INVESTMENT AGREEMENT
dated as of
January 12, 2001
among
DATAWATCH CORPORATION,
WC CAPITAL, LLC
and
CARNEGIE HILL ASSOCIATES, LLC
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions........................................1
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale..................................5
SECTION 2.02. Closing............................................5
SECTION 2.03. Legending of Securities............................5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Corporate Existence and Power......................6
SECTION 3.02. Corporate Authorization............................6
SECTION 3.03. Governmental Authorization.........................7
SECTION 3.04. Non-contravention..................................7
SECTION 3.05. Capitalization.....................................7
SECTION 3.06. Subsidiaries.......................................8
SECTION 3.07. SEC Filings........................................8
SECTION 3.08. Financial Statements...............................9
SECTION 3.09. Absence of Certain Changes.........................9
SECTION 3.10. No Undisclosed Material Liabilities...............10
SECTION 3.11. Litigation........................................10
SECTION 3.12. Compliance with Laws..............................11
SECTION 3.13. Finders' Fees.....................................11
SECTION 3.14. Employee Benefit Plans............................11
SECTION 3.15. Taxes.............................................12
SECTION 3.16. Environmental Matters.............................13
SECTION 3.17. Title to Properties...............................14
SECTION 3.18. Intellectual Property.............................14
SECTION 3.19. Significant Agreements............................15
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Page
SECTION 3.20. Exemption from Registration.......................16
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 4.01. Organization......................................16
SECTION 4.02. Power and Authorization...........................16
SECTION 4.03. Finders' Fees.....................................17
SECTION 4.04. Purchase for Investment...........................17
SECTION 4.05. Disclosure of Information.........................17
SECTION 4.06. Restricted Securities.............................17
ARTICLE 5
CONDITIONS TO CLOSING
SECTION 5.01. Conditions to the Obligations of the Purchasers...17
SECTION 5.02. Conditions to the Obligations of the Company......21
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.01. Notices of Certain Events.........................21
SECTION 6.02. Registration Rights...............................22
SECTION 6.03. Access to Book and Records........................22
ARTICLE 7
ADDITIONAL COVENANTS
SECTION 7.01. Board Representation; Committees..................22
SECTION 7.02. Reports...........................................23
SECTION 7.03. Preemptive Rights.................................24
SECTION 7.04. Fees and Expenses.................................26
SECTION 7.05. Use of Proceeds...................................26
ARTICLE 8
TERMINATION
SECTION 8.01. Grounds for Termination...........................27
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Page
SECTION 8.02. Effect of Termination.............................27
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices...........................................27
SECTION 9.02. Survival..........................................29
SECTION 9.03. Amendments and Waivers............................29
SECTION 9.04. Successors and Assigns............................29
SECTION 9.05. Governing Law.....................................29
SECTION 9.06. Counterparts; Third Party Beneficiaries...........29
SECTION 9.07. Public Announcements..............................30
SECTION 9.08. Entire Agreement; Exhibits........................30
SECTION 9.09. Headings..........................................30
Exhibit A Registration Rights
Exhibit B Share Allocation
Exhibit C Form of Indemnity Contract
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INVESTMENT AGREEMENT
INVESTMENT AGREEMENT ("Agreement"), dated as of January 12, 2001, among
Datawatch Corporation, a Delaware corporation (the "Company"), WC Capital, LLC,
a Delaware limited liability company ("WC"), and Carnegie Hill Associates, LLC,
a Delaware limited liability company ("CHA" and, together with WC, the
"Purchasers").
WHEREAS, the Company desires to sell to the Purchasers, and the Purchasers
desire to purchase from the Company, an aggregate of 1,875,000 shares of Common
Stock upon the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions contained
herein, each of the Company and the Purchasers agrees as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
"Balance Sheet" means the audited consolidated balance sheet of the Company
as of September 30, 2000.
"Balance Sheet Date" means September 30, 2000.
"beneficial ownership" and "beneficially own" shall be determined in
accordance with Rules 13d-3 and 13d-5 under the 1934 Act.
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"Benefit Arrangement" means any employment, severance or similar contract
or arrangement (whether or not written) or any plan, policy, fund, program or
contract or arrangement (whether or not written) providing for compensation,
bonus, profit-sharing, stock option or other stock-related rights or other forms
of incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, worker's compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance or other benefits) that
(i) is not an Employee Plan; (ii) is entered into, maintained, administered or
contributed to, as the case may be, by the Company or any of its Affiliates; and
(iii) covers any employee or former employee of the Company or any Subsidiary.
"Closing Date" means the date of the Closing.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company, par value $.01 per
share.
"Common Stock Plan" means any present or future Employee Plan, employment
agreement, restricted stock, stock option, stock purchase or dividend
reinvestment plan or other similar type of plan or arrangement of the Company
which provides for the issuance of equity securities or options or rights to
purchase equity securities of the Company.
"Convertible Securities" means any securities convertible into or
exercisable or exchangeable for Voting Securities.
"Employee Plan" means any "employee benefit plan," as defined in Section
3(3) of ERISA, that (i) is subject to any provision of ERISA; (ii) is
maintained, administered or contributed to by the Company or any of its
Affiliates; and (iii) covers any employee or former employee of the Company or
any Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, and the rules and regulations
promulgated thereunder.
"ERISA Affiliate" of any entity means any other entity which, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
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"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Material Adverse Effect" means a material adverse effect on the condition
(financial or otherwise), business, assets, results of operations or prospects
of the Company and the Subsidiaries, taken as a whole.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
3(37) of ERISA.
"New Shares" means any newly issued shares of capital stock of the Company,
including Common Stock and any class or series of preferred stock, whether
authorized or not, and Rights to acquire shares of Common Stock or preferred
stock.
"Originally Issued Shares" means, with respect to any Purchaser and as of
any time, the aggregate number of Shares issued to such Purchaser on the Closing
Date.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Registration Rights Agreement" means the registration rights set forth in
Exhibit A.
"Rights" means any options, warrants, convertible or exchangeable
securities or other rights, however denominated, to subscribe for, purchase or
otherwise acquire any equity interest, including any Common Stock or preferred
stock of any class or series, with or without payment of additional
consideration in cash or property, either immediately or upon the occurrence of
a specified date or specified event or the satisfaction or happening of any
other condition or contingency.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by the Company.
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"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (i) any
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding on amounts paid to or by any Person, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental authority (a
"Taxing Authority") responsible for the imposition of any such tax (domestic or
foreign); (ii) any liability of any Person for the payment of any amounts of the
type described in clause (i) as a result of being a member of any affiliated,
consolidated, combined or unitary group or being a party to any agreement or
arrangement whereby liability of a Person for payments of such amounts was
determined or taken into account with reference to the liability of any other
Person for any period; and (iii) any liability of any Person for the payment of
any amounts of the type described in clause (i) as a result of any express or
implied obligation to indemnify any other Person.
"Voting Securities" means all securities of the Company entitled, in the
ordinary course, to vote in the election of Directors of the Company.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Accredited Investor................................. 4.04
Additional Shares................................... 7.03(c)
Closing............................................. 2.02
Company Securities.................................. 3.05(b)
Company 10-K........................................ 3.07(a)
Contract............................................ 3.04
Environmental Laws.................................. 3.16(c)(ii)
Intellectual Property............................... 3.18
Notice.............................................. 7.03(a)
Purchase Price...................................... 2.01
Purchaser Nominee................................... 7.01(a)
Returns............................................. 3.15
SEC Reports......................................... 3.07(a)
Shares.............................................. 2.01
Significant Agreements.............................. 3.19
Subsidiary Securities............................... 3.06(b)
Transaction......................................... 7.03(b)
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Transaction Shares.................................. 7.03(b)
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Company agrees to sell and the Purchasers
agree, severally and not jointly, to purchase from the Company, for an aggregate
purchase price of $1,162,500 (the "Purchase Price"), an aggregate of 1,875,000
shares of Common Stock (the "Shares"). The number of Shares to be purchased at
the Closing by each Purchaser, and the portion of the Purchase Price to be paid
by each Purchaser, are set forth opposite such Purchaser's name on Exhibit B
hereto.
SECTION 2.02. Closing. The closing (the "Closing") of the transactions
contemplated hereby shall take place at the offices of Xxxxxx Xxxxxx & Xxxxxxx,
00 Xxxx Xxxxxx, Xxx Xxxx, XX 00000-0000, at 4:30 p.m., New York time, on January
12, 2001, or at such other time or place as the parties may agree. At the
Closing:
(a) The Company shall deliver to each Purchaser one or more certificates
for the Shares, registered in the name of such Purchaser and representing the
number of the Shares to be purchased by such Purchaser; and
(b) Each Purchaser shall deliver to the Company an amount equal to the
number of the Shares to be purchased by such Purchaser at the Closing multiplied
by $0.62 per share in immediately available funds by wire transfer to an account
of the Company designated by the Company, by notice to each Purchaser, no later
than two business days prior to the Closing.
SECTION 2.03. Legending of Securities. All Shares to be issued to each
Purchaser by the Company hereunder shall bear the following legend:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or securities laws of any state and
may not be offered, sold, transferred or otherwise disposed of except
in compliance therewith."
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company to
each of the Purchasers prior to the execution of this Agreement, (the
"Disclosure Schedule") (each section or subsection of which qualifies the
corresponding representation and warranty), the Company represents and warrants
to each Purchaser as of the date hereof and as of the Closing Date that:
SECTION 3.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where such qualification is necessary, except for
those jurisdictions where failure to be so qualified or in good standing would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has heretofore delivered to each Purchaser true and
complete copies of the restated certificate of incorporation and by-laws of the
Company as currently in effect.
SECTION 3.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement are within the Company's corporate
powers and have been duly authorized by all necessary corporate action on the
part of the Company. This Agreement constitutes a valid and binding agreement of
the Company enforceable against the Company in accordance with its terms, except
that (i) the enforcement hereof may be subject to (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (y) general principles of equity and
the discretion of the court before which any proceeding therefor may be brought;
and (ii) any rights to indemnity or contribution under hereunder or under the
registration rights agreement may be limited by federal and state securities
laws and public policy considerations.
(b) The Shares, when issued and delivered to and paid for by each Purchaser
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares is not subject to any
pre-emptive or similar rights.
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SECTION 3.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement require no action by or in respect
of, or filing with, any governmental body, agency or official other than (i)
compliance with any applicable requirements of the 1934 Act; (ii) compliance
with any applicable existing requirements of the Nasdaq Stock Market; and (iii)
any action or filing as to which the failure to make or obtain would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 3.04. Non-contravention. The execution, delivery and performance by
the Company of this Agreement do not and will not (i) violate the certificate of
incorporation or by-laws or any similar organizational document of the Company
or any Subsidiary; (ii) assuming compliance with the matters referred to in
Section 3.03, violate any applicable law, rule, regulation, judgment,
injunction, order or decree; (iii) constitute a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of the Company or any Subsidiary or to a loss of any benefit to which
the Company or any Subsidiary is entitled under, any loan or credit agreement,
note, mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise or license (each, a
"Contract") binding upon or held by the Company or any Subsidiary; or (iv)
result in the creation or imposition of any Lien on any asset of the Company or
any Subsidiary.
SECTION 3.05. Capitalization. (a) The authorized capital stock of the
Company consists of (i) 20,000,000 shares of Common Stock, of which 9,426,274
shares were issued and outstanding as of January 10, 2001 (which amount does not
include 32,052 shares held in treasury); (ii) 1,000,000 shares of preferred
stock, par value $.01 per share, of which no shares were issued or outstanding
as of January 10, 2001. All outstanding shares of Common Stock and any other
class of capital stock of the Company have been duly authorized and are validly
issued, fully paid and non-assessable.
(b) Except as set forth in Section 3.05(a) above or Section 3.05(b) of the
Disclosure Schedule, there are no outstanding (i) shares of capital stock or
Voting Securities of the Company; (ii) securities of the Company convertible
into or exercisable or exchangeable for shares of capital stock or Voting
Securities of the Company; or (iii) warrants, options or other rights to acquire
from the Company, or other obligations of the Company to issue, any capital
stock, Voting Securities or securities convertible into or exercisable or
exchangeable for capital stock or Voting Securities of the Company (the items in
clauses 3.05(b)(i), (ii) and (iii) being referred to collectively as the
"Company Securities"). There are no outstanding obligations of the Company or
any Subsidiary to repurchase, redeem or otherwise acquire any Company
Securities.
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SECTION 3.06. Subsidiaries. (a) Each Subsidiary (i) is duly incorporated or
organized, validly existing and, to the extent applicable, in good standing
under the laws of its jurisdiction of incorporation or organization, has all
corporate or other organizational powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; and (ii) is
duly qualified to do business as a foreign corporation or other legal entity
and, to the extent applicable, is in good standing in each jurisdiction where
such qualification is necessary, except for those jurisdictions where the
failure to be so qualified or, to the extent applicable, in good standing would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. All Subsidiaries and their respective jurisdictions of
incorporation or organization are identified in Section 3.06(a) of the
Disclosure Schedule.
(b) Except as set forth in Section 3.06(b) of the Disclosure Schedule, all
of the outstanding capital stock of, or other voting securities or ownership
interests in, each Subsidiary are owned by the Company, directly or indirectly,
free and clear of any Lien and free of any other limitation or restriction,
including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other voting securities or ownership interests (other than
such transfer restrictions as may exist under federal and state securities
laws). Except as set forth in Section 3.06(b) of the Disclosure Schedule, there
are no outstanding (i) securities of the Company or any Subsidiary convertible
into or exercisable or exchangeable for shares of capital stock or other voting
securities or ownership interests in any Subsidiary; or (ii) options or other
rights to acquire from the Company or any Subsidiary, or other obligation of the
Company or any Subsidiary to issue, any capital stock or other voting securities
or ownership interests in, or any securities convertible into or exercisable or
exchangeable for any capital stock or other voting securities or ownership
interests in, any Subsidiary (the items in clauses 3.06(b)(i) and (ii) being
referred to collectively as the "Subsidiary Securities").
SECTION 3.07. SEC Filings. (a) The Company has delivered to each Purchaser
(i) the Company's annual report on Form 10-K for its fiscal year ended September
30, 2000 (the "Company 10-K"); and (ii) all of its other reports, statements,
schedules and registration statements filed with the Commission since October 1,
2000 (the items in clauses 3.07(a)(i) and (ii) being referred to collectively as
the "SEC Reports").
(b) As of its filing date, or, if such SEC Report was amended, on the date
of filing of such amendment, each SEC Report did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
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SECTION 3.08. Financial Statements. The audited consolidated balance sheets
as of September 30, 1999 and 2000 and the related audited consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the years ended September 30, 1998, 1999 and 2000 included in the
Company 10-K fairly present, in all material respects and in all material
respects and in conformity with generally accepted accounting principles applied
on a consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company as of the dates thereof and its
consolidated results of operations and cash flows for the periods then ended.
SECTION 3.09. Absence of Certain Changes. Except as set forth in Section
3.09 of the Disclosure Schedule, since the Balance Sheet Date, other than as
disclosed, or provided for, in the Company 10-K or other SEC Report, the
businesses of the Company and its Subsidiaries have been conducted in the
ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or facts
which has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any Subsidiary of
any outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or any Subsidiary;
(c) any amendment of any material term of any outstanding security of the
Company or any Subsidiary;
(d) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any indebtedness for borrowed money, except in the ordinary course
of business consistent with past practices;
(e) any creation or assumption by the Company or any Subsidiary of any Lien
on any material asset other than in the ordinary course of business consistent
with past practices;
(f) any making of any loan, advance or capital contribution to or
investment in any Person other than loans, advances or capital contributions to
or investments in Subsidiaries made in the ordinary course of business
consistent with past practices;
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(g) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company or any Subsidiary
which, individually or in the aggregate, has had or would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect;
(h) any change in any method of accounting or application thereof by the
Company or any Subsidiary, except for any such change required by reason of a
concurrent change in generally accepted accounting principles;
(i) any (A) employment, deferred compensation, severance, retirement or
other similar agreement entered into with any director, officer or employee of
the Company or any Subsidiary (or any amendment to any such existing agreement),
(B) grant of any severance or termination pay to any director, officer or
employee of the Company or any Subsidiary or (C) change in compensation or other
benefits payable to any director, officer or employee of the Company or any
Subsidiary pursuant to any severance or retirement plans or policies thereof,
other than in the ordinary course of business consistent with past practices; or
(j) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company or any Subsidiary or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to any employees
of the Company or any Subsidiary.
SECTION 3.10. No Undisclosed Material Liabilities. There are no liabilities
of the Company or any Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(a) liabilities disclosed or provided for in the Balance Sheet;
(b) liabilities incurred in the ordinary course of business consistent with
past practice since the Balance Sheet Date, which in the aggregate are not
material; and
(c) liabilities under this Agreement.
SECTION 3.11. Litigation. There is no action, suit, investigation or
proceeding pending against, or, to the knowledge of the Company, threatened
against or affecting, the Company or any Subsidiary or any of their respective
properties before any court or arbitrator or any governmental body, agency or
official (i) which would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; or (ii) which in
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any manner challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
SECTION 3.12. Compliance with Laws. Neither the Company nor any Subsidiary
is in violation of or has violated any applicable law, rule or regulation,
except for violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.13. Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Company which might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.14. Employee Benefit Plans. (a) The Company has provided the
Purchasers with a list identifying each Employee Plan and Benefit Arrangement.
(b) No Employee Plan (i) constitutes a Multiemployer Plan; or (ii) is
maintained in connection with any trust described in Section 501(c)(9) of the
Code. Neither the Company nor any ERISA Affiliate of the Company maintains,
contributes to or is required to contribute to or in the past has maintained,
contributed to or been required to contribute to any plan subject to Title IV of
ERISA.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code and has been so exempt since its
creation. The Company has furnished to the Purchasers copies of the most recent
Internal Revenue Service determination letter with respect to each such Employee
Plan. To the Company's knowledge, each Employee Plan and Benefit Arrangement has
been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including, but not limited to, ERISA and the Code, which are applicable to such
Employee Plan or Benefit Arrangement, as applicable.
(d) Except as disclosed in Section 3.14 of the Disclosure Schedule, there
is no contract, agreement, plan or arrangement covering any employee or former
employee of the Company or any Subsidiary that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 162(m) or 280G of the Code.
(e) Neither the Company nor any Subsidiary maintains or contributes to any
Employee Plan which provides, or has any liability to provide, life insurance,
medical or
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other welfare benefits to any employee upon retirement or termination of
employment, except as may be required by law.
(f) Except as disclosed in writing to the Purchasers, since the Balance
Sheet Date, there has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its Affiliates
relating to, or change in employee participation or coverage under, any Employee
Plan or Benefit Arrangement which would increase materially the expense of
maintaining such Employee Plan or Benefit Arrangement above the level of the
expense incurred in respect thereof for the fiscal year ended on the Balance
Sheet Date.
(g) Except as set forth in Section 3.14(g) of the Disclosure Schedule or
disclosed in the Company's SEC Reports, neither the Company nor any Subsidiary
is a party to or subject to any union contract or any employment contract
providing for annual future compensation of $100,000 or more with any officer,
consultant, director or employee.
SECTION 3.15. Taxes. Except as disclosed in the financial statements
included in the Company 10-K (including the notes thereto) or as set forth in
Section 3.15 of the Disclosure Schedule or except in respect of Taxes, the
liability for which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, (i) all Tax returns, statements,
reports and forms required to be filed with any Taxing Authority by or on behalf
of the Company or any Subsidiary (collectively, the "Returns"), on or prior to
the Closing Date, have been or will be filed when due in accordance with all
applicable laws except where failure to so file would not subject the Company or
any Subsidiary to liabilities or penalties; (ii) as of the time of filing, the
Returns correctly reflected (and, as to any Returns not filed as of the date
hereof, will correctly reflect) the facts regarding the income, business,
assets, operations, activities and status of the Company and each Subsidiary;
(iii) the Company and each Subsidiary has timely paid, withheld or made
provision for all Taxes shown as due and payable on the Returns that have been
filed; (iv) neither the Company nor any Subsidiary is delinquent in the payment
of any Tax or has requested any extension of time within which to file or send
any Return, which Return has not since been filed or sent; (v) neither the
Company nor any Subsidiary (or any member of any affiliated or combined group of
which the Company or any Subsidiary is or has been a member) has been granted
any extension or waiver of the limitation period applicable to the assessment or
collection of any Taxes payable by the Company or any Subsidiary which will
remain in effect after the Closing Date; (vi) there is no claim, audit, action,
suit, proceeding or investigation now pending or threatened against or with
respect to the Company or any Subsidiary of which the Company is aware in
respect of any Tax or assessment; and (vii) there are no liens for Taxes upon
the assets of the Company or any Subsidiary except liens for current Taxes not
yet due.
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SECTION 3.16. Environmental Matters. (a) Except as set forth in the Company
10-K or other SEC Report:
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed,
no penalty has been assessed and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of the Company,
threatened by any governmental entity or other Person with respect to any
matters relating to the Company or any Subsidiary and relating to or
arising out of any Environmental Law which, individually or in the
aggregate, would reasonably be expected to result in a Material Adverse
Effect;
(ii) the Company is in compliance with all Environmental Laws and has,
and is in compliance with, all environmental permits, except where any
noncompliance or failure to receive environmental permits would not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect; and
(iii) to the Company's knowledge, there are no liabilities of, or
relating to, the Company or any Subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise,
arising under or relating to any Environmental Law which, individually or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect, and there are no facts, conditions, situations or set of
circumstances which could reasonably be expected to result in or be the
basis for any such liability.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Company has knowledge in
relation to the current or prior business of the Company or any property or
facility now or previously owned or leased by the Company or any Subsidiary.
(c) For purposes of this Section, the following terms shall have the
meanings set forth below:
(i) "Company" and "Subsidiary" shall include any entity which is, in
whole or in part, a predecessor of the Company or any Subsidiary; and
(ii) "Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and governmental
restrictions, relating to human health, the environment or to emissions,
discharges or releases of pollutants, contaminants or other hazardous
substances or wastes into the environment, including without
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limitation ambient air, surface water, groundwater or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants or
other hazardous substances or wastes or the clean-up or other remediation
thereof.
SECTION 3.17. Title to Properties. Each of the Company and the Subsidiaries
has good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by it which is material to its
business, in each case free and clear of all Liens and defects except such as
are set forth in Section 3.17 of the Disclosure Schedule or such as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Any real property and facilities held under lease by any of the
Company or the Subsidiaries are held by it under valid, subsisting and
enforceable leases with such exceptions as would not have a Material Adverse
Effect.
SECTION 3.18. Intellectual Property. Except as has not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, (i) each of the Company and the Subsidiaries owns, or is
licensed to use (in each case, free and clear of any Liens), all Intellectual
Property used in or necessary for the conduct of its business as currently
conducted; (ii) the use of any Intellectual Property by the Company and the
Subsidiaries does not infringe on or otherwise violate the rights of any Person
and is in accordance with any applicable license pursuant to which the Company
or any Subsidiary acquired the right to use any Intellectual Property; (iii) to
the knowledge of the Company, no Person is challenging, infringing on or
otherwise violating any right of the Company or any of the Subsidiaries with
respect to any Intellectual Property owned by and/or licensed to the Company or
the Subsidiaries; and (iv) neither the Company nor any of the Subsidiaries has
received any written notice or otherwise has knowledge of any pending claim,
order or proceeding with respect to any Intellectual Property used by the
Company or the Subsidiaries and to its knowledge no Intellectual Property owned
and/or licensed by the Company or the Subsidiaries is being used or enforced in
a manner that would reasonably be expected to result in the abandonment,
cancellation or unenforceability of such Intellectual Property. For purposes of
this Section, the term "Intellectual Property" shall mean trademarks, service
marks, brand names, certification marks, trade dress and other indications of
origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including, without limitation, divisions, continuations, continuations in part
and renewal applications), and any renewals, extensions or reissues thereof, in
any jurisdiction; nonpublic information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any Person; writings and other works, whether copyrightable
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or not, in any jurisdiction; registrations or applications for registration of
copyrights in any jurisdiction, and any renewals or extensions thereof; and any
similar intellectual property or proprietary rights.
SECTION 3.19. Significant Agreements. Section 3.19 of the Disclosure
Schedule sets forth a complete and correct list of (i) all Contracts applicable
on the date of this Agreement to the Company or any of the Subsidiaries or any
of their respective properties or assets and that are required to be filed as
exhibits to the SEC Reports; (ii) all Contracts applicable to the Company or any
of the Subsidiaries or any of their respective properties or assets and in
effect as of the date of this Agreement that are reasonably expected to require
the payment (whether by or to the Company or any of the Subsidiaries) of $1
million or more in the aggregate in any twelve-month period; and (iii) all
in-licenses or Contracts in effect on the date of this Agreement calling for the
purchase or other acquisition by the Company or any of the Subsidiaries of
rights to products that generate or are reasonably expected to generate $1
million or more of annualized revenues (the Contracts described in clauses (i)
through (iii) being collectively referred to herein as the "Significant
Agreements"). The Company has heretofore made available to the Purchasers
complete and correct copies of each of the Significant Agreements, each as
amended or modified to the date hereof (including any waivers with respect
thereto). Each of the Significant Agreements is in full force and effect and
enforceable against the Company and the Subsidiaries, as applicable, and, to the
knowledge of the Company, against the other party or parties thereto, in each
case in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and similar laws relating
to or affecting creditors generally or by general equity principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law) and except in each case where the failure to be in full force and effect
and enforceable has not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. None of the Company
or any of the Subsidiaries has received any notice (written or oral) of
cancellation or termination of, or expression or indication of any intention or
desire to cancel or terminate, any of the Significant Agreements except in each
case for those that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. No Significant
Agreement is the subject of, or, to the knowledge of the Company, has been
threatened to be made the subject of, any arbitration, suit or other legal
proceeding except in each case for those that have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. With respect to any Significant Agreement which by its terms
will terminate as of a certain date unless renewed or unless an option to extend
such Significant Agreement is exercised, neither the Company nor any of the
Subsidiaries has received any notice (written or oral), or otherwise has any
knowledge, that any such Significant Agreement will not be, or is not likely to
be, so renewed or that any such extension option will not be exercised except in
each case for those that have not had and
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would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. There exists no event of default or occurrence,
condition or act on the part of the Company or any of the Subsidiaries or, to
the knowledge of the Company, the other party or parties to the Significant
Agreements which constitutes or would constitute (with notice or lapse of time
or both) a breach of or default under any of the Significant Agreements except
in each case for those that have not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.20. Exemption from Registration. None of the Company, the
Subsidiaries or any of their respective Affiliates has directly, or through any
agent, (i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any "security" (as defined in the 0000 Xxx) that is or
could be integrated with the sale of the Shares in a manner that would require
the registration under the 1933 Act of the Shares; or (ii) engaged in any form
of general solicitation or general advertising (as those terms are used in
Regulation D under the 0000 Xxx) in connection with the offering of the Shares
or in any manner involving a public offering within the meaning of Section 4(2)
of the 1933 Act. Assuming the accuracy of the representations and warranties of
the Purchasers in Article 4, it is not necessary in connection with the offer,
sale and delivery of the Shares to the Purchasers in the manner contemplated by
this Agreement to register any of the Shares under the 1933 Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants to the Company, severally as to
itself and not jointly, as of the date hereof and as of the Closing Date that:
SECTION 4.01. Organization. Such Purchaser is organized under the laws of
the State of Delaware.
SECTION 4.02. Power and Authorization. The execution, delivery and
performance by such Purchaser of this Agreement are within the powers of such
Purchaser and have been duly authorized by all necessary action on the part of
such Purchaser. This Agreement constitutes a valid and binding agreement of such
Purchaser enforceable against such Purchaser in accordance with its terms,
except that (i) the enforcement hereof may be subject to (x) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (y) general principles of
equity and the discretion of the court before which any proceeding therefor may
be brought; and (ii) any rights to indemnity or contribution under hereunder or
under the registration rights
-17-
agreement may be limited by federal and state securities laws and public policy
considerations.
SECTION 4.03. Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of such Purchaser who might be entitled to any fee or commission from
such Purchaser or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
SECTION 4.04. Purchase for Investment. Such Purchaser is acquiring the
Shares for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof. Such Purchaser is an "Accredited
Investor" as such term is defined in Regulation D under the 1933 Act.
SECTION 4.05. Disclosure of Information. Each Purchaser believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Shares. Each Purchaser further represents that it has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the sale of the Restricted Securities.
SECTION 4.06. Restricted Securities. Each Purchaser understands that the
Shares it is purchasing are characterized as "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act, only in certain limited circumstances. In this connection, each
Purchaser represents that it is familiar with Rule 144 under the 1933 Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the 1933 Act.
ARTICLE 5
CONDITIONS TO CLOSING
SECTION 5.01. Conditions to the Obligations of the Purchasers. The
obligations of each of the Purchasers to purchase and pay for the Shares shall,
in its sole discretion, be subject to the satisfaction of the following
conditions at or prior to the Closing (unless expressly waived in writing by
such Purchasers at or prior to the Closing):
(a) On the Closing Date, the Purchasers shall have received the opinion,
dated as of the Closing Date and addressed to the Purchasers, of Xxxxx, Xxxxxxx
& Xxxxxxxxx,
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counsel for the Company, in form and substance satisfactory to counsel for the
Purchasers, to the effect that:
(i) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware and has all corporate
powers and all governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted, except for
those licenses, authorizations, permits, consents and approvals the absence
of which would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to
be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect.
(ii) The execution, delivery and performance by the Company of this
Agreement are within the Company's corporate powers and have been duly
authorized by all necessary corporate action on the part of the Company.
This Agreement constitutes a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except that
(i) the enforcement hereof may be subject to (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (y) general principles of
equity and the discretion of the court before which any proceeding therefor
may be brought; and (ii) any rights to indemnity or contribution under
hereunder or under the registration rights agreement may be limited by
federal and state securities laws and public policy considerations.
(iii) The Shares, when issued and delivered to and paid for by each
Purchaser pursuant to this Agreement, will be validly issued, fully paid
and non-assessable, and the issuance of such Shares is not subject to any
pre-emptive or similar rights.
(iv) The execution, delivery and performance by the Company of this
Agreement require no action by or in respect of, or filing with, any
governmental body, agency or official other than (i) compliance with any
applicable requirements of the 1934 Act; (ii) compliance with any
applicable existing requirements of the Nasdaq Stock Market; and (iii) any
action or filing as to which the failure to make or obtain would not,
individually or in the aggregate, have a Material Adverse Effect.
-19-
(v) The execution, delivery and performance by the Company of this
Agreement do not and will not (i) violate the certificate of incorporation
or bylaws of the Company or any Subsidiary; (ii) (x) assuming compliance
with any applicable requirements of the 1934 Act, (y) assuming compliance
with any applicable existing requirements of the Nasdaq Stock Market and
(z) except for any action or filing as to which the failure to make or
obtain would not, individually or in the aggregate, have a Material Adverse
Effect, violate any applicable law, rule, regulation, judgment, injunction,
order or decree; (iii) constitute a default under, or give rise to any
right of termination, cancellation or acceleration of any right or
obligation of the Company or any Subsidiary or to a loss of any benefit to
which the Company or any Subsidiary is entitled under, any Contract binding
upon or held by the Company or any Subsidiary; or (iv) result in the
creation or imposition of any material Lien on any asset of the Company or
any Subsidiary.
(vi) No registration under the 1933 Act of the Shares is required in
connection with the sale of the Shares to the Purchasers as contemplated by
this Agreement assuming the accuracy of the Purchasers' representations in
Article 4 and those of the Company contained in this Agreement regarding
the absence of a general solicitation in connection with the sale of such
Shares to the Purchasers.
(b) The representations and warranties of the Company contained in this
Agreement that are qualified by materiality or Material Adverse Effect shall be
true and correct in all respects and the representations and warranties of the
Company contained in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case on and as of the date hereof and
on and as of the Closing Date as if made on and as of the Closing Date; the
statements of the Company's officers made pursuant to any certificate delivered
in accordance with the provisions hereof shall be true and correct on and as of
the date made and on and as of the Closing Date; the Company shall have
performed all covenants and agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to the Closing Date; and
subsequent to the Balance Sheet Date, there shall have been no event or
development, and no information shall have become known, that, individually or
in the aggregate, has or would be reasonably likely to have a Material Adverse
Effect.
(c) The sale of the Shares hereunder shall not be enjoined (temporarily or
permanently) on the Closing Date.
(d) Subsequent to the Balance Sheet Date, none of the Company or any of the
Subsidiaries shall have sustained any loss or interference with respect to its
business or
-20-
properties from fire, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any strike, labor dispute, slow down or work
stoppage or from any legal or governmental proceeding, order or decree, which
loss or interference, individually or in the aggregate, has or would be
reasonably likely to have a Material Adverse Effect.
(e) The Purchasers shall have received a certificate of the Company, dated
the Closing Date, signed on behalf of the Company by its Chief Executive Officer
and its Chief Financial Officer, to the effect that:
(i) The representations and warranties of the Company contained in
this Agreement that are qualified by materiality or Material Adverse Effect
are true and correct in all respects and the representations and warranties
of the Company contained in this Agreement that are not so qualified are
true and correct in all material respects, in each case on and as of the
date hereof and on and as of the Closing Date, and the Company has
performed all covenants and agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to the Closing
Date;
(ii) At the Closing Date, since the date hereof or since the Balance
Sheet Date, no event or development has occurred, and no information has
become known, except as set forth in Section 3.09 of the Disclosure
Schedule that, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect; and
(iii) The sale of the Shares hereunder has not been enjoined
(temporarily or permanently).
(f) The Company shall have obtained, with financially sound and reputable
insurers, directors' and officers' liability insurance in the amount of coverage
at least equal to $2,000,000. The Company shall have entered into indemnity
contracts with each of the Purchaser Nominees substantially in the form of
Exhibit C hereto.
(g) Prior to the Closing Date, (i) trading in securities generally on
either the New York Stock Exchange or the Nasdaq Stock Market shall not have
been suspended or limited or minimum or maximum prices shall not have been
generally established on such exchange or market, or additional material
governmental restrictions, not in force on the date of this Agreement, shall not
have been imposed upon trading in securities generally by such exchange or
market or by order of the Commission or any court or other governmental
authority; (ii) trading in the Common Stock shall not have been suspended by the
Commission or the Nasdaq Stock Market; (iii) a general banking moratorium shall
not have been declared by either federal or New York state authorities; or (iv)
any material adverse
-21-
change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any outbreak
or material escalation of hostilities or declaration by the Unites States of a
national emergency or war or other calamity or crisis shall not have occurred.
On or before the Closing Date, the Purchasers and counsel for the
Purchasers shall have received such further documents, opinions, certificates,
letters and schedules or instruments relating to the business, corporate, legal
and financial affairs of the Company and the Subsidiaries as they shall have
heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Purchasers and counsel for the Purchasers.
SECTION 5.02. Conditions to the Obligations of the Company. The obligations
of the Company to be discharged under this Agreement on or prior to the Closing
are subject to satisfaction of the following conditions at or prior to the
Closing (unless expressly waived in writing by the Company at or prior to the
Closing):
(a) The representations and warranties of Purchasers contained in this
Agreement that are qualified by materiality or Material Adverse Effect shall be
true and correct in all respects and the representations and warranties of the
Company contained in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case on and as of the date hereof and
on and as of the Closing Date as if made on and as of the Closing Date.
(b) The sale of the Shares hereunder shall not be enjoined (temporarily or
permanently) on the Closing Date.
ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 6.01. Notices of Certain Events. Prior to the Closing, the Company
shall promptly notify each Purchaser of:
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(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced or,
to its knowledge, threatened against, relating to or involving or otherwise
affecting the Company or any Subsidiary that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
3.11.
SECTION 6.02. Registration Rights. Each Purchaser shall have the
Registration Rights set forth in Exhibit A.
SECTION 6.03. Access to Book and Records. The Company agrees that, after
Closing and for so long as a WC beneficially owns, directly or indirectly, at
least 40% of the Originally Issued Shares, WC will have access on reasonable
terms to the books, records and employees of the Company and the Subsidiaries
and to the provision by the Company of all information reasonably requested by
WC, subject to confidentiality obligations that at the time may be owed by the
Company to third parties, to appropriate confidentiality arrangements and
requirements of law.
ARTICLE 7
ADDITIONAL COVENANTS
SECTION 7.01. Board Representation; Committees. (a) The Company agrees that
for so long as WC beneficially owns, directly or indirectly, at least 50% of the
Originally Issued Shares, WC shall have the right to cause the Company to
include, as nominees for the Company's Board of Directors recommended by the
Board, two Directors (the "Purchaser Nominees").
(b) At or prior to the Closing, the Company shall, if necessary, increase
the size of the Board of Directors of the Company as determined pursuant to
Section 7.01(a) and shall elect as Directors of the Company (with a term
expiring at the following annual meeting of the Company's stockholders) the
Purchaser Nominees designated by WC. In connection with the annual meeting of
stockholders of the Company next following such election, the Company shall
nominate the Purchaser Nominees for election as Directors by the
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stockholders and use its best efforts to cause the Purchaser Nominees to be so
elected and re-elected at each subsequent stockholder meeting at which Directors
are elected for so long as WC shall have the rights set forth in Section
7.01(a).
(c) For so long as WC shall have the rights set forth in Section 7.01(a),
if a vacancy shall exist in the office of a Purchaser Nominee, WC shall be
entitled to designate a successor and the Company shall elect such successor as
a Director of the Company (with a term expiring at the following annual meeting
of the Company's stockholders).
(d) For so long as WC shall have the rights set forth in Section 7.01(a),
at least one Purchaser Nominee shall be entitled to serve as a member of each
committee (whether standing or special) of the Board of Directors of the Company
and WC shall have the right to designate one Purchaser Nominee to serve as the
Chairman of the Board of the Company; provided that such Purchaser Nominee is
then serving as a Director of the Company.
(e) For so long as WC shall have the rights set forth in Section 7.01(a),
any Purchaser Nominee then serving as the Chairman of the Board of the Company
shall be entitled to serve, in such capacity, as an executive officer of the
Company with such duties as are related to the Company's strategic planning;
provided that, unless otherwise determined by the Board of Directors of the
Company, any such Purchaser Nominee serving as an executive officer of the
Company shall not be entitled to receive any compensation in connection
therewith; provided, further, that this Agreement shall not be deemed to be an
employment contract between the Company and such Purchaser Nominee and nothing
herein shall obligate such Purchaser Nominee to dedicate any defined portion of
his business time and effort to the performance of the duties described herein.
The Chief Executive Officer and President of the Company shall report directly
to such Purchaser Nominee..
SECTION 7.02. Reports. The Company agrees that, after the Closing and for
so long as WC beneficially owns, directly or indirectly, at least 40% of the
Originally Issued Shares, the Company will furnish to WC the following reports,
subject, in the case of paragraphs (d), (e) and (g) below, to confidentiality
obligations that at the time may be owed by the Company to third parties and
appropriate confidentiality arrangements:
(a) Within the applicable time period required under the 1934 Act,
after the end of each fiscal year of the Company, the information required
by Form 10-K (or any successor form thereto) under the 1934 Act with
respect to such period (including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" section that describes
the consolidated financial position and results of operations of the
Company), together with a report thereon by the Company's independent
accountants.
-24-
(b) Within the applicable time period required under the 1934 Act,
after the end of each of the first three fiscal quarters of each fiscal
year of the Company, the information required by Form 10-Q (or any
successor form thereto) under the 1934 Act with respect to such period
(including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section that describes the consolidated
financial position and results of operations of the Company).
(c) Any current report on Form 8-K (or any successor form thereto)
required to filed under the 1934 Act.
(d) As soon as practicable upon approval or adoption by the Company's
Board of Directors, the Company's budget and operating plan (including
projected balance sheets and profit and loss and cash flow statements), if
any, for such fiscal year.
(e) Simultaneously with the delivery thereof to any of the Company's
lenders or other holders of the Company's indebtedness, such other
financial and operating data of the Company and the Subsidiaries delivered
to such lenders or holders.
(f) Promptly after the same are filed with the SEC, copies of all
reports, statements and other documents filed with the Commission pursuant
to the 1933 Act or the 0000 Xxx.
(g) Promptly after receipt thereof, a copy of any communication
received by the Company from any holder of the Company's outstanding
indebtedness notifying the Company that a default or event of default
exists under the terms of the instrument or instruments governing such
indebtedness.
SECTION 7.03. Preemptive Rights. (a) Subject to the terms and conditions
specified in this Section 7.03, the Company hereby grants to each Purchaser a
right to purchase up to the number of Additional Shares (as defined below) in
connection with any Transaction (as defined below) undertaken by the Company;
provided, however, that the rights set forth in this Section 7.03 shall only
apply to WC so long as WC holds at least five percent (5%) of the Originally
Issued Shares and shall only apply to CHA so long as CHA holds at least
twenty-five percent (25%) of the Originally Issued Shares.
(b) Subject to the terms and conditions specified in this Section 7.03,
each time the Company proposes to offer, sell or otherwise issue any New Shares
in a public or private transaction (a "Transaction"), the Company shall deliver
a notice (the "Notice") to each Purchaser stating (i) the Company's bona fide
intention to undertake such Transaction,
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(ii) the number of New Shares to be offered in the Transaction (the "Transaction
Shares"), (iii) the number of Additional Shares up to which such Purchaser may
elect to purchase in such Transaction (which would be added to the Transaction
Shares) and (iv) the price and terms, if any, upon which it proposes to offer,
sell or otherwise issue New Shares in the Transaction.
(c) Within 7 days after receipt by such Purchaser of the Notice, such
Purchaser may elect to purchase, at the price and on the terms specified in the
Notice, up to the number of Additional Shares set forth in the Notice. The
number of New Shares ("Additional Shares") that the Purchaser may elect to
purchase and include in the Transaction shall be calculated as follows:
Additional Shares = Transaction Shares -- Transaction Shares
------------------
1-- X%
X% represents the percentage (stated as a decimal) of the outstanding
shares of Common Stock then held by such Purchaser (assuming the conversion,
exercise or exchange of all New Shares then held by such Purchaser and acquired
pursuant to this Section 7.03).
(d) In the event that the price or terms upon which the Company proposes to
offer, sell or otherwise issue New Shares in the Transaction or the number of
Transaction Shares to be included in such Transaction changes for any reason
(other than including the Additional Shares) after the Notice is delivered to
the Purchasers, the number of Additional Shares shall, with respect to a change
in the number of Transaction Shares, be recalculated using the new number of
Transaction Shares and, in any case, the Company shall promptly provide a
revised Notice to each Purchaser reflecting any such recalculated Additional
Shares and any change to such price or terms. If the Company proposes to offer,
sell or issue any New Shares for consideration other than cash, each Purchaser
may exercise the right set forth in this Section 7.03 and purchase Additional
Shares for cash at a per share purchase price equal to (i)(A) the face amount of
any cash received for such New Shares plus (B) the fair market value of the
non-cash consideration expressly received for such New Shares, as reasonably
determined by the Board of Directors of the Company in good faith, divided by
(ii) the number of Transaction Shares issued in such Transaction (excluding any
Additional Shares).
(e) The rights of the Purchasers set forth in this Section 7.03 shall not
be applicable to (i) shares of Common Stock issued as a stock dividend to all
holders of shares of Common Stock or upon any subdivision or combination of
shares of Common Stock; (ii) securities issued for the acquisition by the
Company of another entity or business by merger or such other transaction as
would result in the ownership by the Company of not less than a majority of the
voting power of the other entity or for the purchase of all the assets of
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an entity or business, (iii) shares of Common Stock or Rights that are sold by
the Company pursuant to a bona fide public offering pursuant to a registration
statement filed under the 1933 Act; (iv) shares of Common Stock or Rights issued
pursuant to the Company's stock option plans in existence at the date of this
Agreement or other such stock option plans as approved by the stockholders of
the Company; (v) shares of Common Stock issued upon exercise of any Rights as to
which the Purchasers shall have been afforded the opportunity to exercise their
rights of first refusal pursuant to this Section 7.03; (vi) up to an aggregate
of 70,000 shares of Common Stock or Rights issued to Silicon Valley Bank; and
(vii) up to aggregate of 50,000 shares of Common Stock or Rights issued to
Xxxxxxx Xxxx.
(f) The rights and obligations of the Purchasers under this Section 7.03
shall not be assignable, except that the right to purchase any Additional Shares
may be assigned by each Purchaser to any of its Affiliates that agrees in
writing to be bound by the provisions of this Section 7.03.
SECTION 7.04. Fees and Expenses. (a) The Company shall be responsible for
the payment of all expenses incurred by the Company in connection with the
transactions contemplated by this Agreement, regardless of whether such
transactions are consummated, including, without limitation, all fees and
expenses of the Company's legal counsel, all third-party consultants engaged by
the Company to assist in such transactions and all fees and expenses incurred in
connection with any filings to be made with any governmental agency. The Company
also agrees to reimburse the Purchasers for all out-of-pocket expenses
reasonably incurred by the Purchasers in connection with the transactions
contemplated by this Agreement, including, without limitation, all fees and
expenses of the Purchasers' legal counsel, financial advisors, accountants and
all third-party consultants engaged by the Purchasers to assist in such
transactions and all fees and expenses, including fees and expenses of legal
counsel, incurred in connection with enforcing the provisions of, and collecting
amounts payable pursuant to, this Agreement; provided that the aggregate amount
of such expenses shall not exceed $30,000. Such reimbursements shall be due to
the Purchasers at the Closing, or promptly following any earlier termination of
this Agreement for any reason or, in the case of fees and expenses incurred
thereafter, promptly upon demand therefor.
(b) All amounts payable under this Agreement shall be paid in immediately
available funds to an account or accounts designated by the recipient of such
amounts.
SECTION 7.05. Use of Proceeds. The Company shall use the proceeds from the
sale of the Shares for general corporate purposes.
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ARTICLE 8
TERMINATION
SECTION 8.01. Grounds for Termination. This Agreement may be terminated at
any time by mutual written agreement of the Company and each Purchaser.
SECTION 8.02. Effect of Termination. If this Agreement is terminated as
permitted by Section 8.01, termination shall be without liability of any party
(or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other parties to this Agreement; provided
that if such termination shall result from the willful failure of any party to
fulfill a condition to the performance of the obligations of any other party or
to perform a covenant of this Agreement or from a willful breach by any party to
this Agreement, such party shall be fully liable for any and all damage, loss or
expense incurred or suffered by the other party or parties as a result of such
failure or breach. The provisions of Sections 9.02 shall survive any termination
hereof pursuant to Section 8.01. The provisions of Section 6.02 and the
Registration Rights shall survive any termination of this Agreement subsequent
to the Closing.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (i) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt; or (ii) on the first business day following the date of dispatch if
delivered by an internationally recognized next-day courier service. All notices
hereunder shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice.
if to WC, to:
WC Capital, LLC
000 Xxxx Xxxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxx
Fax: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxx, Esq.
Fax: (000) 000-0000
if to CHA, to:
Carnegie Hill Associates, LLC
00 Xxxx 00xx Xxxxxx
Xxx. Xx. 00X
Xxx Xxxx, XX 00000
Attention: Xxxxxxx de X. Xxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxx, Esq.
Fax: (000) 000-0000
if to the Company, to:
Datawatch Corporation
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
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with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Fax: (000) 000-0000
SECTION 9.02. Survival. The representations and warranties of the parties
hereto contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith shall survive the Closing
until twelve months after the Closing Date.
SECTION 9.03. Amendments and Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Closing Date if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement or, in the case of a waiver, by the party against
whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 9.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that except as expressly provided
herein no party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of each other party hereto.
SECTION 9.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
SECTION 9.06. Counterparts; Third Party Beneficiaries. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. No provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
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SECTION 9.07. Public Announcements. The Company and each Purchaser shall
agree on the form and content of any public announcements which shall be made
concerning this Agreement or the transactions contemplated hereby, and neither
the Company nor any Purchaser shall make any such public announcement without
the consent of the other, except with respect to any public announcement or
other public disclosure, to the extent either party determines, in good faith
and with the advice of counsel, such announcement or disclosure is required by
law or the rules or regulations of any exchange or market on which such party's
securities are listed or to avoid undue risk that the transactions contemplated
hereby will be enjoined or that such party, its officers, directors or
representatives will be liable for damages as a result thereof.
SECTION 9.08. Entire Agreement; Exhibits. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, among the parties with respect to the subject matter of this Agreement.
No representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any party hereto. All exhibits
hereto constitute part of this Agreement and are expressly incorporated herein.
SECTION 9.09. Headings. The headings and the table of contents appearing in
this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope and intent of this Agreement
or any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
DATAWATCH CORPORATION
By:
-------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Executive
Officer
WC CAPITAL, LLC
By:
-------------------------------------------
Name: Xxxxx Xxxx
Title: Managing Principal
CARNEGIE HILL ASSOCIATES, LLC
By:
-------------------------------------------
Name: Xxxxxxx de X. Xxxxxxx
Title: Managing Principal