.7 Cooperate with the selling Holders to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold pursuant to such registration statement and not bearing
any restrictive legends and registered in such names as the selling Holders may
reasonably request at least 5 days before the closing of any sale of Registrable
Securities;
2.3.8 On the occurrence of any event contemplated by
Section 2.3.5(v) above, use reasonable efforts to prepare a supplement or
post-effective amendment to a registration statement or the related prospectus
or any document incorporated therein by reference or file any other required
documents so that, as thereafter delivered to the purchasers of the Registrable
Securities, such prospectus will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. In the
event a circumstance contemplated in Section 2.3.5(v) should occur, the Company
shall notify the selling Holders to suspend use of the prospectus as soon as
reasonably practicable after discovery of the same and the selling Holders shall
suspend use of the prospectus until the Company has amended or supplemented the
prospectus to correct such mistake or omission. At such time as such public
disclosure is otherwise made or the Company determines in good faith that such
disclosure is not necessary the Company shall promptly notify the selling
Holders of such determination, amend or supplement the prospectus if necessary
to correct any untrue statement or omission therein and furnish the selling
Holders such numbers of copies of the prospectus as so amended or supplemented
as the selling Holders may reasonably request; and
2.3.9 Use the Company's best efforts to cause the
Registrable Securities to be listed on any stock exchange or quotation system on
which the Common Stock has been listed.
Section 2.4 COMPANY'S RIGHT TO DELAY REGISTRATION. If at the time of
any request to register Registrable Securities under Section 2.1, the Company is
engaged or has fixed plans to engage within 90 days of the time of the request
in a registered public offering as to which the Holders of Registrable
Securities may include Registrable Securities pursuant to Section 2.1, or is
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<PAGE>
engaged in any other activity which, in the good faith determination of the
Company's Board of Directors, would be adversely effected by the requested
registration to the material detriment of the Company, then the Company may, at
its option, direct that such requests be delayed for a period not in excess of
four (4) months from the effective date of such offering or the date of
commencement of such other material activity, as the case may be or, if earlier,
such time as any such material detriment would not occur.
2.4.1 HOLDBACK AGREEMENTS. If any registration of shares
of the Company's Common Stock or securities exercisable or exchangeable for, or
convertible into, shares of the Company's Common Stock shall be registered in
connection with an underwritten public offering, Seller agrees not to effect any
public sale or distribution, including any sale pursuant to Rule 144 under the
Securities Act, of any Registrable Securities, and not to effect any such public
sale or distribution of any other equity security of the Company or of any
security convertible into, or exchangeable or exercisable for, any equity
security of the Company (in each case, other than as part of such underwritten
public offering) during the thirty (30) days prior to, and during the ninety
(90) day period beginning on the effective date of such Registration Statement
(except as part of such registration).
3. INDEMNIFICATION. Incident to any registration referred to in this Agreement,
and subject to applicable law, the Company will indemnify each Holder of
Registrable Securities so registered, and each person controlling any of them
within the meaning of the Securities Act or the Exchange Act against all claims,
losses, damages and liabilities, including legal and other expenses reasonably
incurred in investigating or defending against the same, arising out of any
untrue statement of a material fact contained in any prospectus or other
document (including any related registration statement) or any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any violation by the
Company of the Securities Act, any state securities or "blue-sky" laws or any
rule or regulation thereunder in connection with such registration; PROVIDED,
HOWEVER, that the Company will not be liable in any case to the extent that any
such claim, loss, damage or liability may have been caused by an untrue
statement or omission based on information furnished in writing to the Company
by such Holder expressly for use therein. In the event of any registration of
any of the Registrable Securities under the Securities Act pursuant to this
Agreement, each seller of Registrable Securities, jointly and severally, will
indemnify and hold harmless the Company, each of its directors and officers and
each underwriter (if any) and each person, if any, who controls the Company or
any such underwriter within the meaning of the Securities Act or the Exchange
Act against any claim, losses, damages and liabilities, including legal and
other expenses reasonably incurred in investigating or defending it against the
same, arising out of any untrue statement of a material fact contained in any
prospectus or other document (including any related registration statement) or
any omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, if the statement or
omission was made in reliance on and in conformity with information furnished in
writing to the Company by or on behalf of such selling Holder, specifically for
use in connection with the preparation of such registration statement,
prospectus amendment or supplement; PROVIDED, HOWEVER, that the obligations of
such selling Holders hereunder shall be limited to an amount equal to the
proceeds to each Holder of Registrable Securities sold as contemplated herein.
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4. RULE 144 REQUIREMENTS. The Company shall use its best efforts to take all
action as may be required as a condition to the availability of Rule 144 under
the Securities Act (or any successor exemptive rule afterwards in effect). In
connection therewith, the Company shall furnish to any Holder of Registrable
Securities, on request, a written statement executed by the Company as to the
steps it has taken to comply with the current public information requirements of
Rule 144.
5. TRANSFER OF REGISTRATION RIGHTS. The registration rights of the Holders under
this Agreement may be transferred to any transferee of the Warrant and any
Registrable Security who (i) is a Holder of Registrable Securities, (ii) is an
affiliate, as that term is defined in regulations promulgated by the Commission
under the Exchange Act, of a Holder of Registrable Securities (including a
partner of such Holder) or (iii) acquires Registrable Securities or the Warrant.
Each such transferee shall be deemed to be a "Holder" for purposes of this
Agreement; provided that no transfer of registration rights by a Holder under
this Section 5 shall create any additional rights in the transferee beyond those
rights granted to Holders in this Agreement.
6. MISCELLANEOUS.
Section 6.1. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the
part of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
These remedies are cumulative and not exclusive of any remedies provided by law.
Section 6.2. AMENDMENTS AND WAIVERS. Except as provided below,
amendments to this Agreement shall require and shall be effective on receipt of
the written consent of: (i) the Company and (ii) the holders of at least a
majority in interest of the Warrant or Registrable Securities. Except as
provided below, compliance with any covenant or provision in this Agreement may
be waived on written consent by the party or parties whose rights are being
waived; PROVIDED, THAT, the rights of holders of Registrable Securities may be
waived only with the written consent of the holders of at least a majority in
interest of the Registrable Securities. Notwithstanding the foregoing, no
waivers or amendments shall be effective to reduce the percentage in interest of
the Registrable Securities the consent of the holders of which is required under
this Section. Any waiver or amendments may be given subject to satisfaction of
conditions stated therein and any waiver or amendments shall be effective only
in the specific instance and for the specific purpose for which given.
Section 6.3. ADDRESSES FOR NOTICES. All notices, requests demands and
other communications required by this Agreement shall be in writing (including
telegraphic communication) and mailed, telegraphed or delivered to each
applicable party at the address set forth in the Purchase Agreement or at such
other address any party may inform the party in writing in compliance with this
Section.
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All such notices, requests, demands and other communications shall,
when mailed (which mailing must be accomplished by first class mail, postage
prepaid, electronic facsimile transmission, express overnight courier service,
or registered mail, return receipt requested) or telegraphed, and shall be
considered to be delivered two (2) days after dispatch; PROVIDED, HOWEVER, that
notice delivered by facsimile shall be deemed delivered the day it is sent and
notice delivered by overnight courier shall be deemed delivered the day
immediately following the day on which it is sent .
Section 6.4. BINDING EFFECT; ASSIGNMENT. This Agreement shall bind and
inure to the benefit of the parties and their respective heirs, successors and
assigns, except that the Company shall not have the right to delegate its
obligations hereunder or to assign its rights hereunder or any interest herein
without the prior written consent of the holders of at least a majority in
interest of the Warrant or Registrable Securities.
Section 6.5. PRIOR AGREEMENTS. This Agreement constitutes the entire
agreement between the parties and supersedes any prior understandings or
agreements concerning the subject matter hereof.
Section 6.6. SEVERABILITY. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of a provision
contained in this Agreement, for any reason, is invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement,
but this Agreement shall be reformed and construed as if such invalid or illegal
or unenforceable provision, or part of a provision, had never been contained
herein, and such provisions or part reformed so that it would be valid, legal
and enforceable to the maximum extent possible.
Section 6.7. JURISDICTION AND VENUE. The Company consents to the
jurisdiction of the Circuit Court of the City of Norfolk, Virginia, for the
purpose of any suit, action or other proceeding arising out of any of its
obligations arising under this Agreement or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in such court.
Section 6.8. HEADINGS. Article, section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 6.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 6.10. FURTHER ASSURANCES. From and after the date of this
Agreement, on the request of any party, the other parties shall execute and
deliver such instruments documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
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IN WITNESS, the undersigned have executed this Registration Rights
Agreement as the day and year first above written.
TRIANGLE IMAGING GROUP, INC.
By /s/ HAROLD S. FISCHER
--------------------------------------
Harold S. Fischer, President and
Chief Executive Officer
WATERSIDE CAPITAL CORPORATION
By /s/ GERALD T. McDONALD
-----------------------------------
Name GERALD T. McDONALD
-----------------------------------
Title Secretary/Treasurer
-----------------------------------
8
6
STOCK PURCHASE WARRANT
This Warrant is issued as of the 30th day of June, 1999, by TRIANGLE
IMAGING GROUP, INC., a Florida corporation (the "Company"), to WATERSIDE CAPITAL
CORPORATION, a Virginia corporation ("WSCC"), or its registered assignee,
(together with WSCC the "Holder" or "Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM.
1.1 For and in consideration of WSCC purchasing from
the Company 700 shares of its Series D Convertible Preferred Stock, par value
$1,000 per share (the "Preferred Stock"), pursuant to the terms of a Series D
Convertible Preferred Stock Purchase Agreement of even date (the "Agreement"),
and other good and valuable consideration, the receipt and sufficiency of which
are acknowledged, the Company grants to Holder the right to purchase 80,000
shares of the Company's common stock (the "Common Stock").
1.2 The shares of Common Stock issuable upon exercise
of this Warrant are referred to as the "Shares." For purposes of this Warrant
the term "fully diluted basis" will be determined in accordance with generally
accepted accounting principles.
1.3 20,000 of the Shares vest upon the execution of
this Warrant. The remaining Shares will vest at a rate of 12,000 shares on each
of the five anniversary dates of this Agreement provided that on such
anniversary date shares of Series D Convertible Preferred Stock remain
outstanding.
1.4 This Warrant will be exercisable in accordance
with the vesting provisions of Section 1.3 in whole or in part at any time and
from time to time from the date hereof until June 30, 2009.
2. EXERCISE PRICE. The exercise price (the "Exercise
Price") per share for which all or any of the Shares may be purchased under this
Warrant will be $1.15 per Share.
3. EXERCISE.
3.1 This Warrant may be exercised by the Holder (but
only on the following conditions ) as to all or any increment or increments of
100 Shares (or the balance of the Shares if less than such number), on delivery
of written notice of intent to exercise to the Company at the following address:
1800 NW 49th Street, Suite 100, Fort Lauderdale, Florida 33309 or such other
address as the Company designates in a written notice to the Holder, together
with this Warrant and payment to the Company of the aggregate Exercise Price of
the Shares so purchased. The Exercise Price will be payable by certified check
or other certified funds. On exercise of this Warrant, the Company will as
promptly as practicable, and in any event within 15 days thereafter, execute and
deliver to the Holder a certificate or certificates for the total number of
whole Shares for which this Warrant is being exercised in such names and
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denominations as are requested by such Holder. If this Warrant is exercised with
respect to less than all of the Shares, the Holder is entitled to receive a new
Warrant covering the number of Shares in respect of which this Warrant has not
been exercised, and such new Warrant will in all other respects be identical to
this Warrant. The Holder will pay when due any and all state and federal issue
taxes payable in respect of the issuance of this Warrant or the issuance of any
Shares on exercise of this Warrant.
3.2 If the shares of the Company's Common Stock are
subdivided or combined into a greater or smaller number of shares of Common
Stock, the Target Price shall be proportionately adjusted by the ratio which the
total number of shares of Common Stock outstanding immediately prior to such
event bears to the total number of shares of Common Stock to be outstanding
immediately after such event.
4. COVENANTS AND CONDITIONS. The above provisions are subject
to the following:
4.1 Neither this Warrant nor the Shares have been
registered under the Securities Act or any state securities laws ("Blue Sky
Laws"). This Warrant has been acquired for investment purposes and not with a
view to distribution or resale and may not be pledged, hypothecated, sold, made
subject to a security interest or otherwise transferred without (i) an effective
registration statement for such Warrant under the Securities Act and applicable
Blue Sky Laws or (ii) an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to the Company and its counsel, that registration is not
required under the Securities Act or under any applicable Blue Sky Laws (the
Company acknowledges that Williams, Mullen, Clark & Dobbins is acceptable
counsel). Transfer of the shares issued on the exercise of this Warrant will be
restricted in the same manner and to the same extent as the Warrant and the
certificates representing such Shares will bear substantially the following
legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER
THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS
SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR
(II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY, REGISTRATION UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED TRANSFER.
The Holders and the Company will execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
on exercise hereof with applicable federal and state securities laws.
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4.2 All Shares issued on exercise of this Warrant
will, on issuance and payment therefor, be legally and validly issued and
outstanding, fully paid and nonassessable, free from all taxes, liens, charges
and preemptive rights, if any, with respect thereto or to the issuance thereof.
The Company will at all times reserve and keep available for issuance on the
exercise of this Warrant such number of authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of this Warrant.
4.3 Except for stock option grants to officers,
directors, employees and consultants to the Company and the sale of any shares
of the Company's capital stock to employees of the Company pursuant to any
direct stock purchase program, the Company will not sell any shares of the
Company's capital stock at a price below the Fair Market Value of such shares
(as defined in Section 8), without the prior written consent of the Holder. If
the Company sells shares of the Company's capital stock in violation of this
Section 4.3, the number of shares issuable on exercise of this Warrant will be
equal to the product obtained by multiplying the number of shares issuable under
this Warrant before such sale by the quotient obtained by dividing (i) the Fair
Market Value of the Shares issued in violation of this Section 4.3 by (ii) the
price at which such Shares were sold.
4.4 Any Holder or subsequent transferee of the
Warrant or the Shares shall not, and any employee, officer, director, or
affiliates of any such Holder or subsequent transferee shall not, lend, sell or
cause to be lent or sold any of the shares of Company Common Stock underlying
the Warrant during the term of the Warrant or any Shares during any applicable
restricted holding period required under federal or state securities laws
effective upon exercise of the Warrant absent registration of the Warrant or
Shares under the Act, or upon delivery of an opinion of counsel acceptable to
the Company that such registration is not required in connection with such
proposed transfer.
5. TRANSFER OF WARRANT. Subject to the provisions of Section
4, this Warrant may be transferred by the Holder on presentation of this Warrant
to the Company along with an opinion of counsel acceptable to the Company that
such transfer complies with all applicable state and federal securities laws, if
requested by the Company, with written instructions for such transfer. On such
presentation for transfer, the Company will promptly execute and deliver a new
Warrant or Warrants in the form hereof in the name of the assignee or assignees
and in the denominations specified in such instructions. The Company will pay
all expenses incurred by it in connection with the preparation, issuance and
delivery of Warrants under this Section.
6. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise
provided, this Warrant does not confer on the Holder, as such, any right
whatsoever as a shareholder of the Company. Notwithstanding the foregoing, if
the Company offers to all of the Company's shareholders the right to purchase
any securities of the Company, then, for such purpose, all shares of Common
Stock that are subject to this Warrant shall be deemed to be outstanding and
owned by the Holder and the Holder shall be entitled to participate in such
rights offering. The Company will not grant any preemptive rights with respect
to any of its capital stock without the prior written consent of Holder. The
Company will not issue any additional securities, other than the Series D
Convertible Preferred Stock issued on even dated herewith, which entitle the
holder thereof to obtain any preference over holders of Common Stock on the
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dissolution, liquidation, winding-up, sale, merger, or reorganization of the
Company without the prior written consent of the Holder.
7. ADJUSTMENT ON CHANGES IN STOCK.
7.1 If all or any portion of this Warrant is
exercised after any stock split, stock dividend, recapitalization, combination
of shares of the Company or other similar event, occurring after the date
hereof, then the Holder exercising this Warrant will receive, for the aggregate
price paid on such exercise, the aggregate number and class of shares that the
Holder would have received if this Warrant had been exercised immediately before
such stock split, stock dividend, recapitalization, combination of shares or
other similar event. If any adjustment under this Section 7.1 would create a
fractional share of Common Stock or a right to acquire a fractional Share such
fractional Share be disregarded and the number of Shares subject to this Warrant
will be the next higher number of shares, rounding all fractions upward.
Whenever there is an adjustment under this Section 7.1, the Company will
forthwith notify the Holder of such adjustment, setting forth in reasonable
detail the event requiring the adjustment and the method by which such
adjustment was calculated.
7.2 If all or any portion of this Warrant is
exercised after any merger, consolidation, exchange of shares, separation,
reorganization or liquidation of the Company or other similar event, occurring
after the date hereof and, as a result of, shares of Common Stock are changed
into the same or a different number of shares of the same or another class or
classes of securities of the Company or another entity, then the Holder
exercising this Warrant will receive, for the aggregate price paid on such
exercise, that number of shares of Common Stock or other security for which the
Common Stock was exchanged determined by (i) dividing the aggregate price paid
on such exercise by the Exercise Price, and (ii) multiplying such quotient by
the exchange ratio applicable to such event. If any adjustment under this
Section 7.2 would create a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, such fractional share will be
disregarded and the number of shares subject to this Warrant will be the next
higher number of shares, rounding all fractions upward. Whenever there is an
adjustment pursuant to this Section 7.2, the Company will forthwith notify the
Holder of such adjustment, setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated.
8. FAIR MARKET VALUE.
The Fair Market Value of each Share will be
determined as follows:
8.1 If the Company is at the time of valuation a
reporting company under the Securities Exchange Act of 1934, as amended, and its
shares of Common Stock are actively traded on the NASD OTC Bulletin Board,
Nasdaq SmallCap Market, Nasdaq NMS, AMEX, or NYSE, then the Fair Market Value of
such Shares shall be equal to, at any date, the average of the closing market
prices for 20 consecutive business days prior to the valuation date. If no sale
takes place on such day on any such exchange, the average of the closing bid and
asked prices on such day as so reported shall represent the closing market price
for that day.
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8.2 If 8.1 does not apply, then the Fair Market Value
of each Share will be the fair value as determined in good faith by the Board of
Directors. If the Holder objects to this valuation, then it shall have the right
to an appraisal conducted as follows:
8.2.1 The Company and the Holder will each
appoint an independent, experienced appraiser who is a member of a recognized
professional association of business appraisers. The two appraisers will
determine the value of the shares of Common Stock that would be issued on the
exercise of the Warrant, without taking into consideration that such shares
would constitute a minority interest, and would lack liquidity but assuming that
the sale would be between a willing buyer and a willing seller, both of whom
have full knowledge of the financial and other affairs of the Company, and
neither of whom is under any compulsion to sell or to buy.
8.2.2 If the highest of the two appraisals
is not more than 10% more than the lowest of the appraisals, the Fair Market
Value will be the average of the two appraisals. If the highest of the two
appraisals is 10% or more than the lowest of the two appraisals, then a third
appraiser shall be appointed by the two appraisers, and if they cannot agree on
a third appraiser, the American Arbitration Association will appoint the third
appraiser. The third appraiser, regardless who appoints him or her, must have
the substantially same qualifications as the first two appraisers.
8.2.3 The Fair Market Value after the
appointment of the third appraiser will be the mean of the three appraisals and
shall be the conclusive and binding upon the parties .
9. GOVERNING LAW. This warrant will be governed by the laws of
the State of Florida.
10. SEVERABILITY. If any provision(s) of this Warrant or the
application thereof to any person or circumstances is invalid or unenforceable
to any extent, the remainder of this Warrant and the application of such
provisions to other persons or circumstances, will not be affected and will be
enforced to the greatest extent permitted by law.
11. COUNTERPARTS. This Warrant may be executed in any number
of counterparts and be different parties to this Warrant in separate
counterparts, each of which when so executed will be deemed to be an original
and all of which taken together will constitute one and the same Warrant.
IN WITNESS, the parties have set their hands as of the date first above
written.
TRIANGLE IMAGING GROUP, INC., a Florida
corporation
By /s/ HAROLD S. FISCHER
----------------------------------------
Harold S. Fischer, President and
Chief Executive Officer
WATERSIDE CAPITAL CORPORATION,
a Virginia corporation
By /s/ GERALD T. McDONALD
----------------------------------------
Gerald T. McDonald
Its: Secretary/Treasurer
5
64805
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
TRIANGLE IMAGING GROUP, INC.
PURSUANT TO THE PROVISIONS OF SECTION 607.1006, FLORIDA STATUTES, THIS
CORPORATION ADOPTS THE FOLLOWING ARTICLES OF AMENDMENT TO ITS ARTICLES OF
INCORPORATION:
1. ARTICLE I - NAME is hereby amended to read as follows:
The name of the corporation is "@ebs, inc."
2. ARTICLE IV - CAPITAL STOCK is hereby amended by adding the following
paragraphs to the end of such Article:
The shares of Preferred Stock may be issued from time to time
in one or more series, in any manner permitted by law, as determined
from time to time by the Board of Directors, and stated in the
resolution or resolutions providing for the issuance of such shares
adopted by the Board of Directors pursuant to authority hereby vested
in it. Without limiting the generality of the foregoing, shares in such
series shall have such voting powers, full or limited, or no voting
powers, and shall have such designations, preferences and relative,
participating, optional, or other special rights, and qualifications,
limitations, or restrictions thereof, permitted by law, as shall be
stated in the resolution or resolutions providing for the issuance of
such shares adopted by the Board of Directors pursuant to authority
hereby vested in it. The number of shares of any such series so set
forth in such resolution or resolutions may be increased (but not above
the total number of authorized shares of Preferred Stock) or decreased
(but not below the number of shares thereof then outstanding) by
further resolution or resolutions adopted by the Board of Directors
pursuant to authority hereby vested in it.
I. SERIES C PREFERRED STOCK. A series of the Preferred Stock,
designated the Series C Redeemable Preferred Stock (herein the "Series
C Preferred Stock"), is hereby established. The aggregate number of
shares of the Series C Preferred Stock shall be 1,500 and the stated
value of such stock shall be One Thousand Dollars ($1,000) per share;
provided, that upon redemption, repurchase, or other reacquisition of
shares of the Series C Preferred Stock, the number of shares of such
Series C and the number of shares of authorized Series C Preferred
Stock shall automatically be reduced by such number of shares that have
been redeemed, repurchased or reacquired. The foregoing
notwithstanding, during such period in which shares of the
Corporation's Series C Preferred Stock are outstanding, the Corporation
shall not issue other series of Preferred Stock having dividend rights,
powers, rights, privileges or preferences upon liquidation that are
<PAGE>
superior to the Series C Preferred Stock. The preferences, powers,
rights and privileges and the qualifications, limitations and
restrictions of the Series C Preferred Stock are as follows:
a. DIVIDEND RIGHTS. The holders of the Series C
Preferred Stock shall be entitled to receive, out of any funds legally
available therefor, dividends at the rate of $125 per share (the
"Dividend") per annum from the date of issuance which shall accrue
quarterly in equal increments of $31.25 on January 15, April 15, July
15 and October 15 of each year (each a "Dividend Accrual Date")
commencing April 15, 1999, which Dividend shall be payable on the first
business day that is ten (10) days following each such Dividend Accrual
Date (each such date being a "Dividend Payment Date") which dividends
shall be payable in preference and priority to any payment of any cash
dividend on Common Stock and any shares of any other class or series of
preferred or other form of capital stock of the Corporation (such
Common Stock and other stock being collectively referred to as "Junior
Stock"), when and as declared by the Board of Directors of the
Corporation. Such dividends shall accrue and be deemed to accrue
whether or not earned or declared, and shall be cumulative so that if
such dividends on the Series C Preferred Stock shall not have been
paid, or declared and set apart for payment, the deficiency shall be
fully paid or declared and set apart for payment before any dividend
shall be paid or declared or set apart for any shares of Junior Stock
and before any purchase or acquisition of any shares of Junior Stock is
made by the Corporation. Accrued, but unpaid, Dividends shall bear
interest at twelve and one-half percent (12.5%) per annum, compounded
annually.
b. LIQUIDATION RIGHTS. In the event of the
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of each share of Series C
Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its
shareholders, before any payment or declaration and setting apart for
payment of any amount shall be made in respect of the Junior Stock, an
amount equal to One Thousand Dollars ($1,000) per share, plus all
accrued and unpaid dividends and interest on the Series C Preferred
Stock (no less and no more) and any unpaid penalties. If the assets of
the Corporation available for distribution to its stockholders shall be
insufficient to pay in full all amounts to which the holders of the
Series C Preferred Stock are entitled, the amount available for
distribution shall be shared PRO RATA by the holders of such series.
For the purposes of this Section b, a merger or consolidation of the
Corporation with any other corporation or other entity in which the
corporation's shareholders do not have a controlling interest in the
surviving corporation in the merger or consolidation, or the sale,
transfer or lease of all or substantially all the Corporation's assets
shall constitute and be deemed a liquidation, dissolution, or winding
up of the Corporation.
c. VOTING RIGHTS. In addition to any other vote or
consent required by the laws of the State of Florida, the Corporation
will not, without the affirmative votes or written consent of the
holders of at least sixty six and two-thirds percent (66 2/3%) of the
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<PAGE>
outstanding shares of Series C Preferred Stock (with each share of
Series C Preferred Stock being entitled to one vote):
(1) In any manner, including by amendment of its
Certificate of Incorporation or By-laws, alter or change the
powers, rights, preferences or privileges or the
qualifications, limitations or restrictions of the Series C
Preferred Stock;
(2) Create, authorize or issue a new class or series
(or change or reclassify a class or series of shares with
junior, subordinate or inferior rights into a class or series
of shares) having rights, preferences or privileges prior,
superior or on parity with the shares of Series C Preferred
Stock or increase the rights, preferences, privileges or
number of any class or series having rights, preferences or
privileges on dissolution that are prior, superior or on
parity with those of the Series C Preferred Stock;
(3) Increase or decrease the aggregate number of
authorized shares of Series C Preferred Stock, except for any
decrease resulting from any redemption, repurchase or other
reacquisition; effect an exchange or reclassification or
create a right of exchange, of all or part of the shares of
Series C Preferred Stock into shares of another class; effect
an exchange or reclassification or create a right of exchange,
of all or part of the shares of another class or series into
the shares of Series C Preferred Stock; change the shares of
all or part of the Series C Preferred Stock into a different
number of shares of Series C Preferred Stock.
(4) Repurchase redeem or otherwise acquire any shares
of the Corporation's capital stock other than the Series C
Preferred Stock if any dividends on the Series C Preferred
Stock which have accrued and are payable remain outstanding at
the time;
(5) Liquidate, dissolve or wind-up the affairs of the
Corporation or merge or consolidate the Corporation with any
other entity or sell or encumber all or substantially all of
the Corporation's assets or issue in one or a series of
related transactions shares representing more than fifty
percent (50%) of the aggregate voting power of all classes and
series of the Corporation's voting stock if any dividends on
the Series C Preferred Stock which have accrued and are
payable remain outstanding at the time; or
(6) Declare or pay any dividend or other distribution
with respect to Junior Stock if any dividends on the Series C
Preferred Stock which have accrued and are payable remain
outstanding at the time.
d. DIRECTORS. In addition to the rights specified
above and any other rights provided in the Corporation's Bylaws or the
laws of the State of Florida, a majority of the holders of the Series C
Preferred Stock shall have the right at all times to elect one member
to the Board of Directors of the Corporation. The right to elect one
director accorded to the holders of the Series C Preferred Stock may be
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<PAGE>
exercised either at a special meeting of the holders of Series C
Preferred Stock, or at a special meeting of the stockholders of the
Corporation, or by written consent of such holders in lieu of a meeting
which such holders shall have the right to execute from time to time
irrespective of the call of any special meeting of the stockholders;
provided that in no event shall the holders of the Series C Preferred
Stock have the right to elect a member to the Board of Directors any
more frequently than the election of the other members of the Board of
Directors by the shareholders (although such holders may replace their
designated director at any time as provided above). The director to be
elected by the holders of the Series C Preferred Stock shall serve for
terms extending from the date of his election and qualification until
the time of the next succeeding annual meeting of the stockholders of
the Corporation and until his successor has been elected and qualified;
provided, however, that such director may be removed by the Company
immediately and without notice upon redemption by repurchase or other
reacquisition of all of the Series C Preferred Stock.
II. SERIES D CONVERTIBLE PREFERRED STOCK. A series of the Preferred
Stock, designated the Series D Redeemable Convertible Preferred Stock
(herein the "Series D Preferred Stock"), is hereby established. The
aggregate number of shares of the Series D Preferred Stock shall be 700
and the stated value of such stock shall be One Thousand Dollars
($1,000) per share; provided, that upon redemption, repurchase, or
other reacquisition of shares of the Series D Preferred Stock, the
number of shares of such Series D and the number of shares of
authorized Series D Preferred Stock shall automatically be reduced by
such number of shares that have been redeemed, repurchased or
reacquired. The foregoing notwithstanding, during such period in which
shares of the Corporation's Series D Preferred Stock are outstanding,
the Corporation shall not issue other series of Preferred Stock having
dividend rights, powers, rights, privileges or preferences upon
liquidation that are superior to the Series D Preferred Stock except
for the 1,500 shares of Series C Preferred Stock issued to Waterside
Capital Corporation. The preferences, powers, rights and privileges and
the qualifications, limitations and restrictions of the Series D
Preferred Stock are as follows:
a. DIVIDEND RIGHTS. The holders of the Series D Preferred
Stock shall be entitled to receive, out of any funds legally available
therefor, dividends at the rate of $125 per share (the "Dividend") per
annum from the date of issuance which shall accrue quarterly in equal
increments of $31.25 on January 15, April 15, July 15 and October 15 of
each year (each a "Dividend Accrual Date") commencing October 15, 1999,
which Dividend shall be payable on the first business day that is ten
(10) days following each such Dividend Accrual Date (each such date
being a "Dividend Payment Date") which dividends shall be payable in
preference and priority to any payment of any cash dividend on Common
Stock and any shares of any other class or series of preferred (other
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<PAGE>
than the Series C Preferred Stock) or other form of capital stock of
the Corporation (such Common Stock and other stock (other than the
Series C Preferred Stock) being collectively referred to as "Additional
Junior Stock"), when and as declared by the Board of Directors of the
Corporation. Such dividends shall accrue and be deemed to accrue
whether or not earned or declared, and shall be cumulative so that if
such dividends on the Series D Preferred Stock shall not have been
paid, or declared and set apart for payment, the deficiency shall be
fully paid or declared and set apart for payment before any dividend
shall be paid or declared or set apart for any shares of Additional
Junior Stock and before any purchase or acquisition of any shares of
Additional Junior Stock is made by the Corporation. Accrued, but
unpaid, Dividends shall bear interest at twelve and one-half percent
(12.5%) per annum, compounded annually.
b. LIQUIDATION RIGHTS. In the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of each share of Series D Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its shareholders (after the
payment in full of an amount equal to One Thousand Dollars ($1,000) per
share of Series C Preferred Stock, plus all accrued and unpaid
dividends and interest on the Series C Preferred Stock and any unpaid
penalties, but before any payment or declaration and setting apart for
payment of any amount shall be made in respect of the Additional Junior
Stock) an amount equal to One Thousand Dollars ($1,000) per share, plus
all accrued and unpaid dividends and interest on the Series D Preferred
Stock (no less and no more) and any unpaid penalties. If the assets of
the Corporation available for distribution to its stockholders shall be
insufficient to pay in full all amounts to which the holders of the
Series D Preferred Stock are entitled, the amount available for
distribution shall be shared PRO RATA by the holders of such series.
For the purposes of this Section b, a merger or consolidation of the
Corporation with any other corporation or other entity in which the
corporation's shareholders do not have a controlling interest in the
surviving corporation in the merger or consolidation, or the sale,
transfer or lease of all or substantially all the Corporation's assets
shall constitute and be deemed a liquidation, dissolution, or winding
up of the Corporation.
c. VOTING RIGHTS. In addition to any other vote or consent
required by the laws of the State of Florida, the Corporation will not,
without the affirmative votes or written consent of the holders of at
least sixty six and two-thirds percent (66 2/3%) of the outstanding
shares of Series D Preferred Stock (with each share of Series D
Preferred Stock being entitled to one vote):
(1) In any manner, including by amendment of its
Certificate of Incorporation or By-laws, alter or change the
powers, rights, preferences or privileges or the
qualifications, limitations or restrictions of the Series D
Preferred Stock;
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<PAGE>
(2) Create, authorize or issue a new class or series
(or change or reclassify a class or series of shares with
junior, subordinate or inferior rights into a class or series
of shares) having rights, preferences or privileges prior,
superior or on parity with the shares of Series D Preferred
Stock (other than the Series C Preferred Stock) or increase
the rights, preferences, privileges or number of any class or
series having rights, preferences or privileges on dissolution
that are prior, superior or on parity with those of the Series
D Preferred Stock;
(3) Increase or decrease the aggregate number of
authorized shares of Series D Preferred Stock, except for any
decrease resulting from any redemption, repurchase or other
reacquisition; effect an exchange or reclassification or
create a right of exchange, of all or part of the shares of
Series D Preferred Stock into shares of another class; effect
an exchange or reclassification or create a right of exchange,
of all or part of the shares of another class or series into
the shares of the Series C Preferred Stock or Series D
Preferred Stock; change the shares of all or part of the
Series D Preferred Stock into a different number of shares of
Series D Preferred Stock.
(4) Repurchase redeem or otherwise acquire any shares
of the Corporation's capital stock other than the Series D
Preferred Stock if any dividends on the Series D Preferred
Stock which have accrued and are payable remain outstanding at
the time;
(5) Liquidate, dissolve or wind-up the affairs of the
Corporation or merge or consolidate the Corporation with any
other entity or sell or encumber all or substantially all of
the Corporation's assets or issue in one or a series of
related transactions shares representing more than fifty
percent (50%) of the aggregate voting power of all classes and
series of the Corporation's voting stock if any dividends on
the Series D Preferred Stock which have accrued and are
payable remain outstanding at the time; or
(6) Declare or pay any dividend or other distribution
with respect to Additional Junior Stock if any dividends on
the Series D Preferred Stock which have accrued and are
payable remain outstanding at the time.
d. CONVERSIONS. The holders of shares of Series D Preferred
Stock shall have the following conversion rights:
(1) RIGHT TO CONVERT. Subject tot he terms and
conditions of this paragraph d, the holder of any share of
Series D Preferred Stock shall have the right, at its option
at any time, to convert any such share of Series D Preferred
Stock into 870 fully paid and nonassessable shares of Common
Stock or, in case an adjustment (an "Adjustment") has taken
place pursuant to the further provisions of this paragraph d,
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<PAGE>
then as last adjusted and in effect at the date any share or
shares of Series D Preferred Stock are surrendered for
conversion. Such rights of conversion shall be exercised by
the holder thereof by giving written notice that the holder
elects to convert a stated number of shares of Series D
Preferred Stock into Common Stock and by surrender of a
certificate or certificates for the shares so to be converted
to the Corporation at its principal office (or such other
office or agency of the Corporation as the Corporation may
designate by notice in writing to the holders of the Series D
Preferred Stock) at any time during its usual business hours
on the date set forth in such notice, together with a
statement of the name or names (with address) in which the
certificate or certificates for shares of Common Stock shall
be issued.
(2) ISSUANCE OF CERTIFICATES: TIME CONVERSION
EFFECTED. Promptly after receipt of the written notice
referred to in subparagraph d.1. and surrender of the
certificate or certificates for the share or shares of Series
D Preferred Stock to be converted, the Corporation shall issue
and deliver, or cause to be issued and delivered, to the
holder, registered in such name or names as such holder may
direct, a certificate or certificates for the number of whole
shares of Common Stock issuable upon the conversion of such
share or shares of Series D Preferred Stock. To the extent
permitted by law, such conversion shall be deemed to have been
effected as of the close of business on the date on which such
written notice shall have been received by the Corporation and
the certificate or certificates for such share or shares shall
have been surrendered as aforesaid, and at such time the
rights of the holder of such share or shares of Series D
Preferred Stock shall cease, and the person or persons in
whose name or names any certificate or certificates for shares
of Common Stock shall be issuable upon such conversion shall
be deemed to have become the holder or holders of record of
the shares represented thereby.
(3) FRACTIONAL SHARES; DIVIDENDS; PARTIAL CONVERSION.
No fractional shares shall be issued upon conversion of Series
D Preferred Stock into Common Stock and no payment or
adjustment shall be made upon any conversion on account of any
cash dividends on the Common Stock issued upon such
conversion. At the time of each conversion, the Corporation
shall pay in cash within ninety days after the date of
conversion an amount equal to all dividends accrued and unpaid
on the shares of Series D Convertible Preferred Stock
surrendered for conversion to the date upon which such
conversion is deemed to take place as provided in subparagraph
d.2. In case the number of shares of Series D Preferred Stock
represented by the certificate or certificates surrendered
pursuant to subparagraph d.1. exceeds the number of shares
converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the
Corporation, a new certificate or certificates for the number
of shares of Series D Preferred Stock represented by the
certificate or certificates surrendered which are not to be
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<PAGE>
converted. If any fractional share of Common Stock would,
except for the provisions of the first sentence of this
subparagraph d.3., be delivered upon such conversion, the
Corporation, in lieu of delivering such fractional share,
shall pay to the holder surrendering the Series D Preferred
Stock for conversion, an amount in cash equal to the current
market price of such fractional share as determined in good
faith by the Board of Directors of the Corporation.
(4) ADJUSTMENT OF PRICE FOR STOCK SPLITS AND OTHER
SUBDIVISION AND COMBINATIONS. In case the Corporation shall at
any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a
greater number of shares, or shall declare a dividend or make
any other distribution upon any stock of the Corporation
payable in Common Stock (except for dividends or distributions
upon the Common Stock), or shall otherwise issue Common Stock
for no consideration, then the number of shares of Common
Stock into which the Series D Preferred Stock may be converted
will be adjusted appropriately.
In case the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them
to receive a dividend or other distribution payable in Common
Stock then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the
case may be.
(5) REORGANIZATION OR RECLASSIFICATION. If any
capital reorganization or reclassification of the capital
stock of the Corporation shall be effected in such a way that
holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made
whereby each holder of a share or shares of Series D Preferred
Stock shall thereupon have the right to receive, upon the
basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore
receivable upon the conversion of such share or shares of
Series D Preferred Stock, such shares of stock, securities or
assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common Stock
immediately theretofore receivable upon such conversion had
such reorganization or reclassification not taken place, and
in any such case appropriate provisions shall be made with
respect to the rights and interests of such holder to the end
that the provisions hereof (including without limitation
provisions for Adjustments) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise
of such conversion rights.
(6) NOTICE OF ADJUSTMENT Upon any Adjustment, then
and in each such case the Corporation shall give written
notice thereof, by delivery in person, certified or registered
mail, return receipt requested, telecopier or telex, addressed
to each holder of shares of Series D Preferred Stock at the
address of such holder as shown on the books of the
Corporation, which notice shall state the adjustment resulting
from such Adjustment, setting forth in reasonable detail the
method upon which such calculation is based.
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(7) STOCK TO BE RESERVED. The Corporation will at all
times reserve and keep available out of its authorized Common
Stock, solely for the purpose of issuance upon the conversion
of Series D Preferred Stock as herein provided, such number of
shares of Common Stock as shall then be issuable upon the
conversion of all outstanding shares of Series D Preferred
Stock. The Corporation covenants that all shares of Common
Stock which shall be so issued shall be duly and validly
issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof.
The Corporation will take all such action as may be necessary
to assure that all such shares of Common Stock may be so
issued without violation of any applicable law or regulation,
or of any requirement of any national securities exchange upon
which the Common Stock may be listed. The Corporation will not
take any action which results in any adjustment if the total
number of shares of Common Stock issued and issuable after
such action upon conversion of the Series D Preferred Stock
would exceed the total number of shares of Common Stock then
authorized by the Articles of Incorporation.
(8) NO REISSUANCE OF SERIES D PREFERRED STOCK. Shares
of Series D Preferred Stock which are converted into shares of
Common Stock as provided herein shall not be reissued.
(9) ISSUE TAX. The issuance of certificates for
shares of Common Stock upon conversion of Series D Preferred
Stock shall be made without charge to the holders thereof for
any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance
and delivery of any certificate in a name other than that of
the holder of the Series D Preferred Stock which is being
converted.
(10) CLOSING OF BOOKS. The Corporation will at no
time close its Transfer books against the transfer of any
Series D Preferred Stock or of any shares of Common Stock
issued or issuable upon the conversion of any shares of Series
D Preferred Stock in any manner which interferes with the
timely conversion of such Series D Preferred Stock, except as
may otherwise be required to comply with applicable securities
laws.
III. COMMON STOCK
a. RELATIVE RIGHTS OF PREFERRED STOCK AND COMMON
STOCK. All preferences, powers, rights and privileges, and
qualifications, limitations, or restrictions of the Common Stock are
expressly made subject to and subordinate to those that are or may be
fixed with respect to the Preferred Stock.
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b. DIVIDEND RIGHTS. The Corporation shall not make
any dividend payments upon the Common Stock as long as any shares of
Series C Preferred Stock or Series D Preferred Stock are outstanding
unless all dividends, deficiencies and penalties relating to the Series
C Preferred Stock and Series D Preferred Stock have been fully paid or
declared and set apart for payment.
c. LIQUIDATION RIGHTS. In the event of any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the rights of the holders of the Common Stock
shall be subordinate to the rights of the holders of the Preferred
Stock, as more specifically described above, and the assets of the
Corporation shall not be deemed available for distribution unless and
until the liquidation preference of the Preferred Stock has been
satisfied.
This Articles of Amendment to the Articles of Incorporation was adopted
by the shareholders on the 27th day of May, 1999. The number of votes cast for
the Amendment were sufficient for approval. This Articles of Amendment to the
Articles of Incorporation was adopted by the directors on the 23rd day of June,
1999.
IN WITNESS WHEREOF, the undersigned has executed these articles of
Amendment to the Articles of Incorporation this 30th day June, 1999.
By: /s/ HAROLD S. FISCHER
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Harold S. Fischer
Chief Executive Officer
