EXHIBIT 10.19
PRIME RESPONSE, INC.
COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
DECEMBER 6, 1999
COMMON STOCK AND WARRANT
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PURCHASE AGREEMENT
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THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") is made
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as of the 6th day of December, 1999, by and between (i) Prime Response, Inc.
(f/k/a Prime Response Group, Inc.), a Delaware corporation (the "Company") and
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(ii) Xxxxxxxx Consulting LLP, an Illinois limited liability partnership
("Xxxxxxxx Consulting"), and AC Ventures B.V., a limited liability corporation
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formed in the Netherlands ("AC Ventures", hereinafter referred to, together with
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Xxxxxxxx Consulting, as "AC").
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WHEREAS, the Company and Xxxxxxxx Consulting desire to enter into certain
marketing alliance and consulting arrangements with each other and, in
connection therewith, are entering into a Marketing Agreement of even date
herewith (the "Marketing Agreement"); and
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WHEREAS, as a condition precedent to entering into the Marketing Agreement,
and vice versa, the Company and AC have agreed, among other things, to enter
into the transactions contemplated by this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Company and AC hereby agree as
follows:
1. PURCHASE AND SALE OF PURCHASED SECURITIES.
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1.1 Sale and Issuance of Common Stock and Warrants. Subject to the
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terms and conditions of this Agreement, at the Closing (as defined below), (a)
AC Ventures agrees to purchase, and the Company agrees to sell and issue to AC
Ventures, an aggregate of 570,409 shares (the "Purchased Shares") of the
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Company's common stock, $0.01 par value per share (the "Common Stock"), at an
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aggregate price of $4,000,000, and (b) Xxxxxxxx Consulting agrees to purchase,
and the Company agrees to sell and issue to Xxxxxxxx Consulting, warrants to
purchase an aggregate of 909,709 shares of Common Stock (the "Warrants"), at an
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initial exercise price per share equal to $7.01 and substantially in the form
attached hereto as Exhibit A, and at the purchase price of $0.01. The Purchased
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Shares and the Warrants shall hereinafter be referred to, collectively, as the
"Purchased Securities".
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1.2 Closing. Subject to the fulfillment of the conditions set forth
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in Sections 5 and 6 below (or the waiver thereof by the appropriate party), the
purchase and sale of the Purchased Securities and the consummation of the
transactions set forth herein (the "Closing") shall take place at the offices of
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Xxxxxxx Xxxx LLP, 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, at 10:00
A.M., on or before December 8, 1999 (the "Closing Date"), (the "Closing"),
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provided, that if the Company fails to deliver the Final Audited Financial
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Statements (as defined in Section 5.10) on or before the Closing Date,
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the Closing Date may be unilaterally extended at the sole option and discretion
of AC. At the Closing, the Company shall deliver to AC Ventures a certificate
representing the Purchased Shares and to Xxxxxxxx the Warrants against payment
therefor by AC Ventures and Xxxxxxxx by check or wire transfer to an account
specified in writing by the Company (or, in the case of the Warrants, in cash).
2. Representations, Warranties and Covenants of the Company. The Company
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hereby represents, warrants and covenants to AC that:
2.1 Organization and Authority. The Company is a corporation duly
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organized, validly existing, and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as now conducted
and as proposed to be conducted. The minute books of the Company have been made
available to AC for inspection and accurately record therein all corporate
actions taken by the Board of Directors and stockholders of the Company.
2.2 Corporate Power; Binding Effect. The Company has all requisite
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power and full legal right to execute and deliver this Agreement, and to perform
all of its obligations hereunder in accordance with the terms set forth herein.
This Agreement and the transactions contemplated hereby have been duly approved
and authorized by all requisite corporate action on the part of the Company and
its stockholders, and this Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid, and binding obligation of the Company,
enforceable against it in accordance with the terms set forth herein. The
execution, delivery, and performance by the Company of this Agreement in
accordance with the terms set forth herein, and the consummation by the Company
of the transactions contemplated hereby, will not result (with or without the
giving of notice or the lapse of time or both) in any conflict, violation,
breach, or default, or the creation of any lien , security interest, option or
other charge or encumbrance, or the termination, acceleration, vesting, or
modification of any right or obligation, under or in respect of (x) the
Certificate of Incorporation (as amended and in effect as of the date hereof) or
by-laws of the Company, (y) any judgment, decree, order, statute, rule, or
regulation binding on or applicable to the Company, or (z) any agreement or
instrument to which the Company is a party or by which it or any of its assets
is or are bound.
2.3 Foreign Qualification. The Company is duly qualified to do
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business and is in good standing as a foreign corporation in the Commonwealth of
Massachusetts and, except as set forth in Schedule 2.3, in each jurisdiction in
which the character of the properties owned or leased by the Company or the
nature of its activities makes such qualification necessary, other than any
jurisdictions in which the failure so to qualify or be in good standing would
not, either in any case or in the aggregate, have a material adverse effect on
the business, current prospects, results of operations or financial condition of
the Company (a "Material Adverse Effect").
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2.4 Subsidiaries. Schedule 2.4 sets forth a list of all of the
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Subsidiaries
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of the Company and, with respect to each Subsidiary, (a) the name of each
stockholder or other holder of record or beneficial owner of capital stock,
securities or other equity interests, (b) the number of shares of capital stock,
securities or other equity interests authorized, issued and outstanding, (c) the
class, series or type of capital stock, securities or other equity interests
authorized, issued and/or outstanding, and (d) the jurisdiction of incorporation
and/or formation and the type and/or form of entity (e.g., partnership,
corporation, limited liability company, etc.). Each of the Subsidiaries set
forth on Schedule 2.4 is duly organized, validly existing, and in good
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standing (to the extent applicable) under the laws of its jurisdiction of
incorporation or formation. Each of the Subsidiaries has all requisite
corporate or other power and authority to own or lease and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted. The minute books of each of the Subsidiaries have been made
available to AC for inspection and accurately record therein all actions taken
by the Board of Directors (or other similar governing committee or body) and
stockholders (or other equity holders) of such Subsidiary. For purposes of this
Agreement, the term "Subsidiary" means, with respect to a party, any corporation
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or other organization, whether incorporated or unincorporated, of which (i) such
party or any other Subsidiary of such party is a general partner or a managing
member, (ii) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. For purposes of Section 2 of this Agreement, all references to
the Company shall be deemed to include the Subsidiaries set forth on
Schedule 2.4.
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2.5 Capitalization.
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(a) Immediately after the Closing, giving effect to the sale and
purchase of the Purchased Securities provided for in this Agreement, the
authorized and the outstanding capital stock of the Company will be as set forth
in Schedule 2.5(a), and all such outstanding shares of capital stock will be
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owned (of record and beneficially) by the Persons and in the amounts there
indicated. All such outstanding shares of capital stock will be duly
authorized, validly issued, fully paid, and non-assessable, and, to the
Company's knowledge, free and clear of any liens, security interests, options or
other charges or encumbrances. Except as set forth on Schedule 2.5(a), no
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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
Purchased Securities (and the issuance of Common Stock upon the exercise of the
Warrants) to the rate at which shares of the Series A Convertible Participating
Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"), the
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Series B Convertible Participating Preferred Stock, $.01 par value per share
(the "Series B Preferred Stock"), and the Series C Convertible Preferred Stock,
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$.01 par value per share (the "Series C Preferred Stock"), and any other capital
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stock or other security of the Company are convertible into or exercisable for
shares of Common Stock or Preferred Stock (as defined in the next sentence) (by
reason of any "anti-dilution" provisions or agreements or otherwise). The term
"Preferred
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Stock" shall refer, collectively, to the Series A Preferred Stock, the Series B
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Preferred Stock and the Series C Preferred Stock.
(b) Except as set forth in Schedule 2.5(b), 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. Except as set forth in Schedule 2.5(b), no adjustment has previously
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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 Purchased Securities (or the
issuance of Common Stock upon the exercise of the Warrants) to the number of
shares of capital stock or security 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).
(c) Except as set forth in Schedule 2.5(c), the Company (i) has no
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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
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or documents to which the Company is a party or of which the Company is aware,
except as set forth in Schedule 2.5(c), which govern or affect in any way the
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rights of the holders of securities, including any class of capital stock, of
the Company.
(d) The Company has reserved, solely for the purpose of issuance upon
exercise of the Warrants, a number of shares of Common Stock sufficient to cover
the exercise of all such Warrants.
2.6 Lawful Issuance. All of the outstanding shares of capital stock
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and other securities of the Company were offered, issued, and sold, and the
Purchased Securities have been offered and at the Closing will be issued and
sold, in compliance with (i) all applicable preemptive, participation, rights of
first refusal or similar rights of all persons, and (ii) assuming the
truthfulness and accuracy of the representations made by AC in Section 3 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.
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2.7 Valid Issuance of Purchased Securities. The Purchased Securities
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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. In addition, the
shares of Common Stock issuable upon the exercise of the Warrants shall, upon
issuance pursuant to the terms thereof, 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 Purchased Securities
and the Common Stock upon the exercise of the Warrants are not and will not be
subject to any pre-emptive rights, first refusal rights, right to purchase or
similar rights with respect to such Purchased Securities and the Common Stock
issuable upon the exercise of the Warrants.
2.8 Financial Statements. The Company has delivered to AC a draft
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(the "Draft Audited Financial Statements") of the audited consolidated balance
sheet of the Company as of December 31, 1996, 1997 and 1998, and September 30,
1999 (the "Most Recent Balance Sheet"), and the related consolidated statements
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of income, changes in stockholders' equity, and cash flows for the years ended
December 31, 1996, 1997 and 1998 and for the nine month period ended September
30, 1999, a copy of which is attached hereto as Exhibit D. Each of such
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financial statements was prepared in accordance with generally accepted
accounting principles (GAAP) applied on a basis consistent with prior periods.
Each of such balance sheets is true and correct and accurately presents the
financial condition of the Company as of its date; and each of such statements
of income, changes in stockholders' equity, and cash flows accurately presents
the results of operations, changes in stockholders' equity, or cash flows, as
the case may be, of the Company for the period covered thereby. The Final
Audited Financial Statements (as defined in Section 5.10) shall be the same in
all material respects to the Draft Audited Financial Statements.
2.9 Absence of Certain Changes. Since the date of the Most Recent
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Balance Sheet, there has not been:
(a) any (i) acquisition (by purchase, lease as lessee, license as
licensee, or otherwise) or disposition (by sale, lease as lessor, license as
licensor, or otherwise) by the Company of any material properties or assets, or
(ii) other transaction by, or any agreement or commitment on the part of, the
Company, other than those in the ordinary course of business, that have not
caused and will not cause, either in any case or in the aggregate, a Material
Adverse Effect;
(b) except as set forth in Schedule 2.9(b), any material change in the
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condition (financial or otherwise), properties, assets, liabilities,
investments, revenues, expenses, income, operations, business, or current
prospects of the Company, or in any of its relationships with any clients,
suppliers, customers, or other third parties with whom it has financial,
commercial, or other business relationships, other than changes in the ordinary
course of business that have not caused and cannot reasonably be expected to
cause, either in any case or in the aggregate, a Material Adverse Effect;
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(c) any transaction or change in compensation by the Company with any
of its stockholders, directors or officers other than the payment of
compensation and reimbursement of reasonable employee travel and other business
expenses in accordance with existing employment arrangements and usual past
practices;
(d) any damage, destruction, or loss, whether or not covered by
insurance, that, either in any case or in the aggregate, has caused, or could
reasonably be expected to cause, a Material Adverse Effect;
(e) any declaration, setting aside, or payment of any dividend or any
other distribution (in cash, stock, and/or property or otherwise) in respect of
any shares of the capital stock, equity interests or other securities of the
Company;
(f) except as set forth in Schedule 2.9(f), any issuance of any shares
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of the capital stock, equity interests or other securities of the Company, or
any direct or indirect redemption, purchase, or other acquisition by the Company
of any shares of capital stock, equity interests or other securities;
(g) except as set forth in Schedule 2.9(g), any change in the
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officers, directors or strategic partners of the Company;
(h) any labor or employee trouble or claim of unfair labor or
employment practices involving the Company, any increase in any single case in
excess of $50,000 in the compensation or other benefits payable or to become
payable by the Company to any of its officers, employees, or independent
contractors, or any bonus payments or arrangements made to or with any of such
officers, employees, or independent contractors;
(i) any forgiveness or cancellation of any debt or claim by the
Company or any waiver by the Company of any right of material value, other than
compromises of accounts receivable in the ordinary course of business of less
than $50,000;
(j) any incurrence or any payment, discharge, or satisfaction by the
Company 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);
(k) any incurrence, discharge, or satisfaction of any material lien,
charge or other encumbrance (i) by the Company, or (ii) on any of the capital
stock, other securities or equity interests, properties, or assets owned, held
or leased by the Company;
(l) any change in the financial or tax accounting principles,
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practices, or methods of the Company; or
(m) any agreement, understanding, or commitment by or on behalf of the
Company, whether in writing or otherwise, to do or permit any of the things
referred to in this Section 2.9.
2.10 Properties, Leases, Etc.
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(a) Title to Properties; Condition of Personal Properties. The
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Company 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 Most Recent 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, charges and other encumbrances, and (iii) full right to
hold and use all of the assets and properties used in or necessary to their
respective businesses and operations, in each case all free and clear of all
liens, charges and other encumbrances, and in each case subject to applicable
laws and the terms of any lease under which the Company 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 as presently conducted and as currently
proposed to be conducted.
(b) No Owned Real Properties. The Company does not own any real
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property or any interest (other than a leasehold interest) in any real property.
(c) Leased Properties. Schedule 2.10(c) sets forth a complete and
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correct description of all leases of real or personal property under which the
Company is lessor or lessee. Complete and correct copies of all such leases and
all amendments, supplements, and modifications thereto, other than any personal
property lease with an annual rent of less than $20,000 and total remaining
rental payments of less than $10,000, have been delivered to AC. Each such
lease is valid and subsisting and no event or condition exists that constitutes,
or after notice or lapse of time or both would constitute, a default thereunder
by the Company or, to the Company's knowledge, any other party thereto. The
Company's leasehold interests are subject to no liens, charges or other
encumbrances, and the Company is in quiet possession of the properties covered
by such leases.
2.11 Indebtedness. Except to the extent reflected or reserved in
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the Most Recent Balance Sheet, incurred in the ordinary course of business since
the date of the Most Recent Balance Sheet, or as set forth on Schedule 2.11, the
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Company has no Indebtedness outstanding. The Company is not in default with
respect to any outstanding Indebtedness or any instrument or agreement relating
thereto, and no such Indebtedness or any instrument or agreement relating
thereto purports to limit the issuance of any securities by the Company or the
operation of the business of the Company. Complete and correct copies of all
instruments and agreements (including all amendments, supplements, waivers, and
consents) relating to any Indebtedness of the Company have
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been furnished to AC. As used in this Agreement, the term "Indebtedness" means
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(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 generally accepted accounting principles
(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 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.
2.12 Absence of Undisclosed Liabilities. Except to the extent
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reflected or reserved in the Most Recent Balance Sheet, or incurred after the
date of such balance sheet in the ordinary course of business, or incurred in
connection with the transactions contemplated by this Agreement, the Company has
no material liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise (including without limitation liabilities as guarantor
or otherwise with respect to obligations of others) and whether due or to become
due.
2.13 Tax Matters.
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(a) Filing of Tax Returns and Payment of Taxes. Except as set forth
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on Schedule 2.13(a), the Company has timely filed all Tax Returns required to be
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filed by the Company, each such Tax Return has been prepared in compliance with
all applicable laws and regulations, and all such Tax Returns are true and
accurate in all respects. All Taxes due and payable by the Company have been
paid, and the Company will not be liable for any additional Taxes in respect of
any taxable period ending on or before the Closing Date in an amount that
exceeds the corresponding reserve therefor, if any, reflected in the accounting
records of the Company as of the Closing Date. No claim has ever been made by a
taxing authority in a jurisdiction where the Company does not pay Tax or file
Tax Returns that the Company is or may be subject to Taxes assessed by such
jurisdiction. There are no liens for Taxes (other than current Taxes not yet
due and payable) on the assets of the Company.
(b) Audit History, Extensions, Etc. There is no action, suit, taxing
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authority proceeding, or audit with respect to any Tax now in progress, pending,
or to the best of the Company's knowledge, threatened, against or with respect
to the Company. No deficiency or proposed adjustment in respect of Taxes that
has not been settled or otherwise resolved has been asserted or assessed by any
taxing authority against the Company. The Company has not consented to extend
the time in which any Tax may be assessed or collected by any taxing authority.
The Company has not requested or been
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granted an extension of the time for filing any Tax Return to a date on or after
the Closing Date.
(c) Membership in Affiliated Groups, Etc. The Company has never been
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a member of any Affiliated Group, nor has ever filed or been included in a
combined, consolidated, or unitary Tax Return. The Company is not a party to or
bound by any tax sharing or allocation agreement nor has any current or
potential contractual obligation to indemnify any other person with respect to
Taxes. As used in herein, the term "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.
(d) Withholding Taxes. The Company has withheld and paid all Taxes
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required to have been withheld and paid by it in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other Person.
(e) Certain Defined Terms. As used herein, the term "Tax" or "Taxes"
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means any federal, state, local, or foreign income, gross receipts, franchise,
estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, severance, stamp, occupation, premium,
windfall profit, customs, duties, real property, personal property, capital
stock, intangibles, social security, unemployment, disability, payroll, license,
employee, or other tax or levy, of any kind whatsoever, including any interest,
penalties, or additions to tax in respect of the foregoing. In addition, the
term "Tax Return" means any return, declaration, report, claim for refund,
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information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or required
to be filed in connection with the determination, assessment, or collection of
any Tax or the administration of any laws, regulations, or administrative
requirements relating to any Tax.
2.14 Litigation, Etc. Except as set forth on Schedule 2.14, no
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litigation, arbitration, action, suit, claim, demand, proceeding or
investigation (whether conducted by or before any judicial or regulatory body,
arbitrator, commission) is pending or, to the Company's knowledge, threatened,
against the Company, its property or assets, nor is there any basis therefor
known to the Company.
2.15 Safety, Zoning, and Environmental Matters.
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(a) The Company is not nor has ever been in violation in any material
respect of any applicable statute, law, or regulation relating to occupational
health or safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced against or
received by it alleging any failure by it to comply with any such statute, law,
or regulation, nor is there any basis therefor known to the Company.
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(b) To the best of the Company's knowledge, none of the real
properties presently leased, or operated by the Company, nor any leasehold
improvements thereto, nor any business conducted by the Company thereon, are in
violation in any material respect 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.
(c) The Company is not presently, and has never been, in violation of
any judgment, decree, order, statute, law, permit, license, rule, or regulation
pertaining to environmental matters, including without limitation those arising
under any Environmental Laws, nor has any of them received any written notice
alleging any such violation. As used herein, the term "Environmental Laws"
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means, collectively, the Resource Conservation and Recovery Act, CERCLA, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, and any and
all state or local statutes, regulations, ordinances, orders, and decrees
relating to health, safety, or the environment, each, as the case may be, as
amended. The term "CERCLA" means the Comprehensive Environmental Response,
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Compensation and Liability Act of 1980, as amended.
(d) None of the Company and its Subsidiaries has received any notice
or request for information from any third party, including without limitation
any federal, state, or local governmental authority, (i) that any of them has
been identified by the EPA or any state environmental regulatory authority as a
potentially responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B, or under any equivalent
state law; (ii) that any Hazardous Substances that any of them has generated,
transported, or disposed of have been found at any site at which a federal,
state, or local agency or other third party has conducted or has ordered it to
conduct a remedial investigation, removal or other response action pursuant to
any Environmental Law; or (iii) that any of them is or will or may be a named
party to any claim, action, cause of action, complaint, or legal or
administrative proceeding arising out of any third party's incurrence of Damages
in connection with the release (within the meaning of CERCLA) of any Hazardous
Substances or any other environmental matters. No circumstances exist that
could reasonably be expected to give rise to any such notice or request for
information or to any Damages. As used herein, the term "Hazardous Substances"
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means, collectively, any hazardous waste, as defined by 42 U.S.C. (S) 6903(5),
any hazardous substances as defined by 42 U.S.C. (S) 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. (S) 9601(33), or any toxic substance,
methane gas, oil, or hazardous materials or other chemicals or substances
regulated by any Environmental Laws. In addition, as used herein, the term
"Damages" means all damages, losses, claims, demands, actions, causes of action,
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suits, litigations, arbitrations, liabilities, costs, and expenses, including
without limitation court costs and the fees and expenses of counsel and experts.
2.16 Labor Relations. The Company is in compliance in all material
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respects with all applicable federal and state laws respecting employment and
employment practices, terms and conditions of employment, wages and hours, and
nondiscrimination in employment, and is not engaged in any unfair labor
practice. There is no charge pending or, to the best of the Company's
knowledge, threatened, against or with respect to the Company before any court
or agency and alleging unlawful discrimination in employment practices, and
there is no charge of or proceeding with regard to any unfair labor practice
against the Company pending before the National Labor Relations Board. There is
no labor strike, dispute, slow-down, or work stoppage pending or, to the
Company's knowledge, threatened against or involving the Company. None of the
employees of the Company is covered by any collective bargaining agreement, and
no such collective bargaining agreement is currently being negotiated. No one
has petitioned and, to the Company's knowledge, no one is now petitioning, for
union representation of any employees of the Company. The Company has not
experienced any work stoppage or other material labor difficulty.
2.17 Material Contracts. Except for the contracts, agreements and
------------------
other arrangements listed in Schedule 2.17 and contracts, agreements, or other
-------- ----
arrangements that have been fully performed and with respect to which the
Company has no further obligations or liabilities, the Company is not a party to
or otherwise bound by (i) any agreement, instrument, or commitment that may
affect its ability to consummate the transactions contemplated hereby, or (ii)
any other material agreement, instrument, or commitment; including without
limitation any:
(a) agreement for the purchase, sale, lease, or license by or from it
of services, products, or assets, requiring total payments by or to it in excess
of $50,000 in any instance, or entered into other than in the ordinary course of
business;
(b) 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;
(c) agreement or other commitment pursuant to which it has agreed
to indemnify or hold harmless any other person;
(d) (i) employment agreement, (ii) consulting agreement, or (iii)
agreement 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;
(e) agreement with any current or former affiliate, stockholder,
officer, director, or strategic partner of the Company, or with any person in
which any such affiliate is known by the Company to have an interest;
(f) joint venture, partnership or teaming agreement;
-13-
(g) 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;
(h) agreement imposing non-competition or exclusive dealing
obligations on it;
(i) agreement with respect to the confidentiality of the Company's
Proprietary Information (as described in Section 2.20 hereof), and the
------------
assignment to the Company of any and all rights employees of the Company might
have to acquire with respect to technology, inventions, developments, etc.,
developed in connection with this employment with the Company; and
(j) agreement the performance of which is reasonably likely to
result in a loss to it.
The Company has delivered or caused to be delivered to AC correct and
complete copies of each agreement, instrument, and commitment listed in Schedule
--------
2.17, each as amended to date. Each such agreement, instrument, and commitment
----
is a valid, binding and enforceable obligation of the Company and, to the
Company's knowledge, of the other party or parties thereto, and is in full force
and effect. The Company is not nor, to the Company's knowledge, is any other
party thereto, (nor to the Company's knowledge is the Company 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 breach or non-compliance 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 and any client, supplier or customer, relating
to any agreement, instrument, or commitment listed in Schedule 2.17 is pending
-------------
or, to the Company's knowledge, threatened, nor to the Company's knowledge is
there any basis for any of the foregoing. No agreement, instrument, or
commitment listed in Schedule 2.17 includes or incorporates any provision, the
-------------
effect of which may be to enlarge or accelerate any of the obligations of the
Company or to give additional rights to any other party thereto, or will
terminate, lapse, or in any other material way be affected, by reason of the
transactions contemplated by this Agreement.
2.18 Employee Benefit Plans.
----------------------
(a) Identification of Plans. Except for the arrangements set forth in
-----------------------
Schedule 2.18, the Company does not now maintain or contribute to any pension,
-------- ----
profit-sharing, deferred compensation, bonus, stock option, share appreciation
right, severance, group or individual health, medical, life insurance, survivor
benefit, or similar plan, policy or arrangement, whether formal or informal, for
the benefit of any director, officer, consultant, or employee of any of them,
whether active or terminated; nor has it
-14-
ever maintained or contributed to any such plan, policy, or arrangement that was
subject to ERISA. Each of the arrangements set forth in Schedule 2.18 is herein
-------------
referred to as an "Employee Benefit Plan." As used herein, the term "ERISA"
--------------------- -----
means the Employee Retirement Income Security Act of 1974, as amended.
(b) Compliance with Terms and Law. Each Employee Benefit Plan is and
-----------------------------
has been maintained and operated in compliance in all material respects with the
terms of such plan and with the requirements prescribed (whether as a matter of
substantive law or as necessary to secure favorable tax treatment) by any and
all statutes, governmental, or court orders, or governmental rules or
regulations in effect from time to time, including but not limited to ERISA and
the Internal Revenue Code of 1986, as amended (the "Code"), and applicable to
----
such plan. Each Employee Benefit Plan that is intended to qualify under Section
401(a) of the Code is so qualified.
(c) Absence of Certain Events and Arrangements.
------------------------------------------
(1) There is no pending or, to the Company's knowledge, threatened,
legal action, proceeding, or investigation, other than routine claims for
benefits, concerning any Employee Benefit Plan, or any fiduciary or service
provider thereof and there is no basis for any such legal action or proceeding.
(2) No Employee Benefit Plan, nor any party in interest in respect
thereof has engaged in a prohibited transaction that could subject the Company,
directly or indirectly, to liability under Section 409 or 502(i) of ERISA or
Section 4975 of the Code.
(3) No communication, report, or disclosure has been made that, at the
time made, did not accurately reflect the terms and operations of any Employee
Benefit Plan.
(4) No Employee Benefit Plan provides welfare benefits subsequent to
termination of employment to employees or their beneficiaries (except to the
extent required by applicable state insurance laws and Title I, Part 6 of
ERISA).
(5) The Company has not undertaken to maintain any Employee Benefit
Plan for any specific period of time and each such plan is terminable at the
sole discretion of the Company, subject only to such constraints as may imposed
by applicable law.
(6) No Employee Benefit Plan is maintained pursuant to a collective
bargaining agreement or is or has been subject to the minimum funding
requirements of Section 302 of ERISA or Section 412 of the Code.
(d) Funding of Certain Plans. With respect to each Employee Benefit
------------------------
Plan for which a separate fund of assets is or is required to be maintained,
full
-15-
payment has been made of all amounts that, under the terms of each such plan, it
is required to have paid as contributions to that plan as of the end of such
plan's most recently ended year.
2.19 Potential Conflicts of Interest. Except as set forth on
-------------------------------
Schedule 2.19, neither the Company nor any of its officers, directors, partners,
-------------
members 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 and traded 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; (ii) owns, directly or indirectly, any
interest in any tangible or intangible property used in or necessary to the
business of the Company; (iii) has any cause of action or other claim whatsoever
against the Company, or owes any amount to the Company, 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.
2.20 Proprietary Information.
-----------------------
(a) Schedule 2.20 lists all patents, patent applications, trademarks,
-------------
trade names, service marks, logos, copyrights, and licenses used in or necessary
to the Company's business as now being conducted or as proposed to be conducted
(other than commercially available off-the-shelf software, so long as such
software is not packaged with, imbedded in, or sold in connection with any of
the Company's products) (collectively, and together with any technology, know-
how, trade secrets, processes, formulas, and techniques used in or necessary to
the Company's business, "Proprietary Information"). The Company owns, or is
-----------------------
licensed or otherwise has 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 (other
than commercially available off-the-shelf software) are necessary to or used in
the conduct of its business.
(b) In any instance where the Company's 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
Schedule 2.20 and such rights are licensed exclusively to it except as indicated
-------------
in Schedule 2.20. No other person has an interest in or right or license to use
-------------
any of the Proprietary Information. To the best of the Company's knowledge,
none of the Proprietary Information is being infringed by others, or is subject
to any outstanding order, decree, judgment, or stipulation. 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 Company's knowledge, threatened, nor, to the best of the
Company's knowledge, is there any basis for any such litigation or proceeding.
The Company maintains adequate and sufficient security measures for the
preservation of the secrecy and proprietary nature of the Proprietary
Information.
-16-
(c) (i) Neither the Company nor, to the Company's knowledge, any of
its employees has infringed or made unlawful use of, or is 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 Company; and (ii) to the Company's knowledge, the
activities of the Company's 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. No litigation (or other
proceedings in or before any court or other governmental, adjudicatory,
arbitral, or administrative body) charging the Company with infringement or
unlawful use of any patent, trademark, copyright, or other proprietary right is
pending or, to the Company's knowledge, threatened, nor is there any basis for
any such litigation or proceeding.
(d) No officer, director, employee, partner, member or consultant of
the Company, to the Company's knowledge, 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
agreements and obligations to use his or her reasonable best efforts to promote
the interests of the Company, (ii) conflicts or may conflict with the business
or operations of the Company 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 Company.
2.21 Insurance. Schedule 2.21 lists the policies of theft, fire,
--------- -------- ----
liability, worker's compensation, life, property and casualty, directors' and
officers', and other insurance owned or held by the Company and the basis on
which such policies provide coverage. Such policies of insurance are maintained
with financially sound and reputable insurance companies, funds, or
underwriters, are of the kinds and cover such risks, and are in such amounts and
with such deductibles and exclusions, as are consistent with prudent business
practice. All such policies are, and at all times since the respective dates
set forth in Schedule 2.21, have been, in full force and effect, are sufficient
-------------
for compliance in all respects by the Company with all requirements of law and
of all agreements to which it is a party, and provide that they will remain in
full force and effect through the respective dates set forth in Schedule 2.21,
-------------
and will not terminate or lapse or otherwise be affected in any way by reason of
the transactions contemplated hereby.
2.22 Governmental and Other Third-Party Consents. Except as set
-------------------------------------------
forth on Schedule 2.22, no consent, approval, or authorization of, or
-------- ----
registration, designation, declaration, or filing with, any governmental
authority, federal or other, or any other person is required on the part of the
Company in connection with its execution, delivery, or performance of this
Agreement and its consummation of the transactions contemplated hereby, other
than pursuant to any applicable federal or state securities laws, or the
continued conduct of the present business of the Company after the Closing Date.
2.23 Brokers. No finder, broker, agent, or other intermediary has
-------
acted
-17-
for or on behalf of the Company in connection with the negotiation or
consummation of the transactions contemplated hereby, and no fee will be payable
by the Company to any such person in connection with such transactions.
2.24 Compliance with Other Instruments, Laws, Etc. The Company 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, either 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. The Company has not committed, been charged with, or, to the
Company's knowledge, been under investigation with respect to, nor does there
exist, any violation by the Company of any provision of any federal, state, or
local law or administrative regulation, except for any violations that, both
singly or in the aggregate, have not had and could not reasonably be expected to
have a material adverse effect on the business, prospects, results of operations
or financial condition of the Company. The Company has and maintains all
licenses, permits, and other authorizations from all such governmental
authorities that are legally required for the conduct of its business or in
connection with the ownership or use of its properties, except for any 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 on the business, prospects, results
of operations or financial condition, and all of which are in full force and
effect in all material respects, and true and complete copies of all of which
have been delivered to AC.
2.25 Compliance with Securities Laws. Assuming the accuracy of the
-------------------------------
representations of AC contained in Section 3 hereof, the offer, issuance, and
delivery of the Purchased Securities as contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and are exempt
from registration or qualification under applicable states' securities laws.
Neither the Company nor anyone acting on its behalf will hereafter offer to
sell, solicit offers to buy, or sell any securities of the Company so as to
subject the offer, issuance, and sale of the Purchased Securities to the
registration requirements of the Securities Act.
2.26 Real Property Holding Corporation. The Company hereby
---------------------------------
represents that it is not a "United States real property holding corporation"
within the meaning of Section 897 of the Code, as amended, and Treasury
Regulation (S)1.897-2.
2.27 Foreign Corrupt Practices Act. The Company has not taken any
-----------------------------
action which would cause it to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any rules or regulations thereunder. To the
Company's knowledge, there is not now, and there has never been, any employment
by the Company of, or beneficial ownership in the Company by, any governmental
or political official in any
-18-
country in the world.
2.28 Year 2000. Except as to functions where the failure to
---- ----
accomplish the following will not have a Material Adverse Effect, all computer
software programs, source code, object code, data and documentation used by the
Company will (a) accurately process date information before, during and after
January 1, 2000, including, but not limited to, accepting date input, providing
date output and performing calculations on dates or portions of dates; (b)
function accurately and without interruption before, during and after January 1,
2000 without any change in operations associated with the advent of the new
century; and (c) store and provide output of date information in ways that are
unambiguous as to century.
2.29 Disclosure. No representation or warranty by the Company in
----------
this Agreement, in any schedule to this Agreement or in the draft of the Form
S-1 dated November 16, 1999 (the "Form S-1") provided by the Company to AC,
--------
contains any untrue statement of a material fact or omits to state a material
fact required to be stated herein or necessary to make the statements contained
herein not false or misleading, provided, however, that all financial
information in such draft registration statement is superceded by the financial
statements referred in Section 2.8. There is no fact or circumstance relating
specifically to the business or condition of the Company that could reasonably
be expected to result in a Material Adverse Effect that is not disclosed in a
Schedule attached hereto or in the Form S-1.
2A. Covenant Pending Closing. The Company shall use its best efforts
------------------------
to deliver to AC the Final Audited Financial Statements (as defined in Section
5.10 below) on or before December 8, 1999.
3. Representations and Warranties of AC. AC hereby represents and warrants
------------------------------------
that:
3.1 Authorization. AC has full power and authority to enter into
-------------
this Agreement and such agreement constitutes its valid and legally binding
obligation, enforceable against AC in accordance with its terms.
3.2 Purchase Entirely for Own Account. AC is acquiring the Purchased
----------------------------------
Securities for investment for AC's own account, not as a nominee or agent
(provided that loans from affiliates for the purchase price of the Purchased
Securities shall not constitute action as a nominee or agent), and not with a
view to the resale or distribution of any part thereof. AC has no present
intention of selling, granting any participation in or otherwise distributing
the same. By executing this Agreement, AC further represents that AC does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person
with respect to any of the Purchased Securities.
-19-
3.3 Investment Experience. AC is an investor in securities of
---------------------
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Common Stock. AC also represents it
has not been organized for the purpose of acquiring the Purchased Securities.
3.4 Accredited Investor. AC is an "accredited investor" within the
-------------------
meaning of Rule 501 of Regulation D, as promulgated by the Securities and
Exchange Commission, as presently in effect.
3.5 Restricted Securities. AC understands that the Purchased
---------------------
Securities are "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances.
3.6 Legends. It is understood that the certificates or other
-------
instruments evidencing the Purchased Securities may bear one or all of the
legends in substantially the form specified below:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. 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 EXEMPTION THEREFROM."
4. REPURCHASE OF SECURITIES.
---------- -- ----------
4.1 Right to Put Securities. At any time and from time to time, on
----- -- --- ----------
or after January 1, 2001 (the "Put Exercise Date"), in the event that the
-----------------
Company has not consummated an underwritten public offering of its capital stock
registered pursuant to the Securities Act on or before the Put Exercise Date, AC
may, by written notice to the Company (the "Put Notice"), elect to sell to the
----------
Company (and the Company hereby agrees to repurchase from such holders) (the
"Put Right"), at the Repurchase Price specified in Section 4.4 hereof, all (but
---------
not less than all) of the Purchased Shares then held by AC (the "Put Shares").
----------
4.2 Put Closing. The closing (the "Put Closing") shall take place at
--- -------
the offices of the Company at 10:00 a.m. (Boston time) on a date, to be
specified in the Put Notice, which date shall be not less than fourteen (14)
days after the date of the Put Notice (the "Put Closing Date"), or at such other
----------------
place or on such other date as the Company and AC shall agree. At the closing,
the holders of the Put Shares will deliver to the Company, free and clear of all
liens and encumbrances, a certificate or certificates evidencing the Put Shares
then to be purchased by the Company (properly endorsed or
-20-
accompanied by stock powers or similar appropriate documentation or authority to
transfer) against payment of the Repurchase Price to such holders in the manner
specified in Section 4.3 hereof. Except to the extent prohibited by applicable
law, prior to the Put Closing Date, the Company will provide AC with all
available information that may be material to the exercise of AC's rights under
this Section 4, including any plans or proposals for any mergers, sales of
assets, acquisitions and substantial sales of stock (either by its stockholders
or through new issuances).
4.3. Payment. The Company shall pay the Repurchase Price at any
-------
closing under Section 4.2 hereof out of funds legally available therefor in cash
or immediately available funds in three installments as follows: (a) one-half
at the Put Closing; (b) one-fourth on or before the later to occur of March 31,
2001 and the date which is three months after the Put Closing Date; and (c)
one-fourth on or before the later to occur of June 30, 2001 and the date which
is six months after the Put Closing Date. If the funds of the Company legally
available for the purchase of the Put Shares are insufficient to pay the
Repurchase Price when due in accordance with the foregoing sentence, those funds
which are legally available will be used to purchase the maximum possible number
of Put Shares ratably on the basis of the number of Put Shares that would be
purchased on such date if the funds of the Company legally available therefor
had been sufficient to purchase all Put Shares required to be purchased on such
date. At any time thereafter when additional funds of the Company become
legally available for the purchase of the remaining Put Shares, such funds will
be used, as soon as practicable, to purchase the balance of the Put Shares that
the Company was theretofore obligated to purchase, ratably on the basis and on
the dates set forth in the first sentence. In the event that any portion of the
Repurchase Price is not paid as a result of any insufficiency of legally
available funds or otherwise, until such time as the unpaid portion of the
Repurchase Price and any interest thereon is paid to the holders of the Put
Shares in full, (a) the holders of the Put Shares shall retain all rights
hereunder and in connection with the Put Shares (including all rights under this
Agreement and the Registration Rights Agreement), and (b) AC shall, by delivery
of a rescission notice to the Company, at any time or from time to time, be
entitled to rescind the put of the Put Shares by giving written notice of such
rescission (the "Rescission Notice") whereupon the Company shall immediately
-----------------
return to AC the uncancelled original stock certificate(s) representing the Put
Shares, provided that AC shall immediately repay to the Company any portion of
the Repurchase Price theretofor paid. Unless and until the Company receives
such Rescission Notice, the unpaid portion of the Repurchase Price shall remain
an obligation of the Company and shall become due and payable, in cash or
immediately available funds, as soon as there are funds legally available
therefor.
4.4. Repurchase Price for Put Shares; Additional Interest Rate. The
----------------------------------------------------------
repurchase price (the "Repurchase Price") of the Put Shares shall be equal to
---------- -----
$4,000,000 plus interest, which interest shall accrue commencing on January 1,
2001 through the date on which the entire Repurchase Price has been paid at a
rate per annum equal to eight percent (8%) (compounded annually),
notwithstanding any partial payments of the Repurchase Price. Such interest
shall become due and payable on the date when the
-21-
Repurchase Price is due and payable (in accordance with Section 4.3) or, if not
then paid, on such later date as the Repurchase Price (or any portion thereof)
is paid. In the event that the Company shall fail to make any payments of the
Repurchase Price when due (in accordance with Section 4.3), then an additional
interest rate of seven percent (7%) per annum (compounded annually) for an
aggregate interest rate of fifteen percent (15%) (or such lesser amount if
required by applicable usury laws) will accrue on such amounts commencing on the
date on which the Company failed to make such payment when due and through the
date on which the entire amount has been paid.
4.5 Termination; Acceleration. In the event that the Company
----------- ------------
consummates an underwritten public offering of its capital stock registered
pursuant to the Securities Act on or before January 1, 2001, then the Put Right
set forth in this Section 4 shall automatically terminate. In addition, the
Company shall give AC written notice at least fourteen (14) days prior to the
consummation of any Liquidity Event, and in the event of such a Liquidity Event,
AC shall by written notice to the Company given at any time prior to the
consummation of such Liquidity Event, either (a) accelerate the put right under
this Section 4, whereupon the obligations of the Company under this Section 4
shall be fulfilled either immediately prior to or simultaneously with the
consummation of such Liquidity Event, or (b) waive the Put Right (or give a
Rescission Notice in the event that AC has already exercised such Put Right, in
which case AC shall immediately repay to the Company any portion of the
Repurchase Price theretofore paid and the Company shall immediately return to AC
the uncancelled original stock certificate(s) representing the Put Shares) under
this Section 4. The term "Liquidity Event" shall mean (x) an underwritten
---------------
initial public offering of the Company's capital stock which occurs after
January 1, 2001, (y) the sale of all or substantially all of the property and
assets of the Company in one transaction or a series of one or more related
transactions, or (z) the acquisition of the Company by another person or entity
by means of stock purchase (whether by transfer or outstanding shares or through
new issuances), merger, consolidation or otherwise which would result in the
exchange of shares of capital stock of the Company for cash, securities or other
consideration paid by the acquiring person or entity, or any similar
transaction.
5. Conditions of AC's Obligations at Closing. The obligation of AC to
-----------------------------------------
purchase the Purchased Securities from the Company is subject to the fulfillment
on or before the Closing of each of the following conditions:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
date hereof with the same effect as though such representations and warranties
had been made on and as of the Closing Date.
5.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
-22-
5.3 Compliance Certificate. The President of the Company shall
----------------------
deliver to AC at the Closing a certificate stating that the conditions specified
in Sections 5.1 and 5.2 have been fulfilled.
5.4 Qualifications. All authorizations, approvals or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Purchased Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
5.5 Marketing Agreement. The Company shall have entered into,
-------------------
executed and delivered the Marketing Agreement.
5.6 Stockholder Approval. The Company shall have obtained all
--------------------
requisite stockholder approval in order to consummate the transactions
contemplated by this Agreement.
5.7 Waivers. The Company shall have obtained the consents of any
-------
third parties required to consummate the transactions contemplated by this
Agreement and waivers from all persons who have pre-emptive rights, first
refusal rights, participation rights or other similar rights to purchase, with
respect to the Purchased Securities.
5.8 Legal Opinion of Xxxx and Xxxx LLP. AC shall have received an
----------------------------------
executed legal opinion of Xxxx and Xxxx LLP, counsel to the Company, in
substantially the form attached hereto as Exhibit B.
---------
5.9 Registration Rights Agreement. The Company shall have entered
-----------------------------
into, executed and delivered the Amended and Restated Registration Rights
Agreement, in substantially the form attached hereto as Exhibit C (the
---------
"Registration Rights Agreement").
-----------------------------
5.10 Financial Statements. The Company shall have delivered to AC,
---------------------
and signed by Pricewaterhouse Coopers LLP, the final audited consolidated
balance sheet of the Company as of December 31, 1996, 1997 and 1998 and as of
September 30, 1999 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the years ended December 31, 1996, 1997
and 1998 and for the nine month period ended September 30, 1999 (the "Final
-----
Audited Financial Statements"), which shall be the same in all material respects
----------------------------
to the financial statements attached hereto as Exhibit D and acceptable to AC in
---------
its sole discretion.
6. Conditions of the Company's Obligations at Closing. The obligation of
--------------------------------------------------
the Company to issue and sell the Purchased Securities to AC is subject to the
fulfillment on or before the Closing of each of the following conditions:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of AC contained in Section 3 shall be true on and as of the date
hereof with the
-23-
same effect as though such representations and warranties had been made on and
as of the Closing Date.
6.2 Qualifications. All authorizations, approvals or permits, if
---------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Purchased Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
6.3 Marketing Agreement. Xxxxxxxx shall have entered into, executed
-------------------
and delivered the Marketing Agreement.
6.4 Registration Rights Agreement. AC shall have entered into,
-----------------------------
executed and delivered the Registration Rights Agreement.
7. Purchaser Rights.
----------------
7.1 Information Rights. In the event that the Company does not
------------------
consummate an underwritten initial public offering of its common stock on or
before February 14, 2000, and so long as ac holds not less than 25% of the
Purchased Shares and the Company has not consummated an underwritten public
offering of its capital stock registered pursuant to the Securities Act, then AC
shall be entitled to the following:
(a) Annual Statements. As soon as available and in any event within
-----------------
ninety (90) days after the close of each fiscal year, commencing with the fiscal
year ending on December 31, 1999, the Company will deliver a consolidated
balance sheet and statements of income, retained earnings, and cash flows,
audited by a "big five" independent public accounting firm selected by the
Company, showing the financial condition of the Company as of the close of such
fiscal year and the results of its operations during such fiscal year. Each of
the financial statements delivered hereunder will be certified by such
accounting firm without material qualification 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).
(b) Quarterly and Monthly Statements.
--------------------------------
(i) As soon as available, and in any event within forty-five (45) days
after the end of each of the first three fiscal quarters of each fiscal year,
commencing with the fiscal quarter ending March 31, 2000, the Company will
deliver an unaudited consolidated balance sheet and statements of income,
retained earnings, and cash flows of the Company and its Subsidiaries as of the
end of and for such fiscal quarter, certified by the chief financial officer (or
other officer acting in a similar capacity, including the Treasurer) 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
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year-end accruals, the effect of which, both individually and in the aggregate,
is not material.
(ii) As soon as available and in any event within thirty (30) days
after the end of each month, commencing with the month ending January 31, 2000,
the Company will deliver unaudited consolidated balance sheets and statements of
income and cash flows of the Company and its Subsidiaries as of the end of each
such month, as well as summary information as to backlog and bookings as of such
month-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.
7.2 Pre-Emptive Rights. So long as AC shall hold not less than 25%
------------------
of the Purchased Shares, AC shall be entitled to the rights, and the Company
shall be bound by the obligations, set forth in this Section 7.2.
(a) Right to Purchase. If at any time after the Closing the Company
-----------------
authorizes the offer, issuance, or sale, or offers, issues or sells to any
Person (the "Offeree") any shares of capital stock or other securities (whether
-------
convertible or not) of the Company (whether as newly issued shares or other
securities or from the Company's treasury) in an offering or issuance not
registered under the Securities Act, the Company will first offer to sell, by
written notice, to AC a portion (such holder's "Portion") of such capital stock
-------
or other securities authorized to be offered, issued or sold, or proposed to be
offered, issued or sold equal to the product obtained by multiplying (i) the
number of such shares or securities authorized to be offered, issued or sold, or
proposed to be offered, issued or sold, by (ii) the quotient obtained by
dividing (A) the number of shares of Common Stock held by AC (for this purpose
assuming the conversion into Common Stock of all other securities held by AC at
such time, including without limitation the Warrants), by (B) the sum of (I) the
aggregate number of shares of Common Stock issued and outstanding as of such
date and (II) the aggregate number of shares of Preferred Stock issued and
outstanding as of such date (on an as-converted basis).
(b) Procedure. AC will be entitled (but not obligated) to purchase
---------
all or part of such holder's Portion at the same price and on the same terms as
such stock or securities are to be offered to the Offeree. AC may exercise such
purchase rights within 20 days after receipt of written notice from the Company
describing in reasonable detail the stock or securities to be offered to the
Offeree, the purchase price thereof, the payment terms, and such holder's
percentage allotment. If AC fails in whole or in part to exercise the purchase
rights hereunder within such 20-day period (other than by reason of the
Company's failure to comply with the provisions of this Section 7.2(b)), then
the Company may sell so much, and only so much, of any Portion as to which AC,
having been offered the right to purchase such Portion in accordance with all of
the provisions of
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this Section 7.2, have exercised such purchase rights, to the Offeree at the
same price and on the same terms as those offered to such holder, provided, that
in the event that such shares or other securities are not sold to the Offeree
within 60 days following the lapse of the 20-day exercise period provided to AC,
such unsold shares or other securities will once again be subject to the
purchase rights of AC hereunder. In the event that shares of Common Stock, other
shares of capital stock or other securities are authorized to be issued and sold
by the Company for services, property, or other non-cash consideration, AC will
be allowed to participate in such issue and sale by substituting cash in the
amount of the fair market value, per share, of such non-cash consideration.
(c) Excluded Transactions. The prohibitions and rights provided in
---------------------
this Section 7 will not apply to (i) shares of Common Stock issued by the
Company pursuant to stock dividends, stock splits, recapitalizations, and
similar transactions; (ii) shares of Common Stock issued upon the conversion of
shares of the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock outstanding as of the date of this Agreement; and (iii)
options or other rights to purchase or receive Common Stock, and any shares of
Common Stock issued upon the exercise thereof or upon such a purchase, in each
case to officers, directors, consultants, agents and employees of the Company
pursuant to the Company's 1998 Stock Option Plan (in effect as of the date
hereof and as amended from time to time (except for amendments which increase
the number of shares reserved under such 1998 Stock Option Plan)); (iv) shares
of Common Stock or other shares of capital stock issuable upon the exercise of
options and warrants specifically identified on Schedule 2.5(a) or 2.5(b)
--------------- ------
hereof; provided, that such issuance is otherwise permitted under the terms of
--------
the Company's Certificate of Incorporation.
(d) Termination. The rights and obligations set forth in this Section
-----------
7.2 shall automatically terminate upon the consummation by the Company of an
underwritten initial public offering of its common stock pursuant to the
Securities Act.
7.3 Restriction on Transfer. AC agrees that it shall not transfer to
-----------------------
persons (other than its affiliates, who shall be bound by the provisions of this
Section) the shares of Common Stock issuable upon the exercise of the Warrant
and the warrants issuable pursuant to that certain Warrant Purchase Agreement,
dated the date hereof, between the Company and AC during the 360 days following
the consummation by the Company of an underwritten initial public offering of
its common stock pursuant to the Securities Act without the consent of the
Company.
8. Miscellaneous.
-------------
8.1 Survival of Obligations. The terms and provisions of Sections 4
-----------------------
and 7 hereof shall survive the execution and delivery of this Agreement and the
Closing for so long as by their respective terms they shall be in force and
effect.
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8.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Purchased Securities).
8.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the Commonwealth of Massachusetts.
8.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effective given upon personal delivery to the party to be notified, upon
confirmation of facsimile transmission or upon deposit with the United States
Post Office, by registered or certified mail, postage prepaid and addressed to
the party to be notified at the address indicated for such party on the
signature page hereof, or at such other address as such party may designate by
ten days' advance written notice to the other parties.
8.7 Finder's Fee. Each party represents that it neither is nor will
------------
be obligated for any finders' fee or commission in connection with this
transaction. AC agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which AC or any of its officers, partners, employees or
representatives is responsible. The Company agrees to indemnify and hold
harmless AC from any liability for any commission or compensation in the nature
of a finders' fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
8.8 Expenses. Each party shall bear its own costs and expenses
--------
incurred in connection with the negotiation, execution, delivery and performance
of this Agreement, including the costs and expenses of legal counsel.
8.9 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the parties hereto. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which
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such securities are convertible), each future holder of all such securities and
the Company.
8.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.11 Aggregation of Stock. All shares of Common Stock and Preferred
--------------------
Stock and any other securities held or acquired by affiliated entities or
persons shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.
8.12 Entire Agreement. This Agreement, the exhibits and schedules
----------------
hereto and the documents referred to herein constitute the entire agreement
among the parties and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants, except as
specifically set forth herein or therein.
8.13 Disclosure. AC hereby acknowledges and agrees that the Company
----------
shall be entitled to disclose the existence and terms of this Agreement, only to
the extent required by law, in any registration statement, prospectus, report or
other document filed by the Company pursuant to any state or federal securities
laws or other applicable laws. The Company agrees to provide to AC a reasonable
opportunity to review and consent to such disclosure (which consent shall not be
unreasonably withheld or delayed) in advance of such filing.
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IN WITNESS WHEREOF, the parties have executed this Common Stock and Warrant
Purchase Agreement as of the date first above written.
PRIME RESPONSE, INC.
By: /s/ Xxxxx X. Xxxx
--------------------------------
Name: Xxxxx X. Xxxx
--------------------------
Title: Chief Executive Officer and
President
----------------------------
Address: 000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: President and Chief Executive
Officer
XXXXXXXX CONSULTING LLP
By: /s/ J. Xxxxxxx X'Xxxxxxxx
Name: J. Xxxxxxx X'Xxxxxxxx
---------------------------------
Title: Partner
--------------------------------
Address: 000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
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AC VENTURES B.V.
By: /s/ X.X. XxXxxxx
---------------------------------
Name: X.X. XxXxxxx
---------------------------
Title: Chief Financial Officer
--------------------------
Address: c/x Xxxxxxxx Consulting LLP
0000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
