|
Exhibit
10.9
SENIOR SECURED CONVERTIBLE
NOTE PURCHASE AGREEMENT
This Senior Secured
Convertible Note Purchase Agreement (this “ Agreement
”), dated as of November 16, 2001, is by and between TRX,
Inc., a Georgia corporation (the “ Company ”)
and Sabre Investments, Inc., a Delaware corporation (the
“Lender”).
SECTION 1
PURCHASE AND SALE OF
NOTE
1.1 Issuance and Sale of
Convertible Note . Subject to the terms and conditions of this
Agreement, the Lender agrees to purchase and the Company agrees to
sell and issue to the Lender at the Closing (as defined herein), a
senior secured convertible promissory note, in the form attached
hereto as Exhibit A (the “ Note ”), in
the principal amount of Fifteen Million Dollars and 00/100
($15,000,000.00).
1.2 Grant of Warrants
. The Company shall grant to the Lender warrants, in the form
attached hereto as Exhibit B (the “ Warrant
Agreement ”), to purchase, upon the terms and
conditions set forth in the Warrant Agreement, the number of shares
of common stock set forth therein.
1.3 Federal Income Tax
Allocation . The Company and the Lender hereby acknowledge and
agree that the Note and the Warrants constitute an
“investment unit” for purposes of Section 1273(c)(2) of
the Internal Revenue Code of 1986, (the “Code”).
Notwithstanding anything to the contrary contained herein, the
Lender and the Company hereby further acknowledge and agree that
for United States federal income tax purposes the “issue
price,” under principles of Section 1273(b) of the Code (and
for purposes of comparable state and local income tax laws) of the
Warrant shall equal $1,781,942, and the “issue price”
of the Note shall equal $ 13,218,058. The Lender and the Company
agree to use the foregoing “issue prices” for all
income tax purposes with respect to this transaction.
SECTION 2
CLOSING
2.1 The Closing . The
purchase and sale of the Note shall take place at the offices of
Long Aldridge & Norman, 303 Peachtree Street, Suite 5300,
Atlanta, Georgia 30308, on the date hereof, or at such other time
and place as the Company and the Lender may mutually agree upon
(the “ Closing ”).
2.2 Deliveries . At
Closing, the Company shall deliver to the Lender the Note to be
purchased by the Lender, against payment of the purchase price
therefore by wire transfer of good and immediately available funds,
the Company and the Lender shall deliver to each other a duly
executed Security Agreement, Warrant Agreement and Rights Agreement
(defined below) in consideration of entering into the transactions
contemplated in this Agreement.
SECTION 3
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as set forth on the
Schedule of Exceptions attached hereto as specifically
identifying the subsection of this Section 3 to which each such
exception relates, the Company hereby represents and warrants to
the Lender as of the date hereof as follows (as used in this
Section 3 all references to the “Company” except as
explicitly set forth herein, shall be deemed to include Arthur H.
Ltd., TRX Fulfillment Services, LLC and TRX Technology Services,
L.P. (each a “Subsidiary” and collectively the
“Subsidiaries”)):
3.1 Organization and
Standing . The Company is duly organized and validly existing
under the laws of the state of its organization or formation and is
in good standing under such laws. The Company has all requisite
corporate or other power and authority to own and operate its
properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. The Company is duly
qualified and authorized to transact business and is in good
standing as a foreign corporation in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its
business, properties, financial condition or, to the best of the
Company’s knowledge, prospects.
3.2 Corporate Power
.
(a) The Company, excluding
the Subsidiaries, has all requisite legal and corporate power and
authority to execute and deliver this Agreement, the Rights
Agreement, attached hereto as Exhibit C (the “Rights
Agreement”), the Warrant Agreement, the Security Agreement,
attached hereto as Exhibit D (the “Security Agreement”)
the Pledge Agreement, attached hereto as Exhibit I (the
“Pledge Agreement”), the Trademark Collateral Security
and Pledge Agreement, attached hereto as Exhibit J (the
“Trademark Security Agreement”), the Copyright
memoranda attached hereto as Exhibit K (the “Copyright
Memoranda”) (the Rights Agreement, Warrant Agreement, the
Security Agreement, the Pledge Agreement, the Trademark Security
Agreement and the Copyright Memoranda are collectively referred to
herein as the “Related Agreements”), and, to issue the
Note and the warrants pursuant to the Warrant Agreement, as
appropriate, with respect to the conversion of the Note and the
exercise of the warrants, and to reserve and issue the
Company’s common stock contemplated thereby (collectively
referred to herein as the “Underlying Stock”), and to
carry out and perform its obligations under the terms of this
Agreement and the Related Agreements, and the transactions
contemplated hereby and thereby (collectively, the
“Transactions”).
(b) The Subsidiaries have all
requisite legal and corporate or other power and authority to
execute and deliver the Security Agreement, as attached hereto as
Exhibit E (the “Subsidiary Security Agreement”) and the
Guaranty, as attached hereto as Exhibit F (the
“Guaranty”), the Trademark Agreement and the Copyright
Memoranda. TRX Fulfillment Services, LLC and Travel Technology, LLC
have all requisite legal and corporate or other power and authority
to execute and deliver the Pledge Agreement.
3.3 Subsidiaries . The
Company has no subsidiaries and does not otherwise own or control,
directly or indirectly, any equity interest in any corporation,
association or other business entity. The Company is not a
participant in any joint venture, partnership or similar
arrangement.
-2-
3.4 Capitalization and
Voting Rights .
(a) As of the date of this
Agreement, the authorized capital stock of the Company consists of
100,000,000 shares of common stock, $.01 par value per share (the
“ Common Stock ”), and 10,000,000 shares of
preferred stock, $.01 par value per share (the “ Preferred
Stock ”). As of the date of this Agreement, there are
11,480,976 shares of Common Stock and no shares of Preferred Stock
issued and outstanding, and 96,594 shares of Common Stock held in
treasury by the Company.
(b) All issued and
outstanding shares have been duly authorized and validly issued,
are fully paid and nonassessable and have been issued in compliance
with federal and state securities law. Except as contemplated
herein or in the Related Agreements, there are no outstanding
options, warrants, conversion rights, preemptive rights, rights of
first refusal, rights of first offer, redemption rights, phantom
stock, stock appreciation rights, or similar rights presently
outstanding to purchase or otherwise acquire from the Company (or
for the Company to purchase or otherwise acquire) any securities of
the Company and no agreements or understandings with respect
thereto. Immediately after the Closing, the capitalization of the
Company (including a detailed list of all stockholders in the
Company) will be as set forth on Exhibit G attached
hereto.
3.5 Authorization and
Business .
(a) All corporate action on
the part of the Company, excluding the Subsidiaries, its officers,
directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement and the
Related Agreements by the Company, the authorization, sale,
issuance (or reservation for issuance) and delivery of the Note,
the Warrants and the Underlying Stock and the performance of all of
the Company’s obligations hereunder and under the Related
Agreements have been taken or will be taken prior to the Closing.
This Agreement and the Related Agreements constitute valid and
legally binding obligations of the Company (except the
Subsidiaries), enforceable in accordance with their respective
terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other
equitable remedies. The Company is primarily engaged in the
business of providing technology, ticket processing and customer
care solutions to the travel industry.
(b) All corporate or other
action on the part of each of the Subsidiaries, its officers,
directors and stockholders necessary for the authorization,
execution, delivery and performance of the Subsidiary Security
Agreement and the Guaranty by each Subsidiary and the performance
of all of the Subsidiaries’ obligations under the Subsidiary
Security Agreement and the Guaranty have been taken or will be
taken prior to the Closing. The Subsidiary Security Agreement and
the Guaranty constitute valid and legally binding obligations of
the Subsidiaries, enforceable in accordance with their respective
terms, subject to laws of general application
-3-
relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable
remedies.
(c) All corporate or other
action on the part of each of TRX Fulfillment Services, LLC and
Travel Technology, LLC, its officers, directors and stockholders
necessary for the authorization, execution, delivery and
performance of the Pledge Agreement by each of TRX Fulfillment
Services, LLC and Travel Technology, LLC and the performance of all
of the their obligations under the Pledge Agreement have been taken
or will be taken prior to the Closing. The Pledge Agreement
constitutes a valid and legally binding obligation of TRX
Fulfillment Services, LLC and Travel Technology, LLC, enforceable
in accordance with their respective terms, subject to laws of
general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies.
3.6 Valid Issuance of
Note . The Note and warrants, when issued and delivered in
compliance with the provisions of this Agreement, will be duly and
validly issued, fully paid and nonassessable and issued in
compliance with applicable federal and state securities laws, and
the Underlying Stock have been duly and validly reserved and, when
issued in compliance with the provisions of the Note and warrants,
will be duly and validly issued, fully paid and nonassessable and
issued in compliance with applicable federal and state securities
laws, and the Note and the warrants will be free and clear of any
liens or encumbrances except as may be set forth in the Rights
Agreement; provided, however, that the Note and the warrants
may be subject to restrictions on transfer under state and/or
federal securities laws. Except as set forth in the Related
Agreements and subject to restrictions on transfer under state
and/or federal securities laws, the Note are not subject to any
preemptive rights, rights of first refusal or restrictions on
transfer.
3.7 Offering . Subject
in part to the accuracy of the Lender’s representations in
Section 4 hereof, the offer, sale and issuance of the Note pursuant
to the terms of this Agreement, the grant of the Warrants and the
issuance of the Underlying Stock constitute transactions exempt
from the registration requirements of Section 5 of the Securities
Act of 1933, as amended (the “ Securities Act
”), and all applicable state blue sky laws.
3.8 Title to Properties;
Liens and Encumbrances . The Company has good and marketable
title to all of its properties and assets, and is in compliance
(except where non-compliance would not result in a right to
terminate) with the lease of all material properties leased by it
(and has provided the Lenders with true and complete copies of all
such leases), in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than the lien of current taxes
not yet due and payable. The Company is not in default under or in
breach of any material provision of its leases, and the Company
holds valid leasehold interests in the properties which it leases.
The Company’s material properties and material assets are in
reasonably good condition and repair except for ordinary wear and
tear.
-4-
3.9 Intellectual
Property .
(a) Proprietary
Information of Third Parties . No third party has claimed to
the Company or, to the best of the Company’s knowledge, has
reason to claim that any person employed by or affiliated with the
Company has (i) violated or may be violating, in any material
respect, any of the terms or conditions of any employment,
non-competition, or non-disclosure agreement with such third party;
(ii) disclosed or utilized, or may be disclosing or utilizing, in
any material respect, any trade secret or proprietary information
or documentation of such third party without authority to do so; or
(iii) interfered or may be interfering, in any material respect, in
the employment relationship between such third party and any of its
present or former employees. To the best of the Company’s
knowledge, no person employed by or affiliated with the Company has
employed or proposes to employ any trade secret or any information
or documentation proprietary to any former employer without
authority to do so, and to the best of the Company’s
knowledge, no person employed by or affiliated with the Company has
violated, in any material respect, any confidential relationship
that such person may have had with any third party, in connection
with the development or sale of any service or proposed service of
the Company, and the Company has no reason to believe there will be
any such employment or violation. To the best of the
Company’s knowledge, neither the execution nor delivery of
this Agreement, nor the carrying on of the business of the Company
by any officer, director or key employee of the Company, nor the
conduct or proposed conduct of the business of the Company, will
conflict with or result in a breach, in any material respect, of
the terms, conditions, or provisions of or constitute a default
under any contract, covenant, or instrument under which any such
person is obligated.
(b) Patents, Trademarks,
Etc .
(i) Patents . Section
3.9(b)(i) of the Schedule of Exceptions sets forth a true,
complete and correct list of all U.S. and foreign patents
(including, without limitation, certificates of invention and other
patent equivalents), patent applications, and invention disclosures
owned by the Company.
(ii) Trademarks .
Section 3.9(b)(ii) of the Schedule of Exceptions sets forth
a true, complete and correct list of all common law or registered
trademarks and service marks, pending applications for trademark
and service mark registrations, trade dress, trade names, and
domain names owned by the Company or used, held for use or
necessary for use in the Company’s business. The term
trademark expressly includes, but is not limited to, all icons,
logos, slogans, or other indicia of source or
sponsorship.
(iii) Copyrights .
Section 3.9(b)(iii) of the Schedule of Exceptions sets forth
a true, complete and correct list of all registered copyrights,
pending copyright registrations, material unregistered copyrights
and mask works owned by the Company.
(iv) Licenses .
Section 3.9(b)(iv) of the Schedule of Exceptions sets forth
a true, complete and correct list of all material license
agreements to use the intellectual property of others to which the
Company is a party (other than licenses to commercially available
“shrink-wrap” general office and accounting
software).
-5-
(v) Software . Section
3.9(b)(v) of the Schedule of Exceptions sets forth a true,
complete and correct list of all software owned by the Company that
is material to the operation of the Company’s business (other
than commercially available “shrink-wrap” general
office and accounting software).
(vi) License Rights .
The license agreements set forth in Section 3.9(b)(iv) of the
Schedule of Exceptions to the best of the Company’s
knowledge (a) are in full force and effect and enforceable in
accordance with their terms, and no default exists or is threatened
thereunder, to the best knowledge of the Company, by any other
party thereto, (b) license or permit that which they purport to
license or permit, (c) are free and clear of all material liens,
claims or encumbrances, and (d) do not contain any provisions that
will become applicable or inapplicable as a result of the
consummation of the Transactions. The Company has been in the past
and is now in compliance with such licenses in all material
respects.
(vii) Know-How and
Trade Secrets. To the best of the Company’s knowledge,
the Company owns or has the rights to all know-how and trade
secrets that are material to the current operation of the
Company’s business. Know-how includes, but is not limited to,
scientific, engineering, mechanical, electrical, financial,
marketing or practical knowledge or experience useful in the
operation of the business of the Company. The term “trade
secret” includes, but is not limited to, any formula, design,
device or compilation of information that is used or held for use
by the Company in its business, that gives the Company an advantage
or opportunity for advantage over competitors who do not have or
use the same, and that is not generally known by the public. The
Company has taken commercially appropriate measures to protect in
all material respects the confidential and proprietary nature of
the information necessary or materially related to its business
that has not been published and is not generally known to the
public.
(viii) Intellectual
Property . The U.S. and foreign patents, the pending
applications for U.S. and foreign patents, the invention
disclosures to governmental authorities, the registered trademarks
and service marks, the pending applications for trademark and
service mark registrations, the registered copyrights, the pending
copyright registrations, the mask works and the software listed in
Sections 3.9(b)(i), (ii), (iii), (iv) and (v) of the Schedule of
Exceptions and, to the best of the Company’s knowledge,
common law trademarks and service marks, trade dress and trade
names are not the product of a joint invention or authorship where
at least one of the inventors or authors was not an employee of the
Company and was not otherwise obligated by a contract to assign all
of his or her rights to the Company.
3.10 Material Contracts
and Other Commitments .
(a) Except for the Related
Agreements, there are no material agreements, understandings or
proposed transactions between the Company and any of its officers,
directors, affiliates, or any affiliate thereof.
(b) Except for the agreements
explicitly contemplated by this Agreement and the Related
Agreements, there are no agreements, understandings, instruments,
contracts or
-6-
proposed transactions to
which the Company is a party or by which it is bound that involve
(i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $250,000 annually or (ii) the license of any
patent, copyright, trade secret or other proprietary right to or
from the Company.
(c) The Company has not in
2001 (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its
capital stock, (ii) incurred any indebtedness for money borrowed or
incurred any other liabilities in excess of $100,000, (iii) made
any loans or advances over $10,000 to any person, or had over
$100,000 of such loans or advances outstanding in the aggregate at
any one time, other than ordinary advances for travel expenses, or
(iv) sold, exchanged or otherwise disposed of any of its material
assets or material rights. The Company is current in the payment of
all of its debts, accounts payable and lease
obligations.
(d) All the contracts,
agreements and instruments representing payments of or to the
Company in excess of $250,000 annually to which the Company is a
party (whether written or oral) are listed on Section 3.10(a) of
the Schedule of Exceptions and such contracts, agreements
and instruments are valid, binding and in full force and effect in
all material respects, and are valid, binding and enforceable by
the Company in accordance with their respective terms, subject to
laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies. True
and complete copies except for certain confidential information
that has been redacted of all contracts, agreements and instruments
listed on Section 3.10(d) of the Schedule of Exceptions have
been provided to the Lender or have been made available to
Lender’s counsel in the case of certain confidential
agreements identified in writing to such counsel. The Company is
not in material default under any contract set forth on Section
3.10(d) of the Schedule of Exceptions , and, to the best of
the Company’s knowledge, no other party to any such contract
is in material default.
3.11 Litigation .
There are (i) no actions, suits, proceedings, or investigations
pending or, to the best of the Company’s knowledge,
threatened against the Company or its properties before any court
or governmental agency (and, to the best of the Company’s
knowledge, there is no basis thereof), and (ii) to the best of the
Company’s knowledge, no actions, suits, proceedings or
investigations are pending or threatened against its employees that
may relate to their employment with, or conduct on behalf of, the
Company, or that question the validity of this Agreement, the
Related Agreements or any action taken or to be taken in connection
herewith or therewith. The foregoing includes, without limitation,
to the knowledge of the Company, any action, suit, proceeding or
investigation pending or currently threatened against the Company
involving the prior employment of any of the Company’s
employees, their use in connection with the Company’s
business of any information or techniques allegedly proprietary to
any of their former employers, their obligations under any
agreements with prior employers, or negotiations by the Company
with potential backers of, or Lenders in, the Company or its
proposed business. The Company is not a party or subject to any
writ, order, decree, injunction or judgment of any court,
governmental agency, or instrumentality (nor, to the best of the
Company’s knowledge, is there any reasonable basis or threat
thereof). There is no material action, suit, proceeding or
investigation by the Company currently pending or that the Company
currently intends to initiate.
-7-
3.12 Taxes . The
Company has timely filed all tax returns and reports (federal,
state and local) as required by law and such returns and reports
are true and correct in all material respects and have been
provided to the Lender. The Company has paid all taxes and other
assessments due. There are no agreements, waivers or other
arrangements providing for an extension of time with respect to the
assessment of any tax or deficiency against the Company, and there
are no actions, suits, claims, or to the best of the
Company’s knowledge any proceedings or investigations now
pending against the Company with respect to any tax or assessment
or any matters under discussion with any federal, state, local or
foreign authority relating to any taxes or assessments, or any
claims for additional taxes or assessments asserted by any such
authority, and, to the best of the Company’s knowledge, there
is no basis for the assertion of any additional taxes as
assessments against the Company. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended (“
Code ”), to be treated as an S Company or a
collapsible Company pursuant to Section 1362(a) or Section 341(f)
of the Code, nor has it made any other elections pursuant to the
Code (other than elections that relate solely to methods of
accounting, depreciation, or amortization) that would have a
material adverse effect on the business, properties, financial
condition or, to the best of the Company’s knowledge,
prospects of the Company. The Company has never had any tax
deficiency proposed or assessed against it. The Company has never
been audited by governmental authorities. The Company has withheld
or collected from each payment made to each of its employees, the
amount of all taxes, including, but not limited to, income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes required to be withheld or collected therefrom, and
has paid the same to the proper tax receiving officers or
authorized depositaries.
3.13 Insurance . The
Company has in full force and effect property, general liability,
automobile liability and crime insurance policies with recognized
insurers subject to deductibles and in the Company’s
reasonable judgment, such insurance is sufficient in amount,
subject to reasonable deductibles, to allow the Company to replace
any of the Company’s material properties that may be damaged
or destroyed.
3.14 Employee Benefit
Plans . The Company does not have any Employee Benefit Plan as
defined in the Employee Retirement Income Security Act of
1974.
3.15 Proprietary
Information Agreements . Each key employee and officer of the
Company has executed an agreement with the Company regarding
confidentiality and proprietary information. The Company is not
aware that any of such persons are in violation thereof. Each
current contractor to the Company that has had access to the
Company’s confidential information has executed a written
agreement under which, among other things, each such contractor is
obligated to maintain the confidentiality of the Company’s
confidential information. The Company is not aware that any such
contractors are in violation thereof.
3.16 Registration Rights
and Voting . Except as provided in the Rights Agreement, the
Company is not under any obligation and has not granted any rights
to register under the Securities Act any of its presently
outstanding securities or any of its securities that may
-8-
subsequently be issued. To the best of
the Company’s knowledge, except as provided in the Rights
Agreement, no stockholder of the Company has entered into any
agreement with respect to the voting of the Company’s
securities.
3.17 Governmental
Consents .
(a) To the best of the
Company’s knowledge, no consent, approval, qualification or
authorization of registration, designation, declaration or filing
with, any local, state or federal governmental authority on the
part of the Company, excluding the Subsidiaries, is required in
connection with the valid execution, delivery or performance of
this Agreement or the Related Agreements, or the offer, sale or
issuance of the Note and the Underlying Stock or the grant of the
Warrants, or the consummation of any of the Transactions, except
such additional filings as necessary to comply with applicable
state and federal securities laws, and with applicable general
corporate laws of the various states.
(b) To the best of the
Company’s knowledge, no consent, approval, qualification or
authorization of registration, designation, declaration or filing
with, any local, state or federal governmental authority on the
part of the Subsidiaries is required in connection with the valid
execution, delivery or performance of or the consummation of any of
the Transactions, except such additional filings as necessary to
comply with applicable state and federal securities laws, and with
applicable general corporate laws of the various states.
3.18 Environmental and
Safety Laws . To the best of the Company’s knowledge, the
Company is not, and has not been, in violation of any applicable
statute, law or regulation relating to the environment or
occupational health and safety, and no material expenditures have
been or are required in order to comply with any such existing
statute, law, or regulation.
3.19 Related Party
Transactions . No employee, officer, stockholder or director of
the Company or member of his or her immediate family is indebted to
the Company, nor is the Company indebted (or committed to make
loans or extend or guarantee credit) to any of them, other than (i)
for payment of salary for services rendered, (ii) reimbursement for
reasonable expenses incurred on behalf of the Company, and (iii)
for other standard employee benefits made generally available to
all employees (not including stock option agreements outstanding
under any stock option plan approved by the Company’s Board
of Directors). To the best of the Company’s knowledge, no
officer, director, or stockholder or any member of their immediate
families is, directly or indirectly, interested in any material
contract with the Company (other than such contracts as they relate
to any such person’s employment with the Company or ownership
of capital stock or other securities of the Company, or such
contracts that are on terms and conditions that the Company would
have entered into with third parties on an arms length basis, or as
otherwise contemplated by this Agreement or the Related
Agreements).
-9-
3.20 Financial
Statements , (a) Section 3.20(a) of the Schedule of Exceptions
contains a true and complete copy of:
(i) the audited balance sheet
of the Company, on a consolidated basis, as of December 31, 2000
and the related audited statements of operations and cash flows of
the Company for the year ended December 31, 2000; and
(ii) the unaudited balance
sheet of the Company, on a consolidated basis, as of September 30,
2001 and the related unaudited statements of operations and cash
flows of the Company, on a consolidated basis, for the nine-month
period ended September 30, 2001 (the financial statements referred
to in clauses (i) and (ii) of this Section 3.20(a) being
collectively referred to as the “ Financial Statements
”).
(b) The Financial Statements
have been prepared in accordance with generally accepted accounting
principles (except that such unaudited financial statements do not
contain all of the required footnotes or normal recurring year-end
adjustments) applied on the consistent basis during the respective
periods covered thereby. The Financial Statements are correct and
complete and present fairly the financial position of the Company
at the date of the balance sheets included therein and the results
of operations and cash flows of the Company for the respective
periods covered by the statements of operations and cash flows
included therein. Since the date of the Financial Statements (i)
there has been no material adverse change in the assets,
liabilities or financial condition of the Company from that
reflected in the Financial Statements, other than changes in the
ordinary course of business, and (ii) none of the business,
financial condition, operations, property, affairs or, to the
knowledge of the Company, prospects of the Company has been
materially and adversely affected by any occurrence or development,
individually or in the aggregate, whether or not covered by
insurance.
3.21 Compliance with Other
Instruments . The Company is not in violation or default of any
provisions of its Articles of Incorporation or Bylaws or of any
provisions that could result in the right to terminate of any
material mortgage, indenture, agreement, instrument, judgment,
order, writ, decree or contract to which it is a party or by which
it is bound or any provision of any federal or state statute, rule
or regulation applicable to the Company which could, individually
or in the aggregate, materially and adversely affect the business,
assets, liabilities, financial condition, operations or, to the
knowledge of the Company, prospects of the Company. The execution,
delivery and performance of and compliance with this Agreement, the
Related Agreements, the Subsidiary Security Agreement, the
Guaranty, and the consummation of the Transactions will not result
in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default
under any such provision, instrument, judgment, order, writ, decree
or contract or an event which results in the creation of any lien,
charge or encumbrance upon any of the properties or assets of the
Company or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization, or
approval applicable to the Company, its business or operations or
any of its properties or assets.
3.22 Permits . To the
best of the Company’s knowledge, the Company has all material
franchises, permits, licenses, and any similar authority necessary
for the conduct of its business as now being conducted by it, the
lack of which could materially and adversely affect the business,
properties, prospects or financial condition of the Company. The
Company is not in default in any material respect under any of such
franchises, permits, licenses or other similar
authority.
-10-
3.23 Employees . There
are no strike, labor dispute or union organization activities
pending or threatened between the Company and its employees. To the
best of the Company’s knowledge, none of the Company’s
employees belongs to any union or collective bargaining unit. The
Company has complied in all material respects with all applicable
state and federal equal opportunity and other laws related to
employment. To the knowledge of the Company, no employee of the
Company is believed to be in violation of any judgment, decree, or
order, or any term of any employment contract, patent disclosure
agreement, or other contract or agreement relating to the
relationship of any such employee with the Company, or any other
party because of the nature of the business conducted or presently
proposed to be conducted by the Company or to the use by the
employee of his or her best efforts with respect to such business.
The Company is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan,
incentive plan, profit sharing plan, retirement agreement, or other
employee compensation agreement. To the best of the Company’s
knowledge, no officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company.
Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the
Company is terminable at the will of the Company or the applicable
officer or employee.
3.24 Changes . Since
September 30, 2001, other than in the ordinary course of business,
there has not been:
(a) any material change in
the assets, liabilities, financial condition, or operating results
of the Company, except changes in the ordinary course of business
that have not been, in the aggregate, materially
adverse;
(b) any damage, destruction
or loss, whether or not covered by insurance, materially and
adversely affecting the business, properties or financial condition
of the Company (as such business is presently conducted and as it
is presently proposed to be conducted);
(c) any waiver or compromise
by the Company of a material right or of a material debt owed to
it;
(d) any satisfaction or
discharge of any lien, claim, or encumbrance or payment of any
obligation by the Company, except in the ordinary course of
business and that is not material to the business, properties,
financial condition or, to the knowledge of the Company, prospects
of the Company (as such business is presently conducted and as it
is presently proposed to be conducted);
(e) any new material contract
or changes in the material terms of any material contract or
arrangement by which the Company or any of its assets or properties
is bound or to which the Company or any of such assets or
properties is subject;
-11-
(f) any material change in
any compensation arrangement or agreement with any key employee,
officer, director or stockholder;
(g) any sale, assignment, or
transfer of any of the Company Intellectual Property;
(h) any resignation or
termination of employment of any key officer of the
Company;
(i) receipt of notice that
there has been a loss of, or material order cancellation or
reduction by, any material customer of the Company;
(j) any mortgage, pledge,
transfer of a security interest in, or lien, created by the
Company, with respect to any of its material properties or assets,
except liens for taxes not yet due or payable;
(k) any loans or guarantees
made by the Company to or for the benefit of its employees,
stockholders, officers, or directors, or any members of their
immediate families, other than travel advances and other advances
made in the ordinary course of its business;
(l) any declaration, setting
aside, or payment of any dividend or other distribution of the
Company’s assets in respect of any of the Company’s
capital stock, or any direct or indirect redemption, purchase, or
other acquisition of any of such stock by the Company;
(m) to the best of the
Company’s knowledge, any other event or condition of any
character that has materially and adversely affected the business,
properties, prospects or financial condition of the Company (as
such business is presently conducted and as it is presently
proposed to be conducted); or
(n) any agreement or
commitment by the Company to do any of the things described in this
Section 3.24.
3.25 Corporate
Documents . The Articles of Incorporation and Bylaws of the
Company are in the forms provided to the Lender. The copy of the
minute books of the Company provided to the Lender contains minutes
of all meetings of directors and stockholders and all actions by
written consent without a meeting by the directors and stockholders
since the date of incorporation and, except for certain
confidential information that has been redacted, accurately
reflects all actions by the directors (and any committee of
directors) and stockholders with respect to all transactions
referred to in such minutes in all material respects. Neither the
Company stockholders nor the Company’s Board of Directors
have any current obligation relating to the merger, consolidation,
sale of all or a substantial portion of the assets or business,
liquidation, dissolution or any other reorganization of the
Company.
3.26 Business Plan .
The business plan, dated April 2001, which relates to the
Company’s 2001, 2002 and 2003 fiscal years and the updated
financial projections and attached
-12-
hereto a
|
