Exhibit 99.4
SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
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SERIES B PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT
BY AND AMONG
THE PURCHASERS LISTED ON SCHEDULE 1 HERETO,
XXXXXXXX.XXX, INC.
AND
SOFTLOCK SERVICES, INC.
DATED AS OF FEBRUARY 10, 2000
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2/09/00
BD LLP DRAFT
TABLE OF CONTENTS
PAGE NO.
SECTION 1 - AUTHORIZATION, PURCHASE AND SALE OF THE
ACQUIRED SECURITIES
1.1 Authorization of the Acquired Securities...............................1
1.2 Sale and Purchase of the Shares and Warrants...........................1
1.3 Certain Defined Terms..................................................1
SECTION 2 - CLOSING, PAYMENT AND DELIVERY
2.1 Closing ...............................................................2
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
3.1 Organization and Standing; Articles and By-laws........................2
3.2 Corporate Power........................................................3
3.3 Subsidiaries...........................................................3
3.4 Capitalization.........................................................3
3.5 Authorization..........................................................4
3.6 Contracts; Insurance...................................................5
3.7 SEC Documents..........................................................7
3.8 Absence of Undisclosed Liabilities.....................................7
3.9 Absence of Certain Changes.............................................8
3.10 Taxes..................................................................9
3.11 Transactions with Affiliates...........................................9
3.12 Litigation.............................................................9
3.13 Consents..............................................................10
3.14 Title to Properties; Liens and Encumbrances...........................10
3.15 Leases................................................................10
3.16 Franchises, Licenses, Trademarks,
Patents and Other Rights............................................11
3.17 Issuance Taxes........................................................12
3.18 Offering..............................................................12
3.19 Employees.............................................................12
3.20 Business of the Company and Subsidiary................................13
3.21 Use of Proceeds.......................................................13
3.22 Applicability of, and Compliance With, Other Laws.....................14
3.23 Indebtedness..........................................................15
3.24 Insurance Coverage....................................................15
3.25 Illegal or Unauthorized Payments; Political Contributions.............16
3.26 Disclosure............................................................16
3.27 Potential Conflicts of Interest.......................................16
3.28 Real Property Holding Corporation.....................................16
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF PURCHASERS
4.1 Organization; Good Standing; Power and Authority; Binding Obligation............16
4.2 Purchase Entirely for Own Account, Etc..........................................17
4.3 Disclosure......................................................................17
4.4 Accredited Investor.............................................................17
4.5 Restricted Securities...........................................................18
4.6 Legends.........................................................................18
4.7 Termination of Restrictions.....................................................18
SECTION 5 - CONDITIONS TO CLOSING OF PURCHASERS
5.1 Representations and Warranties Correct..........................................18
5.2 Performance.....................................................................18
5.3 Compliance Certificate..........................................................18
5.4 Opinion of Company's Counsel....................................................19
5.5 Good Standing Certificates......................................................19
5.6 Qualifications..................................................................19
5.7 Amendment of Certificate and Filing of Certificate..............................19
5.8 Proceedings and Documents.......................................................19
5.9 Provisions of By-Laws...........................................................19
5.10 Shareholders' and Rights Agreement..............................................19
5.11 Certification by Corporate Secretary............................................19
5.12 Warrants........................................................................20
5.13 Legal Investment................................................................20
5.14 Side Letter.....................................................................20
SECTION 6 - CONDITIONS TO CLOSING OF COMPANY
6.1 Representations and Warranties Correct..........................................20
6.2 Performance.....................................................................20
6.3 Qualifications..................................................................20
6.4 Proceedings and Documents.......................................................20
6.5 Statement of Accredited Investor................................................20
6.6 Legal Investment................................................................21
6.7 Shareholders' and Rights Agreement..............................................21
SECTION 7 - AFFIRMATIVE COVENANTS
7.1 Basic Financial Information.....................................................21
7.2 Additional Information and Rights...............................................21
7.3 Prompt Payment of Taxes, etc....................................................23
7.4 Maintenance of Properties and Leases............................................23
7.5 Insurance.......................................................................23
7.6 Accounts and Records............................................................24
7.7 Compliance with Laws, Contracts, Licenses and Permits...........................24
7.8 Maintenance of Corporate Existence, etc.........................................25
7.9 Availability of Common Stock for Conversion.....................................25
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7.10 Proprietary Information Agreement, and
Key Employee Agreement....................................................25
7.11 Use of Proceeds.............................................................25
7.12 Compliance by Subsidiaries..................................................25
7.13 Expenses of Board Members...................................................25
7.14 Securities Law Filings......................................................25
7.15 Registration and Transfer of Securities.....................................26
7.16 Indemnification.............................................................26
7.17 Registration Requirements...................................................27
7.18 Indemnification and Contribution............................................29
7.19 "Market Stand-Off" Agreement................................................31
SECTION 8 - NEGATIVE COVENANTS
8.1 Sale/Purchase of Assets; Merger.............................................31
8.2 Future Registration Rights..................................................32
8.3 Changes in Type of Business.................................................32
8.4 Dividends and Distributions.................................................32
8.5 Purchase of Equity Securities...............................................32
8.6 Conflicting Agreements......................................................32
8.7 Amendment of Charter Documents..............................................33
8.8 Related Party Transactions..................................................33
8.9 Issuance of Equity Securities...............................................33
8.10 Subsidiaries................................................................33
8.11 Fiscal Year.................................................................33
8.12 Business Plan...............................................................33
8.13 Employee Stock Plans........................................................33
8.14 Liens ....................................................................33
8.15 Investments.................................................................33
8.16 Purchases and Sales.........................................................34
8.17 Leases ....................................................................34
8.18 Indebtedness................................................................34
8.19 Loans, Guarantees...........................................................34
8.20 License of Listed Rights and Intellectual Property..........................34
8.21 Compliance by Subsidiaries..................................................34
SECTION 9 - DEFINITIONS.................................................................34
SECTION 10 - MISCELLANEOUS
10.1 Governing Law...............................................................39
10.2 Survival....................................................................39
10.3 Successors and Assigns......................................................39
10.4 Entire Agreement; Amendment.................................................40
10.5 Notices, etc................................................................40
10.6 Delays or Omissions.........................................................40
10.7 Rights; Severability........................................................41
10.8 Agent's Fees and Services...................................................41
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10.9 Legal Fees and Expenses....................................................41
10.10 Titles and Subtitles.......................................................41
10.11 Counterparts...............................................................41
10.12 Construction...............................................................41
10.13 Further Assurances.........................................................42
10.14 Equitable Relief...........................................................42
10.15 Publicity..................................................................42
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SCHEDULES AND EXHIBITS
SCHEDULE 1 - Schedule of Purchasers
SCHEDULE 2 - Disclosure Schedules
EXHIBIT A - Certificate of Designation of Powers, Preferences and Rights of
Series B Preferred Stock
EXHIBIT B - Form of Proprietary Information Agreement
EXHIBIT C - Form of Opinion of Counsel
EXHIBIT D - Shareholders' and Rights Agreement
EXHIBIT E - Statement of Accredited Investor
EXHIBIT F - Form of Common Stock Warrant
EXHIBIT G - Form of Common Stock Warrant
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SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this
"AGREEMENT") is made and entered into as of the 10th day of February, 2000, by
and among XxxxXxxx.xxx, Inc. (the "COMPANY"), a Delaware corporation having
offices at Five Clock Tower Place, Suite 440, Maynard, Massachusetts, SoftLock
Services, Inc. ("SUBSIDIARY"), a Delaware corporation having offices at Five
Clock Xxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxxxxx, and each of the parties
listed on SCHEDULE 1 hereto (the "SCHEDULE OF PURCHASERS"). The parties listed
on the Schedule of Purchasers and any transferee(s) to which the Purchasers may
from time to time have transferred any "Shares" (as such term is defined in
Section 1.1 below) are hereinafter referred to collectively as the "PURCHASERS".
WHEREAS, the Company desires to issue and sell, and the Purchasers
desire to purchase, certain securities of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the Company, Subsidiary and the
Purchasers (in the case of the Purchasers, severally and not jointly), hereby
agree as follows:
SECTION 1
AUTHORIZATION, PURCHASE AND SALE OF THE ACQUIRED SECURITIES
1.1 AUTHORIZATION OF THE ACQUIRED SECURITIES. The Company has, or
before the Closing (as defined in Section 2.1 hereof) will have, authorized the
designation of Series B Preferred Stock, par value $0.01 per share (the "SERIES
B PREFERRED"), having the rights, privileges and preferences as set forth in the
Certificate of Designation of the Series B Preferred Stock, the form of which is
attached to this Agreement as EXHIBIT A (the "CERTIFICATE"), and the issuance
and sale under this Agreement of all of the Acquired Securities, including
without limitation the 46,875 shares (the "SHARES") of Series B Preferred, the
Conversion Shares, the Warrants and the Warrant Shares. The term "SHARES" as
used in this Agreement also includes any securities issued or issuable with
respect to the original Shares by way of a stock dividend, stock split,
combination or division of shares, recapitalization, reclassification, merger,
consolidation, reorganization, or the like and any securities into which any of
the original Shares are converted or convertible, directly or indirectly
(including but not limited to the Conversion Shares) or for which any of the
original Shares are exchanged or exchangeable, directly or indirectly.
1.2 SALE AND PURCHASE OF THE SHARES AND WARRANTS. Upon and subject to
the terms and conditions of this Agreement and in reliance upon the
representations, warranties and agreements contained herein, at the Closing the
Company will issue and sell to the Purchasers, and each Purchaser will purchase
from the Company at the Closing, (i) that number of shares of Series B Preferred
set forth opposite each such Purchaser's name on the Schedule of Purchasers, and
(ii) the Warrants. The purchase price for the Shares shall be $160.00 per share
of Series B Preferred for an aggregate purchase price for all of the Shares and
Warrants of $7,500,000.00.
1.3 CERTAIN DEFINED TERMS. Certain capitalized terms used in this
Agreement shall have the respective meanings ascribed to them in Section 9
hereof.
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SECTION 2
CLOSING, PAYMENT AND DELIVERY
2.1 CLOSING.
(a) CLOSING DATE AND PLACE OF CLOSING. The closing of the purchase and
sale of the Shares and Warrants (the "CLOSING") shall be held on the date (the
"CLOSING DATE") of, and immediately following, the final execution and delivery
of at least one counterpart of this Agreement by the Company, Subsidiary and the
Purchasers listed on the Schedule of Purchasers, or such other date as shall
have been agreed to by the Company and the Purchasers. The place of the Closing
(including the place of delivery to the Purchasers by the Company of the
Warrants and certificates evidencing the Shares being purchased and the place of
payment to the Company by such Purchasers of the purchase price therefor) shall
be at the offices of Xxxxxxx Xxxx LLP, 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000, or
such other place as shall have been agreed to by the Company and the Purchasers
participating in such Closing.
(b) CLOSING PAYMENT AND DELIVERY. At the Closing, the Purchasers will
pay to the Company, in cash or by check or wire transfer, the amount set forth
opposite such Purchaser's name on the Schedule of Purchasers; and the Company
will deliver to such Purchaser a certificate or certificates registered in such
Purchaser's name for the number of Shares set forth opposite such Purchaser's
name on the Schedule of Purchasers and two Warrants substantially in the form of
EXHIBITS F and G for the number of shares of Common Stock as is set forth
opposite such Purchaser's name on the Schedule of Purchasers.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as expressly set forth (with reference to a paragraph in this
Section 3) on Schedule 2 (the "DISCLOSURE SCHEDULES") hereto, the Company and
Subsidiary jointly and severally represent and warrant to the Purchasers as of
the Closing Date as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS.
(a) The Company and Subsidiary each is a corporation duly organized,
validly existing and in good standing under the laws of its state of
organization and is qualified, licensed or domesticated as a foreign corporation
in each jurisdiction wherein the nature of its activities or properties owned or
leased by each makes such qualification, licensing or domestication necessary.
The Disclosure Schedules set forth the jurisdictions in which the Company and/or
Subsidiary is qualified, licensed or domesticated as a foreign corporation. The
Company and Subsidiary each has all requisite power, governmental licenses,
authorization consents and approvals to own the properties owned by it and to
conduct the business as it is being conducted by it and as contemplated by the
business plan (the "PLAN") prepared by the Company, a true and correct copy of
which has been given to the Purchasers and counsel for the Purchasers. The
Disclosure Schedules set forth all jurisdictions in which the Company or
Subsidiary owns or leases property or engages in any activity which under
applicable law makes qualification or license as a foreign corporation
necessary.
(b) The Company has furnished counsel for the Purchasers with true,
correct and complete copies of the Company's and Subsidiary's Certificate of
Incorporation and By-Laws, and all amendments thereto
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through and including the Closing Date and copies of the minutes of all Board of
Directors, Committees of the Board of Directors and stockholders meetings of the
Company and Subsidiary. Prior to the Closing, the Company shall have properly
filed and recorded the Certificate with the Secretary of the State of Delaware.
Neither the Company nor Subsidiary is in breach of any of the provisions of its
Certificate of Incorporation or its By-Laws.
3.2 CORPORATE POWER. The Company and Subsidiary each has all requisite
corporate power to enter into this Agreement and each of the Financing Documents
to which it is a party and will have on the Closing Date all requisite corporate
power to sell the Shares and Warrants and to carry out and perform its
obligations under the terms of this Agreement and each of the Financing
Documents to which it is a party.
3.3 SUBSIDIARIES. Neither the Company nor Subsidiary has any Other
Subsidiaries and neither owns of record or beneficially any capital stock,
membership interest or equity interest or investment in any corporation, limited
liability company, partnership, association or other business entity. The
Company is the sole owner of all securities of the Subsidiary. There are no
options, warrants, or other agreements pursuant to which any Person may acquire
any of the Equity Securities of the Subsidiary; the Subsidiary has not issued
any Derivative Securities.
3.4 CAPITALIZATION.
(a) The Disclosure Schedules contain a true and correct list of (i) all
capital stock of the Company and Subsidiary (including the amounts thereof)
outstanding immediately prior to the Closing (including all Derivative
Securities, which shall be reflected on a fully diluted basis) not giving effect
to the sale and purchase of the Shares and Warrants provided for in this
Agreement but giving effect to the purchase of 14,706 shares of Series A
Preferred Stock by Ascent Venture Partners III, LLP ("Ascent"), (ii) the holders
of any interest exceeding five percent (5%) of the amount of such outstanding
issued capital stock, (iii) the number of shares of capital stock held by the
Company's management and directors and (iv) the number of shares of capital
stock held by all other shareholders as a group. All such outstanding shares of
capital stock will be duly authorized, validly issued, fully paid, and
nonassessable, and free and clear of Liens. No adjustment has previously been
made (or should have been made) nor will any adjustment be required to be made
as a result of the Company's issuance of the Shares or Warrant Shares (or the
issuance of Common Stock upon the conversion or exercise thereof) to the rate at
which shares of Series A Preferred Stock and any other capital stock or
Derivative Securities of the Company are convertible into or exercisable for
shares of Common Stock (by reason of any "anti-dilution" provisions or
agreements or otherwise).
(b) Except as set forth in the Disclosure Schedule, the Company does
not have, is not bound by, and has no obligation to grant or enter into, any (i)
outstanding subscriptions, options, warrants, calls, commitments, or agreements
of any character calling for it to issue, deliver, or sell, or cause to be
issued, delivered, or sold, any shares of its capital stock, any membership
interests or any other equity security, or any securities described in the
following clause, or (ii) securities convertible into, exchangeable for, or
representing the right to subscribe for, purchase, or otherwise acquire any
shares of its capital stock, any membership interests or any other equity
security. No adjustment has previously been made (or should have been made) nor
will any adjustment be required to be made as a result of the Company's issuance
of the Shares or Warrant Shares (or the issuance of Common Stock upon the
conversion or exercise thereof) to the number of shares of capital stock or
Derivative Securities of the Company into which any subscriptions, options,
warrants, calls, commitments or agreements are convertible (by reason of any
"anti-dilution" provisions or agreements or otherwise).
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(c) Except as set forth in the Disclosure Schedule, the Company (i) has
no outstanding obligations, contractual or otherwise, to repurchase, redeem, or
otherwise acquire any shares of capital stock or other equity securities of the
Company, (ii) is not a party to or bound by, and has no knowledge of, any
agreement or instrument relating to the voting of any of its securities, and
(iii) is not a party to or bound by any agreement or instrument under which any
person has the right to require it to effect, or to include any securities held
by such person in, any registration under the Securities Act of 1933, as amended
(the "Securities Act"). There are no other agreements, contracts, instruments or
documents, except as set forth in the Disclosure Schedule, which govern or
affect in any way the rights of the holders of securities, including any class
of capital stock, of the Company. No First Public Offering (as defined in the
Shareholders' and Rights Agreement dated as of December 30, 1999 and the Amended
and Restated Shareholders' and Rights Agreement dated of even date herewith) has
occurred.
(d) The Company has reserved, solely for the purpose of issuing the
Warrant Shares and issuance upon conversion of shares of Series B Preferred, a
number of shares of Common Stock sufficient to cover the conversion of all such
shares of Series B Preferred and issuance of the Warrant Shares.
(e) All of the outstanding shares of capital stock, membership
interests, and other securities of the Company were offered, issued, and sold,
and the Shares, Warrants and other Acquired Securities have been offered and at
the Closing will be issued and sold, in compliance with (i) all applicable
preemptive or similar rights of all persons (all of which have been waived), and
(ii) assuming the truthfulness and accuracy of the representations made by the
Purchasers in Section 4 hereof, all applicable provisions of the Securities Act
and the rules and regulations thereunder, and all applicable state securities
laws and the rules and regulations thereunder. No person has any valid right to
rescind any purchase of any shares of capital stock or other securities of the
Company.
(f) The Shares, Warrants and other Acquired Securities being issued and
sold by the Company hereunder shall, upon issuance pursuant to the terms hereof,
be duly authorized and validly issued, fully paid and non-assessable and free
and clear of any Lien, security interest, option or other charge or encumbrance.
The Conversion Shares and Warrant Shares shall be duly authorized and validly
issued, fully paid and non-assessable and free and clear of any Lien, security
interest, option or other charge or encumbrance. The issuance of the Acquired
Securities is not and will not be subject to any pre-emptive rights or similar
rights with respect to any of such Acquired Securities.
3.5 AUTHORIZATION.
(a) All action on the part of the Company, the Subsidiary and their
respective directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company and Subsidiary, as
applicable, of this Agreement and each of the Financing Documents and for the
consummation of the transactions contemplated herein and therein, and for the
authorization, issuance and delivery of any and all of the Acquired Securities
has been taken or will be taken prior to the Closing.
This Agreement and each of the Financing Documents is a valid and
binding obligation of the Company and Subsidiary parties hereto and thereto,
enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally. The
execution and delivery by the Company and Subsidiary, as applicable, of this
Agreement and each of the Financing Documents, and compliance herewith and
therewith, and the issuance and sale of the Acquired Securities will not, with
or without notice or the passage of time or both, result in any violation of and
will not conflict with, or result in a breach of any
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of the terms of, or constitute a default under any provision of, any state or
federal law to which the Company or Subsidiary is subject, the Certificate of
Incorporation or By-Laws of the Company or Subsidiary (in each case as amended),
or any mortgage, indenture, agreement, instrument, judgment, decree, order, rule
or regulation or other restriction to which the Company or Subsidiary is a party
or by which it or any of its property is bound, or may be affected, or result in
the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company or Subsidiary pursuant to any such term
or give any other person or entity the right to accelerate the time for
performance of any obligation of the Company or Subsidiary. Except as set forth
in the Shareholders' and Rights Agreement, no shareholder has any preemptive
rights or rights of first refusal by reason of or in connection with the
issuance of the Acquired Securities.
(b) The execution, delivery and performance of this Agreement and each
of the Financing Documents, and the consummation of the transactions
contemplated hereby and thereby require no governmental or judicial approval to
be obtained by the Company or Subsidiary, except for post-sale filings with the
Securities and Exchange Commission (the "COMMISSION") and, as required under
state law, state securities commissions, which filings the Company and/or
Subsidiary (as applicable) will effect in a prompt and timely fashion.
3.6 CONTRACTS; INSURANCE. The Disclosure Schedules set forth a true and
correct list of all material contracts, obligations, commitments, agreements,
plans and the like, whether written or oral, and all administrative, judicial
and similar orders to which the Company and/or Subsidiary is a party or by which
it or any of its properties is bound, including, without limitation, the
following:
(a) Any employment, bonus or consulting agreement, pension, profit
sharing, deferred compensation, stock bonus, retirement, stock option, stock
purchase, phantom stock or similar plan, or agreement evidencing rights to
purchase securities, phantom stock or similar plan of the Company or Subsidiary
or any agreement among shareholders of the Company or Subsidiary;
(b) Any loan or other agreement, note, indenture or instrument relating
to, or evidencing, indebtedness for borrowed money, or mortgaging, pledging or
granting or creating a Lien or security interest or other encumbrance on any
property of the Company or Subsidiary or any agreement or instrument evidencing
any guaranty by the Company or Subsidiary of payment or performance by any other
party;
(c) Any material agreement with any dealer, sales representative,
broker or other distributor, jobber, advertiser or sales agency;
(d) Any agreement with any labor union or collective bargaining
organization or any other labor agreement;
(e) Any contract for the furnishing, purchase or lease of machinery,
equipment, goods or services (including, without limitation, any agreement with
processors and subcontractors) in an amount in excess of $10,000 per year;
(f) Any indenture, agreement or other document (including private
placement brochures) relating to the future sale or repurchase of securities;
(g) Any agreement to register under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), any of the securities of the Company or
Subsidiary;
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(h) Any joint venture, partnership or teaming contract or arrangement
or other agreement involving a sharing of profits or expenses;
(i) Any agreement (other than distributorship agreements or similar
agreements providing for the distribution of the Company's or Subsidiary's
products with dealers, distributors and sales representatives of the Company or
Subsidiary) limiting the freedom of the Company or Subsidiary to compete in any
line of business or in any geographic area or with any party;
(j) Any agreement providing for disposition of any line of business,
assets or securities of the Company or Subsidiary, or any agreement with respect
to the acquisition of any line of business, assets or shares of any other
business, any agreement of merger or consolidation or letter of intent with
respect to the foregoing;
(k) Any agreement requiring it to purchase all or substantially all of
its requirements for a particular product or service from a particular supplier
or suppliers, or requiring it to supply all of a particular customer's or
customers' requirements for a certain service or product;
(l) Any material agreement or other commitment pursuant to which it has
agreed to indemnify or hold harmless any other person;
(m) Any (i) employment agreement, (ii) consulting agreement, or (iii)
other agreement, in each case providing for severance payments or other
additional rights or benefits (whether or not optional) in the event of the sale
or other change in control of it;
(n) Any agreement with any current or former Affiliate, stockholder,
officer, director, employee, or consultant of the Company or Subsidiary, or with
any person in which any such Affiliate has an interest;
(o) Any agreement with any domestic or foreign government or agency or
executive office thereof or any subcontract between it and any third party
relating to a contract between such third party and any domestic or foreign
government or agency or executive office thereof;
(p) Any agreement with employees with respect to the confidentiality of
the Company's or Subsidiary's Proprietary Information and the assignment to the
Company or Subsidiary of any and all rights such employees of the Company or
Subsidiary might have to acquire with respect to technology, inventions,
developments, etc., developed in connection with their employment with the
Company or Subsidiary; and
(q) Any agreement, the performance of which is reasonably likely to
result in a loss to either the Company or the Subsidiary, which loss would be
reasonably likely to have a Material Adverse Effect.
Each of the Company and the Subsidiary has delivered or caused to be delivered
to the Purchasers correct and complete copies of all material agreements
requested by the Purchasers, including but not limited to the Company's
Certificate of Incorporation as amended (including but not limited to the
Certificate of Designation for the Series A Preferred Stock as amended), the
Bylaws, as amended, the Series A Preferred Stock Purchase Agreement dated as of
December 30, 1999, as supplemented, the Shareholders' and Rights Agreement dated
as of December 30, 1999, and the employment agreements with Xxxxx Xxxxx and
Xxxxxxxx Xxxxxx. Each such agreement, instrument, and commitment is a valid,
binding and enforceable obligation of
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the Company or the Subsidiary (as the case may be) and, to the Company's and/or
Subsidiary's (as the case may be) knowledge, of the other party or parties
thereto, and is in full force and effect. Each of the Company and the Subsidiary
is not or, to the Company's and/or Subsidiary's (as the case may be) knowledge,
is any other party thereto, (nor is the Company or the Subsidiary considered by
any other party thereto to be) in breach of or noncompliance with any term of
any such agreement, instrument, or commitment (nor is there any basis for any of
the foregoing), except for any breaches or noncompliances that singly or in the
aggregate would not have a Material Adverse Effect. No claim, change order,
request for equitable adjustment, or request for contract price or schedule
adjustment, between the Company or the Subsidiary and any supplier or customer,
relating to any agreement, instrument, or commitment listed in the Disclosure
Schedule is pending or, to the Company's or the Subsidiary's (as appropriate)
knowledge, threatened, nor is there any basis for any of the foregoing, except
for any claims, change orders, requests for equitable adjustment or requests for
contract price or schedule adjustment would not have a Material Adverse Effect.
No agreement, instrument, or commitment listed in the Disclosure Schedule
includes or incorporates any provision, the effect of which may be to enlarge or
accelerate any of the obligations of the Company or the Subsidiary or to give
additional rights to any other party thereto, or will terminate, lapse, or in
any other way be affected, by reason of the transactions contemplated by this
Agreement.
3.7 SEC DOCUMENTS. The Company has filed all required reports,
schedules, forms, statements and other documents with the Commission (any of the
foregoing are referred to herein as the "SEC DOCUMENTS"). As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act, or the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), as the case may be, and the rules and regulations of the
Commission promulgated thereunder applicable to such SEC Documents, and to the
Company's and Subsidiary's knowledge, none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except to
the extent that information contained in any SEC Document has been revised or
superseded by a later-filed SEC Document, to the Company's and Subsidiary's
knowledge, none of the SEC Documents currently contains any untrue statement of
a material fact at the time that it was made or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein as of the date thereof, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company and
Subsidiary included in the SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-QSB of the Commission) applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position of the
Company, Subsidiary and their consolidated subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). All of the SEC Documents have been provided to the
Purchasers. As used in this Agreement, "BALANCE SHEET" shall mean the unaudited,
draft consolidated balance sheet of the Company and Subsidiary as of December
31, 1999, provided to the Purchasers and "FINANCIAL STATEMENTS" shall mean the
unaudited, draft consolidated financial statements of the Company and Subsidiary
as of and for the twelve-month period ended on December 31, 1999, a true and
complete copy of which has been provided to the Purchasers.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor
Subsidiary has any liabilities (whether accrued, fixed, contingent or otherwise,
including without limitation any tax liabilities due or to become due), whether
due or to become due, which, either individually or in the aggregate, are
material and not disclosed on the Balance Sheet.
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3.9 ABSENCE OF CERTAIN CHANGES. Except as set forth on the Disclosure
Schedules, since the date of the Balance Sheet, there has not been:
(a) Any change in the condition, assets, liabilities, prospects or
business of the Company or Subsidiary from that shown on the Balance Sheet
which, either individually or in the aggregate, has been or is reasonably likely
to have a Material Adverse Effect;
(b) Any damage to, or destruction or loss of, any of the properties or
assets of the Company or Subsidiary (whether or not covered by insurance) that
has a Material Adverse Effect;
(c) Any declaration, setting aside or payment of any dividend or other
distribution in respect of any of the Company's capital stock or other
securities of the Company, or any direct or indirect redemption, purchase or
other acquisition of any of such stock (or any warrant, option or other right
with respect to such stock) by the Company or Subsidiary or any repayment of
Company or Subsidiary debt held by any Related Party or by an Affiliate (in each
such case, whether in cash, stock and/or property or otherwise);
(d) Any organizational activity, collective bargaining activity, labor
dispute or labor trouble;
(e) Any event or condition of any character, which, either individually
or in the aggregate, has a Material Adverse Effect;
(f) Any action taken or entered into by the Company or Subsidiary
involving any transaction other than in the usual and ordinary course of
business, except this Agreement;
(g) Any wage or salary increase made or granted, or entered into by the
Company or Subsidiary involving any employment agreement with an officer or key
employee other than any agreement set forth in the Disclosure Schedules;
(h) Any disclosure to any person of any material trade secrets, except
for disclosures made to persons subject to valid and enforceable confidentiality
agreements;
(i) Any material disposition of assets outside the ordinary course of
business;
(j) Any issuance of any shares of the capital stock or other securities
of the Company or Subsidiary, or any direct or indirect redemption, purchase, or
other acquisition by the Company or Subsidiary of any shares of its capital
stock or other securities;
(k) Any change in the officers, directors, key employees, or key
independent contractors of the Company or Subsidiary;
(l) Any labor trouble or claim of unfair labor practices involving the
Company or the Subsidiary, any increase in the compensation or other benefits
payable or to become payable by the Company or Subsidiary to any of their
respective Affiliates, or to any of their officers, employees, or independent
contractors outside the ordinary course of business, or any bonus payments or
arrangements made to or with any of such officers, employees, or independent
contractors outside the ordinary course of business or which were not accrued
and set forth in the Financial Statements or Balance Sheet;
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(m) Any forgiveness or cancellation of any debt or claim by the Company
or the Subsidiary or any waiver by the Company or the Subsidiary of any right of
material value, other than compromises of accounts receivable in the ordinary
course of business;
(n) Any incurrence or any payment, discharge, or satisfaction by the
Company or the Subsidiary of any material Indebtedness or any material
obligations or material liabilities, whether absolute, accrued, contingent, or
otherwise (including without limitation liabilities, as guarantor or otherwise,
with respect to obligations of others);
(o) Any incurrence, discharge, or satisfaction of any Lien in excess of
$10,000 (i) by the Company or the Subsidiary, or (ii) on any of the capital
stock, other securities, properties, or assets owned or leased by the Company or
the Subsidiary;
(p) Any change in the financial or tax accounting principles,
practices, or methods of the Company or the Subsidiary; or
(q) Any agreement, understanding, or commitment by or on behalf of the
Company or the Subsidiary, whether in writing or otherwise, to do or permit any
of the things referred to in this Section 3.9.
3.10 TAXES. The Company and Subsidiary has each filed or will file
within the time prescribed by law (including extensions of time approved by any
appropriate taxing authority) all tax returns and reports required to be filed
with the United States Internal Revenue Service and with the States of Delaware,
Massachusetts and New York, and (except to the extent that the failure to file
would not have a Material Adverse Effect) with all other jurisdictions where
such filing is required by law; and the Company and Subsidiary has paid, or made
adequate provision in the Balance Sheet for the payment of, all taxes, interest,
penalties, assessments or deficiencies due in connection therewith. Neither the
Company nor Subsidiary has ever had any tax deficiency proposed or assessed
against it and neither the Company nor Subsidiary has executed any waiver of any
statute of limitations on the assessment or collection of any tax or
governmental charge. None of the Company's or Subsidiary's federal income tax
returns nor any state income, sales or franchise tax returns has ever been
audited by governmental authorities. No tax audit, action, suit, proceeding,
investigation or claim is now pending nor, to the best of the Company's and
Subsidiary's knowledge after reasonable inquiry, threatened against the Company
or Subsidiary, and no issue or question has been raised (and is currently
pending) by any taxing authority in connection with any of the Company's or
Subsidiary's tax returns or reports.
The Company and Subsidiary each has withheld or collected from each
payment made to each of their employees, the amount of all taxes (including, but
not limited to, federal income taxes, Federal Insurance Contribution Act taxes
and Federal Unemployment Tax Act taxes) required to be withheld or collected
therefrom, and has paid the same to the proper tax receiving officers or
authorized depositaries.
3.11 TRANSACTIONS WITH AFFILIATES. Except as set forth on the
Disclosure Schedule, there is no loan, lease or other continuing transaction of
any nature between the Company or Subsidiary and any Related Party and/or
Affiliate.
3.12 LITIGATION. Except as set forth on the Disclosure Schedule, there
is neither pending nor threatened any action, suit, proceeding or claim, whether
or not purportedly on behalf of the Company or Subsidiary, to which the Company,
Subsidiary or any employee of the Company or Subsidiary is or may be named as a
party or to which the Company's, Subsidiary's or any such person's property is
or may be subject.
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Except as set forth on the Disclosure Schedule, to the Company's and
Subsidiary's knowledge and belief, there is no basis for any such action, suit,
proceeding or claim, in which an unfavorable outcome, ruling or finding in any
such matter or for all such matters, taken as a whole, might have a Material
Adverse Effect. Except as set forth on the Disclosure Schedule, the Company and
Subsidiary have no knowledge of any unasserted claim, the assertion of which is
likely and which, if asserted, will seek damages, an injunction or other legal,
equitable, monetary or nonmonetary relief which if granted would have a Material
Adverse Effect.
3.13 CONSENTS. No consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority on the part
of the Company or Subsidiary, including qualification under applicable state
securities laws of the offer and sale of the Shares and of the issuance of the
Conversion Shares, is required in connection with the valid execution and
delivery of this Agreement, the offer, sale or issuance of the Shares, the
conversion of the Shares into Common Stock or the issuance of the Conversion
Shares, or the consummation of any other transaction contemplated on the Closing
Date by this Agreement or any of the Financing Documents, except the filing of
the Certificate with the Secretary of the State of Delaware, which filing has
been made and is effective as of the date hereof. Each of the Company and the
Subsidiary has complied with, and is in compliance with, (i) all laws, statutes,
governmental regulations, judicial or administrative tribunal orders, judgments,
writs, injunctions, decrees, and similar commands applicable to it and its
business, and all unwaived terms and provisions of all agreements, instruments,
and commitments to which it is a party or to which it or any of its assets or
properties is subject, except for any non-compliances that, both individually
and in the aggregate, have not had and could not reasonably be expected to have
a Material Adverse Effect, and (ii) its charter documents and by-laws, each as
amended to date. Each of the Company and the Subsidiary has not committed, been
charged with, or, to their knowledge, been under investigation with respect to,
nor does there exist, any violation by either of them of any provision of any
federal, state, or local law or administrative regulation, except for any
violations that, either singly or in the aggregate, have not had and could not
reasonably be expected to have a Material Adverse Effect. Each of the Company
and the Subsidiary has and maintains, and the Disclosure Schedule sets forth a
complete and correct list of, all such licenses, permits, and other
authorizations from all such governmental authorities as are legally required
for the conduct of its business or in connection with the ownership or use of
its properties, except for any such licenses, permits, and other authorizations,
the failure to obtain or maintain which in effect, both singly or in the
aggregate, has not had and could not reasonably be expected to have a Material
Adverse Effect, and all of which (except as specifically described in the
Disclosure Schedule) are in full force and effect in all material respects, and
true and complete copies of all of which have been delivered to the Purchasers.
3.14 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. Each of the Company
and the Subsidiary has (i) good and marketable title to all of the assets and
properties owned by it, including without limitation all assets and properties
reflected in the Balance Sheet (in each case excluding any assets and properties
sold or otherwise disposed of to persons other than Affiliates in the ordinary
course of business since the date of such Balance Sheet), free and clear of all
Liens, (ii) valid title to the lessee interest in all assets and properties
leased by them as lessee, free and clear of all Liens, and (iii) full right to
hold and use all of its assets and properties used in or necessary to its
businesses and operations, in each case all free and clear of all Liens, and in
each case subject to applicable laws and the terms of any lease under which the
Company or the Subsidiary leases such assets or properties as lessee. All such
assets and properties are in good condition and repair, reasonable wear and tear
excepted, and are adequate and sufficient to carry on the businesses of the
Company and the Subsidiary (as applicable) as presently conducted and as
proposed to be conducted.
3.15 LEASES. Set forth on the Disclosure Schedules is a correct and
complete list of all leases
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(including, with respect to each lease, the material provisions of such lease,
including the term, the amount of rent called for and a description of the
leased property) under which the Company or Subsidiary is a lessee, other than
personal property requiring rental payments of less than $10,000 per year. The
Company and Subsidiary each enjoys peaceful and undisturbed possession under all
such leases, all of such leases are valid and subsisting and none of them is in
default in any respect, and to the knowledge of the Company and Subsidiary, no
event has occurred and no condition exists which, with notice or the passage of
time or both, would constitute such a default.
3.16 FRANCHISES, LICENSES, TRADEMARKS, PATENTS AND OTHER RIGHTS.
(a) The Disclosure Schedule lists all patents, patent applications,
trademarks, trade names, service marks, logos, copyrights, and licenses (other
than licenses from governmental authorities which are covered in Section 3.13)
used in or necessary to the Issuer Entities' business as now being conducted or
as proposed to be conducted (collectively, and together with any technology,
know-how, trade secrets, processes, formulas, and techniques used in or
necessary to the Issuer Entities' business, "PROPRIETARY INFORMATION"). Except
as set forth in the Disclosure Schedules, the Issuer Entities own, or are
licensed or otherwise have the full and unrestricted exclusive right to use,
without the payment of royalties or other further consideration, all Proprietary
Information, and no other intellectual property rights, privileges, licenses,
contracts, or other agreements, instruments, or evidences of interests are
necessary to or used in the conduct of their businesses.
(b) In any instance where the Issuer Entities' rights to Proprietary
Information arise under a license or similar agreement (other than for software
programs that have not been customized for its use), this is indicated in the
Disclosure Schedule and such rights are, to the best knowledge of the Issuer
Entities, licensed exclusively to it except as indicated in the Disclosure
Schedule. No other person has an interest in or right or license to use any of
the Proprietary Information. Except as set forth in the Disclosure Schedules, to
the Issuer Entities' best knowledge, none of the Proprietary Information is
being infringed by others, or is subject to any outstanding order, decree,
judgment, or stipulation. Except as set forth in the Disclosure Schedules, no
litigation (or other proceedings in or before any court or other governmental,
adjudicatory, arbitral, or administrative body) relating to the Proprietary
Information is pending or, to the Issuer Entities' best knowledge, threatened,
nor, to the Issuer Entities' knowledge, is there any basis for any such
litigation or proceeding. The Issuer Entities use reasonable efforts to maintain
adequate and sufficient security measures for the preservation of the secrecy
and proprietary nature of the Proprietary Information.
(c) (i) Neither the Issuer Entities nor any of their employees has
infringed or made unlawful use of, or is, to the Issuer Entities' knowledge,
infringing or making unlawful use of, any proprietary or confidential
information of any Person, including without limitation any former employer of
any past or present employee or consultant of the Issuer Entities; and (ii) to
the Issuer Entities' knowledge, the activities of the Issuer Entities' employees
in connection with their employment do not violate any agreements or
arrangements that any such employees or consultants have with any former
employer or any other Person. Except as set forth in the Disclosure Schedule, no
litigation (or other proceedings in or before any court or other governmental,
adjudicatory, arbitral, or administrative body) charging the Issuer Entities
with infringement or unlawful use of any patent, trademark, copyright, or other
proprietary right is pending or, to the Issuer Entities' knowledge, threatened;
nor is there any basis for any such litigation or proceeding.
(d) To the knowledge of the Issuer Entities, no officer, director,
employee, or consultant of the Issuer Entities is presently obligated under or
bound by any agreement or instrument, or any judgment, decree, or order of any
court of administrative agency, that (i) conflicts or may conflict with his or
her
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agreements and obligations to use his or her best efforts to promote the
interests of the Issuer Entities, (ii) conflicts or may conflict with the
business or operations of the Issuer Entities as presently conducted or as
proposed to be conducted, or (iii) restricts or may restrict the use or
disclosure of any information that may be useful to the Issuer Entities.
(e) Except as set forth on the Disclosure Schedule, to the Company's
and Subsidiary's knowledge, all computer software owned, licensed or used by the
Company or Subsidiary: (i) includes Year 2000 date data century recognition,
calculations which accommodate same century and multi-century formulas and date
values, correct date sort ordering (if date sorting is an included function),
and date data interface values that reflect the century; (ii) will not cause an
abnormal abend or abort within the application on account of date data properly
entered into the application or result in the generation of incorrect values or
invalid outputs involving such date; (iii) provides that all date related user
interface functionalities and data fields include the indication of the correct
century, and (iv) include four digit year format and recognize and correctly
process dates for leap years.
3.17 ISSUANCE TAXES. All taxes imposed by any state in connection with
the issuance, sale and delivery of the Acquired Securities shall have been fully
paid, and all laws imposing such taxes shall have been fully complied with,
prior to the Closing Date.
3.18 OFFERING. Except as set forth on the Disclosure Schedule and in
the Company's SEC Documents, within the past six (6) months, the Company has
not, either directly or through any agent, offered any of the Shares, Warrants
or other Derivative Securities, or any preferred security or securities similar
to the Shares for sale to, or solicited any offers to buy the Shares, Warrants
or other Derivative Securities or any part thereof or any such similar preferred
security or securities from, or otherwise approached or negotiated in respect
thereof with, any party or parties other than the Purchasers or institutional or
other sophisticated investors, each of which was offered all or a portion of the
Shares at private sale for investment.
Subject in part to the truth and accuracy of the Purchasers'
representations set forth in this Agreement, the offer, sale and issuance of the
Acquired Securities as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act, and all state securities laws,
and neither the Company nor anyone acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
3.19 EMPLOYEES.
(a) Each of the Company's and Subsidiary's other present or former
employees who has had access to proprietary information of the Company or
Subsidiary has executed a Xxxxxxxx.xxx Non-Disclosure And Solicitation,
Confidentiality and Assignment of Intellectual Property Agreement ("PROPRIETARY
INFORMATION AGREEMENT") to the effect and in substantially the form provided to
the Purchasers and special counsel for the Purchasers, a copy of which is set
forth in EXHIBIT B hereto. The Disclosure Schedules set forth a complete list of
the name and position of each person who has executed a Proprietary Information
Agreement. To the Company's and Subsidiary's knowledge and belief, no employee
or former employee of the Company or Subsidiary is, or to the Company's and
Subsidiary's knowledge and belief now is expected to be, in violation of the
terms of the aforesaid agreement or of any other obligation relating to the use
of confidential or proprietary information of the Company or Subsidiary. Each of
such Proprietary Information Agreements remains in full force and effect.
(b) The Disclosure Schedules set forth the current compensation of each
officer or director of the Company and Subsidiary, and of each employee being
paid (or to whom the Company or Subsidiary has
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agreed to pay) annual salary at a rate of $120,000 per year or more.
(c) To the knowledge of the Company and Subsidiary, except as set forth
on the Disclosure Schedule, no officer or key employee of the Company or
Subsidiary has any present intent of terminating such officer's or key
employee's employment with the Company or Subsidiary.
(d) The Company and Subsidiary each complies in all material respects
with all laws regarding employment, wages, hours, equal opportunity, collective
bargaining and payment of Social Security and other taxes. The Company and
Subsidiary each is in compliance in all material respects with all applicable
foreign, federal, state and local laws and regulations regarding occupational
safety and health standards and has received no complaints from any foreign,
federal, state or local agency or regulatory body alleging violations of any
such laws and regulations.
(e) Except as set forth on the Disclosure Schedules hereto, the
employment of all persons and officers employed by the Company and Subsidiary is
terminable at will without any penalty or severance obligation of any kind on
the part of the employer. All sums due for employee compensation and benefits
and all vacation time owing to any employees of the Company and Subsidiary have
been duly and adequately accrued on the accounting records of the Company. All
employees of the Company and Subsidiary are either United States citizens or
resident aliens specifically authorized to engage in employment in the United
States in accordance with all applicable laws.
(f) Neither the Company nor Subsidiary has experienced, nor does it
know or have reasonable grounds to know of any basis for, any strike, labor
troubles or strife, work stoppages, slow downs, or other interference with or
impairment of its business. Neither the Company nor Subsidiary has experienced,
nor does it know or have reasonable grounds to know of, any union or collective
bargaining organization efforts or negotiations, or requests for negotiations,
for any representation or any labor contract relating to any employees of the
Company or Subsidiary.
3.20 BUSINESS OF THE COMPANY AND SUBSIDIARY. Except as set forth on the
Disclosure Schedule, the Company and Subsidiary have no knowledge or belief that
(i) there is pending or threatened any claim or litigation against or affecting
the Company or Subsidiary contesting its right to manufacture, sell or use any
product or service presently manufactured, sold or used or planned to be
manufactured, sold or used by the Company or Subsidiary, or (ii) there exists,
or there is pending or planned, any statute, rule, law, regulation, standard or
code which would have a Material Adverse Effect. The Company and Subsidiary
currently intend to engage in the business of the general type described in the
Plan (the "BUSINESS").
3.21 USE OF PROCEEDS. The Company and Subsidiary will use the proceeds
of the offering for working capital purposes. The Company and Subsidiary will
not use the proceeds of the offering for other business purposes. None of the
transactions contemplated in this Agreement (including, without limitation, the
use of the proceeds from the sale of the Shares) will violate or result in a
violation of Section 7 of the Exchange Act, or any regulations issued pursuant
thereto, including, without limitation, Regulations G, T and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter 11. Neither the
Company nor Subsidiary owns or intends to carry or purchase any "margin
security" within the meaning of said Regulation G, including margin securities
originally issued by it. None of the proceeds from the sale of the Shares will
be used to purchase or carry (or refinance any borrowing the proceeds of which
were used to purchase or carry) any "security" within the meaning of the
Securities Act.
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3.22 APPLICABILITY OF, AND COMPLIANCE WITH, OTHER LAWS.
(a) Neither the Company nor Subsidiary has or makes contributions to
any pension plans, defined benefit plans or defined contribution plans for its
employees which are subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), except as set forth on the Disclosure Schedules.
With respect to such plans, if any, listed on the Disclosure Schedules, each of
the Company and Subsidiary is in compliance with the applicable provisions of
ERISA. Neither the Company nor Subsidiary has incurred any unremedied
accumulated funding deficiency within the meaning of ERISA or any unsatisfied
liability to the Pension Benefit Guaranty Corporation established under ERISA in
connection with any employee pension plan established or maintained by the
Company or the Subsidiary under the jurisdiction of ERISA. No Reportable Event
or Prohibited Transaction (as defined in Section 4043 of ERISA) has occurred
with respect to any plan administered by the Company or Subsidiary.
(b) The Company's and Subsidiary's employment practices and policies
comply in all material respects with (i) all applicable laws of the United
States and each applicable jurisdiction relating to equal employment
opportunity, and any rules, regulations, administrative orders and Executive
Orders relating thereto; and (ii) the applicable terms, relating to equal
opportunity, of any contract, agreement or grant the Company and Subsidiary has
with, from or relating (by way of subcontract or otherwise) to any other
contract, agreement or grant of, any federal or state governmental unit. Neither
the Company nor Subsidiary has been the subject of any charge of unfair labor
practices, employment discrimination made against it by the National Labor
Relations Board, the United States Equal Employment Opportunity Commission or
any other governmental unit, or is presently subject to any formal or informal
proceedings before, or investigations by, such Commission or governmental unit.
To the Company's and Subsidiary's knowledge, neither the Company, nor
Subsidiary, nor any employees of the Company or Subsidiary, nor any Related
Parties are presently under investigation by any commission or governmental
agency for purposes of security clearance or otherwise.
(c) To the Company's and the Subsidiary's knowledge, none of the real
properties presently owned, leased, or operated by the Company or the
Subsidiary, nor any leasehold improvements thereto, nor any business conducted
by the Company or the Subsidiary thereon, are in violation of any applicable
land use or zoning requirements, including without limitation any building line
or use or occupancy restriction, any public utility or other easement, any
limitation, condition, or covenant of record, or any zoning or building law,
code, or ordinance.
(d) Neither the Company nor Subsidiary nor any property owned or
occupied by the Company or Subsidiary is in material violation of any Federal or
State Environmental Law of any sort or in violation of any Federal or State
"OSHA" law, so-called. The Disclosure Schedules contain a list of all
environmental permits held by the Company and Subsidiary. Without limiting the
foregoing:
(i) ENVIRONMENTAL PERMITS. The Company and Subsidiary each has
obtained all environmental, health and safety permits and governmental
authorizations (collectively, the "ENVIRONMENTAL PERMITS") necessary for the
construction of their facilities or the conduct of their operations, and all
such Environmental Permits are in good standing and the Company and Subsidiary
each is in compliance with all terms and conditions of the Environmental
Permits. No notice to, approval of or authorization or consent from any
governmental or regulatory authority is necessary for the transfer of or
modification to any Environmental Permit and the consummation of the
transactions contemplated by this Agreement will not violate, alter, impair or
invalidate, in any respect, any Environmental Permit.
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(ii) ENVIRONMENTAL CLAIMS. There is no Environmental Claim
pending, threatened or likely to be threatened (a) against the Company or
Subsidiary, (b) to the Company's and Subsidiary's knowledge, against any person
or entity whose liability for any Environmental Claim the Company or Subsidiary
has or may have retained or assumed either contractually or by operation of law,
or (c) against any real or personal property or operations which are now or have
been previously owned, leased, operated or managed, in whole or in part, by the
Company or Subsidiary; PROVIDED, HOWEVER that to the extent the Environmental
Claim is based on the liability of another person or entity that the Company or
Subsidiary has or may have retained or assumed either contractually or by
operation of law such representation and warranty under this clause (c) is
limited to the knowledge of the Company and Subsidiary.
(iii) RELEASES. There have been no Releases of any Hazardous
Materials that would be likely to form the basis of any Environmental Claim
against the Company, Subsidiary or, to the Company's and Subsidiary's knowledge,
against any person or entity whose liability for any Environmental Claim the
Company or Subsidiary has or may have retained or assumed either contractually
or by operation of law.
(iv) ENVIRONMENTAL ASSESSMENTS. There are no environmental
reports, audits, investigations or assessments of the Company, Subsidiary, or
any real or personal property or operations which are now or have been
previously owned, leased, operated or managed, in whole or in part, by the
Company or Subsidiary.
(v) ENVIRONMENTAL DISCLOSURE. To the knowledge of the Company
and Subsidiary upon diligent review, the Company and Subsidiary have disclosed
to the Purchasers all relevant facts with respect to potential or actual
environmental liabilities of the Company and Subsidiary.
3.23 INDEBTEDNESS. The Disclosure Schedules contain a true and complete
list, including the names of the parties thereto and summary description of the
terms thereof, of all Indebtedness, including without limitation debt
instruments, loan agreements, indentures, guaranties or other obligations,
whether written or oral, other than (a) obligations which may be terminated
without payment or penalty by the Company or Subsidiary upon not more than
thirty (30) days notice, and (b) obligations for less than $10,000. All of the
aforesaid items were entered into in the ordinary course of business, are valid
and binding, in full force and effect and are enforceable in accordance with
their respective terms and there exists no breach or default, or any event which
with notice or lapse of time or both, would constitute a breach or default by
any party thereto. All of the Company's and Subsidiary's Indebtedness which is
required to be disclosed under generally accepted accounting principles is
disclosed on the Balance Sheet.
3.24 INSURANCE COVERAGE. Neither the Company nor Subsidiary has been
refused any insurance coverage sought or applied for, and the Company and
Subsidiary have no reason to believe that they will be unable to obtain one or
more policies of insurance issued by insurers of recognized responsibility,
insuring the Company, Subsidiary and their properties and business against such
losses and risks, and in such amounts, as are customary in the case of
corporations of established reputation engaged in the same or similar business
and similarly situated. The Disclosure Schedules set forth each insurance policy
(specifying the insurer, the amount of coverage, the type of insurance, the
policy number, and the expiration date), maintained by the Company and
Subsidiary relating to their properties, assets, business or personnel. Neither
the Company nor Subsidiary is in material default with respect to any provision
contained in any insurance policy, and neither the Company nor Subsidiary has
failed to give any notice or present any presently existing claims under any
insurance policy in due and timely fashion.
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3.25 ILLEGAL OR UNAUTHORIZED PAYMENTS; POLITICAL CONTRIBUTIONS. To the
Company's and Subsidiary's knowledge, neither the Company, Subsidiary nor any of
their officers, directors, employees, agents or other representatives of the
Company, Subsidiary or any other business entity or enterprise with which the
Company or Subsidiary is or has been affiliated or associated, has, directly or
indirectly, made or authorized any payment, contribution or gift of money,
property, or services, whether or not in contravention of applicable law, (a) as
a kickback or bribe to any person ,(b) to any political organization, or the
holder of or any aspirant to any elective or appointive public office except for
personal political contributions not involving the direct or indirect use of
funds of the Company or Subsidiary or (c) in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any rules or regulations thereunder.
3.26 DISCLOSURE. Neither this Agreement, the Disclosure Schedules nor
other written statement furnished to the Purchasers or their counsel in
connection with the offer and sale of the Shares, contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained therein or herein not misleading in the light of the
circumstances under which they were made. The forecasts, projections, estimates
and other forward-looking matters furnished to the Purchasers were prepared on
the basis of the Company's and Subsidiary's best estimates. The Company and
Subsidiary do not have any reason to believe that any assumptions or statements
of opinion contained in such forecasts, projections, estimates or other
forward-looking matters are unreasonable or false.
3.27 POTENTIAL CONFLICTS OF INTEREST. Except as set forth on the
Disclosure Schedule, neither the Company nor the Subsidiary nor, to the best
knowledge of the Company and the Subsidiary, any of either of their officers,
directors or employees, (i) owns, directly or indirectly, any interest
(excepting passive holdings for investment purposes of not more than 1% of the
securities of any publicly held company) in, or is an officer, director,
employee, or consultant of, any person that is a competitor, lessor, lessee,
customer, or supplier of the Company or the Subsidiary; or (ii) has any cause of
action or other claim whatsoever against the Company or the Subsidiary, or owes
any amount to the Company or the Subsidiary, except for claims in the ordinary
course of business, such as for accrued vacation pay, accrued benefits under
employee benefit plans, and similar matters and agreements or under any
employment agreements.
3.28 REAL PROPERTY HOLDING CORPORATION. Neither the Company nor the
Subsidiary is a "United States real property holding corporation" within the
meaning of Section 897 of the Code, as amended, and Treasury Regulation
ss.1.897-2.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each of the Purchasers (severally and NOT jointly) represents and
warrants to the Company, as to itself only, as follows:
4.1 ORGANIZATION; GOOD STANDING; POWER AND AUTHORITY; BINDING
OBLIGATION. It has full power and authority to enter into this Agreement, and is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and all action on its part necessary for the
authorization, execution and delivery of this Agreement and the Financing
Documents, the performance of all of its obligations hereunder, including,
without limitation, the payment of the purchase price for the Shares and
Warrants contemplated by this Agreement, has been taken, and it has all the
requisite power and authority to enter into this Agreement and each of the
Financing Documents to which it is a party. This Agreement and each of the
Financing Documents to which it is a party has been duly executed and delivered
by such
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Purchasers and constitutes its valid and legally binding obligation enforceable
against it in accordance with its terms, subject to the effect of any applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws affecting
creditors' rights generally, subject, as to enforceability, to the effect of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and subject to the effect of
applicable securities laws as to rights of indemnification.
4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT, ETC. It is acquiring the Shares
and Warrants solely for investment for its own account, not as a nominee or
agent and not with the view to, or for resale in connection with, any
distribution thereof. It has no present intention of selling, granting any
participation in, or otherwise distributing the Acquired Securities. It does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to any person with respect to the
Acquired Securities. It understands that the Acquired Securities have not been
registered under the Securities Act by reason of an exemption from the
registration provisions of the Securities Act, and that the Company's and
Subsidiary's reliance on such exemption is predicated in part upon its
representations and warranties set forth in this Section 4.
4.3. DISCLOSURE. It has received or reviewed all the information which
it has requested for the purposes of determining the merits of the purchase of
the Acquired Securities and the execution of this Agreement and the Financing
Documents. It also has received and reviewed a copy of the Financial Statements
and Balance Sheet. It has had an opportunity to ask questions and receive
answers from the Company and Subsidiary regarding such entities, their business,
operations and financial condition and the terms and conditions of the purchase
of the Shares, this Agreement and each of the Financing Documents to which it is
a party, and answers have been provided to its full satisfaction. It has fully
reviewed all corporate and governance documents of the Company and Subsidiary
provided to it, understands all relevant terms and has asked all questions and
received answers thereto to its full satisfaction. If deemed necessary by it, it
has consulted with a professional advisor who has provided it with advice
concerning these terms. IT ACKNOWLEDGES AND AGREES THAT THE PURCHASE OF THE
SHARES AND WARRANTS INVOLVES A HIGH DEGREE OF RISK, AND MAY RESULT IN A LOSS OF
THE ENTIRE AMOUNT INVESTED, AND THERE IS NO ASSURANCE THAT THE REGISTRATION
STATEMENT CONTEMPLATED IN SECTION 7.17 HEREOF WILL BE DECLARED EFFECTIVE;
PROVIDED THAT THE COMPANY ACKNOWLEDGES ITS OBLIGATION TO USE ITS REASONABLE BEST
EFFORTS TO CAUSE SUCH REGISTRATION STATEMENT TO BECOME EFFECTIVE AS PROVIDED IN
SECTION 7.17 HEREOF.
4.4 ACCREDITED INVESTOR. It is an accredited investor as defined in
Rule 501(a) of Regulation D under the Securities Act. The information provided
by it on the Statement of Accredited Investor, attached hereto as EXHIBIT E, is
true and correct in all respects. It is capable of bearing the economic risk of
an investment in the purchase of the Acquired Securities, including the possible
loss of its entire investment. It has such knowledge and experience in financial
or business matters that it is capable of evaluating the merits and risks of an
investment in the Acquired Securities offered hereby. It has not been organized
solely for the purpose of acquiring the Acquired Securities. It has not
construed the contents of this Agreement, any Financing Document or any
additional agreement with respect to the proposed purchase of the Shares and
Warrants or any prior or subsequent communications from the Company or
Subsidiary, or any of their officers, employees or representatives, as
investment, tax or legal advice or as information necessarily applicable to its
particular financial situation. It has consulted its own financial advisor, tax
advisor, legal counsel and accountant, as necessary or desirable, as to matters
concerning the purchase of the Shares and Warrants.
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4.5 RESTRICTED SECURITIES. It understands that the Acquired Securities
are "restricted securities" as defined in the Securities Act, and that under
federal and state securities laws the Acquired Securities may be resold without
registration under the Securities Act only in certain limited circumstances. It
is familiar with Rule 144 promulgated by the Commission under the Securities
Act, and understands the resale limitations imposed thereby and by the
Securities Act generally. It also acknowledges that the Acquired Securities are
subject to significant restrictions on transfer, pledge or hypothecation. It
agrees that in no event will it make a transfer or disposition of the Acquired
Securities other than in compliance with all applicable securities laws.
4.6 LEGENDS. It is understood that certificates or other evidence of
the Shares, Warrant Shares and the Conversion Shares may bear the following
legend, as well as any legend required by the laws of any relevant state:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED PURSUANT TO A
VALID EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS."
4.7 TERMINATION OF RESTRICTIONS. The restrictions imposed by this
Section 4 upon the transferability of any Acquired Securities will terminate as
to any particular Shares when such Shares have been sold pursuant to an
effective registration statement under the Securities Act, or pursuant to Rule
144 under the Securities Act or any other exemption from the registration
requirements of the Securities Act pursuant to which the transferee receives
securities that are not "restricted securities" within the meaning of that term
as defined in Rule 144(a)(3). Whenever any of such restrictions terminates as to
any Shares, the holder thereof will be entitled to receive from the Company,
upon its request and at the Company's expense, new certificates representing
such Shares, without restrictive legends.
SECTION 5
CONDITIONS TO CLOSING OF PURCHASERS
The obligation of the Purchasers to purchase the Shares to be purchased
by them at the Closing is subject to the fulfillment to their satisfaction on or
prior to the Closing Date of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company and Subsidiary in Section 3 hereof, as qualified
by the Disclosure Schedules, shall be true and correct in all respects when
made, and shall be true and correct in all respects on the Closing Date.
5.2 PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company and/or Subsidiary
on or prior to the Closing Date shall have been so performed or complied with in
all material respects.
5.3 COMPLIANCE CERTIFICATE. The Company and Subsidiary shall have
executed and delivered to the Purchasers a certificate of the President or
Executive Vice President of the Company and Subsidiary,
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dated the Closing Date, certifying to the fulfillment of the conditions
specified in Sections 5.1 and 5.2 of this Agreement and such other matters as
the Purchasers may reasonably request.
5.4 OPINION OF COMPANY'S COUNSEL. The Purchasers shall have received an
opinion of McGuire, Woods, Battle & Xxxxxx LLP, counsel to the Company and
Subsidiary, addressed to them and dated the Closing Date, in substantially the
form set forth in EXHIBIT C and in form and substance satisfactory to the
Purchasers.
5.5 GOOD STANDING CERTIFICATES. The Company shall have delivered to the
Purchasers certificates dated not more than 5 days before the Closing Date from
the Secretary of State of the State of the Company's and Subsidiary's state of
incorporation with respect to the Company's and Subsidiary's due incorporation,
good standing, legal corporate existence, due authorization to conduct business
and the payment of all franchise taxes, and, certificates from the Secretary of
State in each jurisdiction in which the Company or Subsidiary is required to be
qualified to do business with respect to the Company's or Subsidiary's good
standing and due authorization to conduct business therein and payment of all
qualification fees.
5.6 QUALIFICATIONS. All authorizations, approvals, or permits of any
governmental authority or regulatory body that are required in connection with
the lawful issuance and sale of the Acquired Securities pursuant to this
Agreement, the conversion of the Shares into Common Stock and the issuance of
Common Stock upon such conversion and upon the exercise of the Warrants and
issuance of Warrant Shares upon such exercise shall have been duly obtained and
shall be effective on and as of the Closing Date, including, if necessary,
permits from applicable state securities authorities, qualifying the offer and
sale of the Acquired Securities.
5.7 AMENDMENT OF CERTIFICATE AND FILING OF CERTIFICATE. The Certificate
shall have been duly filed with the Secretary of the State of Delaware, evidence
of which filing the Company shall have provided to the Purchasers.
5.8 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in substance and
form to the Purchasers and counsel for the Purchasers.
5.9 PROVISIONS OF BY-LAWS. The By-Laws of the Company shall provide
that (a) a majority of the Directors constituting the Board shall constitute a
quorum for the transaction of any business at a meeting of the Board, and (b)
the holders of Series B Preferred which represent 15% or more of outstanding
voting shares of the Company can call special meetings of stockholders.
5.10 SHAREHOLDERS' AND RIGHTS AGREEMENT. The Company, the holders of
the Series A Preferred Stock and the Purchasers shall have executed and
delivered an Amended and Restated Shareholders' and Rights Agreement (the
"SHAREHOLDERS' AND RIGHTS AGREEMENT") to the effect and in substantially the
form set forth in Exhibit D hereto.
5.11 CERTIFICATION BY CORPORATE SECRETARY. With respect to the Company
and the Subsidiary, a certificate of their respective secretaries, dated the
Closing Date, certifying (A) the absence of any amendments to its charter
documents (or proceedings therefor) since the date of the certificate referred
to in Section 5.5, above, (B) an attached copy of their respective by-laws, (C)
an attached copy of the resolutions of their respective boards of directors,
with respect to the transactions hereby contemplated or otherwise to be
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effected at the Closing, (D) the incumbency of their respective officers and
directors, and (E) as to the membership of their respective boards of directors,
each of which shall be constituted as provided in Section 2 of the Shareholders'
and Rights Agreement.
5.12 WARRANTS. The Company shall have executed and delivered to each of
the Purchasers two Warrants (each for the purchase of that number of shares of
Common Stock specified in the Schedule of Purchasers) substantially in the form
of EXHIBITS F and G hereto, each of which shall be in form and substance
satisfactory to the Purchasers (collectively, the "WARRANTS" and each, a
"WARRANT").
5.13 LEGAL INVESTMENT. The acquisition of any Acquired Securities
hereunder shall be legally permitted at Closing by all laws and regulations to
which the Purchasers and the Issuer Entities are subject.
5.14 SIDE LETTER. The Company shall have executed and delivered to each
of Xxxxxx Xxxxxxxx, Xxxxxxx Xxxxx, RAM Trading, Ltd., RC Capital, L.L.C. and
Xxxxxxx Capital Management L.L.C. that certain side letter in form and substance
satisfactory to the foregoing Purchasers.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell the Shares to be purchased at the
Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Purchasers pursuant to Section 4 hereof shall be true and
correct when made and shall be true and correct in all respects on the Closing
Date and with respect thereto, after giving effect to the purchase of the Shares
at the Closing.
6.2 PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Purchasers on or prior to
the Closing Date shall have been so performed or complied with in all material
respects.
6.3 QUALIFICATIONS. All authorizations, approvals, or permits of any
governmental authority or regulatory body that are required in connection with
the lawful issuance and sale of the Acquired Securities pursuant to this
Agreement, the conversion of the Shares into Common Stock and the issuance of
such Common Stock upon such conversion, and the exercise of the Warrants and
issuance of Warrant Shares upon such exercise shall have been duly obtained and
shall be effective on and as of the Closing Date, including, if necessary,
permits from applicable state securities authorities, qualifying the offer and
sale of the Acquired Securities.
6.4 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in substance and
form to the Company and the Subsidiary and their counsel.
6.5 STATEMENT OF ACCREDITED INVESTOR. The Purchasers shall have
executed and delivered to the Company and the Subsidiary a Statement of
Accredited Investor to the effect and in substantially the form set forth in
EXHIBIT E hereto.
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6.6 LEGAL INVESTMENT. The sale and issuance of the Acquired Securities
hereunder shall be legally permitted at Closing by all laws and regulations to
which the Purchasers and the Issuer Entities are subject.
6.7 SHAREHOLDERS' AND RIGHTS AGREEMENT. The Company, the holders of the
Series A Preferred Stock and the Purchasers shall have executed and delivered
the Shareholders' and Rights Agreement in substantially the form of EXHIBIT D
appended hereto.
SECTION 7
AFFIRMATIVE COVENANTS
The Company and Subsidiary hereby jointly and severally covenant and
agree, for the benefit of any Purchaser who owns 2,812 (which number shall be
subject to adjustment for any stock dividends, stock split, combination or
division of shares, recapitalization, reclassification, merger, consolidation,
reorganization, or the like affecting the shares of Series B Preferred) or more
shares of the Series B Preferred which remain outstanding and which have not
been converted to Common Stock (the "Ownership Threshold"):
7.1 BASIC FINANCIAL INFORMATION. The Company will furnish to each such
Purchaser the following reports:
(a) Within seven (7) days following the filing with the Commission,
copies of its reports filed on Form 10-K, Form 10-Q, Form 8-K or any successor
form or forms, its Form of Proxy and any other reports and financial statements
sent or made available to stockholders or directors or filed with the
Commission.
(b) Each set of financial statements delivered to a Purchaser pursuant
to Section 7.1 will be accompanied by a certificate of the Chief Financial
Officer of the Company setting forth:
(i) Covenant Compliance - any information required in order to
establish whether the Company, Subsidiary and their Other Subsidiaries were in
compliance with the requirements of this Section 7 during the period covered by
the income statement then being furnished; and
(ii) Event of Default - that the signer has reviewed the
relevant terms of this Agreement, the Certificate and the other Financing
Documents and has made, or caused to be made, under their supervision, a review
of the transactions and conditions of the Company, Subsidiary and their Other
Subsidiaries, if any, from the beginning of the accounting period covered by the
income statements being delivered therewith to the date of the certificate and
that such review has not disclosed the existence during such period of any
condition or event which constitutes a breach or default under this Agreement,
the Certificate or any of the other Financing Documents or, if any such
condition or event existed or exists, specifying the nature and period of
existence thereof and what action the Company and Subsidiary have taken or
propose to take with respect thereto.
(iii) Notice of Material Litigation and Other Material Events
- any information regarding any litigation or other event that might have a
Material Adverse Effect.
7.2 ADDITIONAL INFORMATION AND RIGHTS.
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The Company and Subsidiary will, for any such Purchaser:
(a) Permit such Purchaser (or its designated representative) to visit
and inspect any of the properties of the Company, Subsidiary and their Other
Subsidiaries, including its books of account, and to discuss its affairs,
finances and accounts with the Company's, Subsidiary's and their Other
Subsidiaries' officers and its independent public accountants, all during
ordinary business hours upon reasonable prior written notice to the Company and
as often as any such party may reasonably request. Any such visitation or
inspection shall be performed in a reasonable manner with a minimum of
disruption to the Company's and Subsidiary's business and with due regard to the
proprietary and confidential nature of any information received by it.
(b) Deliver the reports and data described below to such Purchaser:
(i) As soon as available (but in any event before the
commencement of its fiscal year except in the case of the Annual Plan for fiscal
year 2000 which shall be delivered no later than at Closing) the Company's
consolidated capital and operating expense budgets and its operating plan (the
"ANNUAL PLAN") approved by the Board indicating, among other things, monthly
income statements, balance sheets and cash flow statements for the next fiscal
year, all itemized in reasonable detail, together with the underlying
assumptions therefor, plans for incurring indebtedness and projections regarding
other sources of funds; any material changes in such financial plan shall be
submitted as promptly as practicable after such changes have been approved by
the Board;
(ii) As soon as available, information and data on any
material adverse changes in or any event or condition which has or could have a
Material Adverse Effect;
(iii) Immediately upon becoming aware of any condition or
event which constitutes a breach of this Agreement, the Financing Documents or
any agreement contemplated hereby or thereby, written notice specifying the
nature and period of existence thereof and what action the Company is taking or
proposes to take with respect thereto;
(iv) With reasonable promptness, copies of audit response
letters, accountants' management letters and any other written reports submitted
to the Company by its independent public accountants in connection with an
annual or interim audit of the books of the Company, Subsidiary or any of their
Other Subsidiaries;
(v) Such other information and data with respect to the
Company, Subsidiary and their Other Subsidiaries as any such party may from time
to time reasonably request;
(vi) Promptly after the commencement thereof, notice of all
actions, suits, claims, proceedings, investigations and inquiries of the type
described in Section 3.12 that could have a Material Adverse Effect;
(vii) Promptly upon sending, making available or filing the
same, all press releases, reports and financial statements that the Company,
Subsidiary or any of their Other Subsidiaries sends or makes available to its
stockholders or directors or files with the Commission;
(viii) At the time of delivery to the Company's Board of
Directors, reports, minutes, consents, waivers or such other information
substantially similar to such reports, minutes, consents, waivers
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or other information delivered to the members of the Company's Board of
Directors (such obligation being satisfied by delivery to such Purchasers' board
representative, if such Purchaser has a board representative, for signature or
consent) provided that each Purchaser understands that it could be subject to
fines, penalties and other liabilities under applicable securities laws in the
event of trading in the Company's securities while in the possession of any
material, non-public information concerning the Company and agrees to abide by
these legal prohibitions on tipping and trading and each Purchaser agrees to
maintain the confidentiality of such information in accordance with its
applicable nondisclosure agreement with the Company;
(ix) Promptly, from time to time, such other information
regarding the business, prospects, financial condition, operations, property or
affairs of the Company, Subsidiary and their Other Subsidiaries as such
Purchaser reasonably may request; and
(x) As soon as available and in any event within thirty (30)
days after the end of each fiscal quarter, commencing with the quarter ending
March 31, 2000, the Company will deliver to each Purchaser, unaudited balance
sheets and statements of income and cash flows of the Company and the Subsidiary
as of the end of each such quarter, as well as summary information as to backlog
and bookings as of such quarter-end, certified by the treasurer or chief
financial officer (or other officer acting in a similar capacity) of the Company
to be true and correct and to have been prepared in accordance with GAAP
consistently applied (except for changes in the application of such principles
that have been approved by the Company's Board of Directors), subject to the
absence of footnotes and to adjustments consisting of normal year-end accruals,
the effect of which, both individually and in the aggregate, is not material.
(c) The Company will notify the Tudor Entities of any meeting of the
Board or of any action proposed to be taken by written consent at the same time
as it notifies the directors of such meeting or consent action, such notice in
all cases to include a true and complete copies of all documents furnished to
any director in connection with such meeting or consent. One officer or
authorized representative of the Tudor Entities will be entitled to attend as an
observer at any such meeting or, if a meeting is held by telephone conference,
to participate therein.
7.3 PROMPT PAYMENT OF TAXES, ETC. The Company, Subsidiary and any Other
Subsidiary will promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Company,
Subsidiary or such Other Subsidiary; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall at the
time be contested in good faith by appropriate proceedings, and provided,
further, that unless otherwise approved by the Board, the Company, Subsidiary
and any Other Subsidiary will pay all such taxes, assessments, charges or levies
forthwith upon the commencement of proceedings to foreclose any lien which may
have attached as security therefor. Unless otherwise approved by the Board, the
Company, Subsidiary and any Other Subsidiary will promptly pay or cause to be
paid when due, or in conformance with customary trade terms, all other
obligations incident to their operations.
7.4 MAINTENANCE OF PROPERTIES AND LEASES. The Company, Subsidiary and
each Other Subsidiary will keep their properties in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
needful and proper, or legally required, repairs, renewals, replacements,
additions and improvements thereto; and the Company, Subsidiary and each Other
Subsidiary will at all times comply with each provision of all leases to which
it is a party or under which it occupies, or has possession of, property if the
breach of such provision might have a Material Adverse Effect.
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7.5 INSURANCE. The Company, Subsidiary and any Other Subsidiary will
keep their assets which are of an insurable character insured by financially
sound and reputable insurers against loss or damage by fire, extended coverage
and explosion in amounts sufficient to prevent the Company, Subsidiary or any
Other Subsidiary from becoming a co-insurer. The Company, Subsidiary and any
Other Subsidiary will maintain for themselves with financially sound and
reputable insurers, insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for companies in
similar businesses similarly situated. The Company will use its best efforts to
obtain within 60 days of the date hereof and shall thereafter maintain key-man
life insurance on the life of Xxxxx Xxxxx, having a death benefit of at least
$500,000 payable to the Company and providing that such insurance may not be
cancelled without at least thirty (30) days' prior written notice to the
Purchasers delivered in accordance with Section 10.5 of this Agreement, for so
long as Xxxxx Xxxxx continues to be employed by the Company and will maintain
with, to the best knowledge of the Company, financially sound and reputable
insurance companies, funds, or underwriters such other insurance of the kinds,
covering the risks (including without limitation directors' and officers'
liability, which the Company will use its best efforts to obtain within 90 days
of the date hereof and shall thereafter maintain) and in the relative
proportionate amounts usually carried by reasonable and prudent companies
conducting businesses similar to that of the Company (such insurance coverage at
all times to be at least as protective as the insurance currently carried by the
Company and described in the Disclosure Schedule). The Company shall not cause
or permit any assignment or change in beneficiary and shall not borrow against
any such policy.
7.6 ACCOUNTS AND RECORDS. The Company and the Subsidiary will each keep
true and accurate records and books of account in which full, true, and correct
entries will be made so as to permit the preparation of financial statements in
accordance with GAAP and maintain adequate accounts and reserves in accordance
with good accounting practice for all taxes (including income taxes), all
depreciation, depletion, obsolescence, and amortization of its properties, all
contingencies, and all other reserves.
7.7 COMPLIANCE WITH LAWS, CONTRACTS, LICENSES AND PERMITS. The Company,
Subsidiary and Other Subsidiaries shall duly observe and conform in all material
respects to all valid requirements of governmental authorities relating to their
conduct of their businesses or to their property or assets. Without limiting the
generality of the foregoing, the Company, Subsidiary and their Other
Subsidiaries will:
(a) Comply with all minimum funding requirements applicable to any
pension plans, employee benefit plans or employee contribution plans which are
subject to ERISA or to the Internal Revenue Code of 1986, as amended (the
"CODE"), and comply in all other material respects with the provisions of ERISA
and the provisions of the Code applicable to such plans; and
(b) Comply in all material respects with all applicable laws of the
United States and of each applicable jurisdiction relating to equal employment
opportunity, any rules, regulations, administrative orders and Executive Orders
relating thereto and the applicable terms, relating to equal employment
opportunity, of any contract, agreement or grant the Company, Subsidiary or any
Other Subsidiary has with, from or relating (by way of subcontract or otherwise)
to any other contract, agreement or grant of, any federal or state governmental
unit; and keep all records required to be kept, and file all reports,
affirmative action plans and forms required to be filed, pursuant to any such
applicable law or the terms of any such government contract.
(c) So conduct its business that neither the Company, Subsidiary, any
Other Subsidiaries nor any property owned or occupied by any of them is in
material violation of any Federal or State Environmental Law of any sort or in
material violation of any Federal or State "OSHA" Law so-called.
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7.8 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company, Subsidiary
and each Other Subsidiary maintain in full force and effect its corporate
existence, rights, government approvals and franchises and all licenses and
other rights to use patents, processes, licenses, trademarks, trade names or
copyrights owned or possessed by it and deemed by it to be necessary to the
conduct of its business.
7.9 AVAILABILITY OF COMMON STOCK FOR CONVERSION. The Company will, from
time to time, in accordance with the laws of the state of its incorporation,
increase the authorized amount of Common Stock if at any time the number of
shares of Common Stock remaining unissued and available for issuance shall be
insufficient to permit the conversion of all the then outstanding shares of the
Series B Preferred and issuance of the Warrant Shares.
7.10 PROPRIETARY INFORMATION AGREEMENT, AND KEY EMPLOYEE AGREEMENT.
(a) The Company, Subsidiary and each Other Subsidiary will enter into a
Proprietary Information Agreement to the effect and in substantially the form of
EXHIBIT B hereto or as otherwise approved by the Board of Directors of the
Company with each person hereafter employed by any of them with access to
confidential information.
(b) At such time as the Board of Directors of the Company authorizes
the Company, Subsidiary or any Other Subsidiary to enter into an agreement or
other arrangement that would constitute consideration for such key employee
agreement, the Company, Subsidiary and each Other Subsidiary will require all
persons now or hereafter employed by the Company, Subsidiary or such Other
Subsidiary and designated as a "key person" by the Company's Board to execute a
key employee agreement in favor of the Company containing the non-competition
provisions approved by the Board and reasonably satisfactory to the Purchasers
as a condition to the entering into of such agreement or arrangement with the
key person.
(c) The Company, Subsidiary and each Other Subsidiary will cause all
technological developments, inventions, discoveries or improvements made by
employees of the Company, Subsidiary and such Other Subsidiary to be fully
documented in engineering notebooks in accordance with the best prevailing
industrial professional standards, and where possible and appropriate, cause all
employees to file and prosecute United States and foreign patent applications
relating to and protecting such developments.
7.11 USE OF PROCEEDS. The Company and Subsidiary will use the proceeds
from the sale of the Shares for the purposes described in Section 3.21 hereof.
7.12 COMPLIANCE BY SUBSIDIARIES. The Company and Subsidiary will each
cause any Other Subsidiary which it may now have and/or which it may organize or
acquire in the future to comply fully with all the terms and provisions of this
Section 7.
7.13 EXPENSES OF BOARD MEMBERS. The Company agrees to reimburse each of
the directors elected to the Company's Board by the Purchasers for their
reasonable and properly documented out-of-pocket travel and lodging expenses in
connection with attending Board meetings and performing their respective
obligations and responsibilities as directors of the Company upon receipt of an
itemized invoice or expense report with appropriate receipts or other evidence
in support of such expenses.
7.14 SECURITIES LAW FILINGS. Based on the Purchaser's representations
and warranties made pursuant to this Agreement, the Company will make any
filings necessary to perfect in a timely fashion exemptions from (i) the
registration and prospectus delivery requirements of the Securities Act and (ii)
the
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registration or qualification requirements of all applicable securities or
blue sky laws of any state or other jurisdiction, for the issuance of the Shares
to the Purchasers.
7.15 REGISTRATION AND TRANSFER OF SECURITIES.
(a) TRANSFER AND EXCHANGE OF CAPITAL STOCK. The Company has retained
and will continue to retain a transfer agent to maintain a register of names and
addresses of the holders of the Common Stock and handle other record-keeping
matters regarding the Common Stock. The Company will maintain at its principal
executive office a register in which will be entered the names and addresses of
the holders of the capital stock (other than Common Stock) and the particulars
(including without limitation the class thereof) of the respective capital stock
(other than Common Stock) held by them and of all transfers of shares of capital
stock (other than Common Stock) or conversions of shares of capital stock from
one class to another. Upon surrender at such office of any certificate
representing shares of capital stock (other than Common Stock) for registration
of conversion, exchange, or (subject to compliance with applicable federal and
state securities laws) transfer, the Company will issue, at its expense, one or
more new certificates, in such denomination or denominations as may be
requested, for shares of such capital stock (other than the Common Stock) and
registered as such holder may request. Any certificate representing shares of
capital stock surrendered for registration of transfer will be duly endorsed, or
accompanied by a written instrument of transfer duly executed by the holder of
such certificate or his attorney duly authorized in writing. The Company will
pay shipping and insurance charges, from and to each holder's principal office,
upon any transfer, exchange, or conversion provided for in this Section 7.15(a).
(b) REPLACEMENT OF SHARES. In the case of any loss, theft, destruction,
or mutilation of the certificate representing any Shares or Warrant Shares, or
of any Warrant, upon receipt of evidence thereof reasonably satisfactory to the
Company, and (i) in the case of any such loss, theft, or destruction, upon
delivery of an indemnity bond in such reasonable amount as the Company may
determine, or (ii) in the case of any such mutilation, upon the surrender to the
Company at its principal office of such mutilated certificate for cancellation,
the Company will execute and deliver, in lieu thereof, new certificates (or
Warrants, as the case may be) of like tenor. Any old stock certificate (or
Warrants, as the case may be) in lieu of which any such new stock certificate
(or Warrants, as the case may be) has been so executed and delivered by the
Company will not be deemed to be outstanding for any purpose of this Agreement
or otherwise.
7.16 INDEMNIFICATION.
(a) All covenants, agreements, representations, and warranties made
herein or in the other Financing Documents or any other document referred to
herein or delivered to the Purchasers pursuant hereto will be deemed to have
been relied on by the Purchasers, notwithstanding any investigation made by or
on behalf of the Purchasers, and will survive the Closing. The Company and the
Subsidiary will jointly and severally indemnify, defend, and hold harmless each
Purchaser, and each of such Purchaser's partners, stockholders, officers,
directors, employees, agents, and representatives, from and against any and all
Damages incurred by any of them in any capacity and resulting from or relating
to the breach by the Company of any of its representations, warranties,
covenants, or agreements contained in this Agreement or in the Financing
Documents or any other document referred to herein or delivered to the
Purchasers pursuant hereto, (i) for two (2) years after the Closing Date in the
case of any breach by the Company of any of its representations and warranties
set forth in this Agreement and (ii) for two (2) years after the date of any
breach by the Company of any covenant or agreement contained in this Agreement
or in any of the other Financing Documents.
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(b) The obligations of the Company and the Subsidiary under this
Section 7.16 will survive transfer of the Acquired Securities and the
termination of this Agreement.
7.17 REGISTRATION REQUIREMENTS.
(a) No later than April 15, 2000, the Company shall (i) file with the
Commission one or more registration statements on Form S-1 or Form S-3, as
determined by the Company in its discretion, (together with any prospectus
included therein, a "REGISTRATION STATEMENT") pursuant to Rule 415 of the
Securities Act in order to register with the Commission the continuous resale by
the Purchasers, from time to time, of all Warrant Shares and shares of Common
Stock of the Company that may be acquired by the Purchasers through any exchange
or conversion of the Shares, through the Nasdaq SmallCap Market or the
facilities of any national securities exchange on which the Common Stock is then
traded, or in privately-negotiated transactions, and (ii) file an application
for listing of such Common Stock on the Nasdaq SmallCap Market. The Company
shall use its reasonable best efforts to (i) cause such Registration Statement
to be declared effective on or before July 15, 2000, and (ii) cause a Nasdaq
application covering shares of Common Stock of the Company to become effective
on or before July 15, 2000. Each Purchaser agrees to furnish promptly to the
Company in writing all information required from time to time to be disclosed in
order to make the information previously furnished to the Company by such holder
not misleading.
(b) The Company shall pay all Registration Expenses (as defined below)
in connection with any registration, qualification or compliance hereunder, and
each Purchaser shall pay all Selling Expenses (as defined below) and other
expenses that are not Registration Expenses relating to the Common Stock resold
by such Purchaser. "REGISTRATION EXPENSES" shall mean all expenses, except for
Selling Expenses, incurred by the Company in complying with the registration
provisions herein described, including without limitation, all registration,
qualification and filing fees (including all Commission and Nasdaq fees),
printing expenses, escrow fees, fees and disbursements of counsel for the
Company and for any underwriter (unless paid by such underwriter), blue sky fees
and expenses, the expense of any special audits incident to or required by any
such registration and the fees, not to exceed $20,000, and disbursements of one
counsel to all selling Purchasers. "SELLING EXPENSES" shall mean only selling
commissions, underwriting fees and stock transfer taxes applicable to the Common
Stock sold by each Purchaser and all fees and disbursements of counsel for any
Purchaser in excess of $20,000 for the one counsel to all selling Purchasers.
(c) In the case of the registration effected by the Company pursuant to
these registration provisions, the Company will use its best efforts to:
(1) keep such registration statement on Form S-1 or Form S-3
effective until the earlier of (A) the second anniversary of the date on which
the Registration Statement first becomes effective, (B) such date as all of the
Common Stock has been resold or (C) such time as all of the Conversion Shares
and Warrant Shares can be sold within a given three-month period without
compliance with the registration requirements of the Securities Act pursuant to
Rule 144;
(2) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by the
Registration Statement;
(3) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Purchaser from time to time may reasonably request;
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(4) cause all Common Stock registered as described herein to
be listed on each securities exchange and quoted on each quotation service on
which the common equity securities of the Company are then listed or quoted;
(5) provide a transfer agent and registrar for all Common
Stock registered pursuant to the Registration Statement and a CUSIP number for
all such Common Stock;
(6) otherwise use its best efforts promptly to comply with all
applicable rules and regulations of the Commission;
(7) file the documents required of the Company and otherwise
use its best efforts promptly to obtain, if applicable, and maintain requisite
blue sky clearance in (A) all jurisdictions in which any of the Acquired
Securities are originally sold, and (B) all other states specified in writing by
a Purchaser, provided as to clause (B), however, that the Company shall not be
required to qualify to do business or consent to service of process in any state
in which it is not now so qualified or has not so consented; and
(8) with respect to the initial filing of the Registration
Statement as of the date of declaration of effectiveness, obtain an opinion of
counsel to the Company in customary form and reasonably acceptable to each
Purchaser addressed to each Purchaser selling registrable securities pursuant to
the Registration Statement. The Company shall use its best efforts to qualify
for use of Form S-1 or Form S-3 under the Securities Act to register the resale
of the Common Stock issuable upon the conversion of the Shares and to maintain
such qualification during the periods described in subsection (c)(i) hereof and
to be listed on the Nasdaq Small Cap market and maintain such listing unless
listed on NASDAQ NMS or another national exchange.
(d) The Company shall furnish to each Purchaser upon request a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary in order to facilitate the public sale or other
disposition of all or any of the Common Stock held by the Purchaser.
(e) With a view to making available to the Purchasers the benefits of
Rule 144 and any other rule or regulation of the Commission that may at any time
permit a Purchaser to sell Common Stock to the public without registration or
pursuant to registration, the Company covenants and agrees to: (i) make and keep
public information available, as those terms are understood and defined in Rule
144, until the earlier of (A) the second anniversary of the Closing Date or (B)
such date as all of the Common Stock shall have been resold: (ii) file with the
Commission in a timely manner all reports and other documents required of the
Company under the Exchange Act; and (iii) furnish to any Purchaser upon request,
as long as the Purchaser owns any Common Stock, (A) a written statement by the
Company that it has complied with the reporting requirements of the Exchange
Act, (B) a copy of the most recent annual or quarterly report of the Company,
and (C) such other information as may be reasonably requested in order to avail
any Purchaser of any rule or regulation of the Commission that permits the
selling of any such Common Stock without registration.
(f) The Company may, at any time, refuse to permit a Purchaser to
resell any Common Stock pursuant to the Registration Statement; PROVIDED,
HOWEVER, that in order to exercise this right at any time the Company does not
qualify for either Form S-1 or Form S-3, the Company must deliver a certificate
in writing to the Purchasers to the effect that suspension of the sale of shares
under the Registration Statement, until such time as the Company can make an
appropriate filing with the Commission, is necessary because a sale pursuant to
the Registration Statement, in its then-current form, could constitute a
violation of the federal securities laws. In such an event, each Purchaser
agrees to immediately suspend any sale of Common Stock under the Registration
Statement, and the Company shall use its best efforts to amend the Registration
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Statement if necessary and take all other actions necessary to allow such sale
under the federal securities laws, and shall notify the Purchasers promptly
after it has determined that such sale has become permissible under the federal
securities laws. Notwithstanding the foregoing, the Company shall not under any
circumstances be entitled to exercise its right to suspend sales under the
Registration Statement more than two (2) times in any twelve (12) month period,
and the period during which such Registration Statement may be withdrawn shall
not exceed thirty (30) days or sixty (60) days if the Company has suspended
sales of the Common Stock to permit the Company to negotiate a strategic
acquisition, disposition, merger or other significant transaction.
(g) The Purchasers agree not to sell or otherwise transfer any Acquired
Securities covered by the Registration Statement until the EARLIER of (i)
November 1, 2000, and (ii) the date that is four (4) months after the date on
which such Registration Statement became effective; PROVIDED, HOWEVER, that the
Purchasers shall remain free from time to time to transfer Acquired Securities
to or among their Affiliates (including without limitation the Tudor Entities)
and otherwise in sales exempt from registration.
7.18 INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Purchaser
and its Affiliates from and against any losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) to which such Purchaser may
become subject (under the Securities Act, state law, common law or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement of a material fact contained in, or omission of a material fact from,
the Registration Statement, or arise out of any failure by the Company to
fulfill any undertaking included in the Registration Statement or this
Agreement, and the Company will, as incurred, reimburse such Purchaser for any
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; PROVIDED HOWEVER, that
the Company shall not be liable in any such case (i) to the extent that such
loss, claim, damage or liability arises out of, or is based upon, an untrue
statement made in such Registration Statement in reliance upon and in conformity
with information furnished to the Company in writing by or on behalf of such
Purchaser specifically for use in preparation of the Registration Statement or
(ii) to any particular Purchaser or its Affiliate to the extent that any such
claim, loss, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
any final, preliminary or summary prospectus if such untrue statement or alleged
untrue statement or omission or alleged omission is completely corrected in an
amendment or supplement to such prospectus provided to, and which the relevant
Purchaser or its Affiliates fails to deliver prior to or concurrently with the
sales of the Common Stock to the person or entity asserting such claim, loss,
damage or liability. The Company will reimburse the Purchasers for any legal or
other expenses reasonably incurred and documented in investigating, defending or
preparing to defend any such action, proceeding or claim notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the obligations under this section and the possibility that such payments might
later be held to be improper, provided, that to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them.
(b) Each Purchaser, severally and not jointly, agrees to indemnify and
hold harmless the Company and its Affiliates from and against any losses,
claims, damages or liabilities (or actions or proceedings in respect thereof) to
which the Company or its Affiliates may become subject (under the Securities
Act, state law, common law or otherwise) insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of, or
are based upon, an untrue statement made in or omission of a material fact from
such Registration Statement in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of such Purchaser
specifically for use in preparation of the Registration Statement; PROVIDED,
HOWEVER, that no Purchaser shall be liable in any such
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case for any untrue statement included in or any omission of a material fact
from any Registration Statement which statement has been corrected, in writing,
by such Purchaser and delivered to the Company before the sale from which such
loss occurred and in no event shall any Purchaser be liable for any amount in
excess of the net proceeds received for the sale of its Common Stock pursuant to
such Registration Statement.
(c) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 7.18, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof; PROVIDED,
HOWEVER, that if there exists or shall exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the indemnified person for
the same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying person.
No indemnifying person, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified person, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified person
of a release from all liability in respect to such claim or litigation. If the
defense of any claim or resulting litigation is not assumed by the indemnifying
person, the indemnifying person will not be subject to any liability for any
settlement made without its consent, but such consent may not be unreasonably
withheld; provided that an indemnifying person shall not be deemed unreasonable
in withholding consent to any settlement involving the imposition of equitable
remedies or involving the imposition of any material obligations on such
indemnifying person other than financial obligations for which such indemnified
person will be indemnified hereunder.
(d) If the indemnification provided for in this Section 7.18 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) hereof in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Purchasers
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or a Purchaser on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation (even if the Purchasers were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, or liabilities (or actions in respect thereof) referred to above in
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Purchaser shall be required to contribute any amount in
excess of the amount, if any, by which the amount received by the
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Purchaser from the sale of the Common Stock to which such loss relates exceeds
the amount of any damages which such Purchaser has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Purchasers' obligations in this subsection (d) to contribute are several in
proportion to their respective sales of Common Stock.
7.19 "MARKET STAND-OFF" AGREEMENT. If at the time of any underwritten
offering a Purchaser has not sold all the Acquired Securities owned by it
pursuant to the Registration Statement, each such Purchaser agrees, if requested
by the managing underwriter of any public offering of the Common Stock, to enter
into an agreement pursuant to which such Purchaser agrees not to sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by it during a period specified by such underwriter, not to exceed
one hundred eighty (180) days following the effective date of the registration
statement of the Company filed under the Securities Act in connection with any
underwritten offering; provided that all shareholders having registration rights
and all officers and directors of the Company enter into similar agreements.
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing restriction
until the end of such period and shall remove such stop-transfer instructions
effective immediately upon the expiration of such period.
SECTION 8
NEGATIVE COVENANTS
The Company and Subsidiary jointly and severally agree, for the benefit
of any Purchaser who meets the Ownership Threshold, that so long as less than
75% of the shares of Series B Preferred have been converted into Common Stock
each of the Company, Subsidiary and each of their Other Subsidiaries (unless the
context otherwise requires) will not after the date hereof do (a) any of the
following set forth in Section 8.1 through 8.9 unless the holders of a majority
(which majority shall include one or more of the Tudor Entities or their
Affiliates provided that at such time the Tudor Entities and/or their Affiliates
(if any) meet the Ownership Threshold as determined in accordance with Section
10.4(c)) of such outstanding shares of Series B Preferred held by holders who
continue to meet the Ownership Threshold approve or consent in writing or (b)
any of the following set forth in Sections 8.10 through 8.21 without the
approval of a majority of the Board:
8.1 SALE/PURCHASE OF ASSETS; MERGER.
(a) Sell or otherwise dispose of the capital stock of
Subsidiary or any Other Subsidiary or of all or a substantial part of the
Company's assets or business or of all or a substantial part of the assets or
business of Subsidiary or any Other Subsidiary (whether by sale of assets,
exclusive license or otherwise);
(b) Purchase or otherwise acquire all or substantially all of
the capital stock of any corporation or equity interest in any other entity or
lend money to any person or entity, or purchase a substantial part of the
operating assets of any person or entity for a purchase price in excess of the
lower of (i) $5,000,000, and (ii) 20% of the Company's and Subsidiary's
consolidated net revenues for the twelve month period immediately preceding such
purchase; or
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(c) Consolidate with or merge into or with any other person or
entity or permit any other person or entity to consolidate with or merge into it
(except that Subsidiary may merge into the Company, and a 100% Other Subsidiary
may consolidate with or merge into Subsidiary or the Company or into another
100% Other Subsidiary); provided that the foregoing restriction does not apply
to the merger of another corporation into the Company or Subsidiary, if:
(i) either (x) in the case of a merger into the Company, the
Company is the surviving corporation and more than 50% of the outstanding common
stock of the surviving corporation is owned by persons who prior to such merger
owned Common Stock of the Company; or (y) in the case of a merger into
Subsidiary, Subsidiary is the surviving corporation, remains a 100% subsidiary
of the Company and more than 50% of the outstanding Common Stock of the Company
after the merger is owned by persons who prior to such merger owned Common Stock
of the Company; and
(ii) After giving effect to the proposed merger or
consolidation the surviving corporation will be engaged in substantially the
same lines of business; and
(iii) Immediately after the consummation of the transaction,
and after giving effect thereto, no default under this Agreement, the
Certificate or any other Financing Document would exist.
8.2 FUTURE REGISTRATION RIGHTS. Except as set forth in the
Shareholders' and Rights Agreement and except for an underwriting agreement
between the Company and one or more professional underwriters of securities, the
Company shall not agree to register any Equity Securities under the Securities
Act that will provide such other Equity Securities with registration rights
which are preferential to or inconsistent with those granted to Purchasers under
this Agreement.
8.3 CHANGES IN TYPE OF BUSINESS. Make any substantial change in the
character of its business. Any business activities related to repetitive locking
techniques or the distribution of electronic content will not constitute a
substantial change in the character of its business.
8.4 DIVIDENDS AND DISTRIBUTIONS. Directly or indirectly declare or pay
any dividends or make any distributions upon any of its Equity Securities other
than (i) the dividend amount set forth in the Certificate of Designation of the
Series A Preferred Stock payable on the Series A Preferred Stock and (ii)
dividends and distributions on the Series A Preferred Stock and the Series B
Preferred made, together as a single class for this purpose, PRO RATA in
proportion to the number of shares of Series A Preferred Stock and Series B
Preferred.
8.5 PURCHASE OF EQUITY SECURITIES. Directly or indirectly redeem,
purchase or otherwise acquire, any of the Company's, Subsidiary's or any Other
Subsidiary's Equity Securities except (a) as permitted by this Agreement, the
Shareholders' and Rights Agreement, and the Certificate, (b) as required by the
Certificate of Designation for the Series A Preferred Stock or (b) from any
employee upon termination of employment, but subject to Board approval.
8.6 CONFLICTING AGREEMENTS. Become subject to any agreement or
instrument, which by its terms would (under any circumstances) restrict the
Company's, Subsidiary's or any Other Subsidiary's right to perform any of its
obligations pursuant to the terms of this Agreement or any agreement
contemplated hereby, the Certificate, the Financing Documents, or the Company's
By-laws (including, without limitation, all obligations relating to payment of
dividends on and making redemptions of the Series B Preferred and conversions of
the Series B Preferred).
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8.7 AMENDMENT OF CHARTER DOCUMENTS. Except as contemplated by this
Agreement, make any amendment to the By-laws that has not been approved by
action of the Board of Directors or any amendment to the Company's, Subsidiary's
or any Other Subsidiary's Certificate of Incorporation, including but not
limited to the Certificate.
8.8 RELATED PARTY TRANSACTIONS. Enter into any transaction with any
Related Party or Affiliate, except as otherwise expressly contemplated by this
Agreement or referred to in Section 3.11 hereto.
8.9 ISSUANCE OF EQUITY SECURITIES. Issue, sell, grant or award or enter
into any agreement or adopt any plan to issue, sell, grant or award any Equity
Security (other than 36,765 shares of Series A Preferred Stock issued as of the
date hereof and any shares of Series A Preferred Stock issued hereafter to Apex
Investment Fund IV, L.P., Apex Strategic Partners IV, LLC, Ascent, RSA Security
Inc., SI Venture Fund II, L.P. or any affiliate of such entities) or option to
acquire any Equity Security (other than the warrants to purchase 1,964 shares of
Series A Preferred Stock granted to SI Venture Fund II, L.P.) with rights
ranking senior or pari passu to the Series B Preferred as to liquidation
preference, voting rights, registration rights, dividends or any other matters
or rights.
8.10 SUBSIDIARIES. Establish or acquire (a) any Other Subsidiaries
other than wholly-owned Other Subsidiaries or (b) any Other Subsidiaries
organized outside of the United States and its territorial possessions.
8.11 FISCAL YEAR. Change its fiscal year.
8.12 BUSINESS PLAN. Make any material changes in the Plan or the
Company's, Subsidiary's and their Other Subsidiaries' operation of the Business.
8.13 EMPLOYEE STOCK PLANS. Issue, sell, grant or award any Equity
Security or any option to acquire any Equity Security to officers, directors,
employees, consultants or advisors to the Company; provided, however that this
provision shall not limit the ability of the Board of Directors to delegate
authority to issue, sell, grant or award Equity Securities or options to the
Compensation Committee.
8.14 LIENS. Create, assume or permit, any Lien upon any of its
properties or assets, whether now owned or hereafter acquired, except (a) Liens
existing as of the date hereof as disclosed in Section 3.14 hereof, (b) any Lien
on any asset of a corporation existing at the time such corporation is merged
into or consolidated with the Company, Subsidiary or any Other Subsidiary and
not created in contemplation of such event, (c) any Lien existing on any asset
prior to the acquisition thereof by the Company, Subsidiary or any Other
Subsidiary and not created in contemplation of such event, (d) any Lien created
on any real property or equipment in connection with the leasing of such real
property or equipment, (e) Liens contemplated by the Annual Plan and (f)
Permitted Liens.
8.15 INVESTMENTS. Own, purchase or acquire any stock, obligations or
securities of, or any interest in, or make any capital contribution to, any
other Person, or own, purchase or acquire any property not used in the usual and
ordinary course of business, except that the Company, Subsidiary or any Other
Subsidiary may (a) own, purchase or acquire certificates of deposit in or
repurchase agreements from United States commercial banks having capital
resources in excess of $100,000,000 and obligations of the United States
Government or any agency thereof and obligations guaranteed by the United States
Government, (b) invest in commercial paper rated at least Prime 1 by Xxxxx'x
Industrial Manual, (c) deposit funds in money market
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accounts in financial institutions having capital resources in excess of
$100,000,000 and (d) make such investments as are approved by a majority of the
Board.
8.16 PURCHASES AND SALES. Except as contemplated by the Annual Plan:
(a) other than normal operating expenditures made as a part of the
ordinary course of business, purchase, directly or indirectly, any item (or
group of items) of real or personal property which has a purchase price in
excess of $75,000 or enter into any other transaction with respect to such item
(or group of items) which, under generally accepted accounting principles is or
should be treated as a purchase or capital expenditure for accounting purposes;
or
(b) (i) Pay or provide annual salary in excess of $120,000, or (ii)
increase the compensation of any person listed in part 3.19(b) of the Disclosure
Schedules and will not compensate any other officer, director or employee at an
annual salary of $120,000 per year or more.
8.17 LEASES. Enter into any leases or other rental agreements
(excluding capitalized leases) that are not within the scope of an Annual Plan
unless entered into in the ordinary course of business.
8.18 INDEBTEDNESS. Create, incur, issue, assume, guarantee or otherwise
become or remain directly or indirectly liable for any Indebtedness other than
as contemplated by the Annual Plan.
8.19 LOANS, GUARANTEES. Make any loan or advance to any person or
entity, including, without limitation, any employee or director of the Company,
Subsidiary or any Other Subsidiary, except advances for travel and entertainment
expenses, relocation costs and similar expenditures in the ordinary course of
business, as contemplated by the Annual Plan or under the terms of an employee
stock option plan or stock purchase agreement approved by the Board; or
guarantee, directly or indirectly, any Indebtedness except for trade accounts or
personal property leases of the Company, Subsidiary or any Other Subsidiary
arising in the ordinary course of business.
8.20 LICENSE OF LISTED RIGHTS OR INTELLECTUAL PROPERTY. Not transfer,
assign or license any Proprietary Information now owned or hereafter acquired by
it (except for licenses to Company's or Subsidiary's customers in the ordinary
course of business).
8.21 COMPLIANCE BY SUBSIDIARIES. The Company and Subsidiary will cause
any Other Subsidiary which either of them may now have and/or which either of
them may organize or acquire in the future to comply with all the terms and
provisions of this Section 8.
SECTION 9
DEFINITIONS
As used in this Agreement or in the Financing Documents, capitalized
terms shall have the respective meanings set forth in this Agreement or set
forth below or in the Section of this Agreement referred to below:
ACQUIRED SECURITIES means, collectively, the Shares (including without
limitation Conversion Shares), Warrants and Warrant Shares.
AFFILIATE means any other person directly or indirectly controlling,
controlled by, or under direct or
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indirect common control with the Company (or other referenced person) and
includes without limitation, (a) any person who is an officer, director, or
direct or indirect beneficial holder of at least 5% of the then outstanding
capital stock of the Company (or other referenced person), and any of the Family
Members of any such person, (b) any person of which the Company (or other
referenced person) and/or its Affiliates (as defined in clause (a) above),
directly or indirectly, either beneficially own(s) at least 5% of the then
outstanding equity securities or constitute(s) at least a 5% equity participant,
(c) in the case of a specified person who is an individual, Family Members of
such person, and (d) in the case of the Purchasers, any entities for which a
Purchaser or any of its Affiliates serve as general partner and/or investment
adviser or in a similar capacity, and all mutual funds or other pooled
investment vehicles or entities under the control or management of such
Purchaser or the general partner or investment adviser thereof, or any Affiliate
of any of them, or any Affiliates of any of the foregoing. For purposes hereof,
"FAMILY MEMBERS" means, as applied to any individual, any parent, spouse, child,
spouse of a child, brother or sister of the individual sharing the same
household as such individual, and each trust created for the benefit of one or
more of such persons and each custodian of a property of one or more such
persons and the estate of any such persons.
AFFILIATED GROUP has the meaning given to it in Section 1504 of the
Code, and in addition includes any analogous combined, consolidated, or unitary
group, as defined under any applicable state, local, or foreign income tax law.
ANNUAL PLAN shall have the meaning ascribed to it in Section 7.2
hereof.
ASCENT shall have the meaning ascribed to it in Section 3.4(a) hereof.
BALANCE SHEET shall have the meaning ascribed to it in Section 3.7
hereof.
BUSINESS shall have the meaning ascribed to it in Section 3.20 hereof.
BOARD shall mean the entire Board of Directors of the Company.
CLOSING shall have the meaning ascribed to it in Section 2.1 hereof.
CLOSING DATE shall have the meaning ascribed to it in Section 2.1
hereof.
CODE shall have the meaning ascribed to it in Section 7.7 hereof.
COMMISSION shall have the meaning ascribed to it in Section 3.5 hereof.
COMMON STOCK means the Common Stock, par value $0.01 per share, of the
Company.
CONVERSION SHARES shall mean at any time, shares of Common Stock (a)
issued and then outstanding upon the conversion of the Series B Preferred, (b)
issuable upon the conversion of the Series B Preferred, and (c) issued and then
outstanding or issuable in respect of the Common Stock referred to in clause (a)
of this definition upon any stock dividend, stock split, combination or division
of shares, recapitalization, reclassification, merger, consolidation,
reorganization, or the like.
DAMAGES means all damages, losses, claims, demands, actions, causes of
action, suits, litigations, arbitrations, liabilities, costs, and expenses,
including without limitation court costs and the fees and expenses of counsel
and experts.
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DERIVATIVE SECURITIES means (a) all shares of stock and other
securities that are convertible into or exchangeable for shares of Common Stock,
and (b) all options, warrants, and other rights to acquire shares of Common
Stock or any class of stock or other security or securities convertible into or
exchangeable for shares of Common Stock or any class of stock of other security.
ENVIRONMENTAL CLAIM shall mean any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of compliance or violation (written or
oral) by any person or entity (including any governmental authority) alleging
potential liability (including, without limitation, potential liability for
enforcement, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from (a)
the presence, or Release or threatened Release into the environment, of any
Hazardous Material at any location, whether owned, operated, leased or managed
by the Company, Subsidiary or any Other Subsidiary; or (b) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law; or
(c) any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
the presence or Release of any Hazardous Materials.
ENVIRONMENTAL LAWS shall mean all laws or orders relating to the
regulation or protection of human health, safety or the environment (including,
without limitation, ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata), including, without limitation, laws and regulations
relating to Releases or threatened Releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, recycling or handling of Hazardous Materials.
ENVIRONMENTAL PERMITS shall have the meaning ascribed to it in Section
3.22 hereof.
EQUITY SECURITIES shall mean any stock or similar security, including
without limitation securities containing equity features and securities
containing profit participation features, or any security convertible or
exchangeable, with or without consideration, into any stock or similar security,
or any security carrying any warrant or right to subscribe to or purchase any
stock or similar security, or any such warrant or right.
ERISA shall have the meaning ascribed to it in Section 3.22 hereof.
EXCHANGE ACT shall have the meaning ascribed to it in Section 3.7
hereof.
FINANCING DOCUMENTS shall mean, collectively, this Agreement, the
Certificate, the Shareholders' and Rights Agreement, and all other documents set
forth in any other schedules or exhibits hereto under which, upon its execution
thereof, the Company, Subsidiary, any Other Subsidiary, or any Related Party
shall have an obligation to any Purchaser, all in the respective forms thereof
as executed and as amended from time to time.
FINANCIAL STATEMENTS shall have the meaning ascribed to it in Section
3.7 hereof.
GAAP means generally accepted accounting principles that are (a)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, (b) applied on a basis
consistent with prior periods, and (c) such that, insofar as the use of
accounting principles is pertinent, a certified public accountant could deliver
an unqualified opinion with respect to financial statements in which such
principles have been properly applied.
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HAZARDOUS MATERIALS shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
above ground or underground storage tanks and compressors or other equipment
that contain polychlorinated biphenyls ("PCBS"); and (b) any chemicals,
materials or substances which are now defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutants," "contaminants" or words of similar import, under any
Environmental Law; and (c) any other chemical, material, substance or waste,
exposure to which is now prohibited, limited or regulated under any
Environmental Law.
INDEBTEDNESS means, with respect to the Company, Subsidiary or any
Other Subsidiary, (a) all indebtedness for borrowed money, whether current or
long-term, or secured or unsecured, (b) all indebtedness for the deferred
purchase price of property or services represented by a note or security
agreement, (c) all indebtedness created or arising under any conditional sale or
other title retention agreement (even though the rights and remedies of the
seller or lender under such agreement in the event of default may be limited to
repossession or sale of such property), (d) all indebtedness secured by a
purchase money mortgage or other lien to secure all or part of the purchase
price of property subject to such mortgage or lien, (e) all obligations under
leases that have been or must be, in accordance with GAAP, recorded as capital
leases in respect of which it is liable as lessee, (f) any liability in respect
of banker's acceptances or letters of credit, and (g) all indebtedness of any
person that is directly or indirectly guaranteed by the Company or the
Subsidiary or that it has agreed (contingently or otherwise) to purchase or
otherwise acquire or in respect of which it has otherwise assured a creditor
against loss. Any obligation secured by a Lien on, or payable out of the
proceeds of or production from, property of the Company, Subsidiary or any Other
Subsidiary shall be deemed to be Indebtedness even though such obligation is not
assumed by the Company, Subsidiary or Other Subsidiary.
ISSUER ENTITIES means, collectively, the Company and the Subsidiary.
LIEN(S) means any and all liens, claims, mortgages, security interests,
charges, encumbrances, and restrictions on transfer of any kind, except: (a) in
the case of references to securities, any of the same arising (i) pursuant to
the Financing Documents, or (ii) under applicable securities laws solely by
reason of the fact that such securities were issued pursuant to exemptions from
registration under such securities laws, (b) real estate taxes not yet due and
payable, (c) any lien in favor of any landlord or lessor for unpaid rent,
additional rent, or other charges, which lien is created by statute or under any
lease under which the Company is lessee and (d) Permitted Liens.
MATERIAL ADVERSE EFFECT means, with reference to the Company or the
Subsidiary, a material adverse effect on the condition (financial or otherwise),
operations, business, assets, or prospects of the Company or the Subsidiary, or
on its ability to consummate the transactions hereby contemplated.
OTHER SUBSIDIARY shall mean any corporation, partnership, joint
venture, association or other business entity at least fifty percent (50%) of
the outstanding equity interests of which is at the time owned or controlled,
directly or indirectly, by the Company (other than with respect to the
Subsidiary), or by Subsidiary, or by one or more of such Other Subsidiary
entities or both.
OWNERSHIP THRESHOLD shall have the meaning set forth in the first
paragraph of Section 7.
PERMITTED LIENS shall mean (a) Liens for taxes and assessments or
governmental charges or levies not at the time due or in respect of which the
validity thereof shall currently be contested in good faith by
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appropriate proceedings conducted with due diligence and for the payment of
which the Company, Subsidiary or Other Subsidiary has furnished adequate
security; (b) Liens in respect of pledges or deposits under workers'
compensation laws or similar legislation, carriers', warehousemen's, mechanics',
laborers' and materialmen's and similar Liens, if the obligations secured by
such Liens are not then delinquent or are being contested in good faith by
appropriate proceedings conducted with due diligence and for the payment of
which the Company, Subsidiary or Other Subsidiary has furnished adequate
security; and (c) statutory Liens incidental to the conduct of the business of
the Company, Subsidiary or any Other Subsidiary which were not incurred in
connection with the borrowing of money or the obtaining of advances or credits
and which do not in the aggregate materially detract from the value of its
property or materially impair the use thereof in the operation of its business;
and (d) purchase money liens or security interests securing the cost of
acquisition of assets subject to such liens or security interests.
PERSON shall include all natural persons, corporations, business
trusts, associations, companies, partnerships, joint ventures and other entities
and governments, agencies and political subdivisions.
PLAN shall have the meaning ascribed to it in Section 3.1 hereof.
PROPRIETARY INFORMATION shall have the meaning ascribed thereto in
Section 3.16, above.
PROPRIETARY INFORMATION AGREEMENT shall have the meaning ascribed to it
in Section 3.19 hereof.
QUALIFIED PUBLIC OFFERING shall mean an underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offering and sale of Common Stock for the account of the Company,
on a firm commitment basis, yielding aggregate proceeds to the Company of
$20,000,000 at a public offering price that is at least $6.40 per share of
common stock (as adjusted for stock splits, dividends, recapitalizations and the
like).
RAM shall mean RAM Trading, Ltd.
RAPTOR shall mean the Raptor Global Portfolio.
REGISTRATION EXPENSES shall have the meaning ascribed thereto in
Section 7.17(c), above.
RELATED PARTY shall mean any officer, director, employee or consultant
of the Company, Subsidiary or any Other Subsidiary or any holder of five percent
(5%) or more of any class of capital stock of the Company, Subsidiary or any
Other Subsidiary or any member of the immediate family of any such officer,
director, employee, consultant or shareholder or any Person controlled by any
such officer, director, employee, consultant or shareholder or a member of the
immediate family of any such officer, director, employee, consultant or
shareholder.
RELEASE shall mean any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, ground water or property.
SECURITIES ACT shall have the meaning ascribed to it in Section 3.4(c)
hereof.
SELLING EXPENSES shall have the meaning ascribed thereto in Section
7.17(c), above.
SERIES B PREFERRED shall have the meaning ascribed to it in Section 1.1
hereof.
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SHAREHOLDERS' AND RIGHTS AGREEMENT shall have the meaning ascribed to
it in Section 5.10 hereof.
SHARES shall have the meaning ascribed to it in Section 1.1 hereof.
TUDOR ENTITY or TUDOR ENTITIES means each of the following: Tudor
Private Equity Fund, L.P., Tudor Arbitrage Partners, L.P., Tudor BVI Futures,
Ltd., Raptor Global Fund, L.P., Raptor Global Portfolio, Ltd. and Raptor Global
Fund Ltd., or any funds or other investment vehicles or entities of which any of
the foregoing entities are Affiliates, or any Affiliate or Affiliated Group of
Tudor Investment Corporation and/or Tudor Global Trading, Inc.
WARRANT(S) shall have the meaning ascribed thereto in Section 5.12
hereof.
WARRANT SHARES means, at any time, shares of Common Stock (a) issued
and then outstanding upon exercise of the Warrants, and (b) issued and
outstanding or issuable in respect of the Common Stock referred to in clause (a)
of this definition upon any stock dividend, stock split, combination or division
of shares, recapitalization, reclassification, merger, consolidation,
reorganization, or the like.
SECTION 10
MISCELLANEOUS
10.1 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Massachusetts,
provided however that matters related to the construction, interpretation and
enforcement of the Certificate of Incorporation (including but not limited to
any certificates of designation of preferred stock), Bylaws and other internal
corporate documents of the Company, Subsidiary and any Other Subsidiary shall be
governed by the Delaware General Corporation Law. The parties agree that any
legal or equitable suit, action or proceeding arising out of this Agreement may
be instituted and prosecuted in any state or federal court in the State of
Massachusetts and for the purposes of this Agreement, irrevocably submit to the
jurisdiction of any such court in any such suit, action or proceeding.
10.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
shall survive the Closing.
10.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, transferees, heirs, executors and administrators
of the parties hereto; provided, however, that neither the Company nor the
Subsidiary may assign its rights hereunder. Without limiting the generality of
the foregoing, all representations, covenants and agreements benefiting the
Purchasers shall inure to the benefit of any and all subsequent holders from
time to time of the Shares. Notwithstanding any other provision of this
Agreement, this Agreement and the rights and obligations hereunder and the
Acquired Securities may be transferred by each of the Purchasers in their sole
discretion at any time, in whole or in part, including without limitation
transfers to Affiliates or Affiliated Groups of the transferor, without the
consent of any other party hereto; provided that such transferees agree in
writing with the Company and the Subsidiary to be bound by all of the provisions
contained herein.
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10.4 ENTIRE AGREEMENT; AMENDMENT.
(a) This Agreement (including the Schedules and Exhibits hereto) and
the other documents (including each of the other Financing Documents) delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof. Except as
otherwise expressly provided herein, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated, except by a written instrument
signed by the Company and the holders of two-thirds or more of the shares of
Series B Preferred which have not been converted to Common Stock, but in no
event shall this paragraph be amended or the obligation of any Purchaser
hereunder increased, except upon the written consent of such Purchaser.
(b) For purposes of determining whether a Purchaser has met the
Ownership Threshold, a Purchaser shall be deemed to hold the number of shares of
Series B Preferred owned by such Purchaser and any of its Affiliates.
(c) For purposes of determining whether, for any provision hereof, the
number of shares of Common Stock, Warrant Shares, Conversion Shares or Shares
held by a Tudor Entity is sufficient to meet a required threshold, such Tudor
Entity shall be deemed to hold the number of Shares, Warrant Shares, or
Conversion Shares, as the case may be, held by such Tudor Entity AND any of its
Affiliates AND other Tudor Entities; provided however for purposes of
determining whether a Tudor Entity has met the Ownership Threshold, such Tudor
Entity shall be deemed to hold only the number of shares of Series B Preferred
(without including in such calculation any Warrants, Warrant Shares, Conversion
Shares or other Common Stock) held by such Tudor Entity AND any of its
Affiliates AND other Tudor Entities.
10.5 NOTICES, ETC.
(a) All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first-class, registered or
certified mail, postage prepaid, or delivered either by hand, overnight delivery
service, or by messenger, or sent via telex, telecopier, computer mail or other
electronic means, addressed (a) if to a Purchaser, at the address shown on the
Schedule of Purchasers, or at such other address as such Purchaser shall have
furnished to the Company in writing, or (b) if to any other holder of any
Acquired Securities, at such address as such holder shall have furnished to the
Company in writing, or, until any such holder so furnishes an address to the
Company, then to and at the address of the last holder thereof who has so
furnished an address to the Company, or (c) if to the Company or Subsidiary,
Five Clock Xxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxxxxx 00000, or at such
other address as the Company shall have furnished to the Purchasers and each
such other holder in writing.
(b) Any notice or other communications so addressed and mailed, postage
prepaid, by registered or certified mail (in each case, with return receipt
requested) shall be deemed to be given when so mailed. Any notice so addressed
and otherwise delivered shall be deemed to be given when actually received by
the addressee.
10.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any holder of Acquired Securities, upon any breach
or default of the Issuer Entities under this Agreement, shall impair any such
right, power or remedy of such holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character
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on the part of any holder of any breach or default under this Agreement, or any
waiver on the part of any holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. No course of dealing between the Company
and/or the Subsidiary and any of the Purchasers will operate as a waiver of any
of the Company's, the Subsidiary's or any Purchaser's rights under this
Agreement. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
10.7 RIGHTS; SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
10.8 AGENT'S FEES AND SERVICES.
(a) The Company represents and warrants that it has retained no finder
or broker or other person or firm in connection with the transactions
contemplated by this Agreement. The Company hereby agrees to indemnify and to
hold the Purchasers harmless of and from any liability for any commission or
compensation in the nature of an agent's fee to any broker, finder or other
person or firm (and the costs and expenses of defending against such liability
or asserted liability) arising from any act by the Company or any of its
employees or representatives.
(b) Each Purchaser represents and warrants as to itself only that it
has retained no finder or broker in connection with the transactions
contemplated by this Agreement. Each Purchaser hereby agrees to indemnify and to
hold the Company harmless of and from any liability for any commission or
compensation in the nature of an agent's fee to any broker, finder or other
person or firm (and the costs and expenses of defending against such liability
or asserted liability) arising from any act by such Purchaser or any of its
members, employees or representatives.
10.9 LEGAL FEES AND EXPENSES. The Company and Subsidiary each shall
bear its own expenses and legal fees incurred on its behalf with respect to this
Agreement and the transactions contemplated hereby. At the Closing (or if the
Closing shall not take place, within thirty (30) days of receiving any statement
or invoice therefor), the Company will pay the reasonable legal fees and
out-of-pocket expenses actually incurred for the services of (i) Xxxxxxx Xxxx
LLP, special counsel to the Purchasers (which fees and expenses shall not exceed
$25,000 without the prior, written consent of the Company) and (ii) Xxxxxx
Xxxxxx Zavis, special counsel to the RAM Trading Ltd. and its affiliates (which
fees and expenses shall not exceed $10,000), with respect to this Agreement and
the transactions contemplated hereby.
10.10 TITLES AND SUBTITLES. The titles of the Sections and subsection's
of this Agreement are for convenience or reference only and are not to be
considered in construing this Agreement.
10.11 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which when so executed and delivered shall constitute a complete and
original instrument but all of which together shall constitute one and the same
agreement, and it shall not be necessary when making proof of this Agreement or
any counterpart thereof to account for any other counterpart.
10.12 CONSTRUCTION. The language used in this Agreement is the language
chosen by the parties to express their mutual intent, and no rule of strict
construction will be applied against either party.
10.13 FURTHER ASSURANCES. From time to time on and after the Closing
Date, the Company and the
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Subsidiary will each promptly execute and deliver all such further instruments
and assurances, and will promptly take all such further actions, as the
Purchasers or any of them may reasonably request in order more effectively to
effect or confirm the transactions contemplated by this Agreement and/or any of
the other Financing Documents and to carry out the purposes hereof and thereof.
10.14 EQUITABLE RELIEF. Each of the parties acknowledges that any
breach by such party of his, her, or its obligations under this Agreement would
cause substantial and irreparable damage to one or more of the other parties and
that money damages would be an inadequate remedy therefor. Accordingly, each
party agrees that the other parties or any of them will be entitled to an
injunction, specific performance, and/or other equitable relief to prevent the
breach of such obligations.
10.15 PUBLICITY. The Purchasers or any of them will have the right to
publicize their investment in the Company as contemplated hereby by means of a
"tombstone" advertisement or other customary advertisement in newspapers and
other media. The Company may issue a press release or other form of public
announcement as soon as practicable after the Closing announcing the issuance
and sale of the Shares, provided that each Purchaser shall have approved the
form of such press release or other public announcement, such approval not to be
unreasonably withheld.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
SOFTLOCK COM., INC.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President and Chief Financial Officer
SOFTLOCK SERVICES., INC.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President and Chief Financial Officer
RAPTOR GLOBAL PORTFOLIO, LTD.
By: TUDOR INVESTMENT CORPORATION,
as Investment Advisor
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxxxx
Vice President
ALTAR ROCK FUND, L.P.
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By: Tudor Investment Corporation, as General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxxxx
Vice President
/s/ Xxxxxx X. Xxxxxxxx
---------------------------------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxxxx Xxxxx
---------------------------------------------
Xxxxxxx Xxxxx
RC CAPITAL, L.L.C.
By: Xxxxxxx Capital Investments, L.L.C., its manager
By: Xxxxxxx Capital Management, L.L.C., its manager
By: THR, Inc.
By: /s/ A. R. Xxxxx Xxxxxxx
---------------------------------------
A.R. Xxxxx Xxxxxxx, its President
RAM TRADING, LTD.
By: Xxxxxxx Capital Management, L.L.C., its investment
manager
By: THR, Inc.
By: /s/ A. R. Xxxxx Xxxxxxx
-----------------------------------------
A.R. Xxxxx Xxxxxxx, its President
XXXXXXX CAPITAL MANAGEMENT, L.L.C.
By: THR, Inc.
By: /s/ A. R. Xxxxx Xxxxxxx
------------------------------------------
A.R. Xxxxx Xxxxxxx, its President
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APEX INVESTMENT FUND IV, L.P.
By: Apex Management IV, L.L.C., its General Partner
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxxxx
APEX STRATEGIC PARTNERS IV, LLC
By: Apex Management IV, LLC, Manager
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxxxx, Managing Member
SI VENTURE FUND II, L.P.
By: SI VENTURE MANAGEMENT II, L.L.C.,
its General Partner
By: /s/ N. Xxxx Rin
------------------------------------------
its Managing Member
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