EXHIBIT 10.17
PRODUCTION GROUP INTERNATIONAL, INC.
SERIES D PREFERRED
STOCK PURCHASE AGREEMENT
February 10, 1995
TABLE OF CONTENTS
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Page
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1. Purchase and Sale of Stock.......................................... 1
1.1 Sale and Issuance of Series D Preferred Stock................. 1
1.2 Closing....................................................... 1
1.3 Subsequent Closing of Series D Preferred Stock................ 1
2. Representations and Warranties of the Company....................... 2
2.1 Organization, Good Standing and Qualification................. 2
2.2 Capitalization and Voting Rights.............................. 2
2.3 Subsidiaries.................................................. 3
2.4 Authorization................................................. 3
2.5 Valid Issuance of Preferred and Common Stock.................. 3
2.6 Governmental Consents......................................... 4
2.7 Litigation.................................................... 4
2.8 Confidentiality Agreement..................................... 5
2.9 Patents and Trademarks........................................ 5
2.10 Compliance with Other Instruments............................. 5
2.11 Agreements; Action............................................ 6
2.12 Disclosure.................................................... 7
2.13 Business Projections.......................................... 7
2.14 Registration Rights........................................... 7
2.15 Corporate Documents........................................... 7
2.16 Title to Property and Assets.................................. 8
2.17 Financial Statements.......................................... 8
2.18 Changes....................................................... 8
2.19 Employee Benefit Plans........................................ 9
2.20 Tax Returns, Payments and Elections........................... 9
2.21 Insurance..................................................... 9
2.22 Minute Books.................................................. 10
2.23 Labor Agreements and Actions.................................. 10
3. Representations, Warranties and Covenants of the Investors.......... 10
3.1 Authorization................................................. 10
3.2 Purchase Entirely for Own Account............................. 10
3.3 Disclosure of Information..................................... 11
3.4 Investment Experience......................................... 11
3.5 Accredited Investor........................................... 11
3.6 Restricted Securities......................................... 11
3.7 Further Limitations on Disposition............................ 11
3.8 Legends....................................................... 12
3.9 Consents...................................................... 12
i.
3.10 Litigation................................................... 12
3.11 Compliance with Other Instruments............................ 12
4. California Commissioner of Corporations............................ 13
4.1 Corporate Securities Law..................................... 13
5. Conditions of Investor's Obligations at Closing.................... 13
5.1 Representations and Warranties............................... 13
5.2 Performance.................................................. 13
5.3 Compliance Certificate....................................... 13
5.4 Qualifications............................................... 13
5.5 Proceedings and Documents.................................... 13
5.6 Board of Directors........................................... 14
5.7 Opinion of Company Counsel................................... 14
5.8 Stockholder Voting Agreement................................. 14
5.9 Investors' Rights Agreement.................................. 14
5.10 Restated Articles............................................ 14
5.11 Amendment of Bylaws.......................................... 14
5.12 Management Rights Letter..................................... 14
5.13 Indemnification Agreements................................... 14
6. Conditions of the Company's Obligations at Closing................ 14
6.1 Representations and Warranties............................... 14
6.2 Payment of Purchase Price.................................... 15
6.3 Performance.................................................. 15
6.4 Restated Articles............................................ 15
6.5 Stockholder Voting Agreement................................. 15
6.6 Investors' Rights Agreement.................................. 15
7. Miscellaneous...................................................... 15
7.1 Survival of Warranties....................................... 15
7.2 Benefit of Agreement; Successors and Assigns................. 15
7.3 Governing Law................................................ 15
7.4 Counterparts................................................. 15
7.5 Titles and Subtitles......................................... 16
7.6 Notices...................................................... 16
7.7 Finder's Fee................................................. 16
7.8 Expenses..................................................... 16
7.9 Amendments and Waivers....................................... 16
7.10 Severability................................................. 17
7.11 Aggregation of Stock......................................... 17
7.12 Complete Agreement........................................... 17
ii.
SCHEDULE A - Schedule of Investors
SCHEDULE B - Schedule of Current Securityholders
SCHEDULE C - Schedule of Exceptions
EXHIBIT A - Restated Articles of Incorporation
EXHIBIT B - First Restated Investors' Rights Agreement
EXHIBIT C - First Restated Stockholder Voting Agreement
EXHIBIT D - Investors Voting Agreement
EXHIBIT E - Opinion of Counsel for the Company
iii.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
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THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT is made as of the 10th day
of February, 1995, by and among Production Group International, Inc., a Virginia
corporation (the "Company"), and the investors listed on Schedule A hereto, each
of which is herein referred to as an "Investor", and collectively shall be
hereinafter referred to as the "Investors".
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
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1.1 Sale and Issuance of Series D Preferred Stock.
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(a) The Company shall adopt and file with the Virginia State Corporation
Commission on or before the Closing (as defined below) the Restated Articles of
Incorporation in the form attached hereto as Exhibit A (the "Restated
---------
Articles").
(b) Subject to the terms and conditions of this Agreement, each Investor
agrees, severally, to purchase at the Closing and the Company agrees to sell and
issue to each Investor at the Closing that number of shares of the Company's
Series D Preferred Stock set forth opposite each Investor's name on Schedule A
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hereto for the purchase price set forth thereon.
1.2 Closing. The purchase and sale of the Series D Preferred Stock
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shall take place at the offices of Morgan, Lewis & Bockius, 1800 M Street, N.W.,
Washington, D.C., at 9:00 a.m., on February 10, 1995, or at such other time and
place as the Company and Investors acquiring in the aggregate more than half the
shares of Series D Preferred Stock sold pursuant hereto mutually agree upon
orally or in writing (which time and place are designated as the "Closing"). At
the Closing the Company shall deliver to each Investor a certificate
representing the Series D Preferred Stock that such Investor is purchasing
against payment of the purchase price therefor by check or wire transfer.
1.3 Subsequent Closing of Series D Preferred Stock. Notwithstanding the
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provisions of Section 1.1(b) and Section 1.2 above, with respect to the shares
of Series D Preferred Stock being purchased by Trident Capital Partners Fund-I,
L.P. and Trident Capital Partners Fund-I, C.V. (collectively, the "Trident
Investors"), the Closing shall take place with respect to 119,264 and 23,593
shares, respectively, and the closing of the remaining 59,632 and 11,796 shares,
respectively shall occur upon delivery of the funds thereto to the Company;
provided, that such delivery of funds occur on or before
February 17, 1995, provided further, that there are no conditions to the
obligations of the Trident Investors or the Company with respect to such
subsequent closing.
2. Representations and Warranties of the Company.
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The Company hereby represents and warrants to each Investor that, except as set
forth on a Schedule of Exceptions furnished each Investor and special counsel to
the Investors (the "Schedule of Exceptions"), which exceptions shall be deemed
to be representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Virginia and has all requisite corporate power and
corporate authority to carry on its business as now conducted. The Company is
duly qualified to transact business and is in good standing in each jurisdiction
in which the failure so to qualify would have a material adverse effect on its
business or properties.
2.2 Capitalization and Voting Rights. The authorized capital of the
--------------------------------
Company consists or will consist prior to the Closing of:
(a) Preferred Stock. 3,950,000 shares of Preferred Stock, without
---------------
par value, (the "Preferred Stock"), 600,000 shares have been designated Series A
Preferred Stock all of which are issued and outstanding, 400,000 shares of which
have been designated Series B Preferred Stock, none of which is issued and
outstanding, 1,350,000 shares have been designated Series C Preferred Stock,
1,270,151 shares of which are issued and outstanding and 1,600,000 shares have
been designated Series D Preferred Stock, up to 1,574,997 of which may be sold
pursuant to this Agreement. The outstanding shares of Series A Preferred Stock
and Series C Preferred Stock are owned by the persons and in the numbers
specified in Schedule B hereto. The rights, privileges and preferences of the
----------
Preferred Stock are, or as of the Closing will be, as stated in the Restated
Articles.
(b) Common Stock. 10,000,000 shares of Common Stock, without par
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value, (the "Common Stock"), of which 550,000 shares are issued and outstanding
and are owned by Mark N. Sirangelo, 3,950,000 shares of which are reserved for
issuance upon conversion of the Preferred Stock and a total of 711,000 shares
are reserved for issuance upon exercise of currently existing options and
options not yet granted.
(c) Except for (A) the conversion privileges of the Company's Series
A Preferred Stock, (B) the conversion privileges of the Company's Series B
preferred Stock, (C) the conversion privileges of the Company's Series C
Preferred Stock, (D) the conversion privileges of the Series D Preferred Stock
to be issued under this Agreement, (E) the rights provided in Sections 2.6 of
the First Restated Investors' Rights Agreement attached hereto as Exhibit B (the
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"Investors' Rights Agreement"), (F)
2.
a total of 711,000 shares issuable upon exercise of currently outstanding
options and options not yet granted or issued or reserved for issuance to
employees, directors and consultants of the Company, there are not outstanding
any options, warrants, rights (including conversion or preemptive rights) or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock. The Company is not a party or subject to any agreement or
understanding, and, to the Company's knowledge, except for the First Restated
Stockholder Voting Agreement attached hereto as Exhibit C (the "Stockholder
---------
Voting Agreement"), and that certain Investors Voting Agreement between the
Investors and Mr. Mark N. Sirangelo concerning certain corporate transactions of
even date herewith (the "Investors Voting Agreement") in the form attached
hereto as Exhibit D, there is no agreement or understanding between any persons
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and/or entities, which affects or relates to the voting or giving of written
consents with respect to any security or by a director of the Company.
2.3 Subsidiaries. The Company does not presently own or control,
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directly or indirectly, any interest in any other corporation, association, or
other business entity.
2.4 Authorization. All corporate action on the part of the Company, its
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officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement, the Investors' Rights Agreement and the
Stockholder Voting Agreement, the performance of all obligations of the Company
hereunder and thereunder and the authorization, issuance (or reservation for
issuance) and delivery of the Series D Preferred Stock and the Common Stock
issuable upon conversion of the Series D Preferred Stock (collectively, the
"Securities") have been taken or will be taken prior to the Closing, and each of
this Agreement, the Investors' Rights Agreement, and the Stockholder Voting
Agreement has been duly authorized, executed and delivered by the Company and it
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms, subject to bankruptcy and other laws of general
application affecting the rights of creditors, and except to the extent that the
availability of any equitable remedy is subject to the discretion of a court,
and except insofar as the enforceability of the indemnification provisions of
Section 1.9 of the Investors' Rights Agreement may be limited by applicable laws
and public policy.
2.5 Valid Issuance of Preferred and Common Stock.
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(a) The shares of Series D Preferred Stock which are being purchased
by the Investors hereunder, when issued, sold and delivered in accordance with
the terms hereof for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable and, based in part upon the
representations of the Investors in this Agreement, will be issued in compliance
with all applicable securities laws as presently in effect, of the United States
and each of the states whose securities laws govern the issuance of any of the
Series D Preferred Stock hereunder. The Common Stock issuable upon conversion
of the Series D Preferred Stock has been duly
3.
and validly reserved for issuance and, upon issuance in accordance with the
terms of the Restated Articles, will be duly and validly issued, fully paid and
nonassessable, and assuming the representations of the Investors in this
Agreement continue to be true and correct as of the date of such conversion or
exercise, issued in compliance with all applicable securities laws, as presently
in effect, of the United States and each of the states whose securities laws
govern the issuance of any of the Series D Preferred Stock hereunder.
(b) The outstanding shares of Series A Preferred Stock, Series C
Preferred Stock, and Common Stock are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in compliance with all
applicable securities laws as presently in effect, of the United States and each
of the states whose securities laws govern the issuance of any of the Series A
Preferred Stock, Series C Preferred Stock and the Common Stock.
2.6 Governmental Consents. No consent, approval, order or authorization
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of, or registration, qualification, designation, declaration or filing with, any
federal, state or, local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, the Investors' Rights Agreement or the Stockholder Voting
Agreement, except for those already filed and except for the filing pursuant to
Section 25102(f) of the California Corporate Securities Law of 1968, as amended,
and the rules thereunder, and any other required state securities law filings
that may be filed after the Closing, which filings will be effected within
fifteen (15) days of the sale of the Series D Preferred Stock.
2.7 Litigation. There is no action, suit, proceeding or investigation
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pending or, to the Company's knowledge, currently threatened against the Company
which questions the validity of this Agreement, the Investors' Rights Agreement,
the Stockholder Voting Agreement, or the right of the Company to enter into
them, or to consummate the transactions contemplated hereby or thereby, or which
might result, either individually or in the aggregate, in any material adverse
change in the assets, condition or affairs of the Company (financially or
otherwise) as presently conducted or proposed to be conducted, or any change in
the current equity ownership of the Company, nor is the Company aware of any
facts which would serve as the basis for any litigation which is likely to
result in a judgment against the Company which would have a material adverse
effect on the assets, condition or affairs of the Company, financially or
otherwise. The foregoing includes, without limitation, actions pending or
threatened (or any fact which would serve as the basis for any such action which
is likely to result in such a judgement 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, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court
4.
or government agency or instrumentality. There is no action, suit, proceeding
or investigation by the Company currently pending or which the Company intends
to initiate.
2.8 Confidentiality Agreement. Each employee and officer of the Company
-------------------------
has executed a Confidentiality Agreement in substantially the form provided to
special counsel to the Investors. The Company, after reasonable investigation,
is not aware that any of its employees or officers are in violation thereof.
Neither the execution nor delivery of this Agreement, the Investors' Rights
Agreement or the Stockholder Voting Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed to be conducted, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated.
2.9 Patents and Trademarks. The Company has sufficient title and
----------------------
interest in and to all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
without any conflict with or infringement of the rights of others. The Schedule
of Exceptions contains a complete list of patents and pending patent
applications of the Company. The Company is not aware of any patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
proprietary rights and processes for which it would need to obtain title and
interest in and to for its business as now conducted and as proposed to be
conducted. There are no outstanding options, licenses, or agreements of any
kind relating to the foregoing, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed to be conducted in the
Business Plan, would violate any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other person or entity. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of the Company or that would conflict
with the Company's business as proposed to be conducted.
2.10 Compliance with Other Instruments. The Company is not in violation
---------------------------------
or default in any material respect of any provision of the Restated Articles or
its Amended and Restated Bylaws, or in any material respect of any instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound, or, to its knowledge, of any provision of any federal or state
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of this Agreement,
5.
the Investors' Rights Agreement and the Stockholder Voting Agreement, and the
consummation of the transactions contemplated hereby or thereby 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 such a default under any such
provision, instrument, judgment, order, writ, decree or contract or be an event
that results in the creation of any lien, charge or encumbrance upon any 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 assets or
properties.
2.11 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated by this Agreement,
the Investors' Rights Agreement, the Stockholder Voting Agreement or the
Investors Voting Agreement, there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof.
(b) Except for agreements explicitly contemplated by this Agreement or
the Investors' Rights Agreement, there are no agreements, understandings,
instruments, contracts, or proposed transactions, to which the Company is a
party or by which it is bound outside the normal course of business, which may
involve obligations (contingent or otherwise) of, or payments to the Company in
excess of, $100,000.
(c) The Company has not (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 any
other liabilities individually in excess of $100,000 or, in the case of
indebtedness and/or liabilities individually less than $100,000, in excess of
$250,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its material assets or rights.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) Since November 30, 1994, the Company has not received notice that
there has been a cancellation of one or more orders for the Company's services
or a loss of one or more customers of the Company, the cancellation or loss of
which in the aggregate would result in the loss of an amount equal to or greater
than 1% of the Company's revenues for the fiscal year ended November 30, 1994.
The Company is not aware of any facts or circumstances that would lead it to
reasonably believe that
6.
there will be a cancellation of one or more orders for the Company's services or
a loss of one or more customers of the Company, the cancellation or loss of
which in the aggregate would materially adversely affect the business and
prospects of the Company.
(f) The Company is not a party to and is not bound by any contract,
agreement or instrument, or subject to any restriction under the Restated
Articles or its Amended and Restated Bylaws, which materially adversely affects
its business as now conducted or as proposed to be conducted, its properties or
its financial condition.
(g) With the exception of discussions with the Investors, the Company
has not engaged in the past three (3) months in any discussion (i) with any
representative of any corporation or corporations regarding the consolidation or
merger of the Company with or into any such corporation or corporations, (ii)
with any corporation, partnership, association or other business entity or any
individual regarding the sale, conveyance or disposition of all or substantially
all of the assets of the Company or a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of the
Company is disposed of, or (iii) regarding any other form of acquisition,
liquidation, dissolution or winding up of the Company.
2.12 Disclosure. The Company has fully provided each Investor with all
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the information which such Investor has requested for deciding whether to
purchase the Series D Preferred Stock and has answered all questions posed by
such Investors. Neither this Agreement, the Investors' Rights Agreement, the
Stockholder Voting Agreement, nor any other written statements or certificates
delivered in connection herewith or therewith contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
herein or therein not misleading.
2.13 Business Projections. The business projections of the Company
--------------------
delivered to the Investors were prepared in good faith by the Company and the
Company reasonably believes that as of the date of delivery of such projections,
there was a reasonable basis for such projections. It is acknowledged that such
shall not be regarded as guarantees or assurances with respect to such matters.
2.14 Registration Rights. Except as provided in the Investors' Rights
-------------------
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.15 Corporate Documents. Except for amendments necessary to satisfy
-------------------
representations and warranties or conditions contained herein (the form of which
amendments has been approved by the Investors), the Restated Articles and the
Amended and Restated Bylaws of the Company are in the form previously provided
to special counsel for the Investors.
7.
2.16 Title to Property and Assets. The Company owns the property and
----------------------------
assets that it purports to own in the Financial Statements (as defined in
Section 2.17 below) free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in material compliance with such leases and, to the best of its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances. All of the Company's personal properties, whether owned or
leased, are in good operating condition (normal wear and tear excepted) and are
adequate and suitable for the purposes for which they are currently being used.
2.17 Financial Statements. The Company has delivered to each Investor
--------------------
its audited financial statements (balance sheet and profit and loss statement)
at November 30, 1993 and for the fiscal year then ended and for the period from
inception to such date and its unaudited financial statements at November 30,
1994 for the fiscal year then ended (collectively, the "Financial Statements").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated and with each other, except that unaudited Financial
Statements may not contain all footnotes required by generally accepted
accounting principles. The Financial Statements accurately set out and describe
in all material respects the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein, subject in the
case of unaudited Financial Statements to normal year-end audit adjustments.
Except as set forth in the Financial Statements, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to November 30, 1994 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business, which, in
both cases, individually or in the aggregate, are not material to the financial
condition or operating results of the Company. The Company maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with generally accepted accounting principles.
2.18 Changes. Since November 30, 1994 there has not been:
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(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business which have not
been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
8.
(c) any waiver by the Company of a valuable 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 which is not material to the assets, properties, financial
condition, operating results or business of the Company (as such business is
presently conducted and as it is proposed to be conducted);
(e) any change or amendment to a material contract or arrangement by
which the Company or any of its assets or properties is bound or subject, which
would have a material adverse effect on the Company or its business;
(f) any change in any compensation arrangement or agreement with any
officer; or
(g) to the Company's knowledge, any other event or condition of any
character which might materially and adversely affect the assets, properties,
financial condition, operating results or business of the Company (as such
business is presently conducted and as it is proposed to be conducted).
2.19 Employee Benefit Plans. The Company does not have any Employee
----------------------
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974
("ERISA").
2.20 Tax Returns, Payments and Elections. The Company has filed all tax
-----------------------------------
returns and reports as required by law. To the Company's knowledge these
returns and reports are true and correct in all material respects. The Company
has paid all taxes and other assessments due, except those contested by it in
good faith which are listed in the Schedule of Exceptions. The Company has not
elected pursuant to the Internal Revenue Code of 1986, as amended (the "Code"),
to be treated as a collapsible corporation pursuant to Section 1362(a) of the
Code, nor has it made any other elections pursuant to the Code (other than
elections which relate solely to methods of accounting, depreciation or
amortization) which would have a materially adverse effect on the Company, its
financial condition, its business as presently conducted or proposed to be
conducted or any of its properties or material assets.
2.21 Insurance. The Company has in full force and effect fire and
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casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company also has in full force and
effect general liability insurance and insurance covering all rights customarily
insured against by businesses that are similarly situated.
9.
2.22 Minute Books. The minute books of the Company provided to the
------------
Investors contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
2.23 Labor Agreements and Actions. The Company is not bound by or
----------------------------
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of employees, intends
to terminate their employment with the Company, nor does the Company have a
present intention to terminate the employment of any of the foregoing. The
employment of each officer and employee of the Company is terminable at the will
of the Company. The Company is not obligated to contribute to or accrue or pay
benefits under any deferred compensation or retirement funding arrangement.
3. Representations, Warranties and Covenants of the Investors. Each
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Investor hereby represents and warrants severally, but not jointly, that:
3.1 Authorization. It has full power and authority to enter into this
-------------
Agreement, the Investors' Rights Agreement and the Stockholder Voting Agreement
and to perform all its obligations hereunder and thereunder. This Agreement,
the Investors' Rights Agreement and the Stockholder Voting Agreement have been
duly authorized, executed and delivered by such Investor and constitutes its
valid and legally binding obligation, enforceable in accordance with their
terms.
3.2 Purchase Entirely for Own Account. This Agreement is made with each
---------------------------------
Investor in reliance upon such Investor's representation to the Company, which
by such Investor's execution of this Agreement such Investor hereby confirms,
that the shares of Series D Preferred Stock will be acquired for investment for
such Investor's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, each Investor further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to any of the shares of Series D
Preferred Stock.
10.
3.3 Disclosure of Information. Each Investor has had an opportunity to
-------------------------
ask questions and receive answers from the Company regarding the terms and
conditions of the offering of the Series D Preferred Stock. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 2 of this Agreement or the right of the Investors to rely
thereon.
3.4 Investment Experience. Each Investor is an institutional investor
---------------------
in securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series D
Preferred Stock. Each Investor also represents it has not been organized solely
for the purpose of acquiring the Series D Preferred Stock.
3.5 Accredited Investor. Each Investor is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D, as amended, promulgated under the
Securities Act of 1933, as amended (the "Act").
3.6 Restricted Securities. Each Investor understands that the shares of
---------------------
Series D Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Act, only in certain limited circumstances. In
this connection, each Investor represents that it is familiar with Rule 144,
promulgated under the Act as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting the
----------------------------------
representations set forth above, each Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
the terms of this Agreement, the Investors' Rights Agreement, the Stockholder
Voting Agreement, and
(a) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement and any applicable state securities laws; or
(b) (i) Such Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Act or any
applicable state securities laws. It is agreed that the Company will not
require opinions of counsel for transactions made pursuant to Rule 144 except in
unusual circumstances.
11.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by an Investor which is a partnership to a partner of such partnership
or a retired partner of such partnership who retires after the date hereof, or
to the estate of any such partner or retired partner or the transfer by gift,
will or intestate succession of any partner to his spouse or to the siblings,
lineal descendants or ancestors of such partner or his spouse, if the transferee
agrees in writing to be subject to the Investors' Rights Agreement and the
Stockholder Voting Agreement to the same extent as if he were an original
Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
-------
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the Securities
Act of 1933 or any applicable state securities laws. They may not be sold,
offered for sale, pledged or hypothecated in the absence of a registration
statement in effect with respect to the securities under such Act and applicable
state securities laws or an opinion of counsel and/or other evidence reasonably
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144."
(b) Any legend required by the laws of the Commonwealth of Virginia,
the State of California and any other state in which the securities will be
issued.
3.9 Consents. No consent, approval, order or authorization of, or
--------
registration, qualification, designation, declaration or filing with any local,
state, federal or foreign governmental authority on the part of such Investor is
required in connection with the valid execution and delivery of this Agreement,
the Investors' Rights Agreement, the Stockholder Voting Agreement and the
consummation of the transactions contemplated hereby and thereby.
3.10 Litigation. There is no action, suit, proceeding or investigation
----------
pending or, to such Investors' knowledge, currently threatened against the
Investors which questions the validity of this Agreement, the Investors' Rights
Agreement, the Stockholder Voting Agreement or the right of such Investor to
enter into them, or to consummate the transactions contemplated hereby or
thereby.
3.11 Compliance with Other Instruments. Such Investor is not in
----------------------------------
violation or default in any material respect of any provision of its charter
documents, or in any material respect of any instrument, judgment, order, writ,
decree or contract to which it is a party or by which it is bound, or, to its
knowledge, of any provision of any federal or state statute, rule or regulation
applicable to such Investor. To such Investor's best knowledge, the execution,
delivery and performance of this Agreement, the Investors' Rights Agreement, the
Stockholder Voting Agreement and the consummation of the transactions
contemplated hereby or thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
12.
notice, such a default under any such provision, instrument, judgment, order,
writ, decree or contract.
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE
------------------------
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
5. Conditions of Investor's Obligations at Closing. The obligations of
-----------------------------------------------
each Investor under subsection 1.1 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
5.1 Representations and Warranties. The representations and warranties
------------------------------
of the Company contained in Section 2 shall be true and correct on and as of the
Closing with the same force and effect as though such representations and
warranties had been made on and as of the date of such Closing.
5.2 Performance. The Company shall have performed and complied with all
-----------
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Compliance Certificate. The President of the Company shall deliver
----------------------
to each Investor at the Closing a certificate certifying that the conditions
specified in Sections 5.1 and 5.2 have been fulfilled and stating that there
shall have been no material adverse change in the business, affairs, operations,
properties, assets or condition of the Company since November 30, 1994.
5.4 Qualifications. The Company shall have obtained all necessary state
--------------
securities law permits and qualifications, or secured an exemption therefrom,
required by any state for the offer and sale of the Series D Preferred Stock, or
such permits or qualifications are not required to be obtained until after the
Closing.
5.5 Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Investors' spe-
13.
cial counsel, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request.
5.6 Board of Directors. Effective as of the Closing, the directors of
------------------
the Company shall be Mark Sirangelo, Peter Wendell, Robert McCormack, Rose
Sirangelo and Ed Doody. First Plaza Group Trust will retain its right under the
Stockholder Voting Agreement to designate one representative.
5.7 Opinion of Company Counsel. Each Investor shall have received from
--------------------------
Morgan, Lewis & Bockius, counsel for the Company, an opinion, dated as of the
Closing, in the form attached hereto as Exhibit E.
---------
5.8 Stockholder Voting Agreement. The Company, each Investor, Mr.
----------------------------
Sirangelo and the other parties listed in the Stockholder Voting Agreement shall
have executed and delivered the Stockholder Voting Agreement.
5.9 Investors' Rights Agreement. The Company and each Investor shall
---------------------------
have entered into the Investors' Rights Agreement.
5.10 Restated Articles. The Restated Articles shall have been filed with
-----------------
the Virginia State Corporation Commission.
5.11 Amendment of Bylaws. The Company's Amended and Restated Bylaws
-------------------
shall have been amended to be in conformity with the provisions of the
Stockholder Voting Agreement and to provide that the Chairman of the Board shall
have the authority to break deadlocks on the Board of Directors.
5.12 Management Rights Letter. The Company shall have executed a letter
------------------------
granting certain management rights to First Plaza Group Trust and T. Rowe Price
Threshold Fund III, L.P. sufficient for ERISA qualified limited partners of such
Investors.
5.13 Indemnification Agreements. Each officer and director of the
--------------------------
Company as of the Closing and the Company shall have executed agreements
indemnifying such officers and directors.
6. Conditions of the Company's Obligations at Closing. The
---------------------------------------------------
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
that Investor:
6.1 Representations and Warranties. The representations and warranties
------------------------------
of the Investor contained in Section 3 shall be true and correct on and as of
the Closing with the same force and effect as though such representations and
warranties had been made on and as of the Closing.
14.
6.2 Payment of Purchase Price. The Investors shall have delivered the
-------------------------
purchase price specified in Section 1.1.
6.3 Performance. The Investors shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by them on or before the Closing.
6.4 Restated Articles. The Restated Articles shall have been filed with
-----------------
the Virginia State Corporation Commission.
6.5 Stockholder Voting Agreement. The Company, each Investor, Mr.
----------------------------
Sirangelo and the other parties listed in the Stockholder Voting Agreement shall
have executed and delivered the Stockholder Voting Agreement.
6.6 Investors' Rights Agreement. The Company, each Investor, Mr.
---------------------------
Sirangelo and the other parties listed in the Investors' Rights Agreement shall
have executed and delivered the Investors' Rights Agreement.
7. Miscellaneous.
-------------
7.1 Survival of Warranties. Except for the warranties and
----------------------
representations in Sections 2.1, 2.4 and 3.7 which shall survive indefinitely,
the warranties, representations and covenants of the Company and Investors
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement for two years from the Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on behalf
of the Investors or the Company.
7.2 Benefit of Agreement; Successors and Assigns. Except as otherwise
--------------------------------------------
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as otherwise expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the Commonwealth of Virginia, without giving effect to the
conflict of law provisions.
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15.
7.5 Titles and Subtitles. The titles and subtitles used in this Agreement
--------------------
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
7.7 Finder's Fee. Each party represents that it neither is nor will be
------------
obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.8 Expenses. Irrespective of whether the Closing is effected, the
--------
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement and all other
agreements contemplated herein and shall pay the reasonable fees and out-of-
pocket expenses of the Company counsel. If the Closing is not effected, the
Investors shall pay all costs and expenses that they incur with respect to the
negotiation, execution, delivery and performance of this Agreement and all other
agreements contemplated herein and shall pay the reasonable fees and out-of-
pocket expenses of the Investors' counsel. If the Closing is effected, the
Company shall, at the Closing, reimburse the reasonable fees of the law firm of
Brobeck, Phleger & Harrison, sole special counsel for the Investors relating to
the transactions contemplated by this Agreement in an amount not to exceed
$15,000.00, and shall, upon receipt of a bill therefor, reimburse the reasonable
out-of-pocket expenses of such counsel.
7.9 Amendments and Waivers. Any term of this Agreement may be amended
----------------------
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
Common Stock issued or issuable upon conversion of the Series D Preferred Stock.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of
16.
any securities purchased under this Agreement at the time outstanding (including
securities into which such securities are convertible) and the Company.
7.10 Severability. If one or more provisions of this Agreement are held
------------
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Aggregation of Stock. All shares of Series D Preferred Stock held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
7.12 Complete Agreement. The Agreement, together with all Exhibits and
------------------
Schedules hereto, constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede all prior agreements and understanding,
oral or written, with respect thereto.
[REST OF PAGE LEFT INTENTIONALLY BLANK]
17.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PRODUCTION GROUP INTERNATIONAL, INC.
By:
--------------------------------------
Mark N. Sirangelo, President
Address: One Courthouse Metro
Suite 200
2200 Wilson Boulevard
Arlington, Virginia 22201
SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT
SIERRA VENTURES IV, a
California Limited Partnership
By its General Partner,
SV ASSOCIATES IV, L.P., a California Limited
Partnership
By ________________________________
Peter C. Wendell
General Partner
Address: 3000 Sand Hill Road, Bldg 4, Suite 210
Menlo Park, California 94025
SIERRA VENTURES IV INTERNATIONAL, a
California Limited Partnership
By its General Partner,
SV ASSOCIATES IV, L.P., a California Limited
Partnership
By _______________________________
Peter C. Wendell
General Partner
Address: 3000 Sand Hill Road, Bldg 4, Suite 210
Menlo Park, California 94025
SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT
TRIDENT CAPITAL PARTNERS FUND-I, L.P., a Limited
Partnership
By: TRIDENT CAPITAL, L.P., a Delaware Limited
Partnership
Title: General Partner
By: TRIDENT CAPITAL, INC.
Title: General Partner
By:___________________________
Robert C. McCormack
Address: 2480 Sand Hill Road, Suite 201
Menlo Park, California 94025
141 West Jackson Boulevard, 29th Floor
Chicago, Illinois 60604
SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT
TRIDENT CAPITAL PARTNERS FUND-I, C.V., a Netherlands
Antilles Limited Partnership
By: TRIDENT CAPITAL, L.P., a Delaware Limited
Partnership
Title: Investment General Partner
By: TRIDENT CAPITAL, INC.
Title: General Partner
By:_________________________________
Robert C. McCormack, Co-Chairman
Address: 2480 Sand Hill Road, Suite 201
Menlo Park, California 94025
141 West Jackson Boulevard, 29th Floor
Chicago, Illinois 60604
SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT
MELLON BANK, N.A., as Trustee for First Plaza
Group Trust (as directed by General Motors
Investment Management Corporation)
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Address:
-----------------------------
-----------------------------
SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT
ORCHID & CO., nominee for T. Rowe Price Theshold
Fund III, L.P.
By: T. Rowe Price Threshold Fund
Associates, Inc.
General Partner
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Address: 100 East Pratt Street
Baltimore, Maryland 21202
SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT
GALVIN ENTERPRISES
By:
-------------------------------
Michael Galvin, President
Address: 2000 L Street, Suite 200
Washington, D.C. 20036
SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT
STANFORD UNIVERSITY
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Address: 2770 Sand Hill Road
Menlo Park, CA 94025
SIGNATURE PAGE TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT
SCHEDULE A
SCHEDULE OF INVESTORS
Series D Preferred Stock
------------------------
Number of Shares
of Series D
Name and Address Preferred Stock Purchase Price
- ---------------- --------------- --------------
Mellon Bank, N.A., as Trustee 857,142 $ 5,999,994.00
for First Plaza Group Trust
Sierra Ventures IV, L. P. 206,035 1,442,245.00
Sierra Ventures IV International 8,250 57,750.00
Orchid & Co. 214,285 1,499,995.00
Trident Capital
Partners Fund-I, L. P. 178,896 1,252,272.00
Trident Capital
Partners Fund-I, C.V. 35,389 247,723.00
Galvin Enterprises, Inc. 71,429 500,003.00
Stanford University 3,571 24,997.00
--------- --------------
TOTAL 1,574,997 $11,024,979.00
SCHEDULE B
SCHEDULE OF CURRENT SECURITYHOLDERS
SHAREHOLDER'S NAME SHARES HELD BY SHAREHOLDER
Mark N. Sirangelo 550,000 Shares Common Stock
Jonathan J. Ledecky 120,000 Shares Series A Preferred Stock
and option for 25,000 shares of Common
Stock
Galvin Enterprises, Inc. 120,000 Shares Series A Preferred Stock
and 48,076 Shares Series C Preferred Stock
Trident Capital Partners Fund-1, L.P. 360,000 Shares Series A Preferred Stock
and 192,307 Shares Series C Preferred
Stock
Sierra Ventures IV, L.P. 924,519 Shares Series C Preferred Stock
Sierra Ventures IV International 37,019 Shares Series C Preferred Stock
Stanford University 19,230 Shares Series C Preferred Stock
The Legacy Fund, Inc. 10,000 Shares Series C Preferred Stock
Cyril Wismar Options for 70,000 shares of Common Stock
and 10,000 Shares Series C Preferred Stock
Gerald Lewis Options for 70,000 shares of Common Stock
and 5,000 Shares Series C Preferred Stock
Samuel Smith Options for 70,000 shares of Common Stock
and 10,000 Shares Series C Preferred Stock
Alexander MacKenzie Options for 70,000 shares of Common Stock
and 10,000 Shares Series C Preferred Stock
John Zeller 4,000 Shares Series C Preferred Stock