UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
U.S. TECHNOLOGIES INC.
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(Name of Issuer)
COMMON STOCK
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(Title of Class of Securities)
91272D309
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(CUSIP Number)
C. Gregory Earls
USV Partners, LLC
2001 Pennsylvania Avenue, NW
Suite 675
Washington, D.C. 20006
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 12, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box |_|
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss.240.13d-7 for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Potential persons who are to respond to the collection of information contained
in this form are not required to respond unless the form displays a currently
valid OMB control number.
Page 1 of 6 Pages
SEC 1746 (2-98)
<PAGE>
SCHEDULE 13D
CUSIP No. 91272D309 Page 2 of 6 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)
USV Partners, LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS (See instructions)
WC
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS OR ACTIONS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF
SHARES 7,642,857
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 0
PERSON
WITH 9 SOLE DISPOSITIVE POWER
7,642,857
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,642,857
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.9%
14 TYPE OF REPORTING PERSON (See instructions)
OO (limited liability company)
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SCHEDULE 13D (Continued) Page 3 of 6 Pages
This Schedule 13D is filed on behalf of the USV Partners, LLC.
Item 1. Security and Issuer.
This Schedule 13D relates to shares of common stock (the "Common Stock")
of U.S. Technologies Inc. (the "Issuer"). The principal executive office and
mailing address of the Issuer is 3901 Roswell Road, Suite 300, Marietta,
GA 30062.
Item 2. Identity and Background.
USV Partners, LLC is a Delaware limited liability company whose
principal place of business is the District of Columbia, and whose principal
office is located at 2001 Pennsylvania Avenue, N.W., Suite 675, Washington,
D.C. 20006. The manager of USV Partners, LLC is USV Management, LLC and C.
Gregory Earls is the sole member of USV Management, LLC. The manager's
address and the sole member's address is 2001 Pennsylvania Avenue, N.W.,
Suite 675, Washington, D.C. 20006. C. Gregory Earls is a United States citizen
and his principal occupation is being a venture capitalist. Under the terms of
the Limited Liability Company Agreement of USV Partners, LLC, the manager has
the sole power to vote the shares of Preferred Stock or Common Stock that USV
Partners, LLC receives upon conversion of the Preferred Stock or exercise of
the Warrants.
None of the entities or persons identified in this Item 2 has, during
the past five years, been convicted of any criminal proceeding (excluding
traffic violations or similar misdemeanors), nor been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to an Investment Agreement between the Issuer and USV
Partners, LLC dated as of July 16, 1998 (the "Investment Agreement"), USV
Partners, LLC has the right and obligation to purchase, for an aggregate
purchase price of $5,000,000, (a) a warrant granting USV Partners, LLC the right
to purchase 500,000 shares of Common Stock (the "Warrants") and (b) 500,000
shares of Series A Convertible Preferred Stock that may be converted into Common
Stock (the "Preferred Stock"). USV Partners, LLC paid the Issuer $3,400,000 of
the $5,000,000 purchase price on July 16, 1998. The source of the funds was
personal contributions of the members of USV Partners, LLC. USV Management, LLC,
the manager of USV Partners, LLC, contributed personal funds to USV Partners,
LLC. Additionally, one of the members of USV Partners, LLC (the Earls Family
Limited Partnership), which is controlled C. Gregory Earls (the sole member of
USV Management LLC), funded its interest in USV Partners, LLC with a loan from
C. Gregory Earls. As of the date of this Schedule 13D, USV Partners, LLC does
not have sufficient funds to pay the remaining amounts due the Issuer under this
Investment Agreement, but C. Gregory Earls, the sole member of the manager of
USV Partners, LLC, has represented to USV Partners, LLC that the Earls
Family Limited Partnership will contribute the remaining $1,600,000 necessary to
pay the Issuer.
Item 4. Purpose of Transaction.
Pursuant to the Investment Agreement, USV Partners, LLC has the right
to elect a director to the Board of Directors of the Issuer. USV Partners, LLC
has designated C. Gregory Earls to serve as a director. USV Partners, LLC seeks
to influence the affairs of the Issuer to the extent possible through this
director. USV Partners, LLC has, however, purchased the Preferred Stock and the
Warrants it beneficially owns as of the date of this Schedule 13D for investment
purposes. USV Partners, LLC also has an option to provide an additional
$5,000,000 of financing to the Issuer, which financing may be either debt or
equity financing. USV Partners, LLC intends to review market
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SCHEDULE 13D (Continued) Page 4 of 6 Pages
conditions on a continuing basis and, depending on various factors, including
whether it receives additional funds from its members, the needs of the Issuer,
the Issuer's business, affairs and financial position, other developments
concerning the Issuer, the price level of the Common Stock, conditions in the
securities markets and general economic and industry conditions, to decide
whether it may in the future exercise the option to provide financing (which may
take the form of equity), as it deems appropriate in light of the circumstances
existing from time to time.
Except as described above, USV Partners, LLC does not have any current
plans or proposals which relate to or would result in any of the actions set
forth in Parts (b) through (j) of Item 4.
Item 5. Interest in Securities of the Issuer.
(a), (b) According to the Form 10-Q filed by the Issuer with the SEC
for the quarter ending September 30, 1998, there were 28,922,778 shares of
Common Stock issued and outstanding. USV Partners, LLC has paid the Issuer
$3,400,000 of the $5,000,000 purchase price under the Investment Agreement. The
pro rata proportion of the shares of Preferred Stock and the Warrants, based
on the amount paid to date, is 340,000 shares of Preferred Stock and 340,000
Warrants. If the Earls Family Limited Partnership contributes the balance of the
purchase price to USV Partners, LLC, USV Partners, LLC will own 500,000 shares
of Preferred Stock and 500,000 Warrants, after payment of such amount to the
Issuer.
Beginning January 12, 1999, USV Partners, LLC has the right to convert
its shares of Preferred Stock to Common Stock and exercise its Warrants to
purchase Common Stock. Based on the assumptions set forth in (c) below, if the
Preferred Stock and the Warrants were exercised in full, USV Partners, LLC would
directly own and would have sole power to vote or dispose of 7,642,857 shares of
Common Stock, representing 20.9% of the Issuer.
(c) Pursuant to the Investment Agreement, USV Partners, LLC has the
right and obligation to purchase 500,000 Warrants and 500,000 shares of
Preferred Stock. USV Partners, LLC may convert the Preferred Stock into Common
Stock and exercise the Warrants beginning on January 12, 1999. The number of
shares of Common Stock of the Issuer into which each share of Preferred Stock is
convertible shall be equal to the result obtained by (x) dividing (I) the stated
value of the Preferred Stock ($10.00) plus any accrued but unpaid dividends on
such share of Preferred Stock, by (II) the Conversion Price as defined below;
and (y) multiplying by the Conversion Factor, which adjusts the price for
intervening Common Stock dividends or distributions or issuances of shares of
Common Stock at less than market value. The "Conversion Price" shall be, if the
Issuer achieves a certain earnings target, the average of the daily closing
price for the Common Stock for the 15 trading days preceding December 31, 1998;
provided that (A) if the average daily closing price is less than $0.70 per
share of the Common Stock, the Conversion Price shall be $0.70 per share and (B)
if the average of the daily closing price is more than $1.00 per share of Common
Stock, the Conversion Price shall be $1.00 per share. If the Issuer does not
meet the earnings target, the Conversion Price shall be $0.65. Each Warrant is
exercisable for one share of Common Stock at an exercise price of $1.00 per
share.
If the Earls Family Limited Partnership contributes the balance of the
purchase price to USV Partners, LLC, USV Partners, LLC will own 500,000 shares
of Preferred Stock and 500,000 Warrants, after payment of such amount to the
Issuer, and, based on such range of Conversion Prices, USV Partners, LLC would
have the right to purchase between 5,500,000 and 8,192,308 shares of Common
Stock, which would represent between 16.0% and 22.1% of the outstanding Common
Stock at such time (assuming no other issuances other than the issuance of
Common Stock and a full conversion of the Preferred Stock and a full exercise of
the Warrants).
The estimated ownership of 7,642,857 shares of Common Stock set forth
in (b) above and on the Cover Page of this Schedule 13D is based on the current
price of the Issuer's Common Stock. At the current price of the Issuer's Common
Stock, the 500,000 shares of Preferred Stock would be converted at a $0.70
Conversion Price
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SCHEDULE 13D (Continued) Page 5 of 6 Pages
for 7,142,857 shares of Common Stock. Assuming full exercise of the 500,000
Warrants, USV Partners, LLC would own a total of 7,642,857 shares of Common
Stock, representing 20.9% of the Issuer.
(d), (e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
As of July 16, 1998, the Issuer and USV Partners, LLC entered into a
Registration Rights Agreement ("Registration Rights Agreement"), which
Registration Rights Agreement is attached hereto as Exhibit A and incorporated
by reference into this Schedule 13D. Pursuant to the Registration Rights
Agreement, the Issuer has agreed to provide USV Partners, LLC certain demand and
piggyback registration rights with respect to the Common Stock that USV
Partners, LLC may receive upon conversion of the Preferred Stock, exercise of
the Warrants or pursuant to any stock dividends or splits ("Registrable
Securities"). The demand registration rights are exercisable from time to time
but may only be validly exercised pursuant to a request by holders of
Registrable Securities that constitute a majority of all of the Registrable
Securities. With respect to the piggyback registration rights, if the Issuer at
any time proposes to register the Issuer's securities for its own account or on
behalf of other shareholders of the Issuer, the holders of the Registrable
Securities have the right to have their Registrable Securities included in such
registration. Such registration rights are subject to certain underwriter
cutbacks. Also, as noted in Item 4 above, USV Partners, LLC has an option to
provide an additional $5,000,000 of financing to the Issuer, which financing may
be either debt or equity financing. Such option is set forth in the Investment
Agreement, which is attached hereto as Exhibit B and incorporated by reference
into this Schedule 13D.
Item 7. Material to Be Filed as Exhibits
Exhibit A Registration Rights Agreement dated as of July 16, 1998 by and
between the Issuer and USV Partners, LLC.
Exhibit B Investment Agreement dated as of July 16, 1998 by and between
the Issuer and USV Partners, LLC.
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SCHEDULE 13D (Continued) Page 6 of 6 Pages
SIGNATURES
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this amendment is
true, complete and correct.
Dated: November 23, 1998
USV PARTNERS, LLC
By: USV Management, LLC, its Manager
/s/ C. Gregory Earls
-----------------------------------
By: C. Gregory Earls
Title: Sole Member
<PAGE>
Exhibit A
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REGISTRATION RIGHTS AGREEMENT
between
U.S. TECHNOLOGIES INC.
and
USV PARTNERS, LLC
Dated as of July 16, 1998
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is
entered into as of July 16, 1998, by and between U.S. Technologies Inc., a
Delaware Corporation (the "Company") and USV Partners, LLC, a Delaware limited
liability company (the "Investor").
W I T N E S S E T H :
WHEREAS, the Investor and the Company have entered into an
Investment Agreement, pursuant to which, inter alia, the Investor is to purchase
500,000 shares of Series A Convertible Preferred Stock, with a par value of
$0.02 (the "Series A Convertible Preferred Stock") and 500,000 warrants
("Warrants") to purchase 500,000 shares (subject to adjustment pursuant to the
terms thereof) of common stock with a par value of $0.02 ("Common Stock"); and
WHEREAS, in connection with the purchase and sale of the
Series A Convertible Preferred Stock and the Warrants, the Company has agreed,
on the terms and conditions set forth herein, to register shares of Common Stock
as set forth below.
NOW THEREFORE, in consideration of the foregoing recitals and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto agree as follows:
ARTICLE I DEFINITIONS
1.1 Definitions. As used herein, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Action or Proceeding" means any action, suit, arbitration, proceeding
or Governmental Authority investigation or audit.
"Advice" has the meaning given it in Section 3.2 of this Agreement.
"Affiliate" means any Person that directly, or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
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<PAGE>
"Applicable Securities Authority" means the Commission or any other
Governmental Authority with which a registration statement or similar form must
be filed to issue securities under the Applicable Securities Laws.
"Applicable Securities Law" means each Law applicable to the purchase
and sale of securities of the Company, including, without limitation the
Securities Act, the Exchange Act and "Blue Sky" laws and the rules and
regulations promulgated thereunder.
"Blocking Notice" has the meaning given it in Section 3.2 of this
Agreement.
"Business Day" means any Day other than a Saturday, Sunday or public
holiday or the equivalent for banks under the laws of Washington, DC or Atlanta,
GA.
"Certificate of Designations" means the Certificate of Designations,
Preferences and Rights of Series A Convertible Preferred Stock of the Company
adopted by the Board of Directors of the Company as of July 10, 1998.
"Closing" means the closing of the purchase and sale of the Series A
Convertible Preferred Stock and the Warrants pursuant to the Investment
Agreement.
"Commission" means the United States Securities and Exchange Commission
or any other U.S. federal agency at the time administering the Securities Act.
"Common Stock" means the issued and outstanding shares of common stock
of the Company, with par value of $0.02 per share.
"Company Registration" means the registration pursuant to Section 2.3
hereof, and sale pursuant to such registration, under the Applicable Securities
Laws, of substantially all of the Registrable Securities that are the subject of
a Company Registration Notice.
"Company Registration Notice" means a request to include Registrable
Securities in a registration initiated by the Company pursuant to Section 2.3
hereof (a) made in writing, (b) by a Holder of Registrable Securities, (c)
specifying the number of Registrable Securities to be offered for sale pursuant
to the Company Registration (which may be any or all of the Registrable
Securities owned by any Holder).
"Day" means a calendar day.
"Demand Registration" means the registration pursuant to Section 2.1
hereof and sale pursuant to such registration, under the Applicable Securities
Laws, of substantially all of the Registrable Securities that are the subject of
a Qualifying Request, which sales shall be made pursuant to a firm commitment
underwritten secondary offering arranged for by the Company,
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<PAGE>
unless the requirement of a firm commitment underwriting is waived in writing by
the Holders of a majority of the Registrable Securities that are the subject of
such Qualifying Request.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any court, panel, judge, board, bureau,
commission, agency or other entity, body or other Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to such government.
"Holder" means the Investor and each Transferee of Registrable
Securities that has executed and become a Party to this Agreement.
"Indemnified Party" has the meaning given it in Section 5.3 of this
Agreement.
"Indemnifying Party" has the meaning given it in Section 5.3 of this
Agreement.
"Investment Agreement" means the Investment Agreement dated as of July
16, 1998 by and between the Company and the Investor.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law in any country, or any state,
province, county, city or other political subdivision thereof.
"Order" means any writ, judgment, decree, injunction or similar order
of any Governmental Authority (in each case whether preliminary or final).
"Party" means a party to this Agreement.
"Person" means and includes any individual, partnership, joint venture,
corporation, trust, limited liability company, joint stock company,
unincorporated organization, association or other entity and includes any
Governmental Authority or any political subdivision or agency thereof.
"Piggyback Notice" means a request for a Piggyback Registration (a)
made in writing, (b) by a Holder of Registrable Securities, (c) specifying the
number of Registrable Securities to be offered for sale pursuant to the
Piggyback Registration (which may be any or all of the Registrable Securities
owned by any Holder) and the intended disposition thereof.
"Piggyback Registration" means the registration pursuant to Section 2.2
hereof, and sale pursuant to such registration, under the Applicable Securities
Laws of substantially all of the Registrable Securities that are subject to a
Piggyback Notice.
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<PAGE>
"Qualifying Request" means a request for a Demand Registration (a) made
in writing, (b) by a Holder or Holders of Registrable Securities constituting a
majority of all Registrable Securities, (c) specifying the number of Registrable
Securities to be offered for sale pursuant to the Demand Registration, and (d)
specifying whether the Company is to arrange for a public sale in a firm
commitment underwritten secondary offering of the Registrable Securities that
are the subject of such request.
"Registering Shareholder" has the meaning given it in Section 2.2(a) of
this Agreement.
"Registrable Security" means each share of Common Stock (a) into which
a Series A Share is convertible, (b) for which a Warrant is exercisable, or (c)
received with respect to a Series A Share, Warrant, or Registrable Security
pursuant to any stock dividend, stock split, recapitalization or similar event;
provided, however, that (i) a Holder of Series A Convertible Preferred Stock or
of a Warrant shall be deemed to be the Holder of the Registrable Securities
attributable to such Series A Convertible Preferred Stock or Warrant; and (ii)
any Registrable Security will cease to be a Registrable Security when (A) such
Registrable Security has been transferred pursuant to an effective registration
statement or Rule 144 under the Securities Act or any comparable Applicable
Securities Law covering such Registrable Security (but not including any
transfer exempt from registration under any Applicable Securities Law), or (B)
such Registrable Security is no longer held of record by a Holder.
"Requesting Holder" has the meaning given it in Section 2.3(a) of this
Agreement.
"Requesting Piggyback Holder" has the meaning given it in Section
2.2(a) of this Agreement.
"Securities Act" means the United States Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Series A Convertible Preferred Stock" has the meaning given it in the
recitals.
"Series A Shares" means the shares of Series A Convertible Preferred
Stock of the Company purchased by the Investor pursuant to the Investment
Agreement and any additional or replacement shares of preferred or common stock
issued with respect to Series A Shares upon any stock dividend, stock split,
recapitalization or similar event.
"Shareholder" means any holder of equity securities of the Company.
"Transfer" means a sale, transfer, assignment, pledge, hypothecation or
other disposition or encumbrance of capital stock or an interest therein.
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<PAGE>
"Transferee" means, as applicable (a) any Person to which Registrable
Securities are Transferred by a Holder; and (b) any Person to which a Warrant is
Transferred by the Investor in accordance with the terms of such Warrant.
"Warrants" means the Company's Common Stock Purchase Warrants issued to
Investor pursuant to which the holder thereof has the right to purchase 500,000
shares of the Company's Common Stock as adjusted pursuant to the terms and
conditions of the Warrant.
1.2 Interpretation. Unless otherwise expressly provided herein (a)
defined terms in the singular include the plural and vice versa, and the
masculine, feminine and neuter gender include all genders; (b) the words
"hereof," "herein" and "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular provision of this Agreement; (c)
the words "include," "includes," and "including" mean include, includes and
including "without limitation" and "without limitation by specification"; and
(d) references to any Person shall be construed as a reference to such Person
and any permitted successors or assigns of such Person; (e) references to
"consent" shall mean prior consent evidenced in writing; (f) terms such as
"satisfactory to ______" "acceptable to _________," "in such manner as ______
may determine," to ______'s satisfaction," and phrases of similar import
authorize and permit such Party to approve, disapprove, act or decline to act,
unless otherwise specified herein, in its reasonable discretion without
unreasonable delay or condition; and (g) references to Sections refer to
Sections of this Agreement.
ARTICLE II REGISTRATION RIGHTS
2.1 Demand Registrations. The Holders of Registrable Securities shall
be entitled to require the Company to effect from time to time Demand
Registration of the Registrable Securities pursuant to Qualifying Requests. If a
Qualifying Request is made by fewer than all Holders of Registrable Securities,
copies of the Qualifying Request shall be distributed by the Company to all
Holders who are not Parties to such Qualifying Request within five Business Days
after it is received by the Company. Each such Holder shall be entitled to join
in the Qualifying Request by delivering written notice to the Company within ten
Business Days after its receipt of a copy of the Qualifying Request from the
Company. Such notice shall specify the number of Registrable Securities that
each Holder elects to include in the Qualifying Request and, if the Qualifying
Request does not already include such a requirement, whether such Holder
requires the Company to arrange for public sale in a firm commitment
underwritten secondary offering of the Registrable Securities that are the
subject of the Qualifying Request.
(a) Within 90 Days after receiving a Qualifying Request from
any record Holder of Registrable Securities, the Company shall (i) prepare and
file a registration statement under the Applicable Securities Laws covering the
Registrable Securities which are the subject of such request, (ii) use its best
efforts to cause such registration statement to become effective
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<PAGE>
promptly thereafter and (iii) take appropriate steps to complete all other
requirements for registration or qualification of the Registrable Securities
under the Applicable Securities Laws.
(b) The Company shall use its best efforts to arrange for
public sale in a firm commitment underwritten secondary offering of the
Registrable Securities that are the subject of a Qualifying Request delivered
pursuant to Section 2.1(a), unless the requirement of a firm commitment
underwriting is waived in writing by a majority of the Holders of the
Registrable Securities that are subject to such Qualifying Request. The Holders
of a majority of the Registrable Securities that are the subject of such
Qualifying Request shall have the right to designate the managing underwriter(s)
of any such offering, subject to the consent of the Company, which consent shall
not be unreasonably withheld. Except as provided in this Section 2.1(b), or as
the Holders having delivered a Qualifying Request may consent in writing, the
Company will not file with the Applicable Securities Authority any other
registration statement with respect to its Common Stock (other than a
registration effected on Form S-4, Form S-8 or any successor forms thereto),
whether for its own account or that of other stockholders, from the date of
receipt of the Qualifying Request until the completion of the period of
distribution of the Registrable Securities contemplated thereby.
(c) If the Company grants any demand registration rights to
another Person, the Company shall include within such demand registration rights
an obligation on behalf of such Person to notify the Company in writing of its
intent to exercise its demand registration rights at least 30 days prior to such
exercise. Immediately after receipt of such notice but in no event later than
three days after receipt thereof, the Company shall deliver a copy of such
notice to the Holders. If the Holders exercise their demand registration rights
hereunder, prior to the exercise of the demand registration rights held by the
Person providing such notice, the Registrable Securities sought to be registered
by the Holders shall be included in the registration statement and any
associated offering prior to the securities sought to be registered by such
other Person.
2.2 "Piggyback" Registrations. (a) If, at any time after the Closing,
the Company proposes or agrees to register any Common Stock (other than
securities registered on Form S-4 or Form S-8 or any successor forms thereto)
for the account of any Shareholder (each a "Registering Shareholder"), then in
each such case the Company shall, not later than five Days after deciding or
agreeing to register such shares, give written notice thereof to each Holder of
Registrable Securities (which shall include a list of the jurisdictions in which
the Company intends to attempt to qualify such securities). If, within 30 Days
of the receipt by the Holders of any such written notice, any Holder (each a
"Requesting Piggyback Holder") delivers to the Company a Piggyback Notice,
subject to Section 2.4 hereof, the Company shall include in such registration
statement the Registrable Securities specified in the Piggyback Notice. The
Company shall have the right to designate the managing underwriter(s) of any
such offering subject to the consent of the Registering Shareholder and the
Requesting Piggyback Holders, which consent shall not be unreasonably withheld.
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<PAGE>
(b) If, at any time after giving written notice of the
Piggyback Registration and prior to filing the registration statement filed in
connection with such registration, the Registering Shareholder withdraws its
request for registration or the Company shall determine for any reason either
not to register any securities or to delay registration of such securities, the
Company may, at its election, give written notice of such withdrawal by the
Registering Shareholder, or determination by the Company, to each Requesting
Holder and, thereupon, in the case of a withdrawal by the Registering
Shareholder or a determination not to register by the Company, shall be relieved
of its obligation to register any shares in connection with such registration.
No registration effected under this Section 2.2 shall relieve the Company of its
obligations to effect any registration upon request under Section 2.1, nor shall
any such registration hereunder be deemed to have been effected pursuant to
Section 2.1.
2.3 Company Registration. (a) If at any time or from time to time, the
Company shall determine to register any of its securities for its own account,
the Company will promptly give the record Holders of Registrable Securities
written notice thereof (which shall include a list of the jurisdictions in which
the Company intends to attempt to qualify such securities). If, within 30 Days
of the receipt by the Holders of any such written notice, any Holder (each a
"Requesting Holder") delivers to the Company a Company Registration Notice,
subject to Section 2.4 hereof, the Company shall include in such registration
statement the Registrable Securities specified in the Company Registration
Notice.
(b) If, at any time after giving written notice of its
intention to register any securities and prior to filing the registration
statement filed in connection with such registration, the Company shall
determine for any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Requesting Holder and, thereupon, in the case of a
determination not to register, shall be relieved of its obligation to register
any shares in connection with such registration. No registration effected under
this Section 2.3 shall relieve the Company of its obligations to effect any
registration upon request under Section 2.1, nor shall any such registration
hereunder be deemed to have been effected pursuant to Section 2.1.
2.4 Managing Underwriter Cut-Backs. In the event that one or more
Holders request the Company to register Registrable Securities pursuant to
Sections 2.1, 2.2 or 2.3, and the managing underwriter(s) advise any such Holder
and the Company in writing that the inclusion in the registration statement of
some or all of the Registrable Securities sought to be registered by all such
Holders creates a significant risk that the price per share that such Holders
and the Company will derive from such registration will be adversely affected or
that the number of shares or securities sought to be registered is too large a
number to be reasonably sold, the Company will include in such registration
statement such number of shares or securities as the Company and such Holders
are so advised in writing can be sold in such offering without such an effect,
as follows and in the following order of priority:
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(a) with respect to registrations pursuant to Section 2.1,
first, the Registrable Securities sought to be registered by each Holder on a
pro rata basis in proportion to the number of Registrable Securities sought to
be registered by each Holder; and second, the number of shares or securities
sought to be registered by any other holders who have a contractual, incidental
"piggyback" right to include such securities in the registration statement;
(b) with respect to registrations pursuant to Section 2.2,
first, the number of shares of Common Stock sought to be registered by the
Registering Shareholder; second, on a pro rata basis in proportion to the number
of Registrable Securities sought to be registered, the Registrable Securities of
each of the Requesting Piggyback Holders; and third, the number of shares or
securities sought to be registered by any other holders who have a contractual,
incidental "piggyback" right to include such securities in the registration
statement; and
(c) with respect to registrations pursuant to Section 2.3,
first, the number of shares or securities sought to be registered by the
Company; and second, on a pro rata basis in proportion to the number of
Registrable Securities sought to be registered by each Requesting Holder.
2.5 Other Registration Rights. Except as provided herein, no Person has
any right of any nature to require the Company to register Common Stock of the
Company owned by such Person, and the Company shall not enter into any agreement
offering piggyback registration rights that are superior to the rights set forth
in Sections 2.1, 2.2 or 2.3, without the prior written consent of the Holders of
a majority of the Registrable Securities, which consent shall not be
unreasonably withheld.
2.6 Conversion of Registrable Securities. Series A Shares and Warrants
shall be deemed automatically converted into their corresponding Registrable
Securities immediately before sale of such Registrable Securities pursuant to a
Registration Statement. Any unpaid portion or the exercise price for Registrable
Securities attributable to Warrants shall be deducted from the proceeds of the
sale and paid to the Company at the closing of such sale. Upon such automatic
conversion, such converted Series A Shares shall be deemed to be canceled and
shall cease to be outstanding.
ARTICLE III REGISTRATION PROCEDURES
3.1 Company Obligations. The Company will:
(a) furnish to the Holders drafts of each registration
statement to the Applicable Securities Authority pertaining to any securities of
the Company (each a "Registration Statement"), any prospectus, amendment or
supplement thereto or any document incorporated by reference therein, which
documents will be subject to the review and comments of each Holder as to
matters regarding such Holder; and after filing, the Company shall furnish to
the Holders such number of copies of such Registration Statement, each amendment
and supplement thereto
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(including any exhibits thereto), the prospectus included in such Registration
Statement (including each preliminary prospectus), the documents incorporated by
reference therein and such other documents as any Holder may reasonably request;
(b) use its best efforts to maintain the effectiveness of each
registration statement filed pursuant to this Agreement, and take such other
steps as are required by Applicable Securities Laws to maintain the registration
or qualification in effect, until (i) such time as all Registrable Securities
registered pursuant to the registration statement either have been sold pursuant
to the registration statement or (ii) for a period of 180 days, whichever is
shorter. Each Holder shall provide written notice to the Company within 15 Days
after it has sold all of its Registrable Securities registered pursuant to this
Agreement;
(c) notify the Holders in writing of the occurrence of an
event requiring the preparation of a supplement or amendment to a prospectus and
promptly prepare and file with the Applicable Securities Authority any such
supplement or amendment; and
(d) use its best efforts to register or qualify the
Registrable Securities registered pursuant to such Registration Statement under
such other Applicable Securities Laws, except that the Company shall not be
required to qualify to do business as a foreign corporation, subject itself to
taxation or consent to general service of process in any jurisdiction where it
is not currently obligated to be so qualified, in accordance with and subject to
the terms and conditions contained herein.
3.2 Suspension of Effectiveness. At least five business days prior to
any disposition of Registrable Securities, Holder shall advise the Company of
the dates on which such disposition is expected to commence and terminate, the
number of Registrable Securities expected to be sold, the method of disposition
and such other information as the Company may reasonably request in order to
supplement the related prospectus in accordance with the Applicable Securities
Laws. The Company may suspend dispositions under the registration statement and
notify the Holder that it may not sell the Registrable Securities pursuant to
any registration statement or prospectus (a "Blocking Notice") if (a) the
Company's management determines in its reasonable good faith judgment that the
Company's obligation to ensure that such registration statement and prospectus
are current and complete would require the Company to take actions that might
reasonably be expected to have a detrimental effect on any proposal,
negotiations or plan by the Company or any of its subsidiaries to engage in any
acquisition of assets (other than the ordinary course of business) or any
merger, consolidation, tender offer, reorganization or similar transaction or
(b) the Company determines that the registration statement, the prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or that requires the making of any additions to or
changes in the registration statement or the prospectus, in order to make the
statements therein not misleading; provided that such suspension may not exceed
60 days. The Holder agrees by acquisition of the Registrable Securities that,
upon receipt of a Blocking Notice
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from the Company, such Holder shall not dispose of, sell or offer for sale the
Registrable Securities pursuant to such registration statement until such Holder
receives (a) copies of the supplemented or amended prospectus, or until counsel
for the Company shall have determined that such disclosure is not required due
to subsequent events, (b) notice in writing (the "Advice") from the Company that
the use of the prospectus may be resumed and (c) copies of any additional or
supplemental filings that are incorporated by reference in the prospectus. If so
directed by the Company in connection with any Blocking Notice, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession of the prospectus
covering such Registerable Securities that was current immediately prior to the
time of receipt of such Blocking Notice. In the event the Company shall give any
Blocking Notice, the time regarding the effectiveness of such registration
statement set forth in Section 2.1 shall be extended by the number of days
during the period from and including the date of the giving of such Blocking
Notice to and including the date when the Holder shall have received the copies
of the supplemented or amended prospectus, the Advice and any additional or
supplemental filings that are incorporated by reference in the prospectus or the
supplemental prospectus, as the case may be. Delivery of a Blocking Notice and
the related suspension of any registration statement shall not constitute a
default under this Agreement.
ARTICLE IV REGISTRATION EXPENSES; HOLDBACK
4.1 Company Expenses. Except as provided in Section 4.2, all fees and
expenses incident to the Company's performance of or compliance with this
Agreement shall be borne by the Company, including, without limitation, the
following fees and expenses: (a) all Applicable Securities Authority,
self-regulatory organization, stock exchange and other registration and filing
fees and listing fees; (b) the fees and expenses of the Company's compliance
with securities or "Blue Sky" laws (including reasonable fees and disbursements
of counsel in connection with "Blue Sky" qualifications of the Registrable
Securities); (c) printing expenses; (d) all underwriting discounts and
commissions not attributable to the sale of Registrable Securities; (e) the fees
and disbursements of counsel for the Company and of one counsel for the selling
Holders, collectively, in each relevant jurisdiction; (f) the fees and expenses
of independent certified public accountants; (g) underwriters and other persons
retained by the Company in connection with such registration; (h) fees of
transfer agents and registrars; and (i) messenger and delivery expenses;
provided, however, in connection with Demand Registration pursuant to Section
2.1, the Company shall pay such fees and expenses only with respect to the first
time such right is exercised. In addition, the Company shall pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance
obtained by the Company, and the expenses and fees for listing or authorizing
for quotation the securities to be registered on each securities exchange on
which any Registrable Securities are then listed or quoted.
4.2 Holder Expenses. The selling Holders shall pay all underwriting
discounts and commissions attributable to the sale of Registrable Securities and
all of the selling Holders' internal expenses incurred in connection with the
offering (including, without limitation, all
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salaries and expenses of the selling Holders' officers and employees performing
legal or accounting duties, but excluding fees and expenses of the selling
Holders' counsel that are payable by the Company under Section 4.1).
4.3 Restrictions on Public Sale by Holder of Registrable Securities. To
the extent not inconsistent with Applicable Law, each Holder whose securities
are included in a registration statement agrees not to effect any public sale or
distribution of the issue being registered or a similar security of the Company,
or any securities convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144 under the Securities Act,
during the 14 days prior to, and during the 90-day period beginning on, the
effective date of such registration statement (except as part of such
registration), if and to the extent requested by either the Company in the case
of a non-underwritten public offering or if and to the extent requested by the
managing underwriter(s) in the case of an underwritten public offering.
4.4 Restrictions on Public Sale by the Company and Others. The Company
agrees not to effect any public sale or distribution of any securities similar
to those being registered, or any securities convertible into or exchangeable
for such securities (other than any such sale or distribution of such securities
in connection with any merger or consolidation by either the Company or any
subsidiary thereof of the capital stock or all or substantially all of the
assets of any other Person or in connection with an employee stock option plan
or benefit plan), during the 14 days prior to, and during the 90-day period
beginning on, the effective date of any registration statement in which the
Holders are participating or the commencement of a public distribution of the
Registrable Securities.
ARTICLE V INDEMNIFICATION; CONTRIBUTION
5.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder, each of such Holder's officers, directors, partners,
employers and agents, and each person controlling any such persons, with respect
to which registration, qualification or compliance has been effected pursuant to
this Agreement and, if requested by any underwriter, such underwriter, and each
person who controls such underwriter, from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation, any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, and any of the foregoing incurred in settlement of
any litigation, commenced or threatened) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus contained therein or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any Applicable Securities Law applicable to
the Company and relating to action or inaction by the Company in connection with
any registration, qualification or compliance required hereunder or arising out
of or based upon the Company's breach of any representation, warranty, covenant
or agreement contained in this Agreement;
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provided, however, that the Company shall not be liable in any such case to the
extent any of such losses, claims, damages, liabilities or expenses arise out
of, or are based upon, any such untrue statement or omission or allegation
thereof based upon information furnished in writing to the Company by such
Holder expressly for use therein. In addition to any other information furnished
in writing to the Company, expressly for use therein, by the Holder, the
information in the registration statement under the caption "Selling
Shareholders" (or any similarly captioned section containing the information
required pursuant to Item 507 of Regulation S-K promulgated pursuant to the
Securities Act) shall be deemed information furnished in writing to the Company
by the Holder; provided that the Company has complied with its obligations
pursuant to Section 3.1(a).
5.2 Indemnification by Holders. Each Holder agrees severally to
indemnify and hold harmless the Company, its directors and officers and each
person, if any, who controls the Company and, if requested by any underwriter,
such underwriter, and each person who controls such underwriter, to the same
extent as the foregoing indemnity from the Company set forth above in Section
5.1, but only with respect to information furnished in writing by such Holder,
or on its behalf, expressly for use in the Registration Statement or prospectus
relating to the Registrable Securities any amendment or supplement thereto or
any preliminary prospectus and provided that the obligation of each Holder to
indemnify will be several and not joint. In case any Action or Proceeding shall
be brought against the Company or its directors or officers or any such
controlling person or an underwriter or a controlling person of an underwriter
(if indemnity has been requested by such underwriter) in respect of which
indemnity may be sought against the Holder, the Holder shall have the rights and
duties given to the Company, and the Company or its directors or officers or
such controlling person or any such underwriter or controlling person of any
such underwriter shall have the rights and duties given to the Holder, by the
preceding Section 5.1 hereof. Each Holder's indemnity obligations under this
Section 5.2 and contribution obligations under Section 5.4 shall be limited, in
the aggregate, to the net sales proceeds actually received by it in connection
with the applicable offering.
5.3 Conduct of Indemnification Proceedings. If any Action or Proceeding
(including any governmental investigation) shall be brought or asserted against
any person entitled to indemnification under Section 5.1 or 5.2 above (an
"Indemnified Party") in respect of which indemnity may be sought from any Party
who has agreed to provide such indemnification (an "Indemnifying Party") and the
Indemnifying Party acknowledges in writing to the Indemnified Party that the
Indemnified Party is entitled to indemnity by the Indemnifying Party hereunder,
the Indemnifying Party shall assume the defense of such Action or Proceeding,
including the employment of counsel reasonably satisfactory to such Indemnified
Party, and shall assume the payment of all expenses. Such Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (a) the Indemnifying
Party has agreed to pay such fees and expenses, or (b) such Indemnified Party
shall have been advised by counsel that there is an actual or potential material
conflict of interest on the part of counsel employed by the Indemnifying Party
to represent such Indemnified Party. If counsel advises the
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Indemnified Party of such a conflict of interest, or if the Indemnifying Party
fails to acknowledge in writing that the Indemnified Party is entitled to
indemnity hereunder, the Indemnifying Party shall not have the right to assume
the defense of such Action or Proceeding on behalf of such Indemnified Party
and, upon written notice to the Indemnifying Party, the Indemnified Party may
employ separate counsel at the expense of the Indemnifying Party; it being
understood, however, that the Indemnifying Party shall not, in connection with
any one cause Action or Proceeding or separate but substantially similar or
related Actions or Proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for all such Indemnified Parties, which firm shall be
designated in writing by such Indemnified Parties. The Indemnifying Party shall
not be liable for any settlement of any such Action or Proceeding or any
threatened Action or Proceeding effected without its written consent, but if
settled with its written consent or if there be a final judgment of the
plaintiff in any such Action or Proceedings, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment. The failure of any Indemnified Party to give prompt notice of a claim
for indemnification hereunder shall not limit the Indemnifying Party's
obligations to indemnify under this Agreement, except to the extent such failure
is prejudicial to the ability of the Indemnifying Party to defend the action. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement unless (x) there is no finding or
admission of any violation of any rights of any Person and no effect on any
other claims that be made against any indemnified party, (y) the sole relief
provided is monetary damages that are paid in full by the Indemnifying Party and
(z) such judgment or settlement includes as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation.
5.4 Contribution. If the indemnification provided for in this Article V
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages, liabilities or judgment referred to herein, then such Indemnifying
Party, in lieu of Indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities and judgments in the following manner: as between
the Indemnifying Party on the one hand and any Indemnified Party entitled to
indemnification under Section 5.1 on the other, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and any Indemnified Party entitled to indemnification under Section 5.2 on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand and
of any Indemnified Party entitled to indemnification under Section 5.2 on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such Party,
and the Party's relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No person guilty
of fraudulent misrepresentation (within the means of
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subsection 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
5.5 Survival. The indemnity and contribution agreements contained in
this Article V shall remain operative and in full force and effect with respect
to any sales of Registrable Securities made pursuant to a Registration Statement
regardless of (a) any termination of this Agreement, (b) any investigation made
by or on behalf of any Indemnified Party or by or on behalf of the Company, and
(c) the consummation of the sale or successive resale of the Registrable
Securities.
ARTICLE VI MISCELLANEOUS
6.1 Rules 144 and 144A. The Company covenants that following the
registration of Registrable Securities it will file any reports required to be
filed by it under the Securities Act and the Exchange Act so as to enable
Holders holding registered Registrable Securities to sell such Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rules 144 and 144A under the Securities Act,
as each such Rule may be amended from time to time, or (b) any similar rule or
rules hereafter adopted by the Commission. Upon the request of any such Holder,
the Company will forthwith deliver to such Holder a written statement as to
whether it has complied with its obligation pursuant to this Section 6.1 to file
any reports required to be filed by it under the Securities Act and the Exchange
Act. In connection with any transfer pursuant to this Section 6.1, upon the
written request of the Company, the Holder shall furnish to the Company such
information so that the Company may ensure that the Holder has complied with the
limitations set forth in Rules 144 and 144A or any similar rule or rules
hereafter adopted by the Commission.
6.2 Dispute Resolution.
(a) All disputes, controversies, and claims directly or
indirectly arising out of or in relation to this Agreement or the validity,
interpretation, construction, performance, breach or enforceability of this
Agreement shall be finally, exclusively and conclusively settled by binding
arbitration, as provided in this Section, under the International Rules of
Conciliation and Arbitration of the American Arbitration Association (the "AAA")
which are in effect as of the Closing.
(b) The arbitral tribunal shall be composed of three
arbitrators, each of which shall be appointed by the then President of the AAA.
The arbitration proceedings shall be conducted in the English language, and all
documents not in English submitted by any party must be accompanied by an
English translation. The arbitration proceedings shall be conducted and any
arbitral award shall be made in Atlanta, GA. No discovery shall be conducted
except by written agreement of all Parties.
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(c) The Parties agree: (i) that the arbitrator shall have no
authority to award punitive damages or any damages other than those recoverable
in accordance with this Agreement (which may include reasonable attorneys' fees
and other costs of arbitration); (ii) to be bound by any arbitral award or Order
resulting from any arbitration conducted thereunder and that any such award or
Order shall be a reasoned award, shall be in writing, shall specify the factual
and legal basis for the award, shall be final and binding; (iii) not to
commence, procure, participate in, or otherwise be involved as a party in any
claim, Action or Proceeding that might result in any Order concerning a dispute
(except for initialing Actions or Proceedings to obtain a judgment recognizing
or enforcing an arbitral award or Order and except for applications, claims,
Actions or Proceedings by the Parties, seeking interim interlocutory or other
provisional relief in any court having jurisdiction, but only on the ground that
the award to which the applicant may be entitled may be rendered ineffectual
without such provisional relief); (iv) any monetary award shall be made and
payable in U.S. Dollars, in each case through a bank selected by the recipient
of the award, together with interest therein at the lesser of the one year
London Interbank Offered Rate (LIBOR), as appearing in the Reuters screen, plus
five percent or the maximum interest rate permissible under applicable Law, from
the date the award is granted to but excluding the date it is paid in full; and
(v) that judgment or any arbitral award or Order resulting from an arbitration
conducted under this Section may be entered in any court of competent
jurisdiction, having jurisdiction thereof or having jurisdiction over either
Party or any of their assets.
(d) The Company and the Investor hereby irrevocably waive and
exclude all rights of appeal, challenge, or recourse to any court from any
arbitral award or Order resulting from any arbitration conducted under this
Section (except for initiating Actions or Proceedings to obtain a judgment
recognizing or enforcing an arbitral award or Order and except for Actions or
Proceedings seeking interim, interlocutory or other provisional relief in any
court having jurisdiction, but only on the ground that the award to which the
applicant may be entitled may be rendered ineffectual without such provisional
relief). Each of the Parties to this Agreement hereby consents to the
non-exclusive jurisdiction of any court of competent jurisdiction in the State
of Delaware for all Actions or Proceedings to obtain a judgment recognizing or
enforcing an arbitral award or Order and waives any defense or opposition to
such jurisdiction.
(e) The arbitrators, in their discretion, may consolidate two
or more arbitrations or claims between any of the Parties arising pursuant to
this Agreement or any other agreement among the parties or to which the Investor
and shareholders of the Company are a party into one arbitration, or terminate
any such consolidation and/or establish other arbitration proceedings for
different claims that may rise in any one arbitration. Notwithstanding the
foregoing, the arbitrators shall consolidate arbitrations and/or claims, if they
determine that it would be more efficient to consolidate such arbitrations
and/or claims than to continue them separately and (i) there are matters of fact
or law that are common to the arbitrations and/or claims to be consolidated,
(ii) there are related payment and performance obligations considered in the
arbitrations and/or claims to be consolidated or (iii) there is a danger of
inconsistent awards.
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(f) Each Party shall bear its own expenses in connection with
the arbitration provided in this Section, provided that the fees of the
arbitrators shall be divided equally between the Parties.
6.3 Amendments and Waivers. The provision of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, other than as mutually agreed upon in
writing by the Company and the Holders.
6.4 Notices. Any notices or communications required or permitted
hereunder shall be in writing and shall be delivered by hand, international
courier, or facsimile (confirmed by international courier) addressed as follows:
If to the Investor: USV Partners, LLC
Attn: C. Gregory Earls
c/o U.S. Viewing Corporation
2001 Pennsylvania Avenue, NW
Suite 675
Washington, DC 20006
Telephone: 202-466-3100
Facsimile: 202-466-4557
with a copy to: Wilmer, Cutler & Pickering
Attn: Duane D. Morse
2445 M Street, NW
Washington D.C. 20037
Telephone: (202) 663-6041
Facsimile: (202) 663-6363
If to Company: U.S. Technologies Inc.
Attn: Kenneth H. Smith
3901 Roswell Road
Suite 300
Marietta, GA 30062
Telephone: 770-565-4311
Facsimile: 770-565-8815
with a copy to: Smith, Gambrell & Russell, LLP
Attn: W. Thomas King
1230 Peachtree Street, N.W.
Promenade II, Suite 3100
Atlanta, GA 30309-3592
Telephone: 404-815-3678
Facsimile: 404-815-3509
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Any Party may, on 15 days' notice given in accordance with this Section
6.4 to the other Parties, designate another address or Person for receipt of
notices hereunder. All notices, claims, demands and other communications
hereunder shall be in writing and shall be deemed given (a) in the case of a
facsimile transmission, when received by recipient in legible form and sender
has received an electronic confirmation of receipt of the transmission; (b) in
the case of delivery by a standard overnight courier, upon the date of delivery
indicated in the records of such courier; (c) in the case of delivery by hand,
when delivered by hand; or (d) in the case of delivery by first class
(registered or certified) mail, upon the expiration of seven Business Days after
the day when mailed (postage prepaid, return receipt requested), addressed to
the respective Parties at the above address (or such other address for a party
as shall be specified by like notice).
6.5 Successors and Assigns. A Holder may assign, without the Company's
consent, and shall be deemed to have assigned, such Holder's rights and benefits
with respect to the Registrable Securities that are transferred to a Transferee.
A Transferee that becomes bound by the terms of this Agreement shall retain the
rights and benefits of the transferor and become a Holder under this Agreement.
The Company may not assign any rights, benefits or obligations under this
Agreement without prior written consent of a majority of the Holders; provided,
however, that any person the Company is merged with or consolidated into or to
any person to whom the Company sells substantially all of its assets shall be
bound by this Agreement. This Agreement shall inure to the benefit of and be
binding upon the permitted successors and assigns of the Company and the
Holders.
6.6 Counterparts. This Agreement may be executed in a number of
identical counterparts and it shall not be necessary for each Party to execute
each of such counterparts, but when each has executed and delivered one or more
of such counterparts, the several parts, when taken together, shall be deemed to
constitute one and the same instrument, enforceable against each in accordance
with its terms. In making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart executed by the party
against whom enforcement of this Agreement is sought.
6.7 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
6.8 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware without regard
to its principles of conflict of laws thereof.
6.9 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never constituted a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
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6.10 Entire Agreement. This Agreement and the Investment Agreement are
intended by the Parties as final expression of their agreement and are intended
to be a complete and exclusive statement of their agreement and understanding in
respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the Parties with respect to such
subject matter.
6.11 Third Party Beneficiaries. Other than Indemnified Parties not a
party hereto, this Agreement is intended for the benefit of the Company, the
Holders and their respective successors and permitted assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other person or
entity.
6.12 Obligations Several; Independent Nature of Each Holder's Rights.
Each obligation of any Holder is several and no such Holder shall be responsible
for the obligations of any other Holder. Nothing contained herein, and no action
taken by any such Holder pursuant hereto, shall be deemed to constitute such
Holders as a partnership, an association, a joint venture or any other kind of
entity. Each Holder shall be entitled to protect and enforce its rights arising
out of this Agreement without notice to or the consent of any other person,
except as specifically provided herein, and it shall not be necessary for any
other such Holder to be joined as an additional party in any proceeding for such
purpose.
6.13 Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of any Holder shall
operate as a waiver of or otherwise prejudice such Holder's rights, powers or
remedies.
6.14 Remedies. The Company and the Investor acknowledge that the
remedies at law in the event of any default or threatened default in the
performance of or compliance with any of the terms of this Agreement are not and
will not be adequate and that, to the fullest extent permitted by law and
equity, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise without requiring any bond or
other security, unless otherwise required by applicable law (which cannot be
waived).
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
U.S. TECHNOLOGIES INC
By: /s/ Kenneth H. Smith
--------------------
Name: Kenneth H. Smith
Title: President and Chief Executive Officer
USV PARTNERS, LLC
By: USV MANAGEMENT, LLC
By: /s/ C. Gregory Earls
--------------------
Name: C. Gregory Earls
Title: Sole Member
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<PAGE>
Exhibit B
- --------------------------------------------------------------------------------
INVESTMENT AGREEMENT
between
U.S. TECHNOLOGIES INC.
and
USV PARTNERS, LLC
Dated as of July 16, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.........................................................1
1.1 Definitions......................................................1
1.2 Interpretation...................................................8
1.3 Accounting Terms.................................................9
ARTICLE II PURCHASE AND SALE OF PREFERRED SHARES..............................9
2.1 Purchase and Sale of Preferred Shares and Warrants...............9
2.3 Use of Proceeds..................................................9
ARTICLE III TERMS OF PREFERRED SHARES AND WARRANTS............................9
3.1 The Preferred Shares and Warrants................................9
ARTICLE IV CONDITIONS PRECEDENT TO INVESTOR'S OBLIGATION
TO CLOSE.................................................................10
4.1 Representations and Warranties..................................10
4.2 Documentation at Closing........................................10
4.3 Amended Organizational Documents................................11
4.4 Key Person Life and Directors and Officers Liability Insurance..11
4.5 Unaudited Financial Statements..................................11
4.6 No Material Adverse Change......................................12
4.7 Amended Form 10-K and Form 8-K..................................12
4.8 Closing Price...................................................12
ARTICLE V CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION
TO CLOSE.................................................................12
5.1 Representations and Warranties..................................12
5.2 Documentation at Closing........................................12
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE INVESTOR....................13
6.1 Organization....................................................13
6.2 Authority.......................................................13
6.3 Consents and Approvals..........................................13
6.4 No Conflict or Violation........................................13
6.5 Litigation......................................................14
6.6 Certain Fees....................................................14
6.7 Disclosure......................................................14
6.8 Investment Representation.......................................14
ARTICLE VII REPRESENTATIONS AND WARRANTIES CONCERNING THE
COMPANY GROUP........................................................15
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<PAGE>
7.1 Organization....................................................15
7.2 Corporate Action................................................15
7.3 Capitalization of the Company: Status of Capital Stock..........16
7.4 Capital Stock of Subsidiaries...................................16
7.5 Subsidiaries...................................................16
7.6 Governmental Approvals..........................................16
7.7 No Conflict or Violation. .....................................17
7.8 Taxes...........................................................17
7.9 Financial Statements............................................18
7.10 Absence of Certain Changes or Events............................18
7.11 Real Property...................................................20
7.12 Personal Property...............................................20
7.13 Litigation......................................................21
7.14 Legal Compliance................................................21
7.15 Environmental Matters...........................................21
(a) Compliance......................................21
(b) Environmental Permits...........................21
(c) Environmental Claims............................21
(d) Release of Hazardous Materials..................22
(e) Underground Storage.............................22
(f) Asbestos, PCBs, Etc.............................22
7.16 Insurance............................................23
7.17 Intellectual Property...........................................23
7.18 Labor Matters...................................................23
7.19 Employee Benefits...............................................24
7.20 Contracts.......................................................25
7.21 Absence of Undisclosed Liabilities..............................26
7.22 No Illegal or Improper Transactions.............................26
7.23 Certain Fees....................................................26
7.24 Substantial Customers and Suppliers.............................26
7.25 Books and Records...............................................26
7.26 Assumptions or Guarantees of Indebtedness of Other Persons......27
7.27 Disclosure......................................................28
7.28 Securities Act..................................................28
7.29 Registration Rights.............................................28
7.30 U.S. Real Property Holding Corporation..........................28
7.31 Investments in Other Persons....................................28
7.32 Computer Programs and Software..................................28
ARTICLE VIII COVENANTS.......................................................29
8.1 Affirmative Covenants of the Company............................29
(a) Financial and Business Information..............29
(b) Notice of Certain Events........................30
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<PAGE>
(c) Inspection Rights...............................30
(d) Keeping of Records and Books of Account.........30
(e) U.S. Real Property Holding Corporation..........30
(f) Board of Directors and Committees...............30
(g) Additional Financing............................31
(h) Accounting Controls and Systems.................31
(i) Directors and Officers Liability Insurance......31
8.2 Covenants of the Investor......................................31
(a) Permitted Transfers.............................32
(b) Securities Laws.................................33
8.3 Affirmative Covenant of the Kenneth H. Smith...................33
ARTICLE IX INDEMNIFICATION...................................................33
9.1 Indemnification................................................33
ARTICLE X TERMINATION........................................................34
10.1 Termination by Either of the Investor or the Company...........34
10.2 Effect of Termination and Abandonment..........................34
ARTICLE XI MISCELLANEOUS.....................................................35
11.1 Severability...................................................35
11.2 Specific Enforcement. .........................................35
11.3 Entire Agreement; Amendments. .................................35
11.4 Notices........................................................35
11.5 Waivers........................................................37
11.6 Headings.......................................................37
11.7 Successors and Assignees. ....................................37
11.8 No Third Party Beneficiaries...................................37
11.9 Counterparts...................................................37
11.10 Governing Law..................................................37
11.11 Dispute Resolution.............................................37
11.12 Drafting.......................................................39
11.13 Waiver of Jury Trial...........................................39
11.14 Costs, Expenses and Taxes......................................39
11.15 Further Assurances. ...........................................39
11.16 Disclosure to Other Persons....................................39
EXHIBIT 3.1(a) - CERTIFICATE OF DESIGNATIONS
EXHIBIT 3.1(b) - WARRANTS
SCHEDULES
- iv -
<PAGE>
INVESTMENT AGREEMENT
This Investment Agreement (the "Agreement") is made as of this 16th day
of July 1998, by and between USV Partners, LLC, a limited liability company
organized under the laws of the State of Delaware (the "Investor"), and U.S.
Technologies Inc. (the "Company"), a Delaware corporation (each, individually, a
"Party" and, collectively, the "Parties").
W I T N E S S E T H:
WHEREAS, the Company desires to issue and sell to the Investor, and the
Investor desires to purchase from the Company, certain securities of the
Company, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein, and other good and
valuable consideration, the receipt and sufficiency of which is hereby mutually
acknowledged, the Parties hereto agree as follows:
ARTICLE I DEFINITIONS
1.1 Definitions. As used herein, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"AAA" shall have the meaning given to it in Section 11.11(a).
"ACM" shall have the meaning given to it in Section 7.15(f).
"Action or Proceeding" means any action, suit, arbitration, proceeding
or Government Entity investigation or audit.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such Person. For the purposes of this definition, a Person
shall be deemed to control another Person if it possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through ownership of voting securities,
by contract or otherwise.
"Agreement" means this Investment Agreement as from time to time
amended and in effect between the Parties, including all schedules and exhibits
hereto.
"Audited Financial Statements" has the meaning given it in Section 7.9.
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"Benefit Arrangement" means any arrangement, obligation, custom, or
practice, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or former directors,
employees, agents, or independent contractors, other than any obligation,
arrangement, custom or practice that is a Benefit Plan, including, without
limitation, employment agreements, severance agreements, executive compensation
arrangements, including but not limited to stock options, restricted stock
rights and performance unit awards, incentive programs or arrangements, sick
leave, vacation pay, severance pay policies, plant closing benefits, salary
continuation for disability, consulting, or other compensation arrangements,
workers' compensation, retirement, deferred compensation, bonus, stock purchase,
hospitalization, medical insurance, life insurance, tuition reimbursement or
scholarship programs, employee discounts, employee loans, any plans subject to
Section 125 of the Code, and any plans providing benefits or payments in the
event of a change of control, change in ownership or sale of a substantial
portion (including all or substantially all) of the assets of any business or
portion thereof, in each case with respect to any present or former employees,
directors or agents.
"Benefit Plan" has the meaning given in Section 3(3) of ERISA.
"Benefits" means any employee retirement, severance, profit sharing,
bonus, vacation, insurance, medical, social contribution, contribution for
occupational accidents, meals, travel or vehicle allowances, or any similar
benefit granted by any Member, whether under any employment contract, collective
bargaining arrangement, any other employee compensation arrangement, or required
under any applicable Law or Order.
"Board" means the Board of Directors of the Company.
"Books and Records" means all titles, documents, instruments, papers,
books and records relating to the business and operations of any Member,
including financial statements, tax returns and related workpapers and letters
from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates, corporate books, stock transfer
ledgers, contracts, Licenses, customer lists, computer files and programs,
retrieval programs, operating data and plans and environmental studies and
plans.
"Business Day" means any day other than a Saturday, Sunday or public
holiday or the equivalent for banks under the laws of Washington, D.C. or
Atlanta, GA.
"Capital Lease" means any lease of property (real, personal or mixed)
which, in accordance with GAAP, is required to be capitalized on the lessee's
balance sheet.
"Certificate of Designations" means the Certificate of Designations,
Preferences and Rights of the Series A Convertible Preferred Stock of U.S.
Technologies Inc., adopted by the Board of Directors on July 10, 1998.
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<PAGE>
"Closing" has the meaning given it in Section 2.2.
"Closing Price" shall mean for each share of Common Stock for any day
(x) the last sale price, regular way, or, in case no such sale takes place on
such day, the average closing bid and asked prices, regular way, in either case
as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on NASDAQ National Market
System, the New York Stock Exchange or the American Stock Exchange, as
applicable or (y) the last sale price, regular way, before 5:00 p.m., or, in
case no such sale takes place on such day, the average closing bid and asked
prices, regular way, in either case as reported on the NASDAQ OTC Bulletin
Board.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means (a) the Company's common stock, with a par value
of $0.02 per share, as authorized on the date of this Agreement, (b) any other
capital stock of any class or classes (however designated) of the Company,
authorized on or after the date hereof, the holders of which shall have the
right, without limitation as to amount per share, either to all or to a share of
the balance of current dividends and liquidating distributions after the payment
of dividends and distributions on any shares entitled to preference in the
payment thereof, and the holders of which shall ordinarily, in the absence of
contingencies, be entitled to vote for the election of directors of the Company,
and (c) any other securities into which or for which any of the securities
described in (a) or (b) above may be converted or exchanged pursuant to a plan
or recapitalization, reorganization, merger, sale of assets or otherwise.
"Company" means U.S. Technologies Inc., a Delaware corporation, and its
successors and permitted assigns.
"Company Benefit Arrangement" means any Benefit Arrangement sponsored
or maintained by any Member or with respect to which any Member has or may have
any liability (whether actual, contingent, with respect to any of its assets or
otherwise) as of the Closing, in each case with respect to any present or former
directors, employees, or agents of the Company Group.
"Company Group" means the Company and each of its Subsidiaries,
including, without limitation, Labor-to-Industry Inc., a Texas corporation, and
Service-to-Industry Inc., a Delaware corporation.
"Company Group Business" means and includes, with respect to any date,
all businesses engaged in by any Member.
"Company Plan" means, as of the Closing, any Benefit Plan for which any
Member is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA, without
regard to whether that statute applies) or any Benefit Plan maintained by any
Member or to which any Member is obligated to
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make payments, in each case with respect to any present or former employees of
the Company Group. Company Plan includes any Qualified Plan terminated since
January 1, 1994.
"Contracts" has the meaning given it in Section 7.20(a).
"Environmental Claims" means any and all claims, actions, causes of
action, or other written notices by any Person alleging potential Liability
(including, without limitation, potential liability for investigatory costs,
cleanup costs, Government Entity response costs, natural resources damages,
property damages, personal injuries, or civil or criminal penalties) arising out
of or resulting from (a) the presence or release into the environment of any
Hazardous Material at any location, whether or not owned or operated by any
Member, or (b) circumstances forming the basis of any violation of any
Environmental Laws.
"Environmental Laws" means any and all applicable Laws, Orders and
Licenses having the effect of law under the laws of the United States or any
state, province, county, city or other political subdivision thereof relating to
human health, the environment or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Materials or wastes into the environment,
including without limitation, ambient air, surface water, ground water or land,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Materials or wastes or the clean-up or other remediation thereof.
"Environmental Permits" means any and all Licenses of any Government
Entity relating to or required by Environmental Laws and necessary or proper for
the Company Group Business.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation or rule issued thereunder.
"ERISA Affiliate" means any Person that together with any Member, would
be or was at any time treated as a single employer under Section 414 of the Code
or Section 4001 of ERISA and any general partnership of which any Member is or
has been a general partner.
"GAAP" shall mean the generally accepted accounting principles of the
United States consistently applied.
"Government Entity" means any court or tribunal or administrative,
governmental or regulatory body, agency, commission, division, department,
public body or other authority.
"Hazardous Materials" means any and all toxic, radioactive, caustic or
otherwise hazardous substances, including petroleum, its derivatives, petroleum
derivative gases, by-products and other hydrocarbons, and any and all substances
having any constituent elements displaying any of the foregoing characteristics,
including, without limitation, any and all substances regulated under
Environmental Laws.
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"Indebtedness" means all obligations, contingent and otherwise which
should, in accordance with GAAP, be classified upon the obligor's balance sheet
as liabilities, but in any event including, without limitation, liabilities
secured by any mortgage on property owned or acquired subject to such mortgage,
whether or not the liability secured thereby shall have been assumed, and also
including, without limitation, (a) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be so reflected in said balance sheet except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, and (b) the present value of
any Capital Leases.
"Indebtedness for Money Borrowed" of a Person means at any time the sum
at such time, without duplication, of (a) Indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services, (b)
any obligations of such Person in respect of letters of credit, banker's or
other acceptances or similar obligations issued or created for the account of
such Person, (c) obligations of such Person with respect to Capital Leases, (d)
all liabilities secured by any Lien on any property owned by such Person, to the
extent attached to such Person's interest in such property even though such
Person has not assumed or become personally liable for the payment thereof, and
(e) obligations of third parties which are being guaranteed or indemnified
against by such Person or which are secured by the property of such Person; but
excluding trade and other accounts payable in the ordinary course of business in
accordance with customary trade terms and which are not overdue (as determined
in accordance with past practices) or which are being disputed in good faith by
such Person and for which adequate reserves are being provided on the books of
such Person in accordance with GAAP.
"Indemnified Liability" has the meaning given it in Section 9.1.
"Indemnitees" has the meaning given it in Section 9.1.
"Investment Assets" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by any Member.
"Investment Documents" shall mean this Agreement, the Preferred Shares,
the Certificate of Designations, the Warrants and the Registration Rights
Agreement.
"Investor" means USV Partners, LLC, a Delaware limited liability
company.
"Knowledge" means, with respect to any Person except the Company, the
knowledge that such Person has or should have after reasonable inquiry.
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"Knowledge of the Company" means the actual or constructive knowledge
of the Company and of the directors and Principal Officers of any Member, other
than C. Gregory Earls.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law in the United States, or any
state, province, county, municipality or other political subdivision thereof.
"Leased Real Property" has the meaning given it in Section 7.11(b).
"Leased Real Property Tangible Assets" has the meaning given it in
Section 7.11(d).
"Liabilities" means all Indebtedness, obligations, and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates, approvals,
registrations, franchises and similar consents granted or issued by a Government
Entity or any other Person.
"Lien" means any mortgage, security interest, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge, preference, priority or other security agreement, option, warrant,
attachment, right of first refusal, preemptive, conversion, put, call or other
claim or right, restriction on transfer (other than restrictions imposed by
applicable securities Laws), or preferential arrangement of any kind or nature
whatsoever (including any restriction on the transfer of any assets), any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing and the
filing of any financing statement or similar document with any pertinent public
or private registry.
"Losses" has the meaning given it in Section 9.1(a).
"Material Adverse Effect" means, with respect to any Member, a material
adverse effect on the business, assets, liabilities, revenues, costs and
expenses, income before provision for income taxes, operations or condition,
financial or otherwise, of the Company Group as a whole. In determining whether
any individual event would result in a Material Adverse Effect, notwithstanding
that such event does not of itself have such effect, a Material Adverse Effect
shall be deemed to have occurred if the cumulative effect of such event and all
other then existing events could reasonably be expected to result in a Material
Adverse Effect.
"Member" means any member of the Company Group.
"Net Worth" means, with respect to any Member and as of any date, the
assets of such Member less the liabilities of such Member, in each case as of
such date and calculated in accordance with GAAP.
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"Order" means any writ, judgment, decree, injunction or similar order
of any Government Entity (in each case whether preliminary or final).
"Organizational Documents" means with respect to any Person, articles
of incorporation, certificates of incorporation, by-laws, partnership agreement,
articles of association, joint venture or other agreement, instrument or
document, individually or collectively, pursuant to which such Person is
established or organized, and that governs the internal affairs of such Person,
as such documents may be amended from time to time.
"Owned Real Property" has the meaning given it in Section 7.11(a).
"Party" means any party to this Agreement.
"PCBs" has the meaning given to it in Section 7.15(f).
"Person" means and includes any individual, partnership, joint venture,
corporation, trust, limited liability company, joint stock company,
unincorporated organization, Government Entity or any political subdivision or
agency thereof, or any other entity.
"Personal Property" has the meaning given it in Section 7.12.
"Preferred Shares" has the meaning given it in Section 2.1.
"Preferred Stock" means all series of preferred stock of the Company.
"Principal Officer" means any management level employee.
"Purchase Price" has the meaning given it in Section 2.1.
"Qualified Plan" means any Company Plan that meets, purports to meet,
or is intended to meet the requirements of Section 401(a) of the Code.
"Registration Rights Agreement" means the registration rights agreement
by and between the Company and the Investor dated as of July 16, 1998.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar successor federal statute, and the rules and regulations of the United
States Securities and Exchange Commission (or any other federal agency at that
time administering the Securities Act) thereunder, all as the same shall be in
effect at the time.
"Software" has the meaning given to it in Section 7.32.
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"Subsidiary" or "Subsidiaries" means (a) any entity with more than
fifty percent (50%) of whose capital stock of any class or classes having by the
terms thereof ordinary voting power to elect directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such entity shall have or might have voting power by reason of the happening of
any contingency) is at the time owned directly or indirectly by any one or more
Members and (b) any partnership association, joint venture or other entity in
which any one or more of its Members has more than a fifty percent (50%) equity
interest at the time.
"Tangible Assets" shall have the meaning given to it in
Section 7.11(c).
"Tax Return" means any report, return, statement or other written
information required to be supplied to a taxing authority in connection with
Taxes.
"Taxes" means (a) any and all taxes, levies or other like assessments,
charges or fees (including estimated taxes, charges and fees), including,
without limitation, income, corporation, add-on minimum, ad valorem, advances,
gross receipts, transfer, excise, property, sales, use, value-added, License,
payroll, employment, severance, pay as you earn, withholding on amounts paid by
or to the relevant party, social security and franchise or other governmental
taxes or charges, imposed by the United States or by any other nation, state,
province, county, local or foreign government or by any subdivision or agency of
the foregoing; and such term shall include any interest (punitive or otherwise),
penalties or additions to tax related or attributable to such taxes; and (b)
Liability for the payment of any amounts of the type described in (a) as a
result of any obligation to indemnify any other Person.
"Third Party Claim" shall have the meaning given to it in
Section 9.2(a).
"Third Party Offer" shall have the meaning given to it in
Section 8.1(g).
"Unaudited Financial Statements" has the meaning given in it in
Section 4.5.
"Warrants" shall have the meaning given it in Section 2.1.
1.2 Interpretation. Unless otherwise expressly provided herein (a)
defined terms in the singular include the plural and vice versa, and the
masculine, feminine and neuter gender include all genders; (b) the words
"hereof," "herein" and "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular provision of this Agreement; (c)
the words "include," "includes," and "including" mean include, includes and
including "without limitation" and "without limitation by specification"; and
(d) references to any Person shall be construed as a reference to such Person
and any permitted successors or assigns of such Person; (e) references to
"consent" shall mean prior consent evidenced in writing; (f) terms such as
"satisfactory to ______" "acceptable to _________," "in such manner as ______
may determine," to ______'s satisfaction," and phrases of similar import
authorize and permit such Party to approve, disapprove, act or decline to act,
unless otherwise specified herein, in its
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reasonable discretion without unreasonable delay or condition; and (g)
references to Sections refer to Sections of this Agreement.
1.3 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, and all financial data
submitted pursuant to this Agreement and all financial tests to be calculated in
accordance with this Agreement shall be prepared and calculated in accordance
with GAAP. All financial tests described herein relating to the Company shall be
calculated with respect to the Company Group on a consolidated basis.
ARTICLE II PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS
2.1 Purchase and Sale of Preferred Shares and Warrants. The Company
agrees to issue and sell to the Investor, and, subject to and in reliance upon
the representations, warranties, terms and conditions of this Agreement, the
Investor agrees to purchase (a) 500,000 shares of the Company's Series A
Convertible Preferred Stock, with a par value of $0.02 per, duly authorized,
validly issued, fully paid, non-assessable and free and clear of any and all
Liens (the "Preferred Shares"), and (b) a warrant to purchase 500,000 shares of
Common Stock with a par value of $0.02 per share (the "Warrants"). The aggregate
purchase price for the Preferred Stock and the Warrants shall be $5,000,000 (the
"Purchase Price")
2.2 The Closing. Such purchase and sale shall take place at a closing (
"Closing") to be held at the offices of Wilmer, Cutler & Pickering at 10:00 a.m.
local time on July 16, 1998. At the Closing, (i) the Company will issue to the
Investor a certificate evidencing the Preferred Shares, registered in the name
of the Investor; (ii) the Company will issue to the Investor a certificate
evidencing the Warrants registered in the name of the Investor; and (iii) the
Investor will pay the Purchase Price to the Company in immediately available
funds by wire transfer, to an account or accounts designated by the Company
prior to the Closing.
2.3 Use of Proceeds. The Company agrees to use the full proceeds from
the sale of the Preferred Shares and the Warrants for general corporate purposes
and to pay the Investor's expenses as set forth in Section 11.14.
ARTICLE III TERMS OF PREFERRED SHARES AND WARRANTS
3.1 The Preferred Shares and Warrants. (a) The Company has authorized
the issuance and sale to the Investor of the Preferred Shares. The terms of the
Preferred Shares shall be as set forth in the Certificate of Designations in the
form of Exhibit 3.1(a).
(b) The Company has authorized the issuance and sale to the
Investor of the Warrants. The terms of the Warrants shall be as set forth in the
form of Warrant attached as Exhibit 3.1(b).
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ARTICLE IV CONDITIONS PRECEDENT TO INVESTOR'S OBLIGATION TO CLOSE
The obligation of the Investor to purchase and pay for the Preferred
Shares and the Warrants at the Closing is subject to satisfaction of each the
following conditions, all or any of which may be waived in writing by the
Investor:
4.1 Representations and Warranties. Each of the representations and
warranties of the Company set forth in Article VII hereof shall be true and
correct in all material respects.
4.2 Documentation at Closing. The Investor shall have received prior to
or at the Closing all of the following, each in form and substance satisfactory
to the Investor and its special counsel:
(a) The Certificate of Designations as adopted by the Board,
attested by the Secretary or Assistant Secretary of the Company and filed with
the Secretary of State of the State of Delaware.
(b) Stock certificates, duly executed by the Company,
representing the Preferred Shares; and copies of the stock book of the Company
containing board minutes or consent resolutions, executed by the directors of
the Company, evidencing the issuance of the Preferred Shares to the Investor,
which shall occur prior to or simultaneously with the consummation of the
transactions contemplated hereby.
(c) The Warrants, duly executed by the Company, and copies of
the stock book of the Company containing board minutes or consent resolutions,
executed by the directors of the Company, evidencing the issuance of the
Warrants to the Investor, which shall occur prior to or simultaneously with the
consummation of the transactions contemplated hereby.
(d) A certificate of the Secretary or an Assistant Secretary
of the Company dated the date of Closing, which shall certify the names of the
officers of the Company authorized to sign the Investment Documents and any
other documents or certificates to be delivered pursuant thereto, together with
the true signatures of such officers.
(e) Certified copies of the resolutions of the Board of
Directors and, to the extent required, the shareholders of the Company
evidencing approval of: (i) the Investment Documents, (ii) all other matters
contemplated thereby and (iii) this transaction by not less than two "Continuing
Directors" such that the Investor will not be deemed to be an "Acquiring Person"
(as such terms are defined in the Rights Agreement dated as of October 31, 1997
between the Company and American Securities Transfer & Trust, Inc.).
(f) Certified copies of the Organizational Documents of each
Member and certified copies of all documents evidencing other necessary
corporate or other action and
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governmental approvals, if any, with respect to the Investment Documents and all
other matters contemplated thereby.
(g) The opinion of Smith, Gambrell & Russell, LLP, counsel for
the Company, in form acceptable to the Investor's counsel.
(h) A certificate from a duly authorized officer of the
Company stating that each of the representations and warranties contained in
Article VII hereof and otherwise made by the Company in writing in connection
with the transactions contemplated hereby are true and correct in all material
respects and that all the conditions set forth in this Article IV have been
satisfied other than those, if any, waived by the Investor in writing.
(i) Such other documents referenced in any Schedule hereto or
relating to the transactions contemplated by the Investment Documents as the
Investor or its special counsel may reasonably request.
4.3 Amended Organizational Documents. The Board of Directors of the
Company shall have duly authorized the issuance of the Preferred Shares on the
terms set forth in the Certificate of Designations attached hereto as Exhibit
3.1(a) and the issuance of the Warrants on the terms set forth in the form of
Warrant attached hereto as Exhibit 3.1(b). The Board of Directors shall have
adopted a resolution setting forth the proposed amendment to the Company's
Restated Certificate of Incorporation to eliminate the provision set forth in
Section 4 thereof restricting the preferential amount payable with respect to
preferred shares in the event of an involuntary liquidation and directing that
such proposed amendment be considered at the next annual shareholders meeting,
if it has not been approved prior to such annual meeting by the written consent
of the shareholders.
4.4 Key Person Life and Directors and Officers Liability Insurance. The
Company shall have obtained, and shall maintain, with a financially sound and
reputable insurance company term life insurance on the life of Kenneth H. Smith
in the face amount of at least $2,000,000.
4.5 Unaudited Financial Statements. The Investor shall have received a
copy of the unaudited financial statements for the Company Group for the
three-month period ended March 31, 1998 (prepared on a basis consistent in all
material respects with the audited financial statements for the year ended
December 31, 1997 described in Section 7.9), including therein consolidated and
consolidating balance sheets of the Company Group as of the end of such
three-month period and consolidated and consolidating statements of income and
of shareholders' equity and of cash flows of the Company Group for such
three-month period, together with all schedules and notes thereto (the
"Unaudited Financial Statements"); and the financial conditions and performance
of the Company Group so reflected in the Unaudited Financial Statements shall be
satisfactory to the Investor in its sole discretion.
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4.6 No Material Adverse Change. Since March 31, 1998, there shall
have been no Material Adverse Effect.
4.7 Amended Form 10-K and Form 8-K. The Company shall have amended the
Form 10-K filed with the U.S. Securities Exchange Commission on May 19, 1998 to
reflect the conditional nature of the financing set forth in Section 8.1(g), by
filing an amended Form 10-K with the U.S. Securities Exchange Commission. The
Company shall have amended the Form 8- K filed with the U.S. Securities Exchange
Commission on September 26, 1997 to reflect the option granted by GWP, Inc. to
Komen Holdings Pty., Ltd. to purchase 400,000 shares of common stock of the
Company by filing an amended Form 8-K with the U.S. Securities Exchange
Commission.
4.8 Closing Price. The Closing Price for the Common Stock for the day
immediately preceding the date of Closing is $0.70 per share of Common Stock or
more.
ARTICLE V CONDITIONS PRECEDENT TO THE
COMPANY'S OBLIGATION TO CLOSE
The obligation of the Company to issue and sell to the Investor the
Preferred Shares and the Warrants at the Closing is subject to satisfaction of
each the following conditions, all or any of which may be waived in writing by
the Company:
5.1 Representations and Warranties. Each of the representations and
warranties of the Investor set forth in Article VI hereof shall be true and
correct in all material respects.
5.2 Documentation at Closing. The Company shall have received prior to
or at the Closing all of the following, each in form and substance satisfactory
to the Company and its special counsel:
(a) Certified copies of the resolutions of the Investor and,
to the extent required, the members of the Investor evidencing approval of the
Investment Documents and all other matters contemplated thereby; certified
copies of the Certificate of Formation of the Investor and certified copies of
all documents evidencing other necessary corporate or other action and
governmental approvals, if any, with respect to the Investment Documents and all
other matters contemplated thereby.
(b) The opinion of Wilmer, Cutler & Pickering, special counsel
for the Investor, in form acceptable to the Company's counsel.
(c) A certificate from a duly authorized officer of the
Investor stating that each of the representations and warranties contained in
Article VI hereof and otherwise made by the Investor in writing in connection
with the transactions contemplated hereby are true and
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correct in all material respects and that all the conditions set forth in this
Article V have been satisfied other than those, if any, waived by the Company in
writing.
(d) Such other documents referenced or relating to the
transactions contemplated by the Investment Documents as the Company or its
special counsel may reasonably request.
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants as of the date of this
Agreement and as of the Closing that:
6.1 Organization. It is duly organized, validly existing and in good
standing under the laws of the State of Delaware.
6.2 Authority. It has the power and authority to enter into the
Investment Documents, as applicable, and to carry out its obligations
thereunder. The execution, delivery and perfor mance of the Investment Documents
by the Investor and the consummation by the Investor of the transactions
contemplated thereby have been duly authorized by all necessary internal
proceedings, and no other internal proceedings on the part of the Investor are
necessary to authorize the Investment Documents or the transactions contemplated
thereby. Each Investment Document to which the Investor is a party has been duly
and validly executed and delivered by the Investor and (assuming this Agreement
constitutes a valid and binding obligation of the Company) constitutes a valid
and binding agreement of the Investor, enforceable against the Investor in
accordance with its respective terms, except as enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally and by general
principles of equity.
6.3 Consents and Approvals. No filing with, and no License of, any
Government Entity is necessary for the execution, delivery and performance of
this Agreement or the other documents contemplated hereby by the Investor and
the consummation by the Investor of the transactions contemplated by the
Investment Documents.
6.4 No Conflict or Violation. The execution, delivery and performance
of the Investment Documents to which the Investor is a party, the consummation
of the transactions contemplated thereby, the fulfillment of the terms thereof,
and the compliance with any of the provisions thereof will not: (a) conflict
with or result in a breach or violation of the Organizational Documents of the
Investor; (b) conflict with, or result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, vesting, payment, exercise,
acceleration, suspension, revocation or modification) under, any of the terms,
conditions or provisions of any note, credit agreement, bond, mortgage, deed of
trust, security instrument, indenture, lease, License, Contract, plan or other
instrument or obligation to which the Investor is a party or by which it or
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any of its respective properties or assets may be bound or affected; (c) violate
any Order or Law applicable to the Investor or any of its properties or assets,
except, in the case of clauses (a) or (b), for such violations, breaches,
defaults or rights of termination, cancellation, acceleration, creation,
imposition, suspension, revocation or modification as to which requisite waivers
or consents have been obtained by the Investor on or prior to the Closing.
6.5 Litigation. There is no claim, Action or Proceeding (whether at law
or equity, before or by any Government Entity or before any arbitrator) pending
or, to the Knowledge of the Investor, threatened against or affecting the
Investor, the outcome of which would in any manner impair the ability of the
Investor to perform its obligations under the Investment Documents.
6.6 Certain Fees. The Investor has not entered into, nor will it enter
into, during the term of this Agreement, any agreement, arrangement or
understanding with any Person that will result in the obligation of the Company
to pay any finder's fee, brokerage commission or similar payment in connection
with the transactions contemplated hereby.
6.7 Disclosure. No representation or warranty by the Investor in this
Agreement or any Exhibit or Schedule hereto, or any certificate furnished or to
be furnished by the Investor in connection with this Agreement, contains or will
contain an untrue statement of material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they were made, not misleading.
6.8 Investment Representation.
(a) The Investor acknowledges that the Preferred Shares and
Warrants are not registered under the securities laws of any jurisdiction and
that it is acquiring the Preferred Shares for its own account, and not as
nominee or agent.
(b) The Preferred Shares and Warrants are being and will be
acquired for the purpose of investment and not with a view to distribution or
resale thereof, subject, nevertheless, to the condition that, except as
otherwise provided herein and subject to compliance with applicable securities
laws, the disposition of the property of the Investor shall at all times be
within its control.
(c) It hereby acknowledges that the Preferred Shares and
Warrants and any other securities issued in respect of such securities upon any
stock split, stock dividend, recapitalization, merger or similar event (unless
no longer required in the opinion of counsel) shall bear a legend substantially
in the following form (in addition to any other legend required by the
Investment Documents):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
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LAWS AND MAY NOT BE SOLD OR TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF WITHOUT AN OPINION OF LEGAL COUNSEL (REASONABLY SATISFACTORY TO U.S.
TECHNOLOGIES INC. AND ITS LEGAL COUNSEL) THAT SUCH SALE, TRANSFER,
PLEDGE OR OTHER DISPOSITION IS IN COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES
LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
The acquisition by the Investor of the Preferred Shares and Warrants shall
constitute a confirmation by it of the foregoing representations and warranties.
ARTICLE VII REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY GROUP
The Company represents and warrants as of the date hereof and as of the
Closing that:
7.1 Organization. The Company is a corporation, duly organized, validly
existing and in good standing under the Laws of the State of Delaware.
Labor-to-Industry Inc. is a corporation, duly organized, validly existing and in
good standing under the Laws of the State of Texas. Service-to-Industry Inc. is
a corporation duly organized, validly existing and in good standing under the
Laws of Delaware. Each Member (a) has all requisite corporate power and
authority to own, lease and operate its property and to conduct its business as
it is now being conducted and presently proposed to be conducted; (b) is in
compliance with all Laws applicable to it or its business, including but not
limited to any tax Laws, and (c) has obtained and maintained all Licenses
required to conduct its business as it is currently being conducted and
presently proposed to be conducted. Each Member is duly qualified, licensed or
admitted to do business and is in good standing in all jurisdictions in which
the ownership, use or leasing of its assets and properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary. Schedule 7.1 contains a list of each Member and of all jurisdictions
in which each Member is so qualified and all lines of business in which each
Member is currently participating or is currently engaged. True, complete and
correct copies of the Organizational Documents presently in effect for each
Member have been delivered to the Investor. No Member is in violation of its
Organizational Documents.
7.2 Corporate Action. The Company has all necessary corporate power and
has taken all corporate action required to make all the provisions of the
Investment Documents and any other agreements and executed by it in connection
therewith valid and enforceable obligations of the Company. The Company has duly
executed and delivered each of the Investment Documents and each other agreement
and instrument executed by it in connection therewith, and each is a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting
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creditors' rights generally and by general principles of equity. Neither the
issuance of the Preferred Shares nor the Warrants is subject to preemptive or
other similar statutory or contractual rights.
7.3 Capitalization of the Company: Status of Capital Stock. (a) The
Preferred Shares, when issued and paid for at the Closing, will be duly
authorized, validly issued and fully paid and nonassessable and free and clear
of all Liens other than Liens created by the Investor. As of the Closing, the
Company shall have a total authorized capitalization consisting of 40,000,000
shares of Common Stock, of which 28,671,278 shares will be issued and
outstanding, and 10,000,000 shares of Preferred Stock of which 500,000 shares
will be issued and outstanding.
(b) Except for the Warrants and as disclosed on Schedule
7.3(b), as of the Closing there will be no options, warrants or rights to
purchase shares of capital stock or other securities of the Company authorized,
issued or outstanding, nor will the Company be obligated in any other manner to
issue shares of its capital stock or other securities. There are no restrictions
on the transfer of shares of capital stock of the Company other than those
imposed by relevant state and federal securities laws. Except as set forth in
this Agreement, no holder of any security of the Company is entitled to
preemptive or similar statutory or contractual rights, either arising pursuant
to any agreement or instrument to which the Company is a party, or which are
otherwise binding upon the Company. The offer and sale of all shares of capital
stock and other securities of the Company issued before the Closing complied
with or were exempt from all federal and state securities laws.
7.4 Capital Stock of Subsidiaries. Schedule 7.4 sets forth a list of
each Subsidiary of the Company and its jurisdiction of incorporation or
organization. As of the Closing, the Company owns, directly or indirectly, all
of the outstanding capital stock of each of the Subsidiaries, beneficially and
of record, free and clear of all Liens. All the outstanding shares of capital
stock of each of the Subsidiaries have been duly authorized, are validly issued
and are fully paid and nonassessable and free and clear of all Liens. There are
no options, warrants or rights to purchase shares of capital stock or other
securities of any of the Subsidiaries authorized, issued or outstanding, nor is
any Subsidiary obligated in any other manner to issue shares of its capital
stock or other securities.
7.5 Subsidiaries. Other than the outstanding capital stock of each of
the Subsidiaries set forth on Schedule 7.4, no Member has any Subsidiaries or
presently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, securities convertible into capital stock, or any other
equity or similar interest, in any Person; nor is any Member directly or
indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
7.6 Governmental Approvals. No authorization, consent, approval,
License, exemption, of or filing or registration with any court or Government
Entity is or will be necessary for, or in connection with, the offer, issuance,
sale, execution or delivery by the Company of, or for the performance by the
Company of its obligations under any of the
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Investment Documents other than under applicable securities laws with respect to
the transactions contemplated by the registration rights set forth in the
Registration Rights Agreement.
7.7 No Conflict or Violation. The execution, delivery and performance
of the Investment Documents, the consummation of the transactions contemplated
thereby, the fulfillment of the terms hereof, and the compliance with any of the
provisions hereof will not:
(a) conflict with, or result in a breach or violation of the
Organizational Documents of any Member;
(b) conflict with, or result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, vesting, payment, exercise,
acceleration, suspension, revocation or modification) under, any of the terms,
conditions or provisions of any note, credit agreement, bond, mortgage, deed of
trust, security instrument, indenture, lease, License, Contract, plan or other
instrument or obligation to which any Member is a party or by which any Member
or any of their respective properties or assets may be bound or affected, or
result in the creation or imposition of any material Lien on any of the assets
or properties of any Member pursuant to (i) any Law to which any Member or any
of its property is subject, or (ii) any Order to which any Member is bound or
any of its respective property is subject;
(c) violate any Order or Law applicable to any Member or any
of its respective properties or assets.
7.8 Taxes.
(a) Each Member has (i) duly filed (or has had filed on its
behalf) with the appropriate Government Entities all Tax Returns required to be
filed by it, all of which Tax Returns are true, correct and complete in all
respects and (ii) duly paid in full all Taxes owed by it whether or not shown on
any Tax Return;
(b) Each Member has withheld and paid to the proper Government
Entity all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party;
(c) No Actions or Proceedings, or other administrative or
court claims are presently pending or, to the Knowledge of the Company,
threatened or contemplated with regard to any Taxes or Tax Returns of any
Member;
(d) The income Tax Returns of each Member have been filed with
the appropriate Government Entities for all periods through and including
December 31, 1997, and no deficiencies were asserted as a result of any such
filings that have not been resolved and fully
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paid; no Member has granted any requests, agreements, consents or waivers to
extend the statutory period of limitations applicable to the assessment,
collection or payment of any Taxes for which any Member may be liable;
(e) There are no Liens outstanding against any assets,
properties or business of any Member which arise from or are otherwise related
to Taxes or Tax Returns;
(f) True, correct and complete copies of all Tax Returns,
examination reports and statements of deficiencies assessed against or agreed to
by any Member since December 31, 1997 have been made available to the Investor
or its Affiliates for review; and
(g) No Member is a party to any Tax sharing, Tax indemnity or
other agreement or arrangement relating to Taxes with any Person.
7.9 Financial Statements. The Company has delivered to the Investor
true, correct and complete copies of its audited consolidated balance sheets as
of December 31, 1997 and the related consolidated statements of income, changes
in stockholders' equity and cash flows for the fiscal year then ended, together
with all schedules and notes thereto and an unqualified auditor's opinion (the
"Audited Financial Statements"). The Company has also delivered to the Investor
a true, correct and complete copy of the Unaudited Financial Statements. The
Audited Financial Statements and the Unaudited Financial Statements fairly
present, or will fairly present, in conformity with GAAP, applied on a
consistent basis in accordance with past practice (except as may be indicated in
the notes thereto), the consolidated financial position of the Company Group as
of the respective dates thereof and the results of its operations and its cash
flows for the periods then ended. The notes to the Unaudited Financial
Statements for the Period ended March 31, 1998 have been prepared in a manner
consistent with the notes to the Audited Financial Statements heretofore
delivered. A schedule of Indebtedness for Money Borrowed of the Company Group as
of the Closing (including Capital Leases) is attached hereto as Schedule 7.9.
7.10 Absence of Certain Changes or Events. Since the date of the
Audited Financial Statements, each Member has conducted its business in the
ordinary and regular course consistent with past practices, and there has not
been:
(a) any Material Adverse Effect;
(b) any material damage, destruction or casualty loss to any
material asset or property of any Member that is not covered by insurance that
will be promptly paid to the Member;
(c) except as disclosed in Schedule 7.10, any entry into any
employment agreement, deferred compensation or other similar agreement or any
arrangement with any of their officers or employees; any increase in the rate or
terms of the compensation payable or to become payable to employees of any
Member, except increases occurring in accordance with
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customary practices or in accordance with existing collective bargaining or
employment agreements, or any modification in employee benefits, or any
borrowing of money from any Member by any employee of any Member (other than
routine travel and similar advances);
(d) any waiver by any Member of any rights or claims having
value, except rights or claims not in excess of $10,000, in the aggregate, or
that were waived in the ordinary course of business and consistent with past
practice;
(e) any failure to collect the accounts receivable of any
Member other than in the ordinary course of business and in amounts not
exceeding the applicable reserves or to pay the accounts payable and other
current liabilities of any Member in any manner when due other than amounts that
are subject to a bona fide dispute;
(f) any sale, assignment, lease, transfer or other
disposition, or the execution of any agreement for the sale, assignment, lease,
transfer or other disposition, of any assets of any Member, except in the
ordinary course of business and consistent with past practice;
(g) any change by any Member in accounting or bookkeeping
methods, principles or practices, except as required by GAAP;
(h) any borrowing of money, including any increase or
extension of purchase money credit of any Member or any increase in the
Liabilities of any Member from those reflected in the Unaudited Financial
Statements other than current Liabilities incurred in the ordinary course of
business and consistent with past practice;
(i) any transaction with any officer, director or shareholder
(including any of their respective family members) of any Member or any of their
respective Affiliates, other than payments of salary and employee benefits in
the ordinary course;
(j) any declaration or payment of any dividend or other
distribution on or with respect to, or any redemption or purchase or other
acquisition of, the capital stock of any Member;
(k) any change in any material Tax election or any other
action with respect to Taxes that is inconsistent with past practices;
(l) any material change in the Net Worth of any Member; or
(m) any agreement, arrangement or understanding, whether oral
or written, to do any of the foregoing matters listed in clauses (a) through (l)
inclusive.
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7.11 Real Property.
(a) Schedule 7.11(a) lists all real property owned, whether or
not used by any Member (the "Owned Real Property"). Except as further set forth
in Schedule 7.11(a) and except for utility easements and public rights of way,
each Member has good and marketable title in its Owned Real Property, free and
clear of all Liens. With respect to any Owned Real Property, no Member has
received written notice (nor has any reason to believe such exists) of any
violation of any applicable zoning ordinance, building code, use or occupancy
restriction, or other law, or any condemnation, Action or Proceeding with
respect thereto.
(b) Schedule 7.11(b) lists all real property leased, whether
or not used, by the Members (the "Leased Real Property"). Except as set forth in
Schedule 7.11(b), each Member has a valid and existing lease or sublease for,
and is in peaceful and undisturbed possession of, all Leased Real Property. All
leases covering any of the Leased Real Property are valid and enforceable in
accordance with their respective terms, are, to the Knowledge of the Company, in
full force and effect, and there is no material default by any Member or by any
landlord or lessor under any such lease, or any condition, event or act that,
with the giving of notice or lapse of time, or both, would constitute such a
default. With respect to any Leased Real Property, no Member has received
written notice (nor has any reason to believe such exists) of any violation of
any applicable zoning ordinance, building code, use or occupancy restriction, or
other Law, or any condemnation or Action or Proceeding with respect thereto.
(c) All structures and improvements, and all structural,
mechanical and other physical systems thereof that constitute part of the Owned
Real Property, including but not limited to, the walls, roofs and structural
elements thereof and the heating, ventilation, air conditioning, plumbing,
electrical, mechanical, sewer, waste water, storm water, paving and parking
equipment, systems and facility included therein (collectively, the "Tangible
Assets") (i) are usable in the ordinary course of the operations and business of
the Members; and (ii) have been maintained in a reasonably prudent manner in the
ordinary course of the operations and business of the Members. No maintenance or
repair to the Owned Real Property or any Tangible Assets has been unreasonably
deferred.
(d) To the Knowledge of the Company, all structures and
improvements, and all structural, mechanical and other physical systems thereof
that constitute part of the Tangible Assets and other material items of tangible
property and assets at any of the Leased Real Property (collectively, the
"Leased Real Property Tangible Assets") (i) are usable in the ordinary course of
the operations and business of the Members; and (ii) have been maintained in a
reasonably prudent manner in the ordinary course of the operations and business
of the Members. To Knowledge of the Company, no maintenance or repair to the
Leased Real Property or any Leased Real Property Tangible Assets has been
unreasonably deferred.
7.12 Personal Property. Schedule 7.12 lists all personal property
leased, whether or not used, by each of the Members. Each Member owns or
otherwise possesses adequate rights to use
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such items of personal property that are being used in the conduct or operation
of the Company Group Business (the "Personal Property"). Each Member has good
and marketable title to all Personal Property owned and used by it, free and
clear of all material Liens. All Personal Property (A) is in good working order
and condition, ordinary wear and tear excepted, (B) is usable in the ordinary
course of business; and (C) has been maintained in a reasonably prudent manner
in the ordinary course of business. All fixed assets used by any Member that are
material to the operation of the Company Group Business are owned by the
applicable Member.
7.13 Litigation. Except as described in Schedule 7.13, there is no, and
for the past three (3) years there has been no, claim, Action or Proceeding
(whether at law or equity, before or by any Government Entity or before any
arbitrator) pending or, to the Knowledge of the Company, threatened against or
affecting any Member or any of its assets or properties that would result in a
Material Adverse Effect upon any Member. There are no Orders, stipulations or
awards (whether rendered by a Government Entity or by arbitration) against any
Member or against any of its respective properties, assets or business.
7.14 Legal Compliance. To the Knowledge of the Company, except for
matters covered by Section 7.15, each Member has conducted its operations in
compliance in all material respects with all applicable Laws. Except for matters
covered by Section 7.15, neither the Company nor any director or Principal
Officer of any Member has received any written complaint or notice from any
Government Entity alleging that it has violated any Order or Law and, to the
Knowledge of the Company, no such complaint or notice is threatened.
7.15 Environmental Matters.
(a) Compliance.
(i) Each Member is in material compliance with
all applicable Environmental Laws.
(ii) No Member has received any written
communication from any Person or Government Entity that alleges that any Member
is not in compliance with applicable Environmental Laws or Environmental
Permits.
(b) Environmental Permits. Each Member has all Environmental
Permits necessary for the conduct and operation of its business, and all such
Environmental Permits are in good standing, and each Member is in compliance
with all terms and conditions of all such Environmental Permits and is not
required to make any material expenditure in order to obtain or renew any
Environmental Permits.
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(c) Environmental Claims.
(i) There is no Environmental Claim pending
or, to the Knowledge of the Company, threatened against any Member, or against
any (A) Owned Real Property, (B) Leased Real Property, (C) Personal Property,
(D) operation that any Member owns, leases or manages, in whole or in part, or
(E) other property for which any Member would be responsible, in whole or in
part, for an Environmental Claim.
(ii) No Member has received notice that it is
liable for any response, removal, investigative or remedial costs under any
applicable Law.
(iii) All Hazardous Materials any Member may
have generated have been transported, stored, treated or disposed of by
carriers or treatment, storage and disposal facilities authorized or permitted
under all applicable Environmental Laws and Environmental Permits.
(iv) (A) Each Member has fully complied with
all applicable provisions of any Environmental Laws that condition, restrict or
prohibit the transfer, sale, lease or closure of any property for environmental
reasons; (B) no Member is required to place any notice or restriction relating
to the presence of Hazardous Materials in any instrument or deed to the real
property owned, leased or operated by it; (C) no environmental Lien has attached
to any portion of the real property owned, leased or operated by any Member; and
(D) no Government Entity actions have been taken or, to the Knowledge of the
Company, are in progress or threatened that could subject any or all of the
foregoing to any such Lien.
(d) Release of Hazardous Materials. To the Knowledge of the
Company, there has not been any release of Hazardous Materials at or from any
facility or real property owned, operated or leased by any Member.
(e) Underground Storage. (i) There are not now any underground
storage tanks on or at the real property owned, leased or operated by any
Member; and (ii) any removal of underground storage tanks or any remediation
associated with such removal conducted by or on behalf of any Member was
conducted in accordance with applicable Environmental Laws and Environmental
Permits.
(f) Asbestos, PCBs, Etc. To the Knowledge of the Company, no
polychlorinated biphenyls ("PCBs"), asbestos-containing material ("ACM"), or
urea formaldehyde insulation is present at any of the real property currently
owned, leased or operated by any Member in such condition or under such
circumstances as would reasonably be expected to give rise to an Environmental
Claim, and each Member has complied in all material respects with all regulatory
requirements under all applicable Environmental Laws relating to the storage,
removal, disposal or release, if any, of ACM or PCBs located on the real
property owned, leased or operated by any of the Members.
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7.16 Insurance.
(a) No Member has received any notice of cancellation or
termination with respect to any material insurance policy.
(b) All material insurance policies of each Member are valid
and enforceable policies. Schedule 7.16(b) contains a description of all
insurance policies maintained by each Member on its properties and assets and on
its operations and personnel. Such description includes the insurance carrier,
the amount of premiums thereunder, the type of coverage and limits of coverage
of such policies and the expiration dates of the current premium periods
thereunder. Such insurance is of the kinds, covering such risks and in such
amounts and with such deductibles and exclusions as are consistent with past
business practices of the applicable Member. To the Knowledge of the Company,
there have been no threatened terminations or material premium increases with
respect to insurance of any Member.
7.17 Intellectual Property. Each Member owns or possesses, and has
taken all actions necessary to record, preserve and protect, adequate and
enforceable long-term licenses or other rights to use all copyrights, patents,
trade names, trade secrets, trademarks, franchises, source codes and similar
rights now owned, used or employed by such Member in connection with its
business, including, without limitation, all trade names, trademarks and logos
of each Member, that previously have been used in the conduct or operation of
the Company Group Business.
7.18 Labor Matters.
(a) No Member is engaged in any unfair labor practices as
defined in any applicable Law, and each Member is in compliance in all material
respects with all applicable Laws respecting employment and employment
practices, including, without limitation, terms and conditions of employment,
wages, employment discrimination, workers' compensation, family and medical
leave, the Immigration Reform and Control Act, hours of work and occupational
safety and health requirements.
(b) Except as disclosed in Schedule 7.18(b), there is no
unfair labor practice, charge or complaint brought by any employee pending or,
to the Knowledge of the Company, threatened against any Member and, to the
Knowledge of the Company, there is no basis for any such charge, complaint or
grievance.
(c) There is no labor strike, lock-out, slow-down,
employment-related arbitration or work stoppage pending or, to the Knowledge of
the Company, threatened against any Member, nor have there been any such actions
or threats since the Company's formation.
(d) No Member has experienced any significant work stoppage or
been a party to any Action or Proceeding for the past three (3) years.
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(e) No employees of any Member are represented by any labor
union nor are there any existing collective bargaining agreements or any other
types of agreements with labor unions otherwise in effect with respect to such
employees and, to the Knowledge of the Company, no union organizational campaign
is in progress, no such activities have taken place within the past three (3)
years, and no notice has been received by any Member concerning representation
in respect of such employees.
(f) All Persons classified by any Member as independent
contractors do satisfy and have satisfied the requirements of Law to be so
classified, and the Members have fully and accurately reported their
compensation on IRS Forms 1099 or other comparable reports when required to do
so.
(g) There is no charge or compliance proceeding actually
pending or threatened against any Member before the Equal Employment Opportunity
Commission or any state, local or foreign agency responsible for the prevention
of unlawful employment practices.
7.19 Employee Benefits.
(a) No Member has maintained or contributed to any Qualified
Plans since January 1, 1994. The Qualified Plans have always qualified in form
and operation under Code Section 401(a), and their trusts have always been
exempt under Code Section 501, and nothing has occurred with respect to such
plans and trusts that could cause the loss of such qualification or exemption or
the imposition of any liability, lien, penalty or tax under ERISA or the Code.
(b) Each Company Plan and each Company Benefit Arrangement has
been maintained in all material respects in accordance with its constituent
documents and with applicable provisions of the Code, ERISA and other domestic
Laws, including federal, state, and foreign securities Laws and all Laws
respecting reporting and disclosure.
(c) No Member or other ERISA Affiliate has ever contributed to
or been obligated to contribute to or had any actual or contingent liability
with respect to any Benefit Plan subject to Title IV of ERISA or Section 412 of
the Code.
(d) No Member and other ERISA Affiliate has ever made or been
obligated to make, or reimbursed or been obligated to reimburse another employer
for, contributions to any multiemployer plan (as defined in ERISA Section
3(37)).
(e) There are no pending claims or lawsuits by, against, or
relating to any non-Company Benefit Plans or non-Company Benefit Arrangements
and no claims or lawsuits (other than routine benefit claims) have been
asserted, instituted or, to the Knowledge of the Company, threatened by,
against, or relating to any Company Plan or Company Benefit Arrangement, and the
Members do not have Knowledge of any fact that could form the basis for any such
claim or lawsuit. To the Knowledge of the Company, the Company Plans and Company
Benefit
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Arrangements are not presently under audit or examination (and have not received
notice of a potential audit or examination) by any Government Entity and no
matters are pending with respect to the Qualified Plans under any governmental
compliance programs.
(f) No Company Plan or Company Benefit Arrangement contains
any provision or is subject to any law that would give rise to any vesting of
benefits, severance, termination or other payments or liabilities as a result of
the transactions this Agreement contemplates, and the Members have not declared,
paid or promised any bonus or other incentive compensation or established or
amended any severance plan, program or arrangement in contemplation of the
transactions contemplated by this Agreement.
(g) The Members have made all required contributions to the
Company Plans as of the last day of the each plan's most recent fiscal year; all
benefits accrued under any unfunded Company Plan or Company Benefit Arrangement
will have been paid, accrued, or otherwise adequately reserved in accordance
with GAAP as of the end of the preceding fiscal year; and all monies withheld
from employee paychecks with respect to Company Plans have been transferred to
the appropriate plan within the timing required by governmental regulations.
(h) The Members have no liability (whether actual, contingent,
or otherwise) with respect to any Benefit Plan or Benefit Arrangement that is
not a Company Benefit Plan or Company Benefit Arrangement or with respect to any
Benefit Plan sponsored or maintained (or which has been or should have been
sponsored or maintained) by any ERISA Affiliate; and the Members have no
Knowledge of any facts that could reasonably be expected to result in such
liability, as a result of a termination, withdrawal or funding waiver with
respect to any such plan, program or arrangement.
(i) No employee or former employee of the Members nor
beneficiary of any such employee or former employee is, by reason of such
employee's or former employee's employment, entitled to receive any benefits
subject to reporting under Statement of Financial Accounting Standards No. 106,
other than as required by Code Section 4980B or other applicable law.
7.20 Contracts.
(a) Schedule 7.20(a) lists or describes: (i) all unexpired
written or oral contracts, leases, agreements, arrangements, commitments,
instruments or understandings ("Contracts") that restrict any Member from
engaging in any business activity; and (ii) all Contracts of every nature to
which any Member is a party or to which it or any of its assets or properties
are bound if such Contract obligates such Member to pay more than $50,000 in
remaining payment obligations.
(b) True, complete and correct copies of all written Contracts
listed in Schedule 7.20(a) have been made available to the Investor and true,
complete and correct
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descriptions of all oral Contracts have been provided therein. Each such
Contract is enforceable in accordance with its terms (except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally and by general principles
of equity) and is in full force and effect. No Member is, nor to the Knowledge
of the Company, is any other party to any of such Contracts (with or without the
lapse of time or the giving of notice, or both) in material violation thereof or
in material default thereunder.
7.21 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 7.21, no Member has any Liabilities of any kind whatsoever, either
accrued, absolute, contingent, determined or determinable or otherwise, or any
existing condition, situation or set of circumstances that could reasonably be
expected to result in such a Liability (including documentary or standby letters
of credit, bid or performance bonds or customer or third party guarantees),
except Liabilities reflected or reserved against in the Audited Financial
Statements or the Unaudited Financial Statements and not heretofore paid or
discharged. To the Knowledge of the Company, there are no asserted claims for
indemnification by any Person against any Member under any Law or agreement or
pursuant to the Organizational Documents of any Member, and the Company has no
Knowledge of any facts or circumstances that could reasonably be expected to
give rise to the assertion of such a claim against any Member thereunder.
7.22 No Illegal or Improper Transactions. No Member has, nor has any
director or officer of any Member paid, offered or promised to pay, or
authorized the payment, directly or indirectly, through any other Person or
firm, of any monies or anything of value to (a) any Person or firm employed by
or acting for or on behalf of any Person, whether private or governmental, or
(b) any government official or employee or any political party or candidate for
political office, for the purpose of illegally or improperly inducing or
rewarding any action by any official favorable to the Investor.
7.23 Certain Fees. No Member nor any of their respective officers,
directors or employees, has entered into, or will enter into, during the term of
this Agreement, any agreement, arrangement or understanding with any Person to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
7.24 Substantial Customers and Suppliers. Schedule 7.24 lists the
principal customers of each Member on the basis of revenues for the most recent
fiscal year. No such customer has ceased or materially reduced its purchases
from any Member since December 31, 1997, or to the Knowledge of the Company, has
threatened to cease or materially reduce such purchases after the Closing. To
the Knowledge of the Company, no such customer or supplier is threatened with
bankruptcy or insolvency.
7.25 Books and Records. The minutes books and other similar records of
each Member contain a true, complete and correct record, in all material
respects, of all material
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actions taken at all meetings and by all written consents in lieu of meetings of
the stockholders and the boards of directors of each Member up to and including
the Closing. The stock book and the share certificate ledgers and other similar
records of each Member as made available to the Investor or their Affiliates
prior to the Closing accurately reflect all record transfers and any rights or
Contracts related to or involving any shares of capital stock of any Member. No
Member has any of its Books and Records recorded, stored, maintained, operated
or otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of such Member.
7.26 Assumptions or Guarantees of Indebtedness of Other Persons.
(a) Third Party Guarantees. Except as set forth on the Audited
Financial Statements and the Unaudited Financial Statements, no Member has
assumed, guaranteed, endorsed or otherwise become directly or contingently
liable on (including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in the debtor or otherwise to assure the creditor
against loss) any Indebtedness of any other Person (not including a Member),
except for endorsements made in the ordinary course of business in connection
with the deposit of items for collection.
(b) Affiliate Transactions. Except as disclosed in
Schedule 7.26(b):
(i) there are no outstanding Liabilities
between any Member, on the one hand, and, on the other hand: (A) any other
Member; (B) any officer or director or shareholder of any Member; or (C) any
Affiliate or family member of the Persons listed in (B).
(ii) none of (A) any Member; (B) any officer,
director, Affiliate, or family member of the Persons listed in (A); or (C)
any Affiliate of any such officer, director or Affiliate (other than a Member)
listed in (B), provides or causes to be provided any assets, services or
facilities to (x) any other Member; (y) any officer, director, Affiliate, or
family member of the Persons listed in (x); or (z) any Affiliate (other than a
Member) of any such officer, director or Affiliate listed in (y); and
(iii) no Member beneficially owns, directly or
indirectly, Investment Assets of (A) any other Member; (B) any officer,
director, Affiliate or family member of the Persons listed in (A); or (C) any
Affiliate (other than a Member) of any such officer, director or Affiliate
listed in (B).
Each of the Liabilities and transactions listed in Schedule 7.26(b) was incurred
or engaged in, as the case may be, on an arm's-length basis. All settlements of
outstanding Liabilities between any Member, on the one hand, and any other
Member, Affiliate or any such officer, director, family member or Affiliate of
the same on the other, have been made, and all allocations of
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intercompany expenses have been applied, in the ordinary course of business
consistent with past practice.
7.27 Disclosure. No representation or warranty concerning any Member in
the Investment Documents or any Exhibit or Schedule hereto, or contained in any
certificate or instrument delivered or to be delivered or made available to the
Investor by or on behalf of any Member pursuant to any of the Investment
Documents, contains or will contain an untrue statement of material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not materially misleading.
7.28 Securities Act. Assuming the accuracy of the representations and
warranties of the Investor set forth herein, neither the Company nor anyone
acting on its behalf has offered or will offer to sell, the Preferred Shares,
the Warrants or similar securities to, or solicit offers with respect thereto
from, or enter into any preliminary conversations or negotiations relating
thereto with, any Person, so as to bring the issuance and sale of the Preferred
Shares and the Warrants to the Investor under the registration provisions of the
Securities Act. Assuming the accuracy of the representations and warranties of
the Investor set forth herein, the issuance of the Preferred Shares and the
Warrants to the Investor pursuant to this Agreement is not required to be
registered under the Securities Act or any applicable state securities laws.
7.29 Registration Rights. Except as provided in the Registration Rights
Agreement, immediately following the Closing, no Person will have (a) demand or
other rights to cause any Member to file any registration statement under the
Securities Act relating to any securities of any Member or (b) any right to
participate any such registration statement.
7.30 U.S. Real Property Holding Corporation. No Member is now, nor will
be immediately after the Closing, a "United States Real Property Holding
Corporation" as defined in Section 897(c)(2) of the Code and Section 1.897-2(b)
of the Regulations promulgated by the Internal Revenue Service.
7.31 Investments in Other Persons. Except as disclosed in Schedule
7.31, no Member has made any loan or advance (other than trade credit advanced
in the ordinary course of business and consistent with past practices) to any
Person which is outstanding on the date of this Agreement, nor is any Member
obligated or committed to make any such loan or advance.
7.32 Computer Programs and Software. The technology consisting of
computer programs and software used by each Member, and any and all present and
prior versions, new releases and derivative products related thereto or
resulting therefrom (the "Software") (i) are licensed by such Member under valid
License agreements, (ii) constitute original works for hire compiled or prepared
by employees of such Member within the scope of their employment, the right,
title and interest (including copyright to such Software) being vested in such
Member or (iii) are works prepared or performed by consultants to such Member
and all right, title and
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interest in and to such Software having been transferred and been vested in such
Member with no royalties or other payments due in respect thereof. Each Member
has all documentation necessary to enforce their respective rights in the
Software.
ARTICLE VIII COVENANTS
8.1 Affirmative Covenants of the Company. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that, as long
as any of the Preferred Shares or Warrants are outstanding, it will perform and
observe the following covenants and provisions and will cause each other Member
to perform and observe such of the following covenants and provisions as are
applicable to such Member.
(a) Financial and Business Information. The Company during the
term of this Agreement will, and will cause its Subsidiaries to deliver to the
Investor:
(i) As soon as practicable and in any event
within 120 days after the close of each fiscal year of the Company, beginning
with the current fiscal year, a consolidated balance sheet of the Company and
its Subsidiaries as of the close of such fiscal year and consolidated statements
of income, retained
earnings and cash flows for the Company and its Subsidiaries for the fiscal year
then added, certified by the chief executive officer or chief financial officer
of the Company to be true and accurate in all material respects (it being
understood by the parties hereto that the delivery to the Investor of the
Company's annual report on Form 10-K, together with an unqualified auditor's
opinion, will satisfy the requirements of this Section 8.1(a)(i));
(ii) As soon as practicable and in any event within
45 days after the
end of each of the first three fiscal quarters of each fiscal year, the
consolidated and consolidating balance sheet of the Company Group as at the end
of such fiscal quarter and the related consolidated and consolidating statements
of income, retained earnings and cash flows of the Company Group for such fiscal
quarter and for the period from the beginning of the then current fiscal year to
the end of such fiscal quarter, all in reasonable detail and certified by the
chief financial officer of Company that they fairly present the financial
condition of the Company Group as at the dates indicated and the results of its
operations and its cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments (it being understood by the
parties hereto that the delivery to the Investor of the Company's quarterly
report on Form 10-Q will satisfy the requirements of this Section 8.1(b)(ii);
(iii) Prompt notice of any event having a
Material Adverse Effect;
(iv) Promptly upon their becoming available,
copies of (a) all financial statements, reports, notices and proxy statements
sent or made available generally by the Company to its security holders, (b) all
regular and periodic reports, if any, filed by the Company Group with any
securities exchange or with the SEC or any governmental or private
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regulatory authority, and (c) all press releases and other statements made
available generally by the Company Group to the public concerning material
developments in the business of the Company Group; and
(v) Within a reasonable time, upon Investor's
request, such other information about the property, financial condition and
operations of the Company Group as the Investor may from time to time reasonably
request.
(b) Notice of Certain Events. Unless the Investor otherwise
consents in writing, the Company during the term of this Agreement will, and
will cause its Subsidiaries to, promptly give notice in writing to the Investor
of any litigation or proceeding before any court or administrative body
involving any Member which, if determined adversely to such Member, would have a
Material Adverse Effect on the Company Group, taken as a whole.
(c) Inspection Rights. At any reasonable time and upon
reasonable notice and from time to time and without material disruption of the
Company's business, permit the Investor or any of its agents or representatives
to examine and make copies of and extracts from the records and books of account
of, and visit and inspect the properties of, any Member and to discuss the
affairs, finances and accounts of the Company Group with any of its officers or
directors and independent accountants. The respective Members shall pay the
Investor the reasonable out-of-pocket expenses incurred by Investor in
connection with such respective rights.
(d) Keeping of Records and Books of Account. Keep, and cause
each other Member to keep, adequate records and books of account, in which
complete entries will be made in accordance with GAAP, reflecting all financial
transactions of the Company Group, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization taxes,
bad debts and other purposes in connection with its business shall be made.
(e) U.S. Real Property Holding Corporation. Use its reasonable
best efforts to avoid being classified as a "United States Real Property Holding
Corporation" as defined in Section 897(c)(2) of the Code and Section 1.897-2(b)
of the Regulations promulgated thereunder.
(f) Board of Directors and Committees. So long as a number of
Preferred Shares equal to at least 45% of the Preferred Shares issued at Closing
have not been converted to Common Stock, the holders of the Preferred Shares
shall have the right to elect one-third of the Company's directors; provided,
however, if the Company receives an additional investment in an amount of at
least $5,000,000 from a third party that is not an Affiliate of the Investor, in
accordance with and subject to Section 8.1(g), then (i) if the Board consists of
one to five members, the holders of the Preferred Shares shall have the right to
elect one director to the Board or (ii) if the Board consists of six or more
members, the holders of the Preferred Shares shall have the right to elect the
greater of one-sixth of the Company's directors or two directors to the Board.
The Company shall reimburse the Investor and its appointees for all reasonable
out-of-pocket costs incurred by them in connection with meetings of the Board
and Board
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committees in addition to any directors fees regularly paid to all members of
the Board. In the event a director nominated by the Investor vacates his
position on the Board, for whatever reason, the Company should use its best
efforts to cause a representative of the Investor to be recommended to the
stockholders for election as the replacement director.
(g) Additional Financing. If the Company receives a bona fide
proposal from any third party that is not an Affiliate of the Investor to
provide additional financing (whether equity or debt financing) to the Company
so long as any of the Preferred Shares remains outstanding, the Company shall
give written notice of such third party offer to the Investor identifying the
thirty party, stating all of the material terms and conditions of proposed
financing and attaching a copy of the Third Party Offer to such written notice
("Third Party Offer Notice"). The Company's delivery of such notice shall
constitute an irrevocable offer to the Investor (or its designee) to provide
financing to the Company on the terms and conditions set forth in the Third
Party Offer Notice. The Investor may elect (on behalf of itself or its designee)
to provide the financing to the Company on the same terms and conditions set
forth in the Third Party Offer Notice by providing written notice thereof to the
Company 20 days after the delivery of the Third Party Offer Notice. If the
Investor elects to provide such financing (on behalf of itself or its designee),
the Investor shall pay the third party the reasonable costs and expenses
incurred by such third party in preparing the proposal to provide financing,
which costs and expenses shall be duly evidenced by invoices and receipts. The
closing of the financing shall take place at the offices of the Company on the
later of the date indicated in the Third Party Offer Notice and 90 days after
delivery of the Third Party Offer Notice. If the Investor does not elect to
provide the financing (on behalf of itself or its designee) within such 20-day
period, the Company may proceed with the financing with the third party
specified in the Third Party Offer Notice; provided that the terms and
conditions of the financing are the same as the terms and conditions stated in
the Third Party Offer Notice and such financing is completed within 120 days
after the above noted 20-day period has expired.
(h) Accounting Controls and Systems. The Company shall engage
a full time controller, which controller shall be satisfactory to the Board of
Directors, within 180 days after the date of this Agreement. The Company shall,
within 120 days after the date of this Agreement, have established and
implemented accounting systems and controls satisfactory to the Board of
Directors, including without limitation, a cost accounting system.
(i) Directors and Officers Liability Insurance. The Company
shall purchase directors and officers liability insurance as soon as the Board
of Directors determines that the Company is financially capable of paying for
such directors and officers liability insurance without impairing the Company's
operations.
8.2 Covenants of the Investor. Without limiting any other covenants and
provisions hereof, the Investor covenants and agrees that, as long as any of the
Preferred Shares or Warrants are outstanding, it will perform and observe the
following covenants and provisions and will
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cause each of its members to agree to perform and observe such of the following
covenants and provisions as are applicable to such member.
(a) Permitted Transfers. The Preferred Shares shall be
freely transferable, in whole or in part, subject to the limitations specified
below.
(i) The Preferred Shares shall be transferred only
if:
(A) either a registration statement under
the Securities Act is in effect covering the
Preferred Shares or the Company has received an
opinion from the Company's counsel to the effect that
such registration is not required, or the Investor
has furnished to the Company an opinion of Investor's
counsel, which counsel shall be reasonably
satisfactory to the Company, to the effect that such
registration is not required; and
(B) the proposed transfer complies with
any applicable state securities laws.
(ii) In the event the Investor seeks an opinion from
the Investor's counsel as to transfer without registration, the Company shall
provide such factual information to Investor's counsel as Investor's counsel may
reasonably request for the purpose of rendering such opinion, and such counsel
may rely on the accuracy and completeness of such information in rendering such
opinion. In the event the Company seeks an opinion from the Company's counsel
as to transfer without registration, the Investor shall provide such factual
information to the Company's counsel as Company's counsel may reasonably request
for the purpose of rendering such opinion, and such counsel may rely on the
accuracy and completeness of such information in rendering such opinion.
(iii) Subject to the limitations set forth in this Section
8.2, the Investor may transfer the Preferred Shares on the books of the Company
by surrendering to the Company:
(A) a certificate representing the Preferred Shares
to be transferred;
(B) a written assignment of the Preferred Shares, in
form reasonably satisfactory to the Company and its legal
counsel, wherein the assignee agrees to be bound by the terms
of the applicable Investment Documents and duly executed by
the Investor and the assignee; and
(C) the funds sufficient to pay any stock transfer
taxes payable upon the making of such transfer.
The Company shall thereupon execute and deliver a new certificate representing
the transferred Preferred Shares in the name of the assignee specified in such
instrument of assignment, and if
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the Preferred Shares surrendered to the Company were transferred only in part,
the Company shall also execute and deliver in the name of the Investor a new
certificate covering the untransferred portion of the Preferred Shares. Upon
issuance of the new certificates for the Preferred Shares, the certificate of
the Preferred Shares originally surrendered for transfer shall be canceled by
the Company.
(iv) The Company shall pay all expenses, taxes (other than
transfer taxes) and other charges payable in connection with the preparation,
issue and delivery of any new certificate for Preferred Shares, provided that
each party to the transfer, including the Company, the Investor and the
assignee, as applicable, shall pay their respective legal costs associated with
such transfer.
(b) Securities Laws. Neither the Investor nor anyone acting on
its behalf will sell, offer to sell, or solicit offers to buy, the Preferred
Shares, the Warrants or securities in the Investor, so as to bring the issuance
and sale of the Preferred Shares and the Warrants to the Investor within the
registration requirements of the Securities Act or within the registration
requirements of any applicable securities laws.
8.3 Affirmative Covenant of the Kenneth H. Smith. Kenneth H. Smith
agrees to use his best efforts to cause the amendment of the Company's Restated
Certificate of Incorporation, upon the earlier of (a) the first amendment to the
Company's Restated Certificate of Incorporation by written consent and (b) the
next annual shareholders meeting of the Company, by voting his shares of the
Company and any shares for which he holds a proxy (other than proxies
specifically requiring a vote against such amendment) to amend the Company's
Restated Certificate of Incorporation to eliminate the provision set forth in
Section 4 thereof restricting the preferential amount payable with respect to
preferred shares in the event of an involuntary liquidation.
ARTICLE IX INDEMNIFICATION
9.1 Indemnification. In addition to the payment of expenses pursuant to
Section 11.14, whether or not the transactions contemplated hereby shall be
consummated, the Company agrees to defend, indemnify, pay and hold harmless, the
Investor and its officers, directors, employees, agents and affiliates
(collectively, the "Indemnitees") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened by any Person, whether or not any such
Indemnitee shall be designated as a party or a potential party thereto), whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws, statutes, rules or regulations (including, without limitation,
securities and commercial laws, statutes, rules or regulations), on common law
or equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating
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to or arising out of the Investment Documents or the transactions contemplated
thereby (collectively called the "Indemnified Liabilities"); provided that the
Company shall not have any obligation to any Indemnitee hereunder (a) with
respect to any offering of securities or other financing transaction undertaken
by the Investor, except to the extent that such Indemnified Liabilities are
related to or arise in connection with a misrepresentation or omission in the
Company's filings with the Securities Exchange Commission, or (b) with respect
to any Indemnified Liabilities to the extent such Indemnified Liabilities arise
from the gross negligence or willful misconduct of that Indemnitee as determined
by a final judgment of a court or competent jurisdiction. To the extent that the
undertaking to defend, indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, the Company shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
ARTICLE X TERMINATION
10.1 Termination by Either of the Investor or the Company. (a) This
Agreement may be terminated and the purchase of the Preferred Shares and the
Warrants may be abandoned by the Investor or the Company if (i) the purchase of
the Preferred Shares and Warrants shall not have been consummated by 5:00 p.m.
Eastern Time on August 1, 1998, or (ii) a Government Entity shall have issued an
Order or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such Order or
other action shall have become final and nonappealable; provided, that the party
seeking to terminate this Agreement pursuant to clause (ii) shall have used all
reasonable efforts to remove such Order.
(b) This Agreement may be terminated at any time prior to the
Closing by either Party, if there has been one or more breaches by the other
Party of any representations, warranties, covenants, or agreements contained in
this Agreement which would entitle the terminating Party not to close pursuant
to Article IV or Article V, as the case may be; provided however, that the
terminating Party may not terminate this Agreement pursuant to this Section
10.1(b) unless, within five (5) days of becoming aware of such breach, the
terminating Party has given written notice of such breach to the other Party and
has provided such other Party with fifteen (15) Business Days to cure such
breach.
10.2 Effect of Termination and Abandonment. In the event of termination
of the Agreement pursuant to this Article X, the terminating party shall give
written notice thereof as promptly as practicable to the other Parties to this
Agreement and this Agreement shall terminate and the transactions contemplated
herein shall be abandoned, without further action by any of the Parties hereto.
If this Agreement is terminated as provided herein: (a) other than pursuant to
Section 11.14, there shall be no liability or obligation on the part of the
Investor or the Company or any of their respective officers and directors, and
all obligations of the Parties shall terminate, except for the obligations of
the Parties pursuant to Articles X and XI; provided, however, that a
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Party who is in material breach of its representations, warranties, covenants or
agreements set forth in this Agreement shall be liable for damages occasioned by
such breach, including, without limitation, any expenses incurred by the other
Parties in connection with this Agreement and the transactions contemplated
hereby and (b) all filings, applications, and other submissions made pursuant to
the transactions contemplated by this Agreement shall, to the extent
practicable, be withdrawn from the agency or Person to which made.
ARTICLE XI MISCELLANEOUS
11.1 Severability. If any term, provision, covenant or restriction of
this Agreement is held to be invalid, void or unenforceable, such provision
shall be amended by the Parties only to the extent necessary to be enforceable
consistent with the Parties' intent, and the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect, unless such action would substantially impair the benefits to any Party
of the remaining provisions of this Agreement.
11.2 Specific Enforcement. The Parties each acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to preliminary relief to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which they may be entitled by law or
equity. Any Party shall be entitled to recover from the breaching Party all
reasonable attorney's fees and expenses incurred by such Party in connection
with the enforcement of any obligation of the breaching Party hereunder.
11.3 Entire Agreement; Amendments. This Agreement (including the
Schedules and Exhibits hereto) and the other documents and instruments referred
to herein contain the entire understanding of the Parties with respect to the
matters covered hereby and supersede all other prior agreements and
understandings, both written and oral, among the Parties or any of them, with
respect to the subject matter hereof. This Agreement may be amended only by an
instrument in writing executed by the Parties.
11.4 Notices. Any notices or communications required or permitted
hereunder shall be in writing and shall be delivered by hand, international
courier, or facsimile (confirmed by international courier) addressed as follows:
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If to the Investor: USV Partners, LLC
Attn: C. Gregory Earls
c/o U.S. Viewing Corporation
2001 Pennsylvania Avenue, NW
Suite 675
Washington, DC 20006
Telephone: 202-466-3100
Facsimile: 202-466-4557
with a copy to: Wilmer, Cutler & Pickering
Attn: Duane D. Morse
2445 M Street, NW
Washington D.C. 20037
Telephone: (202) 663-6041
Facsimile: (202) 663-6363
If to Company: U.S. Technologies Inc.
Attn: Kenneth H. Smith
3901 Roswell Road
Suite 300
Marietta, GA 30062
Telephone: 770-565-4311
Facsimile: 770-565-8815
with a copy to: Smith, Gambrell & Russell, LLP
Attn: W. Thomas King
1230 Peachtree Street, N.W.
Promenade II, Suite 3100
Atlanta, GA 30309-3592
Telephone: 404-815-3678
Facsimile: 404-815-3509
Any Party may, on fifteen (15) days' notice given in accordance with
this Section 11.4 to the other Parties, designate another address or Person for
receipt of notices hereunder. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed given (a) in
the case of a facsimile transmission, when received by recipient in legible form
and sender has received an electronic confirmation of receipt of the
transmission; (b) in the case of delivery by a standard overnight courier, upon
the date of delivery indicated in the records of such courier; (c) in the case
of delivery by hand, when delivered by hand; or (d) in the case of delivery by
first class (registered or certified) mail, upon the expiration of seven (7)
Business Days after the day when mailed (postage prepaid, return receipt
requested), addressed to the respective Parties at the above address (or such
other address for a party as shall be specified by like notice).
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11.5 Waivers. No waiver by either Party of any default with respect to
any provision, condition or requirement hereof shall be deemed to be a
continuing waiver in the future thereof or a waiver of any other provision,
condition or requirement hereof; nor shall any delay or omission of either Party
to exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.
11.6 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
11.7 Successors and Assignees. This Agreement shall be binding upon and
inure to the benefit of the Parties and their successors and permitted assigns.
Neither this Agreement nor any of the rights or obligations hereunder may be
assigned by any Party without the prior written consent of the other Parties,
provided that the Investor may assign its rights and obligations hereunder to
one or more Affiliates without the prior written consent of any other Party.
11.8 No Third Party Beneficiaries. This Agreement is intended for the
benefit of the Parties hereto, and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each Party and
delivered to the other Parties, it being understood that all Parties need not
sign the same counterpart.
11.10 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware, United States
of America, without regard to the conflicts of laws principles thereof.
11.11 Dispute Resolution.
(a) All disputes, controversies, and claims directly or
indirectly arising out of or in relation to this Agreement or the validity,
interpretation, construction, performance, breach or enforceability of this
Agreement shall be finally, exclusively and conclusively settled by binding
arbitration, as provided in this Section, under the International Rules of
Conciliation and Arbitration of the American Arbitration Association (the "AAA")
which are in effect as of the Closing.
(b) The arbitral tribunal shall be composed of three (3)
arbitrators, each of which shall be appointed by the then President of the AAA.
The arbitration proceedings shall be conducted in the English language, and all
documents not in English submitted by any party must be accompanied by an
English translation. The arbitration proceedings shall be conducted and any
arbitral award shall be made in Atlanta, GA. No discovery shall be conducted
except by written agreement of all Parties.
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(c) The Parties agree: (i) that the arbitrator shall have no
authority to award punitive damages or any damages other than those recoverable
in accordance with this Agreement (which may include reasonable attorneys' fees
and other costs of arbitration); (ii) to be bound by any arbitral award or Order
resulting from any arbitration conducted thereunder and that any such award or
Order shall be a reasoned award, shall be in writing, shall specify the factual
and legal basis for the award, shall be final and binding; (iii) not to
commence, procure, participate in, or otherwise be involved as a party in any
claim, Action or Proceeding that might result in any Order concerning a dispute
(except for initialing Actions or Proceedings to obtain a judgment recognizing
or enforcing an arbitral award or Order and except for applications, claims,
Actions or Proceedings by the Parties, seeking interim interlocutory or other
provisional relief in any court having jurisdiction, but only on the ground that
the award to which the applicant may be entitled may be rendered ineffectual
without such provisional relief); (iv) any monetary award shall be made and
payable in U.S. Dollars, in each case through a bank selected by the recipient
of the award, together with interest therein at the lesser of the one year
London Interbank Offered Rate (LIBOR), as appearing in the Reuters screen, plus
five (5) percent or the maximum interest rate permissible under applicable Law,
from the date the award is granted to but excluding the date it is paid in full;
and (v) that judgment or any arbitral award or Order resulting from an
arbitration conducted under this Section may be entered in any court of
competent jurisdiction, having jurisdiction thereof or having jurisdiction over
either Party or any of their assets.
(d) The Company and the Investor hereby irrevocably waive and
exclude all rights of appeal, challenge, or recourse to any court from any
arbitral award or Order resulting from any arbitration conducted under this
Section (except for initiating Actions or Proceedings to obtain a judgment
recognizing or enforcing an arbitral award or Order and except for Actions or
Proceedings seeking interim, interlocutory or other provisional relief in any
court having jurisdiction, but only on the ground that the award to which the
applicant may be entitled may be rendered ineffectual without such provisional
relief). Each of the Parties to this Agreement hereby consents to the
non-exclusive jurisdiction of any court of competent jurisdiction in the State
of Georgia for all Actions or Proceedings to obtain a judgment recognizing or
enforcing an arbitral award or Order and waives any defense or opposition to
such jurisdiction.
(e) The arbitrators, in their discretion, may consolidate two
or more arbitrations or claims between any of the Parties arising pursuant to
this Agreement or any other agreement among the parties or to which the Investor
and shareholders of the Company are a party into one arbitration, or terminate
any such consolidation and/or establish other arbitration proceedings for
different claims that may rise in any one arbitration. Notwithstanding the
foregoing, the arbitrators shall consolidate arbitrations and/or claims, if they
determine that it would be more efficient to consolidate such arbitrations
and/or claims than to continue them separately and (i) there are matters of fact
or law that are common to the arbitrations and/or claims to be consolidated,
(ii) there are related payment and performance obligations considered in the
arbitrations and/or claims to be consolidated or (iii) there is a danger of
inconsistent awards.
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(f) Each Party shall bear its own expenses in connection with
the arbitration provided in this Section, provided that the fees of the
arbitrators shall be divided equally between the Parties.
11.12 Drafting. Each Party acknowledges that its legal counsel
participated in the preparation of this Agreement. The Parties therefore
stipulate that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement to favor any Party against the other.
11.13 Waiver of Jury Trial. EACH PARTY HERETO WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OF OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
11.14 Costs, Expenses and Taxes. The Company agrees to pay on demand
all reasonable costs and expenses of the Investor in connection with (a) the
preparation, execution and delivery of this Agreement, the Preferred Shares, the
Warrants, the other Investment Documents and other instruments and documents to
be delivered hereunder, and in connection with the consummation of the
transactions contemplated hereby and thereby, (b) all reasonable costs and
expenses of the Investor in connection with the amendment or waiver (whether or
not such amendment or waiver becomes effective), the Preferred Shares, the
Warrants, the other Investment Documents, and other instruments and documents to
be delivered hereunder and thereunder and (c) all reasonable costs and expenses
of the Investor in connection with offering interests in the Investor; provided
that the Company shall not be required to pay more than $35,000 in the aggregate
with respect to such costs and expenses. In addition, the Company agrees to pay
any and all stamp and other similar taxes (expressly excluding income taxes)
payable or determined to be payable in connection with the execution and
delivery of this Agreement, Preferred Shares, the Warrants, the other Investment
Documents and the other instruments and documents to be delivered hereunder or
thereunder unless otherwise set forth herein, and the Company agrees to save the
Investor harmless from and against any and all liabilities with respect to or
resulting from any delay in paving or omission to pay such taxes and filing
fees.
11.15 Further Assurances. From and after the date of this Agreement,
upon the request of the Investor, each Member 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, Preferred Shares and the Warrants.
11.16 Disclosure to Other Persons. (a) The Company acknowledges that
the Investor may deliver copies of any financial statements and other documents
delivered to the Investor, and disclose any other information disclosed to the
Investor, by or on behalf of the Company in connection with or pursuant to this
Agreement to (i) the Investor's directors, officers, employees,
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agents and professional consultants, (ii) any Person to which the Investor
offers to sell, in accordance with the applicable securities Laws, the Preferred
Shares, the Warrants or any security received with respect thereto pursuant to
any stock dividend, stock split, recapitalization or similar event or any part
thereof, so long as such potential purchaser agrees, in writing, to preserve the
confidentiality of such information (except that such potential purchaser may
disclose such information in accordance with this Section 11.16); provided,
however, that such disclosure will not be made to any potential purchaser which
is known to be a competitor, or an Affiliate of a direct competitor, of the
Company without the prior written consent of the Company, (iii) any Person to
which such holder sells or offers to sell a participation in all or any part of
the Securities, so long as such potential purchaser agrees, in writing, to
preserve the confidentiality of such information (except that such potential
purchaser may disclose such accordance with this Section 11.16); provided,
however, that such disclosure will not be made to any potential purchaser which
is a competitor, or an Affiliate of a competitor, of the Company without the
prior written consent of the Company, (iv) any federal or state regulatory
authority having jurisdiction over the Investor or (v) any other Person to which
such delivery or disclosure may be necessary or appropriate (A) in compliance
with any law, rule, regulation, or order applicable to such holder, (B) in
response to any subpoena or other legal process, or (C) in connection with any
litigation to which the Investor is a party.
(b) The Investor agrees to keep confidential any information
delivered by the Company hereunder; provided, however, that subject to the
provisions contained in Section 11.16(a)(ii) and (iii) hereof, nothing herein
shall prevent the Investor from disclosing such information (i) to any Affiliate
of, or investor in, the Investor or, any actual or potential purchaser,
participant assignee or transferee of the Investor's rights under the Note that
agrees to be bound by this Section 11.16, (iii) upon order of any court or
administrative agency, (iv) upon the request or demand of any regulatory agency
or authority having jurisdiction over the Investor, (v) which has been publicly
disclosed (vi) which has been obtained from any Person that is not a party
hereto or an Affiliate of any such party, (vii) in connection with the exercise
of any remedy hereunder, (viii) to the independent and certified public
accountants for the Investor or (ix) as otherwise expressly contemplated by this
Agreement.
(signature page follows)
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IN WITNESS WHEREOF, the parties hereto have executed this Investment
Agreement as of the date first above written.
U.S. TECHNOLOGIES INC
By: /s/ Kenneth H. Smith
-----------------------------
Name: Kenneth H. Smith
Title: President and Chief Executive Officer
USV PARTNERS, LLC
By: USV MANAGEMENT, LLC
By: /s/ C. Gregory Earls
-----------------------------
Name: C. Gregory Earls
Title: Sole Member
For purposes of Section 8.3 only:
KENNETH H. SMITH
/s/ KENNETH H. SMITH
------------------------------
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