-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oc4VZa5hfTQYvE7BaYEAhw5br1omvFzTun2rL9uqNB9MgW9fmYcCBSJmuk+JMePx ppeTBRDaTUn+xBUgIdXLMg== 0000950144-99-006790.txt : 19990624 0000950144-99-006790.hdr.sgml : 19990624 ACCESSION NUMBER: 0000950144-99-006790 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990511 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990526 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S TECHNOLOGIES INC CENTRAL INDEX KEY: 0000810130 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 731284747 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-15960 FILM NUMBER: 99635358 BUSINESS ADDRESS: STREET 1: 3901 ROSWELL ROAD SUITE 300 CITY: MARIETTA STATE: GA ZIP: 30062 BUSINESS PHONE: 7705654311 MAIL ADDRESS: STREET 1: 3901 ROSWELL ROAD STREET 2: SUITE 300 CITY: MARIETTA STATE: GA ZIP: 30062 FORMER COMPANY: FORMER CONFORMED NAME: CAREAMERICA INC DATE OF NAME CHANGE: 19890720 8-K 1 U.S. TECHNOLOGIES, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report (Date of earliest event reported): May 11, 1999 ------------ U.S. Technologies Inc. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-15960 73-1284747 - ------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 3901 Roswell Road, Suite 300, Marietta, Georgia 30062 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (770) 565-4311 -------------- - ------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 ITEM 5. OTHER EVENTS. On May 11, 1999, U.S. Technologies Inc., a Delaware corporation (the "Company"), closed the sale of 500,000 shares of its Series A Convertible Preferred Stock ("Convertible Preferred Stock"), par value $0.02 share, to USV Partners, LLC, a Delaware limited liability company ("USV Partners"). The Company also issued warrants ("Warrants") to purchase 500,000 shares of the Company's common stock, par value $0.02 per share, to USV Partners. The aggregate purchase price paid by USV Partners for the Convertible Preferred Stock and the Warrants was $5,000,000. Gregory Earls, the Chairman, President and Chief Executive of the Company, is also the sole member of USV Management, LLC, the manager of USV Partners. The Convertible Preferred Stock carries a 9% dividend, which is payable in cash or in shares of the Company's common stock or Convertible Preferred Stock. Each share of the Convertible Preferred Stock is convertible into approximately 24.39 shares of the Company's common stock, at the option of the holder, until January 12, 2004. The Company has the right, subject to the holders' rights to convert the Convertible Preferred Stock to common stock, to redeem the Convertible Preferred Stock at its stated value of $10.00 per share (plus all accrued and unpaid dividends) at any time after the common stock of the Company trades at $3.00 or more per share (or at $2.50 or more per share if a certain earnings target is achieved by the Company) for twenty consecutive trading days. The Warrants entitle the holder thereof to purchase 500,000 shares of the Company's common stock at an exercise price of $1.00 per share. The Warrants are exercisable until January 12, 2004. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements: None (b) Pro Forma Financial Statements: None (c) Exhibits. The following exhibits are filed with this Report:
Exhibit No. Description - ----------- ----------- 4.1 Amended Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock 10.1 Form of Investment Agreement entered into by and between the Company and USV Partners
3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized. U.S. TECHNOLOGIES INC. By: /s/ John P. Brocard ---------------------------- John P. Brocard Executive Vice President and General Counsel Dated: May 25, 1999 4 EXHIBIT INDEX
Exhibit No. Description - ----------- ------------ 4.1 Amended Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock 10.1 Form of Investment Agreement entered into by and between the Company and USV Partners
EX-4.1 2 AMENDED CERTIFICATE OF DESIGNATION 1 EXHIBIT 4.1 AMENDED CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK OF U.S. TECHNOLOGIES INC. PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE U.S. Technologies Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify that, pursuant to the authority contained in its Certificate of Incorporation, as amended and restated, and in accordance with Section 151 of the General Corporation Law of the State of Delaware, the following resolution amending the terms of the Series A Convertible Preferred Stock, $0.02 par value, was duly adopted by the Board of Directors of the Corporation (the "Board") as of February 24, 1999: RESOLVED, that the Board hereby amends the terms of the Corporation's 1,000,000 shares of Series A Convertible Preferred Stock, $0.02 par value, and hereby adopts and prescribes therefore the designation, relative rights, preferences and limitations, and other terms and conditions of such series as set forth in, and governed by, Exhibit A attached to these minutes, with such Exhibit A being hereby incorporated as part of this resolution; and FURTHER RESOLVED, that the officers of the Corporation be and hereby are authorized and directed to take any and all further action that may be necessary or desirable to accomplish the above authorized action, including but not limited to the execution and filing of all instruments or documents that may be necessary to create, designate, issue or evidence shares of the Corporation's Series A Convertible Preferred Stock. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed in its name by the undersigned duly authorized officers of the Corporation, this 24th day of February, 1999. /s/ Gregory Earls ------------------------------------------------ By: C. Gregory Earls Title: Chairman and Chief Executive Officer 1 2 EXHIBIT A SERIES A CONVERTIBLE PREFERRED STOCK The powers, designations, preferences and relative, participating, optional or other rights of the Series A Convertible Preferred Stock of U.S. Technologies Inc. (the "Corporation") are as stated below. Capitalized terms not defined herein have the meaning given them in the Investment Agreement by and between USV Partners, LLC and the Corporation, dated as of July 16, 1998 (the "Investment Agreement"). 1. DESIGNATION AND AMOUNT. This series of preferred stock shall be designated as "Series A Convertible Preferred Stock" and shall have a par value of $0.02 per share. The number of authorized shares constituting this series shall be 1,000,000 shares. Shares of the Series A Convertible Preferred Stock shall have a stated value of $10.00 per share (the "Stated Value"). 2. DIVIDENDS. (a) Right to Receive Dividends. Holders of the Series A Convertible Preferred Stock (each a "Preferred A Holder") shall be entitled to receive annual dividends at the rate, in the form, at the times and in the manner set forth in this Section 2. Such dividends shall accrue on any given share of Series A Convertible Preferred Stock from the day of payment for such share and shall accrue from day to day whether or not earned or declared. (b) Form of Dividend. Any dividend payment made with respect to the Series A Convertible Preferred Stock may, at the sole discretion of the Board of Directors of the Corporation ("Board of Directors"), be made (i) in cash out of funds legally available for such purpose, (ii) in Series A Convertible Preferred Stock having an aggregate stated value equal to the amount of the dividend or (iii) in Common Stock that has a Current Market Value (as defined in Section 5(d)(ii)(C)) on the day before the dividends are distributed, equal to the amount of the dividend. (c) Dividend Rate. The dividend rate on the Series A Convertible Preferred Stock shall be 9% of the Stated Value per share per annum; provided that, upon the occurrence and during the continuance of any Triggering Event (as defined in Section 7), the dividend rate on the Series A Convertible Preferred Stock shall be 11% of the Stated Value per share per annum (such rate, as applicable, the "Dividend Rate"). (d) Payment of Dividends. Dividends shall be payable in arrears on April 1 of each year, commencing April 1, 1999 (each such annual payment date a "Dividend Payment Date"), except that if any such date is a Saturday, Sunday or legal holiday then such dividend shall be 2 3 payable on the first immediately succeeding calendar day which is not a Saturday, Sunday or legal holiday. Dividends shall accrue on each share of Series A Convertible Preferred Stock from the date of payment for such share which, in the case of the initial payment for the Series A Convertible Preferred Stock, shall be from July 16, 1998 (the "Share Payment Date"), and, after payment of a dividend as required hereunder, from and after each Dividend Payment Date based on the number of days elapsed and a 360-day year. The dividend payable on the first Dividend Payment Date, with respect to any share of Series A Convertible Preferred Stock, shall be the pro rata portion of the Dividend Rate based upon the number of days from and including the Share Payment Date, up to and including such first Dividend Payment Date and a 360-day year. Each dividend shall be paid to the Preferred A Holders of record as they appear on the books of the Corporation on such record date, which shall be not more than 45 days nor fewer than 10 days preceding the respective Dividend Payment Date, as shall be fixed by the Board of Directors. (e) Dividend Preference. Dividends on the Series A Convertible Preferred Stock shall be payable before any dividends or distributions or other payments shall be paid or set aside for payment, on the common stock, $0.02 par value, of the Corporation (the "Common Stock"), or any other stock ranking on liquidation or as to dividends or distributions junior to the Series A Convertible Preferred Stock (any such stock together with the Common Stock, being referred to hereinafter as "Junior Stock"). If at any time dividends on the outstanding Series A Convertible Preferred Stock at the rate set forth herein shall not have been paid or declared and set apart for payment with respect to all preceding and current periods, the amount of the deficiency shall be fully paid or declared and set apart for payment before any dividend, distribution or payment shall be declared or paid upon or set apart for the shares of any other class or series of stock of the Corporation; provided that a dividend or distribution to the holders of Junior Stock may be made in shares of Junior Stock so long as there has been no default in the payment of dividends to any Preferred A Holder on any Dividend Payment Date. 3. LIQUIDATION PREFERENCE. In the event of any bankruptcy, liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, each Preferred A Holder at the time thereof shall be entitled to receive, prior and in preference to any distribution of any of the assets or funds of the Corporation to the holders of the Common Stock or other Junior Stock by reason of their ownership of such stock, an amount per share of Series A Convertible Preferred Stock equal to the Stated Value plus any accrued and unpaid dividends to the date of liquidation or such lesser amount as permitted pursuant to the Restated Certificate of Incorporation of U.S. Technologies Inc. filed with the Secretary of the State of Delaware on December 31, 1997, as it may be amended and restated from time to time ("Certificate of Incorporation"). If the assets and funds legally available for distribution among the Preferred A Holders shall be insufficient to permit the payment to the Preferred A Holders of the full aforesaid preferential amount, then the assets and funds shall be distributed ratably among Preferred A Holders in proportion to the number of shares of Series A Convertible Preferred Stock owned by each Preferred A Holder. 3 4 4. VOTING RIGHTS. In addition to any voting rights provided elsewhere herein or in the Corporation's Certificate of Incorporation, and any voting rights provided by law, the Preferred A Holders shall have the following voting rights; provided that the voting rights set forth below in Sections 4(a) and 4(b), to the extent not otherwise available under applicable law, shall thereupon terminate when the number of Preferred Shares that have not been converted is less than 45% of the number of Preferred Shares issued at Closing: (a) Election of Directors (i) Subject to the terms hereof, the Preferred A Holders shall have the right to elect up to one-third of the members of the Board of Directors (each a "Series A Preferred Director"); provided however, if the Corporation receives additional financing (in the form of debt or equity) of at least $5,000,000 from a third party that is not a Preferred A Holder or an Affiliate of a Preferred A Holder then (A) if the Board of Directors consists of one to five members, the Preferred A Holders shall have the right to elect one director to the Board of Directors and (B) if the Board of Directors consists of six or more members, the Preferred A Holders shall have the right to elect the greater of (x) one-sixth of the Board of Directors or (y) two directors. Such Series A Preferred Director(s) shall be elected by the Preferred A Holders (who will have one vote for each Series A Preferred Director for each share held) voting as a single class. (ii) The initial terms of the Series A Preferred Directors to be elected pursuant to Section 4(a)(i) will commence upon their election by the Preferred A Holders and shall expire at the next annual meeting of shareholders of the Corporation. Upon expiration of the initial terms of such Series A Preferred Directors, so long as the Series A Convertible Preferred Stock is outstanding, the Preferred A Holders shall have the right to elect Series A Preferred Directors to replace such directors. A Series A Preferred Director so elected shall hold office for a term expiring at the next annual meeting of shareholders following the election of such director; provided that when the Series A Convertible Preferred Stock ceases to be outstanding, the term of office of each such director shall terminate. Notwithstanding the foregoing, a Series A Preferred Director elected under Section 4(a)(i) shall serve until such Series A Preferred Director's successor is appointed and qualified, duly elected or until such director's earlier removal as provided in Section 4(a)(iii) or such director's death or resignation, and, in the event a vacancy occurs while such Series A Convertible Preferred Stock remains outstanding (and so long as a number of Preferred Shares equal to at least 45% of the number of Preferred Shares issued at Closing have not been converted to Common Stock), a replacement Series A Preferred Director shall be selected as provided in Section 4(a)(i). (iii) While the Series A Convertible Preferred Stock remains outstanding (and so long as a number of Preferred Shares equal to at least 45% of the number of Preferred Shares issued at Closing have not been converted to Common Stock), a Series A Preferred Director may 4 5 be removed by, and shall not be removed except by, the vote of the Preferred A Holders of record of a majority of the outstanding shares of Series A Convertible Preferred Stock, voting together as a single class. (b) Certain Corporate Actions. So long as a number of Preferred Shares equal to at least 45% of the number of Preferred Shares issued at Closing have not been converted to Common Stock, the Corporation shall not, without first obtaining the affirmative vote or written consent of the Preferred A Holders of not less than a majority of the then outstanding shares of Series A Convertible Preferred Stock, voting as a single class: (i) repurchase, purchase or otherwise acquire any Common Stock or other Junior Stock for any consideration (or pay or make available any moneys, whether by means of a sinking fund or otherwise, for the repurchase of any shares of Common Stock or other Junior Stock), except by conversion or exchange of Common Stock or other Junior Stock for such stock that is not Series A Convertible Preferred Stock; (ii) after the first Share Payment Date, authorize or permit the Corporation or any subsidiary of the Corporation, as the case may be, (A) to issue, other than to the Investor, any equity securities or securities convertible into or exchangeable for equity securities or any securities granting the holder an option to acquire any such securities, each at a price below the Current Market Value (and further provided that this provision does not include any transaction that is consummated pursuant to Section 8.1(g) of the Investment Agreement) or (B) to issue any additional Series A Convertible Preferred Stock, other than in payment of accrued dividends on the outstanding shares of Series A Convertible Preferred Stock or (C) to issue any other stock of the Corporation with the same preference and priority as the Series A Convertible Preferred Stock or with a preference or priority senior to the Series A Convertible Preferred Stock, other than in payment of accrued dividends on the outstanding shares of Series A Convertible Preferred Stock; (iii) authorize or effect, in a single transaction or through a series of related transactions, a consolidation, merger, business combination of the Corporation with any other Person or a spin-off or recapitalization of the Corporation; the liquidation, winding up or dissolution of the Corporation or the sale, lease, exchange or other transfer of all or substantially all of the assets of the Corporation to any other Person or adopt any plan for the same; (iv) amend, repeal, modify or supplement any provision of the Amended and Restated Articles of Incorporation, the By-Laws as in effect on July 16, 1998, or any successor Articles of Incorporation or By-Laws, other than as necessary to effect an increase in the authorized Common Stock; 5 6 (v) amend, repeal, modify, supplement or in any other manner, affect or change the terms, designations, preferences or rights of the Series A Convertible Preferred Stock set forth herein or in the Investment Documents; (vi) authorize or permit the Corporation to (A) make an assignment for the benefit of the creditors, (B) file a petition in bankruptcy, (C) petition or apply to any tribunal for appointment of a receiver, custodian or any trustee for it or for a substantial part of its assets or (D) commence any proceeding under any bankruptcy, reorganization or arrangement or readjustment of debt law or statute in any jurisdiction; (vii) authorize or permit the Corporation to materially change the type of business conducted by the Corporation or contemplated to be conducted by the Corporation pursuant to Executive Summary for Accredited Investors dated April 22, 1998 (the "Executive Summary"); (viii) authorize or permit the Corporation to enter into any transaction with any Affiliate (other than a wholly owned subsidiary) or shareholder or the amendment, extension or renewal of such a transaction other than on arm's-length terms; and (ix) authorize or permit the Corporation to acquire an equity interest in any other Person, except as contemplated by the Executive Summary. (c) Means of Voting. The rights of the Preferred A Holders under this Section 4 may be exercised (i) at any meeting of shareholders of the Corporation; (ii) at any meeting of the Preferred A Holders, called for such purpose by the Corporation or the holders of record of 25% or more of the outstanding shares of the Series A Convertible Preferred Stock, pursuant to requests delivered in writing to the Secretary or Assistant Secretary of the Corporation; or (iii) by written consent signed by all of the holders of the requisite percentage required by Applicable Law of the then outstanding shares of the Series A Convertible Preferred Stock, delivered to the Secretary or Assistant Secretary of the Corporation. Except to the extent otherwise provided herein, any meeting of Preferred A Holders shall be conducted in accordance with the provisions of the By-Laws of the Corporation applicable to meetings of shareholders. In the event of a conflict or inconsistency between the By-Laws of the Corporation and any term of this Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock ("Certificate of Designations") (including, but not limited to this Section 4) this Certificate of Designations shall prevail. (d) Other Matters. The Preferred A Holders shall be entitled to vote on any matter as part of the class that includes holders of Common Stock. Each share of Series A Convertible Preferred Stock shall be entitled to the number of votes that is equal to the number of shares of Common Stock into which such share of Series A Convertible Preferred Stock is then convertible. 6 7 5. CONVERSION Shares of Series A Convertible Preferred Stock may be converted into shares of Common Stock, on the terms and conditions set forth in this Section 5. (a) Optional Conversion. Commencing at 9:00 a.m. Eastern Standard Time on January 12, 1999 (the "Commencement Date") and ending at 5:00 p.m. Eastern Standard Time on January 12, 2004 (the "Expiration Date"), each Preferred A Holder may convert any or all of the shares of Series A Convertible Preferred Stock held by such Preferred A Holder into Common Stock by complying with the procedures set forth in Section 5(f). The number of shares of Common Stock into which each share of Series A Convertible Preferred Stock is convertible shall be equal to the result obtained by (x) dividing (I) the Stated Value plus any accrued but unpaid dividends on such share, by (II) the Conversion Price determined in accordance with Section 5(b) below; and (y) multiplying by the Conversion Factor on the date of conversion as determined in accordance with Section 5(d) below. (b) Conversion Price. (i) The "Conversion Price" shall be the average last sale price, per share of Common Stock, for the 20 trading days immediately prior to February 24, 1999, as such last sale price is reported in the principal consolidated transaction reporting system of the NASDAQ National Market System. (c) References. References in this Section 5 to "Common Stock" shall include all stock or other securities or property (including cash) into which Common Stock is converted following any merger, reorganization or reclassification of the capital stock of the Corporation. (d) Conversion Factor. The "Conversion Factor" means 1.00, as adjusted from time to time as follows: (i) In case the Corporation shall at any time or from time to time declare a dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common Stock or subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares or combine or reclassify the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then, and in each such case: (A) The Conversion Factor shall be adjusted such that the number of shares of Common Stock into which each share of Series A Convertible Preferred Stock would be convertible on the effective date of such adjustment is equal to the number of shares of Common Stock that a Preferred A Holder would have been entitled to receive after the happening of any of the events described above had such share been converted immediately prior to the happening of such event or the record date therefor, whichever is earlier; 7 8 (B) an adjustment made pursuant to this Section 5(d)(i) shall become effective (I) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (II) in the case of any such subdivision, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective. (ii) In case the Corporation shall issue shares of Common Stock (or rights or warrants or other securities convertible into or exchangeable for shares of Common Stock) after the first Share Payment Date at a price per share (or having an exercise of conversion price per share) less than the Current Market Price (as defined below) as of the date of issuance of such shares (or of such rights, warrants or other convertible securities), then, and in each such case: (A) The Conversion Factor shall be adjusted such that the number of shares of Common Stock into which each share of Series A Convertible Preferred Stock would be convertible on the effective date of such adjustment is equal to the number of shares of Common Stock that would have been received if there had been no issuance below the Current Market Price (as determined in accordance with Section 5(a)) multiplied by a fraction, (I) the numerator of which is the sum of (1) the number of shares of Common Stock outstanding on the date immediately prior to the date of issuance and (2) the number of additional shares of Common Stock issued (or into which the convertible securities may convert), and (II) the denominator of which is the sum of (1) the number of shares of Common Stock outstanding on the date immediately prior to the date of issuance and (2) the number of shares of Common Stock which the aggregate consideration receivable by the Corporation for the total number of shares of Common Stock so issued (or into which the convertible securities may convert) would purchase at the Current Market Price on such date. For purposes of this subparagraph, the aggregate consideration receivable by the Corporation in connection with the issuance of shares of Common Stock or of securities convertible into shares of Common Stock shall be deemed to be equal to the sum of the net offering price (after deduction of underwriting discounts or commissions and expenses payable to third parties) of all such securities plus the minimum aggregate amount, if any, payable upon conversion of any such convertible securities into shares of Common Stock; (B) such adjustment shall become effective immediately after the date of such issuance. (C) "Current Market Price" means the average of the daily Closing Prices per share of Common Stock for the 15 consecutive trading days immediately prior to such date. The "Closing Price" per share of Common Stock for each day shall be (x) the last sale price, regular way, or, in case no such sale takes place on such day, the average closing bid and asked prices, regular way, in either case as reported in the 8 9 principal consolidated transaction reporting system with respect to securities listed or admitted to trading on NASDAQ National Market System, the New York Stock Exchange or the American Stock Exchange, as applicable or (y) the last sale price, regular way, before 5:00 p.m., or, in case no such sale takes place on such day, the average closing bid and asked prices, regular way, in either case as reported on the NASDAQ OTC Bulletin Board. If on any such trading day or days such securities are not quoted by any such organization, such trading day or days shall be replaced for purposes of the foregoing calculation by the requisite trading day or days preceding the commencement of such 15 trading day period on which such securities are so quoted. If shares of Common Stock are not so listed or traded, the Current Market Price shall mean the fair value per share of Common Stock as determined in good faith by the Board of Directors, whose determination shall be described in a notice to the Preferred A Holders, based on (I) the most recently completed arm's-length transaction between the Corporation and a Person other than an existing shareholder or other Affiliate of the Corporation, the closing of which occurred on such date or within the three-month period preceding such date, or (II) if no such transaction shall have occurred on such date or within such three-month period, the advice of an independent financial expert selected by the Board of Directors with the affirmative vote of at least one of the Series A Preferred Directors, or (III) a unanimous agreement of all Directors. (e) Common Stock. The Common Stock to be issued upon conversion hereunder shall be fully paid and nonassessable upon proper tender of shares of Series A Convertible Preferred Stock and compliance hereunder. (f) Procedures for Conversion. (i) In order to convert shares of Series A Convertible Preferred Stock into shares of Common Stock, the Preferred A Holder shall surrender the certificate or certificates therefore, duly endorsed for transfer, at any time during normal business hours, to the Corporation at its principal office or at such other office or agency then maintained by it for such purpose (the "Payment Office"), accompanied by (A) a written notice, in substantially the form of the conversion notice appearing at the end of this Certificate of Designations (the "Conversion Notice") of such Preferred A Holder's election to convert and (B) (if so required by the Corporation or any conversion agent) an instrument of transfer, in form reasonably satisfactory to the Corporation and to any conversion agent, duly executed by the registered Preferred A Holder or by his duly authorized attorney; provided, however, that a Preferred A Holder's notice may specify that its election to convert is contingent upon the sale pursuant to a registration statement under the Securities Act of 1933 (or any successor statute) of the shares of Common Stock into which such holder's shares of Series A Convertible Preferred Stock are convertible, in which case such conversion shall occur only upon, and to the extent of, such sales. As promptly as practicable after the surrender for conversion of any share of the Series A Convertible Preferred Stock in the manner provided in the preceding sentence but in any event within three Business Days after receipt of the Conversion Notice, the Corporation will deliver or cause to be delivered 9 10 at the Payment Office to or upon the written order of the holder of such shares, certificates representing the aggregate number of shares of Common Stock issuable upon such conversion, issued in such name or names as such holder may direct, and, if the Series A Convertible Preferred Stock is exercised in part, a new certificate representing the Series A Convertible Preferred Stock that has not been converted. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares in proper order for conversion, and all rights of the Preferred A Holder, solely with respect to the shares converted, shall cease at such time and the Person or Persons in whose name or names the certificates for such shares of Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders thereof at such time; provided, however, that any such surrender and payment on any date when the stock transfer books of the Corporation shall be closed shall constitute the Person or Persons in whose name or names the certificates for such shares of Common Stock are to be issued as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which such stock transfer books are opened and such conversion shall be at the conversion price in effect at such time on such succeeding day. (ii) In the event that some but not all of the Series A Convertible Preferred Stock outstanding is converted pursuant to this Section 5, if such conversion causes the Corporation to incur a disproportionate amount of expenses as compared to the respective proportion of costs and expenses that the Corporation would have incurred if all of the Series A Convertible Preferred Stock had been converted, then the Preferred A Holder must pay such costs and expenses, but only to the extent such expenses are disproportionate. (iii) The Corporation shall not be required to issue fractional shares of Common Stock upon conversion of shares of Series A Convertible Preferred Stock. At the Corporation's discretion, in the event the Corporation determines not to issue fractional shares, in lieu of any fractional shares to which the Preferred A Holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the Current Market Price. (iv) The issuance of certificates for shares of Common Stock upon conversion shall be made without charge for any issue, stamp or other similar tax in respect of such issuance. However, if any such certificate is to be issued in a name other than that of the holder of record of the shares converted, the Person or Persons requesting the issuance thereof shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish, to the satisfaction of the Corporation, that such tax has been paid or is not payable. (v) Upon conversion of any shares of Series A Preferred Stock, the holder thereof shall be entitled to receive any accrued dividends in respect of such converted shares to the date of conversion. 10 11 (g) Reservation of Stock Issuable Upon Conversion. The Corporation shall reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Convertible Preferred Stock, 12,200,000 shares of Common Stock. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Convertible Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, taking appropriate board action, recommending such an increase to the holders of Common Stock, holding shareholders meetings, soliciting votes and proxies in favor of such increase to obtain the requisite shareholder approval and upon such approval, the Corporation shall reserve and keep available such additional shares solely for the purpose of effecting the conversion of the shares of the Series A Convertible Preferred Stock. (h) Notices. Whenever the Conversion Factor is adjusted as provided in Section 5 hereof, the Corporation shall promptly mail to the holders of record of the outstanding shares of Series A Convertible Preferred Stock at their respective addresses as the same shall appear in the Corporation's stock records a notice stating that the Conversion Factor has been adjusted and setting forth the new Conversion Factor and number of shares of Common Stock (or describing the new stock, securities, cash or other property) into which each share of Preferred Stock would be convertible on the effective date of and as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof, and the time when such adjustment became effective. Any notice required by the provisions of this Section to be given to the Preferred A Holders shall be given by certified mail, return receipt requested. (i) Reorganization, Merger or Sale of the Corporation. (i) Notwithstanding any other provision hereof, in case of (A) any reorganization or any reclassification of the capital stock of the Corporation or (B) any sale of the Corporation if such transaction does not constitute a liquidation, dissolution or winding up as provided in Section 3, then, at the election of each Preferred A Holder, concurrently with the consummation of such reorganization, reclassification or sale of the Corporation, provision shall be made so that each share of Series A Convertible Preferred Stock shall thereafter be convertible into the number of shares of stock or other securities or property (including cash) to which a holder of the number of shares of Common Stock deliverable upon conversion of such shares of Series A Convertible Preferred Stock would have been entitled assuming conversion on the day immediately prior to the initial announcement of the transaction or a proposed transaction that ultimately resulted in the transaction. In any case, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the Preferred A Holders, to the end that the provisions set forth herein shall thereafter be applicable, as nearly as equivalent as is practicable, in relation to any shares of stock or the securities or property (including cash) thereafter deliverable upon the conversion of the shares of Series A Convertible Preferred Stock. 11 12 (ii) After the Corporation has determined to enter into a transaction described in Section 5(i)(i)(B), and publicly announces that the Corporation will enter into such transaction, the Corporation will provide written notice to each Preferred A Holder setting forth the material terms of the transaction, together with all relevant information regarding such transaction a least 60 days prior to the proposed date of the transaction. (iii) In case of any merger, consolidation, reclassification or other similar reorganization, to the extent the Corporation is not the surviving entity, and the Corporation or the Preferred A Holders do not otherwise redeem, repurchase or convert all outstanding shares of Series A Convertible Stock, the Series A Convertible Preferred Stock shall be converted into or exchanged for and shall become shares of the surviving Corporation having, in respect of the surviving Corporation, substantially the same powers, preferences and relative participating, optional or other special rights, and the qualifications, limitations or restrictions thereon, that the Series A Convertible Preferred Stock had immediately prior to such transaction. 6. REDEMPTION OPTION (a) Redemption Price; Redemption Procedure. Subject to the conversion rights set forth in Section 5 hereof, the Corporation shall have the option (the "Redemption Option") to redeem the Series A Convertible Preferred Stock, in whole or in part, at the Stated Value of the Series A Convertible Preferred Stock ("Redemption Price") plus all accrued and unpaid dividends, at any time after the daily average Closing Price for the Common Stock has been $2.50 per share of Common Stock or above for 20 consecutive trading days; provided, however, that if the Corporation achieves its Earnings Target and the Conversion Price is adjusted as set forth in Section 5(b), the Redemption Option may only be exercised, at any time after the daily average Closing Price for the Common Stock has been $3.00 per share of Common Stock or above for 20 consecutive trading days. The Corporation shall exercise the Redemption Option by giving the Preferred A Holders an irrevocable written notice (the "Redemption Notice") specifying (A) the number of shares of Series A Convertible Stock to be redeemed (and in the case of a partial redemption, the number of shares to be redeemed with respect to each Preferred A Holder, as set forth below) and (B) the proposed date of sale, which shall not be earlier than 30 days after the delivery of the Redemption Notice. If the Redemption Notice is for some but not all of the outstanding Series A Convertible Preferred Stock, the Redemption Option shall be ratable among the Preferred A Holders in proportion to the number of shares of Series A Convertible Preferred Stock owned by each Preferred A Holder. Within the 30 days after the delivery of the Redemption Notice, each of the Preferred A Holders may deliver a Conversion Notice with respect to all or some of the Series A Convertible Preferred Stock held by such Preferred A Holder in accordance with Section 5 hereof. On the 61st day after the Redemption Notice, the Corporation shall redeem (ratably among the Preferred A Holders in proportion to the number of shares of Series A Convertible Preferred Stock owned by each Preferred A Holder) all of the Series A Convertible Preferred Stock for which it has not received a Conversion Notice, up to the amount specified in the Redemption Notice. 12 13 (b) Redemption Closing. The redemption of Series A Convertible Preferred Stock pursuant to the Redemption Option shall take place at the offices of the Corporation at 10:00 a.m. local time on a Business Day (the "Redemption Closing Date") that is no earlier than 61 days after the date of the Redemption Notice and no later than 90 days after the date of the Redemption Notice, which date shall be specified in the Redemption Notice. On or prior to the Redemption Closing Date, the Corporation shall deliver a certified or bank cashier's check to each Preferred A Holder that has not elected to convert its Series A Convertible Preferred Stock, at his or its address as the same appears in the transfer records of the Corporation, in an amount equal to the aggregate of the Redemption Price multiplied by the number of shares redeemed plus all accrued and unpaid dividends, or shall transfer such amount by wire transfer of immediately available funds to any account specified in writing by such Preferred A Holder to the Corporation. To the extent that less than all of the shares of a Preferred A Holder's Series A Convertible Preferred Stock are redeemed, the Corporation shall forthwith issue and deliver to such Preferred A Holder, as appropriate, certificates representing outstanding Series A Convertible Preferred Stock which the Preferred A Holder continues to own. (c) Cessation of Dividends on Shares Redeemed. Provided that the Redemption Notice has been mailed as stated in subsection (a) above, from and after the close of business on the Redemption Closing Date (unless default shall be made by the Corporation in providing money for the payment of the redemption price of the shares called for redemption), dividends on the shares of the Series A Convertible Preferred Stock redeemed shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the Redemption Price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the Redemption Price aforesaid. If fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (d) Status of Redeemed Shares. Upon redemption, any shares of the Series A Convertible Preferred Stock which have been so redeemed shall be retired and thereafter have the status of authorized but unissued shares of preferred stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors or a duly authorized committee thereof. 7. TRIGGERING EVENTS. Each of the following actions or events shall constitute a "Triggering Event" for purposes hereof: 13 14 (a) Failure to Redeem. The Corporation shall fail to redeem the Series A Convertible Preferred Stock after providing the Redemption Notice to the Preferred A Holders in accordance with Section 6. (b) Failure to Pay Dividends. The Corporation shall fail to pay any dividend on any Series A Convertible Preferred Stock on any Dividend Payment Date in accordance with Section 2 for any reason, including but not limited to, that such payment is prohibited by applicable law or the Board of Directors elects not to pay such dividend, or shall otherwise violate any term of Section 2 and such failure shall not be cured within a period of 15 days after such Dividend Payment Date or violation (which cure shall be effected in a manner ensuring the holders the same yield as if such violation had not occurred). (c) Failure of Voting Rights. The Corporation shall enter into any transaction or take any action required to be approved by any Preferred A Holders without obtaining the requisite approval of the Preferred A Holders, including without limitation, the failure to elect the Board of Directors in accordance with Section 4(a) above. (d) Failure to Convert. The Corporation shall fail for any reason to issue Common Stock as required under Section 5 upon the request of any Preferred A Holder as provided in Section 5 or fail to comply with any other term of Section 5 hereof or the Corporation. (e) Registration Rights Agreement. The Corporation shall fail in any material respect to comply with the Registration Rights Agreement dated as of July 16, 1998 between the Corporation and USV Partners, LLC and their permitted successors and assigns, and such failure shall continue for a period of 30 days after notice from any such holder. (f) Additional Financing. The Corporation shall fail in any material respect to comply with Section 8.1(g) of the Investment Agreement granting the Investor a right of first refusal in connection with any additional debt or equity financing obtained by the Corporation. (g) Accounting and Controls and Systems. The Corporation shall fail in any material respect to comply with Section 8.1(h) of the Investment Agreement regarding the employment of a controller and the establishment and implementation of accounting systems and controls. 8. REMEDIES. (a) Upon the occurrence and during the continuance of any Triggering Event, the Dividend Rate on all outstanding Series A Convertible Preferred Stock shall be increased as provided in Section 2 without any action on the part of any Preferred A Holder. (b) The Corporation stipulates that the remedies at law of each Preferred A Holder in the event of any Triggering Event or threatened Triggering Event or otherwise or other failure in the performance of or compliance with any of the terms hereof are not and will not be adequate 14 15 and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise without requiring any holder to post a bond or other security except to the extent required by applicable law. (c) Any Preferred A Holder shall be entitled to recover from the Corporation the reasonable attorneys' fees and expenses incurred by such holder in connection with any Triggering Event or enforcement by such holder of any obligation of the Corporation hereunder. (e) No failure or delay on the part of any Preferred A Holder in exercising any right, power or remedy hereunder or under applicable law or otherwise shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or thereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or otherwise. 15 EX-10.1 3 FORM OF INVESTMENT AGREEMENT 1 EXHIBIT 10.1 INVESTMENT AGREEMENT between U.S. TECHNOLOGIES INC. and USV PARTNERS, LLC Dated as of July 16, 1998 2 TABLE OF CONTENTS ARTICLE I DEFINITIONS 1 1.1 Definitions 1 1.2 Interpretation 8 1.3 Accounting Terms 9 ARTICLE II PURCHASE AND SALE OF PREFERRED SHARES 10 2.1 Purchase and Sale of Preferred Shares and Warrants 10 2.3 Use of Proceeds 10 ARTICLE III TERMS OF PREFERRED SHARES AND WARRANTS 10 3.1 The Preferred Shares and Warrants 10 ARTICLE IV CONDITIONS PRECEDENT TO INVESTOR'S OBLIGATION TO CLOSE 10 4.1 Representations and Warranties 10 4.2 Documentation at Closing 11 4.3 Amended Organizational Documents 12 4.4 Key Person Life and Directors and Officers Liability Insurance 12 4.5 Unaudited Financial Statements 12 4.6 No Material Adverse Change 12 4.7 Amended Form 10-K and Form 8-K 12 4.8 Closing Price 13 ARTICLE V CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE 13 5.1 Representations and Warranties 13 5.2 Documentation at Closing 13 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE INVESTOR 13 6.1 Organization. 14 6.2 Authority. 14 6.3 Consents and Approvals. 14 6.4 No Conflict or Violation. 14 6.5 Litigation. 14 6.6 Certain Fees. 15 6.7 Disclosure. 15 6.8 Investment Representation. 15 ARTICLE VII REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY GROUP 16
3 7.1 Organization. 16 7.2 Corporate Action 16 7.3 Capitalization of the Company: Status of Capital Stock. 16 7.4 Capital Stock of Subsidiaries 17 7.5 Subsidiaries. 17 7.6 Governmental Approvals 17 7.7 No Conflict or Violation. 17 7.8 Taxes. 18 7.9 Financial Statements. 19 7.10 Absence of Certain Changes or Events. 19 7.11 Real Property. 20 7.12 Personal Property. 21 7.13 Litigation. 22 7.14 Legal Compliance. 22 7.15 Environmental Matters. 22 (a) Compliance. 22 (b) Environmental Permits. 22 (c) Environmental Claims. 22 (d) Release of Hazardous Materials. 23 (e) Underground Storage. 23 (f) Asbestos, PCBs, Etc. 23 7.16 Insurance. 23 7.17 Intellectual Property. 24 7.18 Labor Matters. 24 7.19 Employee Benefits 25 7.20 Contracts. 26 7.21 Absence of Undisclosed Liabilities. 27 7.22 No Illegal or Improper Transactions. 27 7.23 Certain Fees. 27 7.24 Substantial Customers and Suppliers 27 7.25 Books and Records. 27 7.26 Assumptions or Guarantees of Indebtedness of Other Persons. 28 7.27 Disclosure 28 7.28 Securities Act. 29 7.29 Registration Rights 29 7.30 U.S. Real Property Holding Corporation 29 7.31 Investments in Other Persons 29 7.32 Computer Programs and Software 29 ARTICLE VIII COVENANTS 29 8.1 Affirmative Covenants of the Company 30 (a) Financial and Business Information 30 (b) Notice of Certain Events 31
4 (c) Inspection Rights 31 (d) Keeping of Records and Books of Account 31 (e) U.S. Real Property Holding Corporation 31 (f) Board of Directors and Committees 31 (g) Additional Financing 32 (h) Accounting Controls and Systems 32 (i) Directors and Officers Liability Insurance 32 8.2 Covenants of the Investor 32 (a) Permitted Transfers 32 (b) Securities Laws 34 8.3 Affirmative Covenant of the Kenneth H. Smith 34 ARTICLE IX INDEMNIFICATION 34 9.1 Indemnification 34 ARTICLE X TERMINATION 35 10.1 Termination by Either of the Investor or the Company 35 10.2 Effect of Termination and Abandonment 35 ARTICLE XI MISCELLANEOUS 36 11.1 Severability 36 11.2 Specific Enforcement. 36 11.3 Entire Agreement; Amendments. 36 11.4 Notices. 36 11.5 Waivers. 37 11.6 Headings. 37 11.7 Successors and Assignees. 38 11.8 No Third Party Beneficiaries. 38 11.9 Counterparts. 38 11.10 Governing Law. 38 11.11 Dispute Resolution 38 11.12 Drafting. 39 11.13 Waiver of Jury Trial. 40 11.14 Costs, Expenses and Taxes. 40 11.15 Further Assurances. 40 11.16 Disclosure to Other Persons 40
EXHIBIT 3.1(a) - CERTIFICATE OF DESIGNATIONS EXHIBIT 3.1(b) - WARRANTS SCHEDULES 5 INVESTMENT AGREEMENT This Investment Agreement (the "Agreement") is made as of this 16th day of July 1998, by and between USV Partners, LLC, a limited liability company organized under the laws of the State of Delaware (the "Investor"), and U.S. Technologies Inc. (the "Company"), a Delaware corporation (each, individually, a "Party" and, collectively, the "Parties"). WITNESSETH: WHEREAS, the Company desires to issue and sell to the Investor, and the Investor desires to purchase from the Company, certain securities of the Company, upon the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the respective representations, warranties, covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged, the Parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. As used herein, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "AAA" shall have the meaning given to it in Section 11.11(a). "ACM" shall have the meaning given to it in Section 7.15(f). "Action or Proceeding" means any action, suit, arbitration, proceeding or Government Entity investigation or audit. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. For the purposes of this definition, a Person shall be deemed to control another Person if it possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through ownership of voting securities, by contract or otherwise. "Agreement" means this Investment Agreement as from time to time amended and in effect between the Parties, including all schedules and exhibits hereto. "Audited Financial Statements" has the meaning given it in Section 7.9. 6 "Benefit Arrangement" means any arrangement, obligation, custom, or practice, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, agents, or independent contractors, other than any obligation, arrangement, custom or practice that is a Benefit Plan, including, without limitation, employment agreements, severance agreements, executive compensation arrangements, including but not limited to stock options, restricted stock rights and performance unit awards, incentive programs or arrangements, sick leave, vacation pay, severance pay policies, plant closing benefits, salary continuation for disability, consulting, or other compensation arrangements, workers' compensation, retirement, deferred compensation, bonus, stock purchase, hospitalization, medical insurance, life insurance, tuition reimbursement or scholarship programs, employee discounts, employee loans, any plans subject to Section 125 of the Code, and any plans providing benefits or payments in the event of a change of control, change in ownership or sale of a substantial portion (including all or substantially all) of the assets of any business or portion thereof, in each case with respect to any present or former employees, directors or agents. "Benefit Plan" has the meaning given in Section 3(3) of ERISA. "Benefits" means any employee retirement, severance, profit sharing, bonus, vacation, insurance, medical, social contribution, contribution for occupational accidents, meals, travel or vehicle allowances, or any similar benefit granted by any Member, whether under any employment contract, collective bargaining arrangement, any other employee compensation arrangement, or required under any applicable Law or Order. "Board" means the Board of Directors of the Company. "Books and Records" means all titles, documents, instruments, papers, books and records relating to the business and operations of any Member, including financial statements, tax returns and related workpapers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates, corporate books, stock transfer ledgers, contracts, Licenses, customer lists, computer files and programs, retrieval programs, operating data and plans and environmental studies and plans. "Business Day" means any day other than a Saturday, Sunday or public holiday or the equivalent for banks under the laws of Washington, D.C. or Atlanta, GA. "Capital Lease" means any lease of property (real, personal or mixed) which, in accordance with GAAP, is required to be capitalized on the lessee's balance sheet. "Certificate of Designations" means the Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock of U.S. Technologies Inc., adopted by the Board of Directors on July 10, 1998. 7 "Closing" has the meaning given it in Section 2.2. "Closing Price" shall mean for each share of Common Stock for any day (x) the last sale price, regular way, or, in case no such sale takes place on such day, the average closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on NASDAQ National Market System, the New York Stock Exchange or the American Stock Exchange, as applicable or (y) the last sale price, regular way, before 5:00 p.m., or, in case no such sale takes place on such day, the average closing bid and asked prices, regular way, in either case as reported on the NASDAQ OTC Bulletin Board. "Code" means the Internal Revenue Code of 1986, as amended. "Common Stock" means (a) the Company's common stock, with a par value of $0.02 per share, as authorized on the date of this Agreement, (b) any other capital stock of any class or classes (however designated) of the Company, authorized on or after the date hereof, the holders of which shall have the right, without limitation as to amount per share, either to all or to a share of the balance of current dividends and liquidating distributions after the payment of dividends and distributions on any shares entitled to preference in the payment thereof, and the holders of which shall ordinarily, in the absence of contingencies, be entitled to vote for the election of directors of the Company, and (c) any other securities into which or for which any of the securities described in (a) or (b) above may be converted or exchanged pursuant to a plan or recapitalization, reorganization, merger, sale of assets or otherwise. "Company" means U.S. Technologies Inc., a Delaware corporation, and its successors and permitted assigns. "Company Benefit Arrangement" means any Benefit Arrangement sponsored or maintained by any Member or with respect to which any Member has or may have any liability (whether actual, contingent, with respect to any of its assets or otherwise) as of the Closing, in each case with respect to any present or former directors, employees, or agents of the Company Group. "Company Group" means the Company and each of its Subsidiaries, including, without limitation, Labor-to-Industry Inc., a Texas corporation, and Service-to-Industry Inc., a Delaware corporation. "Company Group Business" means and includes, with respect to any date, all businesses engaged in by any Member. "Company Plan" means, as of the Closing, any Benefit Plan for which any Member is the "plan sponsor" (as defined in Section 3(16)(B) of ERISA, without regard to whether that statute applies) or any Benefit Plan maintained by any Member or to which any Member is obligated to make payments, in each case with respect to any present or former employees of the Company 8 Group. Company Plan includes any Qualified Plan terminated since January 1, 1994. "Contracts" has the meaning given it in Section 7.20(a). "Environmental Claims" means any and all claims, actions, causes of action, or other written notices by any Person alleging potential Liability (including, without limitation, potential liability for investigatory costs, cleanup costs, Government Entity response costs, natural resources damages, property damages, personal injuries, or civil or criminal penalties) arising out of or resulting from (a) the presence or release into the environment of any Hazardous Material at any location, whether or not owned or operated by any Member, or (b) circumstances forming the basis of any violation of any Environmental Laws. "Environmental Laws" means any and all applicable Laws, Orders and Licenses having the effect of law under the laws of the United States or any state, province, county, city or other political subdivision thereof relating to human health, the environment or to emissions, discharges or releases of pollutants, contaminants, Hazardous Materials or wastes into the environment, including without limitation, ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Materials or wastes or the clean-up or other remediation thereof. "Environmental Permits" means any and all Licenses of any Government Entity relating to or required by Environmental Laws and necessary or proper for the Company Group Business. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulation or rule issued thereunder. "ERISA Affiliate" means any Person that together with any Member, would be or was at any time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA and any general partnership of which any Member is or has been a general partner. "GAAP" shall mean the generally accepted accounting principles of the United States consistently applied. "Government Entity" means any court or tribunal or administrative, governmental or regulatory body, agency, commission, division, department, public body or other authority. "Hazardous Materials" means any and all toxic, radioactive, caustic or otherwise hazardous substances, including petroleum, its derivatives, petroleum derivative gases, by-products and other hydrocarbons, and any and all substances having any constituent elements displaying any of the foregoing characteristics, including, without limitation, any and all substances regulated under Environmental Laws. "Indebtedness" means all obligations, contingent and otherwise which should, in accordance 9 with GAAP, be classified upon the obligor's balance sheet as liabilities, but in any event including, without limitation, liabilities secured by any mortgage on property owned or acquired subject to such mortgage, whether or not the liability secured thereby shall have been assumed, and also including, without limitation, (a) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be so reflected in said balance sheet except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, and (b) the present value of any Capital Leases. "Indebtedness for Money Borrowed" of a Person means at any time the sum at such time, without duplication, of (a) Indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (b) any obligations of such Person in respect of letters of credit, banker's or other acceptances or similar obligations issued or created for the account of such Person, (c) obligations of such Person with respect to Capital Leases, (d) all liabilities secured by any Lien on any property owned by such Person, to the extent attached to such Person's interest in such property even though such Person has not assumed or become personally liable for the payment thereof, and (e) obligations of third parties which are being guaranteed or indemnified against by such Person or which are secured by the property of such Person; but excluding trade and other accounts payable in the ordinary course of business in accordance with customary trade terms and which are not overdue (as determined in accordance with past practices) or which are being disputed in good faith by such Person and for which adequate reserves are being provided on the books of such Person in accordance with GAAP. "Indemnified Liability" has the meaning given it in Section 9.1. "Indemnitees" has the meaning given it in Section 9.1. "Investment Assets" means all debentures, notes and other evidences of Indebtedness, stocks, securities (including rights to purchase and securities convertible into or exchangeable for other securities), interests in joint ventures and general and limited partnerships, mortgage loans and other investment or portfolio assets owned of record or beneficially by any Member. "Investment Documents" shall mean this Agreement, the Preferred Shares, the Certificate of Designations, the Warrants and the Registration Rights Agreement. "Investor" means USV Partners, LLC, a Delaware limited liability company. "Knowledge" means, with respect to any Person except the Company, the knowledge that such Person has or should have after reasonable inquiry. "Knowledge of the Company" means the actual or constructive knowledge of the Company and of the directors and Principal Officers of any Member, other than Gregory C. Earls. "Laws" means all laws, statutes, rules, regulations, ordinances and other pronouncements 10 having the effect of law in the United States, or any state, province, county, municipality or other political subdivision thereof. "Leased Real Property" has the meaning given it in Section 7.11(b). "Leased Real Property Tangible Assets" has the meaning given it in Section 7.11(d). "Liabilities" means all Indebtedness, obligations, and other liabilities of a Person (whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due). "Licenses" means all licenses, permits, certificates, approvals, registrations, franchises and similar consents granted or issued by a Government Entity or any other Person. "Lien" means any mortgage, security interest, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge, preference, priority or other security agreement, option, warrant, attachment, right of first refusal, preemptive, conversion, put, call or other claim or right, restriction on transfer (other than restrictions imposed by applicable securities Laws), or preferential arrangement of any kind or nature whatsoever (including any restriction on the transfer of any assets), any conditional sale or other title retention agreement, any financing lease involving substantially the same economic effect as any of the foregoing and the filing of any financing statement or similar document with any pertinent public or private registry. "Losses" has the meaning given it in Section 9.1(a). "Material Adverse Effect" means, with respect to any Member, a material adverse effect on the business, assets, liabilities, revenues, costs and expenses, income before provision for income taxes, operations or condition, financial or otherwise, of the Company Group as a whole. In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event does not of itself have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then existing events could reasonably be expected to result in a Material Adverse Effect. "Member" means any member of the Company Group. "Net Worth" means, with respect to any Member and as of any date, the assets of such Member less the liabilities of such Member, in each case as of such date and calculated in accordance with GAAP. "Order" means any writ, judgment, decree, injunction or similar order of any Government Entity (in each case whether preliminary or final). "Organizational Documents" means with respect to any Person, articles of incorporation, certificates of incorporation, by-laws, partnership agreement, articles of association, joint venture 11 or other agreement, instrument or document, individually or collectively, pursuant to which such Person is established or organized, and that governs the internal affairs of such Person, as such documents may be amended from time to time. "Owned Real Property" has the meaning given it in Section 7.11(a). "Party" means any party to this Agreement. "PCBs" has the meaning given to it in Section 7.15(f). "Person" means and includes any individual, partnership, joint venture, corporation, trust, limited liability company, joint stock company, unincorporated organization, Government Entity or any political subdivision or agency thereof, or any other entity. "Personal Property" has the meaning given it in Section 7.12. "Preferred Shares" has the meaning given it in Section 2.1. "Preferred Stock" means all series of preferred stock of the Company. "Principal Officer" means any management level employee. "Purchase Price" has the meaning given it in Section 2.1. "Qualified Plan" means any Company Plan that meets, purports to meet, or is intended to meet the requirements of Section 401(a) of the Code. "Registration Rights Agreement" means the registration rights agreement by and between the Company and the Investor dated as of July 16, 1998. "Securities Act" means the Securities Act of 1933, as amended, or any similar successor federal statute, and the rules and regulations of the United States Securities and Exchange Commission (or any other federal agency at that time administering the Securities Act) thereunder, all as the same shall be in effect at the time. "Software" has the meaning given to it in Section 7.32. "Subsidiary" or "Subsidiaries" means (a) any entity with more than fifty percent (50%) of whose capital stock of any class or classes having by the terms thereof ordinary voting power to elect directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such entity shall have or might have voting power by reason of the happening of any contingency) is at the time owned directly or indirectly by any one or more Members and (b) any partnership association, joint venture or other entity in which any one or more of its Members has more than a 12 fifty percent (50%) equity interest at the time. "Tangible Assets" shall have the meaning given to it in Section 7.11(c). "Tax Return" means any report, return, statement or other written information required to be supplied to a taxing authority in connection with Taxes. "Taxes" means (a) any and all taxes, levies or other like assessments, charges or fees (including estimated taxes, charges and fees), including, without limitation, income, corporation, add-on minimum, ad valorem, advances, gross receipts, transfer, excise, property, sales, use, value-added, License, payroll, employment, severance, pay as you earn, withholding on amounts paid by or to the relevant party, social security and franchise or other governmental taxes or charges, imposed by the United States or by any other nation, state, province, county, local or foreign government or by any subdivision or agency of the foregoing; and such term shall include any interest (punitive or otherwise), penalties or additions to tax related or attributable to such taxes; and (b) Liability for the payment of any amounts of the type described in (a) as a result of any obligation to indemnify any other Person. "Third Party Claim" shall have the meaning given to it in Section 9.2(a). "Third Party Offer" shall have the meaning given to it in Section 8.1(g). "Unaudited Financial Statements" has the meaning given in it in Section 4.5. "Warrants" shall have the meaning given it in Section 2.1. 1.2 Interpretation. Unless otherwise expressly provided herein (a) defined terms in the singular include the plural and vice versa, and the masculine, feminine and neuter gender include all genders; (b) the words "hereof," "herein" and "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular provision of this Agreement; (c) the words "include," "includes," and "including" mean include, includes and including "without limitation" and "without limitation by specification"; and (d) references to any Person shall be construed as a reference to such Person and any permitted successors or assigns of such Person; (e) references to "consent" shall mean prior consent evidenced in writing; (f) terms such as "satisfactory to ______" "acceptable to _________," "in such manner as ______ may determine," to ______'s satisfaction," and phrases of similar import authorize and permit such Party to approve, disapprove, act or decline to act, unless otherwise specified herein, in its reasonable discretion without unreasonable delay or condition; and (g) references to Sections refer to Sections of this Agreement. 1.3 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, and all financial data submitted pursuant to this Agreement and all financial tests to be calculated in accordance with this Agreement shall be prepared and calculated in accordance with GAAP. All financial tests described herein relating to the Company shall be calculated with respect to the Company Group on a consolidated basis. 13 ARTICLE II PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS 2.1 Purchase and Sale of Preferred Shares and Warrants. The Company agrees to issue and sell to the Investor, and, subject to and in reliance upon the representations, warranties, terms and conditions of this Agreement, the Investor agrees to purchase (a) 500,000 shares of the Company's Series A Convertible Preferred Stock, with a par value of $0.02 per, duly authorized, validly issued, fully paid, non-assessable and free and clear of any and all Liens (the "Preferred Shares"), and (b) a warrant to purchase 500,000 shares of Common Stock with a par value of $0.02 per share (the "Warrants"). The aggregate purchase price for the Preferred Stock and the Warrants shall be $5,000,000 (the "Purchase Price") 2.2 The Closing. Such purchase and sale shall take place at a closing ("Closing") to be held at the offices of Wilmer, Cutler & Pickering at 10:00 a.m. local time on July 16, 1998. At the Closing, (i) the Company will issue to the Investor a certificate evidencing the Preferred Shares, registered in the name of the Investor; (ii) the Company will issue to the Investor a certificate evidencing the Warrants registered in the name of the Investor; and (iii) the Investor will pay the Purchase Price to the Company in immediately available funds by wire transfer, to an account or accounts designated by the Company prior to the Closing. 2.3 Use of Proceeds. The Company agrees to use the full proceeds from the sale of the Preferred Shares and the Warrants for general corporate purposes and to pay the Investor's expenses as set forth in Section 11.14. ARTICLE III TERMS OF PREFERRED SHARES AND WARRANTS 3.1 The Preferred Shares and Warrants. (a) The Company has authorized the issuance and sale to the Investor of the Preferred Shares. The terms of the Preferred Shares shall be as set forth in the Certificate of Designations in the form of Exhibit 3.1(a). (b) The Company has authorized the issuance and sale to the Investor of the Warrants. The terms of the Warrants shall be as set forth in the form of Warrant attached as Exhibit 3.1(b). ARTICLE IV CONDITIONS PRECEDENT TO INVESTOR'S OBLIGATION TO CLOSE The obligation of the Investor to purchase and pay for the Preferred Shares and the Warrants at the Closing is subject to satisfaction of each the following conditions, all or any of which may be waived in writing by the Investor: 4.1 Representations and Warranties. Each of the representations and warranties of the Company set forth in Article VII hereof shall be true and correct in all material respects. 14 4.2 Documentation at Closing. The Investor shall have received prior to or at the Closing all of the following, each in form and substance satisfactory to the Investor and its special counsel: (a) The Certificate of Designations as adopted by the Board, attested by the Secretary or Assistant Secretary of the Company and filed with the Secretary of State of the State of Delaware. (b) Stock certificates, duly executed by the Company, representing the Preferred Shares; and copies of the stock book of the Company containing board minutes or consent resolutions, executed by the directors of the Company, evidencing the issuance of the Preferred Shares to the Investor, which shall occur prior to or simultaneously with the consummation of the transactions contemplated hereby. (c) The Warrants, duly executed by the Company, and copies of the stock book of the Company containing board minutes or consent resolutions, executed by the directors of the Company, evidencing the issuance of the Warrants to the Investor, which shall occur prior to or simultaneously with the consummation of the transactions contemplated hereby. (d) A certificate of the Secretary or an Assistant Secretary of the Company dated the date of Closing, which shall certify the names of the officers of the Company authorized to sign the Investment Documents and any other documents or certificates to be delivered pursuant thereto, together with the true signatures of such officers. (e) Certified copies of the resolutions of the Board of Directors and, to the extent required, the shareholders of the Company evidencing approval of: (i) the Investment Documents, (ii) all other matters contemplated thereby and (iii) this transaction by not less than two "Continuing Directors" such that the Investor will not be deemed to be an "Acquiring Person" (as such terms are defined in the Rights Agreement dated as of October 31, 1997 between the Company and American Securities Transfer & Trust, Inc.). (f) Certified copies of the Organizational Documents of each Member and certified copies of all documents evidencing other necessary corporate or other action and governmental approvals, if any, with respect to the Investment Documents and all other matters contemplated thereby. (g) The opinion of Smith, Gambrell & Russell, LLP, counsel for the Company, in form acceptable to the Investor's counsel. (h) A certificate from a duly authorized officer of the Company stating that each of the representations and warranties contained in Article VII hereof and otherwise made by the Company in writing in connection with the transactions contemplated hereby are true and correct in all material respects and that all the conditions set forth in this Article IV have been satisfied other than those, if any, waived by the Investor in writing. 15 (i) Such other documents referenced in any Schedule hereto or relating to the transactions contemplated by the Investment Documents as the Investor or its special counsel may reasonably request. 4.3 Amended Organizational Documents. The Board of Directors of the Company shall have duly authorized the issuance of the Preferred Shares on the terms set forth in the Certificate of Designations attached hereto as Exhibit 3.1(a) and the issuance of the Warrants on the terms set forth in the form of Warrant attached hereto as Exhibit 3.1(b). The Board of Directors shall have adopted a resolution setting forth the proposed amendment to the Company's Restated Certificate of Incorporation to eliminate the provision set forth in Section 4 thereof restricting the preferential amount payable with respect to preferred shares in the event of an involuntary liquidation and directing that such proposed amendment be considered at the next annual shareholders meeting, if it has not been approved prior to such annual meeting by the written consent of the shareholders. 4.4 Key Person Life and Directors and Officers Liability Insurance. The Company shall have obtained, and shall maintain, with a financially sound and reputable insurance company term life insurance on the life of Kenneth H. Smith in the face amount of at least $2,000,000. 4.5 Unaudited Financial Statements. The Investor shall have received a copy of the unaudited financial statements for the Company Group for the three-month period ended March 31, 1998 (prepared on a basis consistent in all material respects with the audited financial statements for the year ended December 31, 1997 described in Section 7.9), including therein consolidated and consolidating balance sheets of the Company Group as of the end of such three-month period and consolidated and consolidating statements of income and of shareholders' equity and of cash flows of the Company Group for such three-month period, together with all schedules and notes thereto (the "Unaudited Financial Statements"); and the financial conditions and performance of the Company Group so reflected in the Unaudited Financial Statements shall be satisfactory to the Investor in its sole discretion. 4.6 No Material Adverse Change. Since March 31, 1998, there shall have been no Material Adverse Effect. 4.7 Amended Form 10-K and Form 8-K. The Company shall have amended the Form 10-K filed with the U.S. Securities Exchange Commission on May 19, 1998 to reflect the conditional nature of the financing set forth in Section 8.1(g), by filing an amended Form 10-K with the U.S. Securities Exchange Commission. The Company shall have amended the Form 8-K filed with the U.S. Securities Exchange Commission on September 26, 1997 to reflect the option granted by GWP, Inc. to Komen Holdings Pty., Ltd. to purchase 400,000 shares of common stock of the Company by filing an amended Form 8-K with the U.S. Securities Exchange Commission. 4.8 Closing Price. The Closing Price for the Common Stock for the day immediately preceding the date of Closing is $0.70 per share of Common Stock or more. 16 ARTICLE V CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE The obligation of the Company to issue and sell to the Investor the Preferred Shares and the Warrants at the Closing is subject to satisfaction of each the following conditions, all or any of which may be waived in writing by the Company: 5.1 Representations and Warranties. Each of the representations and warranties of the Investor set forth in Article VI hereof shall be true and correct in all material respects. 5.2 Documentation at Closing. The Company shall have received prior to or at the Closing all of the following, each in form and substance satisfactory to the Company and its special counsel: (a) Certified copies of the resolutions of the Investor and, to the extent required, the members of the Investor evidencing approval of the Investment Documents and all other matters contemplated thereby; certified copies of the Certificate of Formation of the Investor and certified copies of all documents evidencing other necessary corporate or other action and governmental approvals, if any, with respect to the Investment Documents and all other matters contemplated thereby. (b) The opinion of Wilmer, Cutler & Pickering, special counsel for the Investor, in form acceptable to the Company's counsel. (c) A certificate from a duly authorized officer of the Investor stating that each of the representations and warranties contained in Article VI hereof and otherwise made by the Investor in writing in connection with the transactions contemplated hereby are true and correct in all material respects and that all the conditions set forth in this Article V have been satisfied other than those, if any, waived by the Company in writing. (d) Such other documents referenced or relating to the transactions contemplated by the Investment Documents as the Company or its special counsel may reasonably request. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE INVESTOR The Investor hereby represents and warrants as of the date of this Agreement and as of the Closing that: 6.1 Organization. It is duly organized, validly existing and in good standing under the laws of the State of Delaware. 6.2 Authority. It has the power and authority to enter into the Investment Documents, as applicable, and to carry out its obligations thereunder. The execution, delivery and performance 17 of the Investment Documents by the Investor and the consummation by the Investor of the transactions contemplated thereby have been duly authorized by all necessary internal proceedings, and no other internal proceedings on the part of the Investor are necessary to authorize the Investment Documents or the transactions contemplated thereby. Each Investment Document to which the Investor is a party has been duly and validly executed and delivered by the Investor and (assuming this Agreement constitutes a valid and binding obligation of the Company) constitutes a valid and binding agreement of the Investor, enforceable against the Investor in accordance with its respective terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally and by general principles of equity. 6.3 Consents and Approvals. No filing with, and no License of, any Government Entity is necessary for the execution, delivery and performance of this Agreement or the other documents contemplated hereby by the Investor and the consummation by the Investor of the transactions contemplated by the Investment Documents. 6.4 No Conflict or Violation. The execution, delivery and performance of the Investment Documents to which the Investor is a party, the consummation of the transactions contemplated thereby, the fulfillment of the terms thereof, and the compliance with any of the provisions thereof will not: (a) conflict with or result in a breach or violation of the Organizational Documents of the Investor; (b) conflict with, or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, vesting, payment, exercise, acceleration, suspension, revocation or modification) under, any of the terms, conditions or provisions of any note, credit agreement, bond, mortgage, deed of trust, security instrument, indenture, lease, License, Contract, plan or other instrument or obligation to which the Investor is a party or by which it or any of its respective properties or assets may be bound or affected; (c) violate any Order or Law applicable to the Investor or any of its properties or assets, except, in the case of clauses (a) or (b), for such violations, breaches, defaults or rights of termination, cancellation, acceleration, creation, imposition, suspension, revocation or modification as to which requisite waivers or consents have been obtained by the Investor on or prior to the Closing. 6.5 Litigation. There is no claim, Action or Proceeding (whether at law or equity, before or by any Government Entity or before any arbitrator) pending or, to the Knowledge of the Investor, threatened against or affecting the Investor, the outcome of which would in any manner impair the ability of the Investor to perform its obligations under the Investment Documents. 6.6 Certain Fees. The Investor has not entered into, nor will it enter into, during the term of this Agreement, any agreement, arrangement or understanding with any Person that will result in the obligation of the Company to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. 6.7 Disclosure. No representation or warranty by the Investor in this Agreement or any 18 Exhibit or Schedule hereto, or any certificate furnished or to be furnished by the Investor in connection with this Agreement, contains or will contain an untrue statement of material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading. 6.8 Investment Representation. (a) The Investor acknowledges that the Preferred Shares and Warrants are not registered under the securities laws of any jurisdiction and that it is acquiring the Preferred Shares for its own account, and not as nominee or agent. (b) The Preferred Shares and Warrants are being and will be acquired for the purpose of investment and not with a view to distribution or resale thereof, subject, nevertheless, to the condition that, except as otherwise provided herein and subject to compliance with applicable securities laws, the disposition of the property of the Investor shall at all times be within its control. (c) It hereby acknowledges that the Preferred Shares and Warrants and any other securities issued in respect of such securities upon any stock split, stock dividend, recapitalization, merger or similar event (unless no longer required in the opinion of counsel) shall bear a legend substantially in the following form (in addition to any other legend required by the Investment Documents): THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT AN OPINION OF LEGAL COUNSEL (REASONABLY SATISFACTORY TO U.S. TECHNOLOGIES INC. AND ITS LEGAL COUNSEL) THAT SUCH SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION IS IN COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. The acquisition by the Investor of the Preferred Shares and Warrants shall constitute a confirmation by it of the foregoing representations and warranties. ARTICLE VII REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY GROUP The Company represents and warrants as of the date hereof and as of the Closing that: 7.1 Organization. The Company is a corporation, duly organized, validly existing and in good standing under the Laws of the State of Delaware. Labor-to-Industry Inc. is a corporation, duly organized, validly existing and in good standing under the Laws of the State of Texas. Service- 19 to-Industry Inc. is a corporation duly organized, validly existing and in good standing under the Laws of Delaware. Each Member (a) has all requisite corporate power and authority to own, lease and operate its property and to conduct its business as it is now being conducted and presently proposed to be conducted; (b) is in compliance with all Laws applicable to it or its business, including but not limited to any tax Laws, and (c) has obtained and maintained all Licenses required to conduct its business as it is currently being conducted and presently proposed to be conducted. Each Member is duly qualified, licensed or admitted to do business and is in good standing in all jurisdictions in which the ownership, use or leasing of its assets and properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary. Schedule 7.1 contains a list of each Member and of all jurisdictions in which each Member is so qualified and all lines of business in which each Member is currently participating or is currently engaged. True, complete and correct copies of the Organizational Documents presently in effect for each Member have been delivered to the Investor. No Member is in violation of its Organizational Documents. 7.2 Corporate Action. The Company has all necessary corporate power and has taken all corporate action required to make all the provisions of the Investment Documents and any other agreements and executed by it in connection therewith valid and enforceable obligations of the Company. The Company has duly executed and delivered each of the Investment Documents and each other agreement and instrument executed by it in connection therewith, and each is a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally and by general principles of equity. Neither the issuance of the Preferred Shares nor the Warrants is subject to preemptive or other similar statutory or contractual rights. 7.3 Capitalization of the Company: Status of Capital Stock. (a) The Preferred Shares, when issued and paid for at the Closing, will be duly authorized, validly issued and fully paid and nonassessable and free and clear of all Liens other than Liens created by the Investor. As of the Closing, the Company shall have a total authorized capitalization consisting of 40,000,000 shares of Common Stock, of which 28,671,278 shares will be issued and outstanding, and 10,000,000 shares of Preferred Stock of which 500,000 shares will be issued and outstanding. (b) Except for the Warrants and as disclosed on Schedule 7.3(b), as of the Closing there will be no options, warrants or rights to purchase shares of capital stock or other securities of the Company authorized, issued or outstanding, nor will the Company be obligated in any other manner to issue shares of its capital stock or other securities. There are no restrictions on the transfer of shares of capital stock of the Company other than those imposed by relevant state and federal securities laws. Except as set forth in this Agreement, no holder of any security of the Company is entitled to preemptive or similar statutory or contractual rights, either arising pursuant to any agreement or instrument to which the Company is a party, or which are otherwise binding upon the Company. The offer and sale of all shares of capital stock and other securities of the Company issued before the Closing complied with or were exempt from all federal and state securities laws. 20 7.4 Capital Stock of Subsidiaries. Schedule 7.4 sets forth a list of each Subsidiary of the Company and its jurisdiction of incorporation or organization. As of the Closing, the Company owns, directly or indirectly, all of the outstanding capital stock of each of the Subsidiaries, beneficially and of record, free and clear of all Liens. All the outstanding shares of capital stock of each of the Subsidiaries have been duly authorized, are validly issued and are fully paid and nonassessable and free and clear of all Liens. There are no options, warrants or rights to purchase shares of capital stock or other securities of any of the Subsidiaries authorized, issued or outstanding, nor is any Subsidiary obligated in any other manner to issue shares of its capital stock or other securities. 7.5 Subsidiaries. Other than the outstanding capital stock of each of the Subsidiaries set forth on Schedule 7.4, no Member has any Subsidiaries or presently owns, of record or beneficially, or controls, directly or indirectly, any capital stock, securities convertible into capital stock, or any other equity or similar interest, in any Person; nor is any Member directly or indirectly, a participant in any joint venture, partnership or other noncorporate entity. 7.6 Governmental Approvals. No authorization, consent, approval, License, exemption, of or filing or registration with any court or Government Entity is or will be necessary for, or in connection with, the offer, issuance, sale, execution or delivery by the Company of, or for the performance by the Company of its obligations under any of the Investment Documents other than under applicable securities laws with respect to the transactions contemplated by the registration rights set forth in the Registration Rights Agreement. 7.7 No Conflict or Violation. The execution, delivery and performance of the Investment Documents, the consummation of the transactions contemplated thereby, the fulfillment of the terms hereof, and the compliance with any of the provisions hereof will not: (a) conflict with, or result in a breach or violation of the Organizational Documents of any Member; (b) conflict with, or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, vesting, payment, exercise, acceleration, suspension, revocation or modification) under, any of the terms, conditions or provisions of any note, credit agreement, bond, mortgage, deed of trust, security instrument, indenture, lease, License, Contract, plan or other instrument or obligation to which any Member is a party or by which any Member or any of their respective properties or assets may be bound or affected, or result in the creation or imposition of any material Lien on any of the assets or properties of any Member pursuant to (i) any Law to which any Member or any of its property is subject, or (ii) any Order to which any Member is bound or any of its respective property is subject; (c) violate any Order or Law applicable to any Member or any of its respective properties or assets. 21 7.8 Taxes. (a) Each Member has (i) duly filed (or has had filed on its behalf) with the appropriate Government Entities all Tax Returns required to be filed by it, all of which Tax Returns are true, correct and complete in all respects and (ii) duly paid in full all Taxes owed by it whether or not shown on any Tax Return; (b) Each Member has withheld and paid to the proper Government Entity all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party; (c) No Actions or Proceedings, or other administrative or court claims are presently pending or, to the Knowledge of the Company, threatened or contemplated with regard to any Taxes or Tax Returns of any Member; (d) The income Tax Returns of each Member have been filed with the appropriate Government Entities for all periods through and including December 31, 1997, and no deficiencies were asserted as a result of any such filings that have not been resolved and fully paid; no Member has granted any requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment, collection or payment of any Taxes for which any Member may be liable; (e) There are no Liens outstanding against any assets, properties or business of any Member which arise from or are otherwise related to Taxes or Tax Returns; (f) True, correct and complete copies of all Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by any Member since December 31, 1997 have been made available to the Investor or its Affiliates for review; and (g) No Member is a party to any Tax sharing, Tax indemnity or other agreement or arrangement relating to Taxes with any Person. 7.9 Financial Statements. The Company has delivered to the Investor true, correct and complete copies of its audited consolidated balance sheets as of December 31, 1997 and the related consolidated statements of income, changes in stockholders' equity and cash flows for the fiscal year then ended, together with all schedules and notes thereto and an unqualified auditor's opinion (the "Audited Financial Statements"). The Company has also delivered to the Investor a true, correct and complete copy of the Unaudited Financial Statements. The Audited Financial Statements and the Unaudited Financial Statements fairly present, or will fairly present, in conformity with GAAP, applied on a consistent basis in accordance with past practice (except as may be indicated in the notes thereto), the consolidated financial position of the Company Group as of the respective dates thereof and the results of its operations and its cash flows for the periods then ended. The notes to the Unaudited Financial Statements for the Period ended March 31, 1998 have been prepared in a 22 manner consistent with the notes to the Audited Financial Statements heretofore delivered. A schedule of Indebtedness for Money Borrowed of the Company Group as of the Closing (including Capital Leases) is attached hereto as Schedule 7.9. 7.10 Absence of Certain Changes or Events. Since the date of the Audited Financial Statements, each Member has conducted its business in the ordinary and regular course consistent with past practices, and there has not been: (a) any Material Adverse Effect; (b) any material damage, destruction or casualty loss to any material asset or property of any Member that is not covered by insurance that will be promptly paid to the Member; (c) except as disclosed in Schedule 7.10, any entry into any employment agreement, deferred compensation or other similar agreement or any arrangement with any of their officers or employees; any increase in the rate or terms of the compensation payable or to become payable to employees of any Member, except increases occurring in accordance with customary practices or in accordance with existing collective bargaining or employment agreements, or any modification in employee benefits, or any borrowing of money from any Member by any employee of any Member (other than routine travel and similar advances); (d) any waiver by any Member of any rights or claims having value, except rights or claims not in excess of $10,000, in the aggregate, or that were waived in the ordinary course of business and consistent with past practice; (e) any failure to collect the accounts receivable of any Member other than in the ordinary course of business and in amounts not exceeding the applicable reserves or to pay the accounts payable and other current liabilities of any Member in any manner when due other than amounts that are subject to a bona fide dispute; (f) any sale, assignment, lease, transfer or other disposition, or the execution of any agreement for the sale, assignment, lease, transfer or other disposition, of any assets of any Member, except in the ordinary course of business and consistent with past practice; (g) any change by any Member in accounting or bookkeeping methods, principles or practices, except as required by GAAP; (h) any borrowing of money, including any increase or extension of purchase money credit of any Member or any increase in the Liabilities of any Member from those reflected in the Unaudited Financial Statements other than current Liabilities incurred in the ordinary course of business and consistent with past practice; (i) any transaction with any officer, director or shareholder (including any of their 23 respective family members) of any Member or any of their respective Affiliates, other than payments of salary and employee benefits in the ordinary course; (j) any declaration or payment of any dividend or other distribution on or with respect to, or any redemption or purchase or other acquisition of, the capital stock of any Member; (k) any change in any material Tax election or any other action with respect to Taxes that is inconsistent with past practices; (l) any material change in the Net Worth of any Member; or (m) any agreement, arrangement or understanding, whether oral or written, to do any of the foregoing matters listed in clauses (a) through (l) inclusive. 7.11 Real Property. (a) Schedule 7.11(a) lists all real property owned, whether or not used by any Member (the "Owned Real Property"). Except as further set forth in Schedule 7.11(a) and except for utility easements and public rights of way, each Member has good and marketable title in its Owned Real Property, free and clear of all Liens. With respect to any Owned Real Property, no Member has received written notice (nor has any reason to believe such exists) of any violation of any applicable zoning ordinance, building code, use or occupancy restriction, or other law, or any condemnation, Action or Proceeding with respect thereto. (b) Schedule 7.11(b) lists all real property leased, whether or not used, by the Members (the "Leased Real Property"). Except as set forth in Schedule 7.11(b), each Member has a valid and existing lease or sublease for, and is in peaceful and undisturbed possession of, all Leased Real Property. All leases covering any of the Leased Real Property are valid and enforceable in accordance with their respective terms, are, to the Knowledge of the Company, in full force and effect, and there is no material default by any Member or by any landlord or lessor under any such lease, or any condition, event or act that, with the giving of notice or lapse of time, or both, would constitute such a default. With respect to any Leased Real Property, no Member has received written notice (nor has any reason to believe such exists) of any violation of any applicable zoning ordinance, building code, use or occupancy restriction, or other Law, or any condemnation or Action or Proceeding with respect thereto. (c) All structures and improvements, and all structural, mechanical and other physical systems thereof that constitute part of the Owned Real Property, including but not limited to, the walls, roofs and structural elements thereof and the heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water, paving and parking equipment, systems and facility included therein (collectively, the "Tangible Assets") (i) are usable in the ordinary course of the operations and business of the Members; and (ii) have been maintained in a reasonably prudent manner in the ordinary course of the operations and business of the Members. 24 No maintenance or repair to the Owned Real Property or any Tangible Assets has been unreasonably deferred. (d) To the Knowledge of the Company, all structures and improvements, and all structural, mechanical and other physical systems thereof that constitute part of the Tangible Assets and other material items of tangible property and assets at any of the Leased Real Property (collectively, the "Leased Real Property Tangible Assets") (i) are usable in the ordinary course of the operations and business of the Members; and (ii) have been maintained in a reasonably prudent manner in the ordinary course of the operations and business of the Members. To Knowledge of the Company, no maintenance or repair to the Leased Real Property or any Leased Real Property Tangible Assets has been unreasonably deferred. 7.12 Personal Property. Schedule 7.12 lists all personal property leased, whether or not used, by each of the Members. Each Member owns or otherwise possesses adequate rights to use such items of personal property that are being used in the conduct or operation of the Company Group Business (the "Personal Property"). Each Member has good and marketable title to all Personal Property owned and used by it, free and clear of all material Liens. All Personal Property (A) is in good working order and condition, ordinary wear and tear excepted, (B) is usable in the ordinary course of business; and (C) has been maintained in a reasonably prudent manner in the ordinary course of business. All fixed assets used by any Member that are material to the operation of the Company Group Business are owned by the applicable Member. 7.13 Litigation. Except as described in Schedule 7.13, there is no, and for the past three (3) years there has been no, claim, Action or Proceeding (whether at law or equity, before or by any Government Entity or before any arbitrator) pending or, to the Knowledge of the Company, threatened against or affecting any Member or any of its assets or properties that would result in a Material Adverse Effect upon any Member. There are no Orders, stipulations or awards (whether rendered by a Government Entity or by arbitration) against any Member or against any of its respective properties, assets or business. 7.14 Legal Compliance. To the Knowledge of the Company, except for matters covered by Section 7.15, each Member has conducted its operations in compliance in all material respects with all applicable Laws. Except for matters covered by Section 7.15, neither the Company nor any director or Principal Officer of any Member has received any written complaint or notice from any Government Entity alleging that it has violated any Order or Law and, to the Knowledge of the Company, no such complaint or notice is threatened. 7.15 Environmental Matters. (a) Compliance. (i) Each Member is in material compliance with all applicable Environmental Laws. 25 (ii) No Member has received any written communication from any Person or Government Entity that alleges that any Member is not in compliance with applicable Environmental Laws or Environmental Permits. (b) Environmental Permits. Each Member has all Environmental Permits necessary for the conduct and operation of its business, and all such Environmental Permits are in good standing, and each Member is in compliance with all terms and conditions of all such Environmental Permits and is not required to make any material expenditure in order to obtain or renew any Environmental Permits. (c) Environmental Claims. (i) There is no Environmental Claim pending or, to the Knowledge of the Company, threatened against any Member, or against any (A) Owned Real Property, (B) Leased Real Property, (C) Personal Property, (D) operation that any Member owns, leases or manages, in whole or in part, or (E) other property for which any Member would be responsible, in whole or in part, for an Environmental Claim. (ii) No Member has received notice that it is liable for any response, removal, investigative or remedial costs under any applicable Law. (iii) All Hazardous Materials any Member may have generated have been transported, stored, treated or disposed of by carriers or treatment, storage and disposal facilities authorized or permitted under all applicable Environmental Laws and Environmental Permits. (iv) (A) Each Member has fully complied with all applicable provisions of any Environmental Laws that condition, restrict or prohibit the transfer, sale, lease or closure of any property for environmental reasons; (B) no Member is required to place any notice or restriction relating to the presence of Hazardous Materials in any instrument or deed to the real property owned, leased or operated by it; (C) no environmental Lien has attached to any portion of the real property owned, leased or operated by any Member; and (D) no Government Entity actions have been taken or, to the Knowledge of the Company, are in progress or threatened that could subject any or all of the foregoing to any such Lien. (d) Release of Hazardous Materials. To the Knowledge of the Company, there has not been any release of Hazardous Materials at or from any facility or real property owned, operated or leased by any Member. (e) Underground Storage. (i) There are not now any underground storage tanks on or at the real property owned, leased or operated by any Member; and (ii) any removal of underground storage tanks or any remediation associated with such removal conducted by or on behalf of any Member was conducted in accordance with applicable Environmental Laws and Environmental Permits. 26 (f) Asbestos, PCBs, Etc. To the Knowledge of the Company, no polychlorinated biphenyls ("PCBs"), asbestos-containing material ("ACM"), or urea formaldehyde insulation is present at any of the real property currently owned, leased or operated by any Member in such condition or under such circumstances as would reasonably be expected to give rise to an Environmental Claim, and each Member has complied in all material respects with all regulatory requirements under all applicable Environmental Laws relating to the storage, removal, disposal or release, if any, of ACM or PCBs located on the real property owned, leased or operated by any of the Members. 7.16 Insurance. (a) No Member has received any notice of cancellation or termination with respect to any material insurance policy. (b) All material insurance policies of each Member are valid and enforceable policies. Schedule 7.16(b) contains a description of all insurance policies maintained by each Member on its properties and assets and on its operations and personnel. Such description includes the insurance carrier, the amount of premiums thereunder, the type of coverage and limits of coverage of such policies and the expiration dates of the current premium periods thereunder. Such insurance is of the kinds, covering such risks and in such amounts and with such deductibles and exclusions as are consistent with past business practices of the applicable Member. To the Knowledge of the Company, there have been no threatened terminations or material premium increases with respect to insurance of any Member. 7.17 Intellectual Property. Each Member owns or possesses, and has taken all actions necessary to record, preserve and protect, adequate and enforceable long-term licenses or other rights to use all copyrights, patents, trade names, trade secrets, trademarks, franchises, source codes and similar rights now owned, used or employed by such Member in connection with its business, including, without limitation, all trade names, trademarks and logos of each Member, that previously have been used in the conduct or operation of the Company Group Business. 7.18 Labor Matters. (a) No Member is engaged in any unfair labor practices as defined in any applicable Law, and each Member is in compliance in all material respects with all applicable Laws respecting employment and employment practices, including, without limitation, terms and conditions of employment, wages, employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, hours of work and occupational safety and health requirements. (b) Except as disclosed in Schedule 7.18(b), there is no unfair labor practice, charge or complaint brought by any employee pending or, to the Knowledge of the Company, threatened against any Member and, to the Knowledge of the Company, there is no basis for any such charge, complaint or grievance. 27 (c) There is no labor strike, lock-out, slow-down, employment-related arbitration or work stoppage pending or, to the Knowledge of the Company, threatened against any Member, nor have there been any such actions or threats since the Company's formation. (d) No Member has experienced any significant work stoppage or been a party to any Action or Proceeding for the past three (3) years. (e) No employees of any Member are represented by any labor union nor are there any existing collective bargaining agreements or any other types of agreements with labor unions otherwise in effect with respect to such employees and, to the Knowledge of the Company, no union organizational campaign is in progress, no such activities have taken place within the past three (3) years, and no notice has been received by any Member concerning representation in respect of such employees. (f) All Persons classified by any Member as independent contractors do satisfy and have satisfied the requirements of Law to be so classified, and the Members have fully and accurately reported their compensation on IRS Forms 1099 or other comparable reports when required to do so. (g) There is no charge or compliance proceeding actually pending or threatened against any Member before the Equal Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices. 7.19 Employee Benefits. (a) No Member has maintained or contributed to any Qualified Plans since January 1, 1994. The Qualified Plans have always qualified in form and operation under Code Section 401(a), and their trusts have always been exempt under Code Section 501, and nothing has occurred with respect to such plans and trusts that could cause the loss of such qualification or exemption or the imposition of any liability, lien, penalty or tax under ERISA or the Code. (b) Each Company Plan and each Company Benefit Arrangement has been maintained in all material respects in accordance with its constituent documents and with applicable provisions of the Code, ERISA and other domestic Laws, including federal, state, and foreign securities Laws and all Laws respecting reporting and disclosure. (c) No Member or other ERISA Affiliate has ever contributed to or been obligated to contribute to or had any actual or contingent liability with respect to any Benefit Plan subject to Title IV of ERISA or Section 412 of the Code. (d) No Member and other ERISA Affiliate has ever made or been obligated to 28 make, or reimbursed or been obligated to reimburse another employer for, contributions to any multiemployer plan (as defined in ERISA Section 3(37)). (e) There are no pending claims or lawsuits by, against, or relating to any non-Company Benefit Plans or non-Company Benefit Arrangements and no claims or lawsuits (other than routine benefit claims) have been asserted, instituted or, to the Knowledge of the Company, threatened by, against, or relating to any Company Plan or Company Benefit Arrangement, and the Members do not have Knowledge of any fact that could form the basis for any such claim or lawsuit. To the Knowledge of the Company, the Company Plans and Company Benefit Arrangements are not presently under audit or examination (and have not received notice of a potential audit or examination) by any Government Entity and no matters are pending with respect to the Qualified Plans under any governmental compliance programs. (f) No Company Plan or Company Benefit Arrangement contains any provision or is subject to any law that would give rise to any vesting of benefits, severance, termination or other payments or liabilities as a result of the transactions this Agreement contemplates, and the Members have not declared, paid or promised any bonus or other incentive compensation or established or amended any severance plan, program or arrangement in contemplation of the transactions contemplated by this Agreement. (g) The Members have made all required contributions to the Company Plans as of the last day of the each plan's most recent fiscal year; all benefits accrued under any unfunded Company Plan or Company Benefit Arrangement will have been paid, accrued, or otherwise adequately reserved in accordance with GAAP as of the end of the preceding fiscal year; and all monies withheld from employee paychecks with respect to Company Plans have been transferred to the appropriate plan within the timing required by governmental regulations. (h) The Members have no liability (whether actual, contingent, or otherwise) with respect to any Benefit Plan or Benefit Arrangement that is not a Company Benefit Plan or Company Benefit Arrangement or with respect to any Benefit Plan sponsored or maintained (or which has been or should have been sponsored or maintained) by any ERISA Affiliate; and the Members have no Knowledge of any facts that could reasonably be expected to result in such liability, as a result of a termination, withdrawal or funding waiver with respect to any such plan, program or arrangement. (i) No employee or former employee of the Members nor beneficiary of any such employee or former employee is, by reason of such employee's or former employee's employment, entitled to receive any benefits subject to reporting under Statement of Financial Accounting Standards No. 106, other than as required by Code Section 4980B or other applicable law. 7.20 Contracts. (a) Schedule 7.20(a) lists or describes: (i) all unexpired written or oral contracts, leases, agreements, arrangements, commitments, instruments or understandings ("Contracts") that 29 restrict any Member from engaging in any business activity; and (ii) all Contracts of every nature to which any Member is a party or to which it or any of its assets or properties are bound if such Contract obligates such Member to pay more than $50,000 in remaining payment obligations. (b) True, complete and correct copies of all written Contracts listed in Schedule 7.20(a) have been made available to the Investor and true, complete and correct descriptions of all oral Contracts have been provided therein. Each such Contract is enforceable in accordance with its terms (except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally and by general principles of equity) and is in full force and effect. No Member is, nor to the Knowledge of the Company, is any other party to any of such Contracts (with or without the lapse of time or the giving of notice, or both) in material violation thereof or in material default thereunder. 7.21 Absence of Undisclosed Liabilities. Except as set forth in Schedule 7.21, no Member has any Liabilities of any kind whatsoever, either accrued, absolute, contingent, determined or determinable or otherwise, or any existing condition, situation or set of circumstances that could reasonably be expected to result in such a Liability (including documentary or standby letters of credit, bid or performance bonds or customer or third party guarantees), except Liabilities reflected or reserved against in the Audited Financial Statements or the Unaudited Financial Statements and not heretofore paid or discharged. To the Knowledge of the Company, there are no asserted claims for indemnification by any Person against any Member under any Law or agreement or pursuant to the Organizational Documents of any Member, and the Company has no Knowledge of any facts or circumstances that could reasonably be expected to give rise to the assertion of such a claim against any Member thereunder. 7.22 No Illegal or Improper Transactions. No Member has, nor has any director or officer of any Member paid, offered or promised to pay, or authorized the payment, directly or indirectly, through any other Person or firm, of any monies or anything of value to (a) any Person or firm employed by or acting for or on behalf of any Person, whether private or governmental, or (b) any government official or employee or any political party or candidate for political office, for the purpose of illegally or improperly inducing or rewarding any action by any official favorable to the Investor. 7.23 Certain Fees. No Member nor any of their respective officers, directors or employees, has entered into, or will enter into, during the term of this Agreement, any agreement, arrangement or understanding with any Person to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. 7.24 Substantial Customers and Suppliers. Schedule 7.24 lists the principal customers of each Member on the basis of revenues for the most recent fiscal year. No such customer has ceased or materially reduced its purchases from any Member since December 31, 1997, or to the Knowledge of the Company, has threatened to cease or materially reduce such purchases after the Closing. To the Knowledge of the Company, no such customer or supplier is threatened with bankruptcy or insolvency. 30 7.25 Books and Records. The minutes books and other similar records of each Member contain a true, complete and correct record, in all material respects, of all material actions taken at all meetings and by all written consents in lieu of meetings of the stockholders and the boards of directors of each Member up to and including the Closing. The stock book and the share certificate ledgers and other similar records of each Member as made available to the Investor or their Affiliates prior to the Closing accurately reflect all record transfers and any rights or Contracts related to or involving any shares of capital stock of any Member. No Member has any of its Books and Records recorded, stored, maintained, operated or otherwise wholly or partly dependent upon or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership and direct control of such Member. 7.26 Assumptions or Guarantees of Indebtedness of Other Persons. (a) Third Party Guarantees. Except as set forth on the Audited Financial Statements and the Unaudited Financial Statements, no Member has assumed, guaranteed, endorsed or otherwise become directly or contingently liable on (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss) any Indebtedness of any other Person (not including a Member), except for endorsements made in the ordinary course of business in connection with the deposit of items for collection. (b) Affiliate Transactions. Except as disclosed in Schedule 7.26(b): (i) there are no outstanding Liabilities between any Member, on the one hand, and, on the other hand: (A) any other Member; (B) any officer or director or shareholder of any Member; or (C) any Affiliate or family member of the Persons listed in (B). (ii) none of (A) any Member; (B) any officer, director, Affiliate, or family member of the Persons listed in (A); or (C) any Affiliate of any such officer, director or Affiliate (other than a Member) listed in (B), provides or causes to be provided any assets, services or facilities to (x) any other Member; (y) any officer, director, Affiliate, or family member of the Persons listed in (x); or (z) any Affiliate (other than a Member) of any such officer, director or Affiliate listed in (y); and (iii) no Member beneficially owns, directly or indirectly, Investment Assets of (A) any other Member; (B) any officer, director, Affiliate or family member of the Persons listed in (A); or (C) any Affiliate (other than a Member) of any such officer, director or Affiliate listed in (B). Each of the Liabilities and transactions listed in Schedule 7.26(b) was incurred or engaged in, as the 31 case may be, on an arm's-length basis. All settlements of outstanding Liabilities between any Member, on the one hand, and any other Member, Affiliate or any such officer, director, family member or Affiliate of the same on the other, have been made, and all allocations of intercompany expenses have been applied, in the ordinary course of business consistent with past practice. 7.27 Disclosure. No representation or warranty concerning any Member in the Investment Documents or any Exhibit or Schedule hereto, or contained in any certificate or instrument delivered or to be delivered or made available to the Investor by or on behalf of any Member pursuant to any of the Investment Documents, contains or will contain an untrue statement of material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances in which they were made, not materially misleading. 7.28 Securities Act. Assuming the accuracy of the representations and warranties of the Investor set forth herein, neither the Company nor anyone acting on its behalf has offered or will offer to sell, the Preferred Shares, the Warrants or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any Person, so as to bring the issuance and sale of the Preferred Shares and the Warrants to the Investor under the registration provisions of the Securities Act. Assuming the accuracy of the representations and warranties of the Investor set forth herein, the issuance of the Preferred Shares and the Warrants to the Investor pursuant to this Agreement is not required to be registered under the Securities Act or any applicable state securities laws. 7.29 Registration Rights. Except as provided in the Registration Rights Agreement, immediately following the Closing, no Person will have (a) demand or other rights to cause any Member to file any registration statement under the Securities Act relating to any securities of any Member or (b) any right to participate any such registration statement. 7.30 U.S. Real Property Holding Corporation. No Member is now, nor will be immediately after the Closing, a "United States Real Property Holding Corporation" as defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations promulgated by the Internal Revenue Service. 7.31 Investments in Other Persons. Except as disclosed in Schedule 7.31, no Member has made any loan or advance (other than trade credit advanced in the ordinary course of business and consistent with past practices) to any Person which is outstanding on the date of this Agreement, nor is any Member obligated or committed to make any such loan or advance. 7.32 Computer Programs and Software. The technology consisting of computer programs and software used by each Member, and any and all present and prior versions, new releases and derivative products related thereto or resulting therefrom (the "Software") (i) are licensed by such Member under valid License agreements, (ii) constitute original works for hire compiled or prepared by employees of such Member within the scope of their employment, the right, title and interest (including copyright to such Software) being vested in such Member or (iii) are works prepared or 32 performed by consultants to such Member and all right, title and interest in and to such Software having been transferred and been vested in such Member with no royalties or other payments due in respect thereof. Each Member has all documentation necessary to enforce their respective rights in the Software. ARTICLE VIII COVENANTS 8.1 Affirmative Covenants of the Company. Without limiting any other covenants and provisions hereof, the Company covenants and agrees that, as long as any of the Preferred Shares or Warrants are outstanding, it will perform and observe the following covenants and provisions and will cause each other Member to perform and observe such of the following covenants and provisions as are applicable to such Member. (a) Financial and Business Information. The Company during the term of this Agreement will, and will cause its Subsidiaries to deliver to the Investor: (i) As soon as practicable and in any event within 120 days after the close of each fiscal year of the Company, beginning with the current fiscal year, a consolidated balance sheet of the Company and its Subsidiaries as of the close of such fiscal year and consolidated statements of income, retained earnings and cash flows for the Company and its Subsidiaries for the fiscal year then added, certified by the chief executive officer or chief financial officer of the Company to be true and accurate in all material respects (it being understood by the parties hereto that the delivery to the Investor of the Company's annual report on Form 10-K, together with an unqualified auditor's opinion, will satisfy the requirements of this Section 8.1(a)(i)); (ii) As soon as practicable and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year, the consolidated and consolidating balance sheet of the Company Group as at the end of such fiscal quarter and the related consolidated and consolidating statements of income, retained earnings and cash flows of the Company Group for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, all in reasonable detail and certified by the chief financial officer of Company that they fairly present the financial condition of the Company Group as at the dates indicated and the results of its operations and its cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments (it being understood by the parties hereto that the delivery to the Investor of the Company's quarterly report on Form 10-Q will satisfy the requirements of this Section 8.1(b)(ii); (iii) Prompt notice of any event having a Material Adverse Effect; (iv) Promptly upon their becoming available, copies of (a) all financial statements, reports, notices and proxy statements sent or made available generally by the Company to its security holders, (b) all regular and periodic reports, if any, filed by the Company Group with any securities exchange or with the SEC or any governmental or private regulatory authority, and 33 (c) all press releases and other statements made available generally by the Company Group to the public concerning material developments in the business of the Company Group; and (v) Within a reasonable time, upon Investor's request, such other information about the property, financial condition and operations of the Company Group as the Investor may from time to time reasonably request. (b) Notice of Certain Events. Unless the Investor otherwise consents in writing, the Company during the term of this Agreement will, and will cause its Subsidiaries to, promptly give notice in writing to the Investor of any litigation or proceeding before any court or administrative body involving any Member which, if determined adversely to such Member, would have a Material Adverse Effect on the Company Group, taken as a whole. (c) Inspection Rights. At any reasonable time and upon reasonable notice and from time to time and without material disruption of the Company's business, permit the Investor or any of its agents or representatives to examine and make copies of and extracts from the records and books of account of, and visit and inspect the properties of, any Member and to discuss the affairs, finances and accounts of the Company Group with any of its officers or directors and independent accountants. The respective Members shall pay the Investor the reasonable out-of-pocket expenses incurred by Investor in connection with such respective rights. (d) Keeping of Records and Books of Account. Keep, and cause each other Member to keep, adequate records and books of account, in which complete entries will be made in accordance with GAAP, reflecting all financial transactions of the Company Group, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization taxes, bad debts and other purposes in connection with its business shall be made. (e) U.S. Real Property Holding Corporation. Use its reasonable best efforts to avoid being classified as a "United States Real Property Holding Corporation" as defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations promulgated thereunder. (f) Board of Directors and Committees. So long as a number of Preferred Shares equal to at least 45% of the Preferred Shares issued at Closing have not been converted to Common Stock, the holders of the Preferred Shares shall have the right to elect one-third of the Company's directors; provided, however, if the Company receives an additional investment in an amount of at least $5,000,000 from a third party that is not an Affiliate of the Investor, in accordance with and subject to Section 8.1(g), then (i) if the Board consists of one to five members, the holders of the Preferred Shares shall have the right to elect one director to the Board or (ii) if the Board consists of six or more members, the holders of the Preferred Shares shall have the right to elect the greater of one-sixth of the Company's directors or two directors to the Board. The Company shall reimburse the Investor and its appointees for all reasonable out-of-pocket costs incurred by them in connection with meetings of the Board and Board committees in addition to any directors fees regularly paid to all members of the Board. In the event a director nominated by the Investor vacates his position 34 on the Board, for whatever reason, the Company should use its best efforts to cause a representative of the Investor to be recommended to the stockholders for election as the replacement director. (g) Additional Financing. If the Company receives a bona fide proposal from any third party that is not an Affiliate of the Investor to provide additional financing (whether equity or debt financing) to the Company so long as any of the Preferred Shares remains outstanding, the Company shall give written notice of such third party offer to the Investor identifying the thirty party, stating all of the material terms and conditions of proposed financing and attaching a copy of the Third Party Offer to such written notice ("Third Party Offer Notice"). The Company's delivery of such notice shall constitute an irrevocable offer to the Investor (or its designee) to provide financing to the Company on the terms and conditions set forth in the Third Party Offer Notice. The Investor may elect (on behalf of itself or its designee) to provide the financing to the Company on the same terms and conditions set forth in the Third Party Offer Notice by providing written notice thereof to the Company 20 days after the delivery of the Third Party Offer Notice. If the Investor elects to provide such financing (on behalf of itself or its designee), the Investor shall pay the third party the reasonable costs and expenses incurred by such third party in preparing the proposal to provide financing, which costs and expenses shall be duly evidenced by invoices and receipts. The closing of the financing shall take place at the offices of the Company on the later of the date indicated in the Third Party Offer Notice and 90 days after delivery of the Third Party Offer Notice. If the Investor does not elect to provide the financing (on behalf of itself or its designee) within such 20-day period, the Company may proceed with the financing with the third party specified in the Third Party Offer Notice; provided that the terms and conditions of the financing are the same as the terms and conditions stated in the Third Party Offer Notice and such financing is completed within 120 days after the above noted 20-day period has expired. (h) Accounting Controls and Systems. The Company shall engage a full time controller, which controller shall be satisfactory to the Board of Directors, within 180 days after the date of this Agreement. The Company shall, within 120 days after the date of this Agreement, have established and implemented accounting systems and controls satisfactory to the Board of Directors, including without limitation, a cost accounting system. (i) Directors and Officers Liability Insurance. The Company shall purchase directors and officers liability insurance as soon as the Board of Directors determines that the Company is financially capable of paying for such directors and officers liability insurance without impairing the Company's operations. 8.2 Covenants of the Investor. Without limiting any other covenants and provisions hereof, the Investor covenants and agrees that, as long as any of the Preferred Shares or Warrants are outstanding, it will perform and observe the following covenants and provisions and will cause each of its members to agree to perform and observe such of the following covenants and provisions as are applicable to such member. 35 (a) Permitted Transfers. The Preferred Shares shall be freely transferable, in whole or in part, subject to the limitations specified below. (i) The Preferred Shares shall be transferred only if: (A) either a registration statement under the Securities Act is in effect covering the Preferred Shares or the Company has received an opinion from the Company's counsel to the effect that such registration is not required, or the Investor has furnished to the Company an opinion of Investor's counsel, which counsel shall be reasonably satisfactory to the Company, to the effect that such registration is not required; and (B) the proposed transfer complies with any applicable state securities laws. (ii) In the event the Investor seeks an opinion from the Investor's counsel as to transfer without registration, the Company shall provide such factual information to Investor's counsel as Investor's counsel may reasonably request for the purpose of rendering such opinion, and such counsel may rely on the accuracy and completeness of such information in rendering such opinion. In the event the Company seeks an opinion from the Company's counsel as to transfer without registration, the Investor shall provide such factual information to the Company's counsel as Company's counsel may reasonably request for the purpose of rendering such opinion, and such counsel may rely on the accuracy and completeness of such information in rendering such opinion. (iii) Subject to the limitations set forth in this Section 8.2, the Investor may transfer the Preferred Shares on the books of the Company by surrendering to the Company: (A) a certificate representing the Preferred Shares to be transferred; (B) a written assignment of the Preferred Shares, in form reasonably satisfactory to the Company and its legal counsel, wherein the assignee agrees to be bound by the terms of the applicable Investment Documents and duly executed by the Investor and the assignee; and (C) the funds sufficient to pay any stock transfer taxes payable upon the making of such transfer. The Company shall thereupon execute and deliver a new certificate representing the transferred Preferred Shares in the name of the assignee specified in such instrument of assignment, and if the Preferred Shares surrendered to the Company were transferred only in part, the Company shall also execute and deliver in the name of the Investor a new certificate covering the untransferred portion of the Preferred Shares. Upon issuance of the new certificates for the Preferred Shares, the certificate of the Preferred Shares originally surrendered for transfer shall be canceled by the Company. 36 (iv) The Company shall pay all expenses, taxes (other than transfer taxes) and other charges payable in connection with the preparation, issue and delivery of any new certificate for Preferred Shares, provided that each party to the transfer, including the Company, the Investor and the assignee, as applicable, shall pay their respective legal costs associated with such transfer. (b) Securities Laws. Neither the Investor nor anyone acting on its behalf will sell, offer to sell, or solicit offers to buy, the Preferred Shares, the Warrants or securities in the Investor, so as to bring the issuance and sale of the Preferred Shares and the Warrants to the Investor within the registration requirements of the Securities Act or within the registration requirements of any applicable securities laws. 8.3 Affirmative Covenant of the Kenneth H. Smith. Kenneth H. Smith agrees to use his best efforts to cause the amendment of the Company's Restated Certificate of Incorporation, upon the earlier of (a) the first amendment to the Company's Restated Certificate of Incorporation by written consent and (b) the next annual shareholders meeting of the Company, by voting his shares of the Company and any shares for which he holds a proxy (other than proxies specifically requiring a vote against such amendment) to amend the Company's Restated Certificate of Incorporation to eliminate the provision set forth in Section 4 thereof restricting the preferential amount payable with respect to preferred shares in the event of an involuntary liquidation. ARTICLE IX INDEMNIFICATION 9.1 Indemnification. In addition to the payment of expenses pursuant to Section 11.14, whether or not the transactions contemplated hereby shall be consummated, the Company agrees to defend, indemnify, pay and hold harmless, the Investor and its officers, directors, employees, agents and affiliates (collectively, the "Indemnitees") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including, without limitation, securities and commercial laws, statutes, rules or regulations), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of the Investment Documents or the transactions contemplated thereby (collectively called the "Indemnified Liabilities"); provided that the Company shall not have any obligation to any Indemnitee hereunder (a) with respect to any offering of securities or other financing transaction undertaken by the Investor, except to the extent that such Indemnified Liabilities are related to or arise in connection with a misrepresentation or omission in the Company's filings with the Securities Exchange Commission, or (b) with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court or 37 competent jurisdiction. To the extent that the undertaking to defend, indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Company shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any of them. ARTICLE X TERMINATION 10.1 Termination by Either of the Investor or the Company. (a) This Agreement may be terminated and the purchase of the Preferred Shares and the Warrants may be abandoned by the Investor or the Company if (i) the purchase of the Preferred Shares and Warrants shall not have been consummated by 5:00 p.m. Eastern Time on August 1, 1998, or (ii) a Government Entity shall have issued an Order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such Order or other action shall have become final and nonappealable; provided, that the party seeking to terminate this Agreement pursuant to clause (ii) shall have used all reasonable efforts to remove such Order. (b) This Agreement may be terminated at any time prior to the Closing by either Party, if there has been one or more breaches by the other Party of any representations, warranties, covenants, or agreements contained in this Agreement which would entitle the terminating Party not to close pursuant to Article IV or Article V, as the case may be; provided however, that the terminating Party may not terminate this Agreement pursuant to this Section 10.1(b) unless, within five (5) days of becoming aware of such breach, the terminating Party has given written notice of such breach to the other Party and has provided such other Party with fifteen (15) Business Days to cure such breach. 10.2 Effect of Termination and Abandonment. In the event of termination of the Agreement pursuant to this Article X, the terminating party shall give written notice thereof as promptly as practicable to the other Parties to this Agreement and this Agreement shall terminate and the transactions contemplated herein shall be abandoned, without further action by any of the Parties hereto. If this Agreement is terminated as provided herein: (a) other than pursuant to Section 11.14, there shall be no liability or obligation on the part of the Investor or the Company or any of their respective officers and directors, and all obligations of the Parties shall terminate, except for the obligations of the Parties pursuant to Articles X and XI; provided, however, that a Party who is in material breach of its representations, warranties, covenants or agreements set forth in this Agreement shall be liable for damages occasioned by such breach, including, without limitation, any expenses incurred by the other Parties in connection with this Agreement and the transactions contemplated hereby and (b) all filings, applications, and other submissions made pursuant to the transactions contemplated by this Agreement shall, to the extent practicable, be withdrawn from the agency or Person to which made. ARTICLE XI MISCELLANEOUS 38 11.1 Severability. If any term, provision, covenant or restriction of this Agreement is held to be invalid, void or unenforceable, such provision shall be amended by the Parties only to the extent necessary to be enforceable consistent with the Parties' intent, and the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect, unless such action would substantially impair the benefits to any Party of the remaining provisions of this Agreement. 11.2 Specific Enforcement. The Parties each acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to preliminary relief to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they may be entitled by law or equity. Any Party shall be entitled to recover from the breaching Party all reasonable attorney's fees and expenses incurred by such Party in connection with the enforcement of any obligation of the breaching Party hereunder. 11.3 Entire Agreement; Amendments. This Agreement (including the Schedules and Exhibits hereto) and the other documents and instruments referred to herein contain the entire understanding of the Parties with respect to the matters covered hereby and supersede all other prior agreements and understandings, both written and oral, among the Parties or any of them, with respect to the subject matter hereof. This Agreement may be amended only by an instrument in writing executed by the Parties. 11.4 Notices. Any notices or communications required or permitted hereunder shall be in writing and shall be delivered by hand, international courier, or facsimile (confirmed by international courier) addressed as follows: If to the Investor: USV Partners, LLC Attn: Gregory C. Earls c/o U.S. Viewing Corporation 2001 Pennsylvania Avenue, NW Suite 675 Washington, DC 20006 Telephone: 202-466-3100 Facsimile: 202-466-4557 with a copy to: Wilmer, Cutler & Pickering Attn: Duane D. Morse 2445 M Street, NW Washington D.C. 20037 Telephone: (202) 663-6041 Facsimile: (202) 663-6363 39 If to Company: U.S. Technologies Inc. Attn: Kenneth H. Smith 3901 Roswell Road Suite 300 Marietta, GA 30062 Telephone: 770-565-4311 Facsimile: 770-565-8815 with a copy to: Smith, Gambrell & Russell, LLP Attn: W. Thomas King 1230 Peachtree Street, N.W. Promenade II, Suite 3100 Atlanta, GA 30309-3592 Telephone: 404-815-3678 Facsimile: 404-815-3509 Any Party may, on fifteen (15) days' notice given in accordance with this Section 11.4 to the other Parties, designate another address or Person for receipt of notices hereunder. All notices, claims, demands and other communications hereunder shall be in writing and shall be deemed given (a) in the case of a facsimile transmission, when received by recipient in legible form and sender has received an electronic confirmation of receipt of the transmission; (b) in the case of delivery by a standard overnight courier, upon the date of delivery indicated in the records of such courier; (c) in the case of delivery by hand, when delivered by hand; or (d) in the case of delivery by first class (registered or certified) mail, upon the expiration of seven (7) Business Days after the day when mailed (postage prepaid, return receipt requested), addressed to the respective Parties at the above address (or such other address for a party as shall be specified by like notice). 11.5 Waivers. No waiver by either Party of any default with respect to any provision, condition or requirement hereof shall be deemed to be a continuing waiver in the future thereof or a waiver of any other provision, condition or requirement hereof; nor shall any delay or omission of either Party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. 11.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. 11.7 Successors and Assignees. This Agreement shall be binding upon and inure to the benefit of the Parties and their successors and permitted assigns. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by any Party without the prior written consent of the other Parties, provided that the Investor may assign its rights and obligations hereunder to one or more Affiliates without the prior written consent of any other Party. 11.8 No Third Party Beneficiaries. This Agreement is intended for the benefit of the 40 Parties hereto, and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 11.9 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each Party and delivered to the other Parties, it being understood that all Parties need not sign the same counterpart. 11.10 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, United States of America, without regard to the conflicts of laws principles thereof. 11.11 Dispute Resolution. (a) All disputes, controversies, and claims directly or indirectly arising out of or in relation to this Agreement or the validity, interpretation, construction, performance, breach or enforceability of this Agreement shall be finally, exclusively and conclusively settled by binding arbitration, as provided in this Section, under the International Rules of Conciliation and Arbitration of the American Arbitration Association (the "AAA") which are in effect as of the Closing. (b) The arbitral tribunal shall be composed of three (3) arbitrators, each of which shall be appointed by the then President of the AAA. The arbitration proceedings shall be conducted in the English language, and all documents not in English submitted by any party must be accompanied by an English translation. The arbitration proceedings shall be conducted and any arbitral award shall be made in Atlanta, GA. No discovery shall be conducted except by written agreement of all Parties. (c) The Parties agree: (i) that the arbitrator shall have no authority to award punitive damages or any damages other than those recoverable in accordance with this Agreement (which may include reasonable attorneys' fees and other costs of arbitration); (ii) to be bound by any arbitral award or Order resulting from any arbitration conducted thereunder and that any such award or Order shall be a reasoned award, shall be in writing, shall specify the factual and legal basis for the award, shall be final and binding; (iii) not to commence, procure, participate in, or otherwise be involved as a party in any claim, Action or Proceeding that might result in any Order concerning a dispute (except for initialing Actions or Proceedings to obtain a judgment recognizing or enforcing an arbitral award or Order and except for applications, claims, Actions or Proceedings by the Parties, seeking interim interlocutory or other provisional relief in any court having jurisdiction, but only on the ground that the award to which the applicant may be entitled may be rendered ineffectual without such provisional relief); (iv) any monetary award shall be made and payable in U.S. Dollars, in each case through a bank selected by the recipient of the award, together with interest therein at the lesser of the one year London Interbank Offered Rate (LIBOR), as appearing in the Reuters screen, plus five (5) percent or the maximum interest rate permissible under applicable Law, from the date the award is granted to but excluding the date it is paid in full; and (v) that judgment or any arbitral 41 award or Order resulting from an arbitration conducted under this Section may be entered in any court of competent jurisdiction, having jurisdiction thereof or having jurisdiction over either Party or any of their assets. (d) The Company and the Investor hereby irrevocably waive and exclude all rights of appeal, challenge, or recourse to any court from any arbitral award or Order resulting from any arbitration conducted under this Section (except for initiating Actions or Proceedings to obtain a judgment recognizing or enforcing an arbitral award or Order and except for Actions or Proceedings seeking interim, interlocutory or other provisional relief in any court having jurisdiction, but only on the ground that the award to which the applicant may be entitled may be rendered ineffectual without such provisional relief). Each of the Parties to this Agreement hereby consents to the non-exclusive jurisdiction of any court of competent jurisdiction in the State of Georgia for all Actions or Proceedings to obtain a judgment recognizing or enforcing an arbitral award or Order and waives any defense or opposition to such jurisdiction. (e) The arbitrators, in their discretion, may consolidate two or more arbitrations or claims between any of the Parties arising pursuant to this Agreement or any other agreement among the parties or to which the Investor and shareholders of the Company are a party into one arbitration, or terminate any such consolidation and/or establish other arbitration proceedings for different claims that may rise in any one arbitration. Notwithstanding the foregoing, the arbitrators shall consolidate arbitrations and/or claims, if they determine that it would be more efficient to consolidate such arbitrations and/or claims than to continue them separately and (i) there are matters of fact or law that are common to the arbitrations and/or claims to be consolidated, (ii) there are related payment and performance obligations considered in the arbitrations and/or claims to be consolidated or (iii) there is a danger of inconsistent awards. (f) Each Party shall bear its own expenses in connection with the arbitration provided in this Section, provided that the fees of the arbitrators shall be divided equally between the Parties. 11.12 Drafting. Each Party acknowledges that its legal counsel participated in the preparation of this Agreement. The Parties therefore stipulate that the rule of construction that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement to favor any Party against the other. 11.13 Waiver of Jury Trial. EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OF OR THE TRANSACTIONS CONTEMPLATED HEREBY. 11.14 Costs, Expenses and Taxes. The Company agrees to pay on demand all reasonable costs and expenses of the Investor in connection with (a) the preparation, execution and delivery of this Agreement, the Preferred Shares, the Warrants, the other Investment Documents and other 42 instruments and documents to be delivered hereunder, and in connection with the consummation of the transactions contemplated hereby and thereby, (b) all reasonable costs and expenses of the Investor in connection with the amendment or waiver (whether or not such amendment or waiver becomes effective), the Preferred Shares, the Warrants, the other Investment Documents, and other instruments and documents to be delivered hereunder and thereunder and (c) all reasonable costs and expenses of the Investor in connection with offering interests in the Investor; provided that the Company shall not be required to pay more than $35,000 in the aggregate with respect to such costs and expenses. In addition, the Company agrees to pay any and all stamp and other similar taxes (expressly excluding income taxes) payable or determined to be payable in connection with the execution and delivery of this Agreement, Preferred Shares, the Warrants, the other Investment Documents and the other instruments and documents to be delivered hereunder or thereunder unless otherwise set forth herein, and the Company agrees to save the Investor harmless from and against any and all liabilities with respect to or resulting from any delay in paving or omission to pay such taxes and filing fees. 11.15 Further Assurances. From and after the date of this Agreement, upon the request of the Investor, each Member shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement, Preferred Shares and the Warrants. 11.16 Disclosure to Other Persons. (a) The Company acknowledges that the Investor may deliver copies of any financial statements and other documents delivered to the Investor, and disclose any other information disclosed to the Investor, by or on behalf of the Company in connection with or pursuant to this Agreement to (i) the Investor's directors, officers, employees, agents and professional consultants, (ii) any Person to which the Investor offers to sell, in accordance with the applicable securities Laws, the Preferred Shares, the Warrants or any security received with respect thereto pursuant to any stock dividend, stock split, recapitalization or similar event or any part thereof, so long as such potential purchaser agrees, in writing, to preserve the confidentiality of such information (except that such potential purchaser may disclose such information in accordance with this Section 11.16); provided, however, that such disclosure will not be made to any potential purchaser which is known to be a competitor, or an Affiliate of a direct competitor, of the Company without the prior written consent of the Company, (iii) any Person to which such holder sells or offers to sell a participation in all or any part of the Securities, so long as such potential purchaser agrees, in writing, to preserve the confidentiality of such information (except that such potential purchaser may disclose such accordance with this Section 11.16); provided, however, that such disclosure will not be made to any potential purchaser which is a competitor, or an Affiliate of a competitor, of the Company without the prior written consent of the Company, (iv) any federal or state regulatory authority having jurisdiction over the Investor or (v) any other Person to which such delivery or disclosure may be necessary or appropriate (A) in compliance with any law, rule, regulation, or order applicable to such holder, (B) in response to any subpoena or other legal process, or (C) in connection with any litigation to which the Investor is a party. 43 (b) The Investor agrees to keep confidential any information delivered by the Company hereunder; provided, however, that subject to the provisions contained in Section 11.16(a)(ii) and (iii) hereof, nothing herein shall prevent the Investor from disclosing such information (i) to any Affiliate of, or investor in, the Investor or, any actual or potential purchaser, participant assignee or transferee of the Investor's rights under the Note that agrees to be bound by this Section 11.16, (iii) upon order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over the Investor, (v) which has been publicly disclosed (vi) which has been obtained from any Person that is not a party hereto or an Affiliate of any such party, (vii) in connection with the exercise of any remedy hereunder, (viii) to the independent and certified public accountants for the Investor or (ix) as otherwise expressly contemplated by this Agreement. 44 IN WITNESS WHEREOF, the parties hereto have executed this Investment and Loan Agreement as of the date first above written. U.S. TECHNOLOGIES INC By: ------------------------------------- Name: Title: USV PARTNERS, LLC By: ------------------------------------- Name: Title: FOR PURPOSES OF SECTION 8.3 ONLY: KENNETH H. SMITH ------------------------------ 45 EXHIBIT 3.1(a) - CERTIFICATE OF DESIGNATIONS 46 EXHIBIT 3.1(b) - WARRANTS -----END PRIVACY-ENHANCED MESSAGE-----