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Exhibit 2.9
OPTION AGREEMENT
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This Option Agreement (the "Agreement") is made and entered into as of
September 9, 1998, by and among COMPONENT SOFTWARE INTERNATIONAL, INC., an Ohio
corporation ("CSI"); XXXXXX INTERNATIONAL INC., an Ohio corporation ("Xxxxxx"),
and certain shareholders of CSI who have executed this Agreement (the
"Shareholders") only with respect to Section 9 of this Agreement.
R E C I T A L S
A. CSI is in the business of providing a variety of information
technology services including consulting, development, testing, and support
services;
X. Xxxxxx is in the business of providing integrated clinical research
and drug development services on a contractual basis;
C. CSI and Xxxxxx have entered into a Software Development and License
Agreement dated July 5, 1998, pursuant to which CSI has agreed to provide
certain limited information technology services for Xxxxxx (the "Software
Development Agreement");
D. The Shareholders own in excess of Eighty Nine percent (89%) of the
issued and outstanding capital stock of CSI;
E. CSI desires to xxxxx Xxxxxx an option to purchase 206,944 shares of
the common capital stock of CSI in exchange for a payment by Xxxxxx plus
Xxxxxx'x commitment to purchase additional information technology services from
CSI on an on-going basis pursuant to the Multi-Year Strategic Services Agreement
in substantially the same form as attached Exhibit A (the "Multi-Year
Agreement"); and
X. Xxxxxx desires to receive an option to acquire an equity interest in
CSI and desires to obtain additional information technology services from CSI;
ACCORDINGLY, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
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SECTION 1. GRANT OF OPTION
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CSI hereby grants to Xxxxxx the right, option and privilege (the
"Purchase Option") to purchase 206,944 shares of the voting, no par common
capital stock of CSI (the "Stock"), on the terms and conditions set forth
herein, which shares constitute ten percent (10%) of the issued and outstanding
common capital stock of CSI as of the date of this Agreement, calculated on a
fully-diluted basis; provided, however, that such number of shares of Stock
shall be reduced prorata to the extent that the number of common shares subject
to exercise or exercised by the HEP Parties (as defined below) under their
Warrants is reduced on or before the Expiration Date. CSI hereby grants the
Purchase Option in consideration of Xxxxxx'x payment to CSI of Two Hundred Fifty
Thousand Dollars ($250,000) (the "Option Consideration"). CSI hereby
acknowledges receipt of the Option Consideration. If prior to the earlier of the
Expiration Date (as defined below) or the date on which Xxxxxx elects to
exercise the Purchase Option the outstanding shares of CSI's voting, no par
common stock are changed into or exchanged for a different number or kind of
shares of stock of CSI or of another corporation or other securities, property,
cash or any combination thereof (whether by reason of merger, consolidation,
recapitalization, reclassification, split-up, combination of shares or
otherwise), or in the event a stock split or stock dividend shall have occurred,
then there shall be substituted for each share of Stock then subject to the
Purchase Option the number and kind of shares of stock, other securities,
property, cash or any combination thereof into which each outstanding share of
CSI voting, no par common stock shall be so changed or exchanged, or the number
of shares of CSI voting, no par common stock as is equitably required in the
event of a stock split or stock dividend. Prior to the earlier of the Expiration
Date or the date on which Xxxxxx elects to exercise the Purchase Option, CSI
also shall not, without giving Xxxxxx at least twenty (20) days prior written
notice, establish a record date for the declaration of any dividend or
distribution (other than a stock dividend) on the shares of CSI's voting, no par
common stock, or declare any such dividend or distribution or establish a record
date for the dissolution, liquidation or winding up of CSI or adopt any
resolution of directors or shareholders with respect to a dissolution,
liquidation or winding up of CSI. Further, if any other event occurs prior to
the earlier of the Expiration Date or the date on which Xxxxxx elects to
exercise the Purchase Option as to which the adjustment provisions of the two
(2) immediately preceding sentences are not strictly applicable or, if strictly
applicable, would not fairly protect Xxxxxx'x Purchase Option rights, then CSI
shall make an equitable adjustment to the application of those adjustment
provisions so as fairly and fully to protect Xxxxxx'x Purchase Option rights.
SECTION 2. TIME AND MANNER OF EXERCISE
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The Option may be exercised, in whole only, at any time after the date
of this Agreement and by no later than December 31, 1998 (the "Expiration
Date"). To exercise the Option, Xxxxxx must provide written notice to CSI of its
exercise of the Purchase Option in the form of the attached Exhibit B, "Notice
of Option Exercise," and also must enter into the Multi-Year Agreement.
Within fifteen (15) days after Xxxxxx'x due exercise of the Purchase
Option, Xxxxxx shall deliver the Purchase Price to CSI as described in Section 3
below. Upon receipt of the Purchase
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Price from Xxxxxx, CSI shall deliver to Xxxxxx a duly executed certificate or
certificate(s) representing the Stock being issued pursuant hereto, together
with such additional documents as may be reasonably requested by CSI to
effectuate the transfer and to register the same on the books of CSI. Upon
issuance, the shares of Stock shall be duly authorized, validly issued, fully
paid and non-assessable shares of CSI voting, no par common stock, free and
clear of any and all liens, pledges, claims and encumbrances other than
restrictions on transfer under this Agreement, the Multi-Year Agreement and
under applicable federal and state securities laws and regulations.
If Xxxxxx does not elect to exercise the Purchase Option, CSI shall
retain the Option Consideration and apply it as a credit against additional
information technology services to be provided by CSI for Xxxxxx after the
Expiration Date pursuant to the terms of the Software Development Agreement.
SECTION 3. EXERCISE PRICE AND PAYMENT
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3.1 PRICE. As full payment for the Stock, Xxxxxx shall pay CSI Ten
Dollars ($10.00) per share with the total consideration for
the Stock equal to $2,069,440. Xxxxxx shall be entitled to
credit the full amount of the Option Consideration against the
exercise price for the Stock.
3.2 PAYMENT.
3.2.1 Of the total Purchase Price described in Section 3.1
above, if the historical average of the NASDAQ NMS
closing bid price for shares of Xxxxxx'x common
stock, no par value per share ("Xxxxxx Shares") for
the twenty (20) trading days immediately preceding
the date on which Xxxxxx exercises the Purchase
Option (the "Xxxxxx Share Valuation") is equal to or
greater than Twenty- Three and 29/00 Dollars ($23.29)
and not greater than Twenty-Eight and 46/00 Dollars
($28.46), then Seventy-Five percent (75%) of the
Purchase Price, or One Million Five Hundred Fifty Two
Thousand Eighty Dollars ($1,552,080) (including the
Option Consideration), shall be paid in cash, with
One Million Three Hundred Two Thousand Eighty Dollars
($1,302,080) to be paid by wire transfer of
immediately available funds, with the remaining
Twenty-Five percent (25%) of the Purchase Price being
paid in 19,995 Xxxxxx Shares.
3.2.2 Of the total Purchase Price described in Section 3.1
above, if the Xxxxxx Share Valuation for the Xxxxxx
Shares is greater than Twenty-Eight and 46/00 Dollars
($28.46), then Seventy-Five percent (75%) of the
Purchase Price, or One Million Five Hundred Fifty Two
Thousand Eighty Dollars ($1,552,080) (including the
Option Consideration), shall be paid in cash, with
One Million Three Hundred Two Thousand Eighty Dollars
($1,302,080) to be paid by wire transfer of
immediately available funds, with the remaining
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Twenty-Five percent (25%) of the Purchase Price being
paid in Xxxxxx Shares valued at the Xxxxxx Share
Valuation.
3.2.3 Of the total Purchase Price described in Section 3.1
above, if the Xxxxxx Share Valuation for the Xxxxxx
Shares is less than Twenty-Three and 29/00 Dollars
($23.29) and equal to or greater than Twenty and
70/00 Dollars ($20.70), then Seventy-Five percent
(75%) of the Purchase Price, or One Million Five
Hundred Fifty Two Thousand Eighty Dollars
($1,552,080) (including the Option Consideration),
shall be paid in cash, with One Million Three Hundred
Two Thousand Eighty Dollars ($1,302,080) to be paid
by wire transfer of immediately available funds, with
the remaining Twenty-Five percent (25%) of the
Purchase Price being paid in Xxxxxx Shares valued at
the Xxxxxx Share Valuation.
3.2.4 Of the total Purchase Price described in Section 3.1
above, if the Xxxxxx Share Valuation for the Xxxxxx
Shares is less than Twenty and 70/00 Dollars
($20.70), then, at CSI's option, at least
Seventy-Five percent (75%) and no more than Ninety
percent (90%) of the Purchase Price, or between One
Million Five Hundred Fifty Two Thousand Eighty
Dollars ($1,552,080) and One Million Eight Hundred
Sixty Two Thousand Four Hundred Ninety Six Dollars
($1,862,496) (including the Option Consideration),
shall be paid in cash, with an amount equal to the
cash portion of the Purchase Price less the Option
Consideration to be paid by wire transfer of
immediately available funds, and with the remaining
ten percent (10%) to Twenty-Five percent (25%) of the
Purchase Price being paid in Xxxxxx Shares valued at
the Xxxxxx Share Valuation.
Upon issuance, the Xxxxxx Shares shall be duly authorized, validly
issued, fully paid and non-assessable shares of Xxxxxx common stock, no par
value, free and clear of any and all liens, pledges, claims and encumbrances
other than restrictions on transfer under this Agreement and under applicable
federal and state securities laws and regulations.
SECTION 4. RESTRICTIONS ON EXERCISE; RESERVATION OF STOCK
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4.1 Xxxxxx may exercise the Purchase Option only with respect to
all of the Stock and no partial exercises shall be permitted.
4.2 CSI covenants and agrees that, prior to the Expiration Date:
(i) CSI shall at all times have authorized, and reserved for
the purpose of issue or transfer upon exercise of the Purchase
Option, sufficient shares of voting, no par common stock of
CSI to provide for the full exercise of the Purchase Option;
and (ii) CSI shall take all actions as may be necessary to
ensure that the Stock issuable upon exercise of the Purchase
Option
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may be issued without violations of any applicable law or
regulation; provided, however, that nothing contained herein
shall impose on CSI any obligation to register the Stock under
applicable securities laws except as provided in Exhibit C to
this Agreement. In the event that any securities of CSI other
than shares of CSI's voting, no par common stock are issuable
on the exercise by Xxxxxx of the Purchase Option, CSI will
take all actions referred to in clauses (i) and (ii) in the
preceding sentence as though such clauses applied, mutatis
mutandis, to such other securities then issuable upon the
exercise of the Purchase Option.
SECTION 5. CSI REPRESENTATIONS AND WARRANTIES
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CSI represents and warrants that the following are true and correct on
the date hereof and on the date on which Xxxxxx acquires the Stock pursuant to
exercise of the Purchase Option:
5.1 CORPORATE STANDING. CSI is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Ohio. CSI has all requisite power and authority to
own, lease and operate its properties and to carry on its
business as now being conducted and as presently proposed to
be conducted and to execute, deliver and perform this
Agreement. CSI is duly licensed, authorized and qualified to
do business and is in good standing in all jurisdictions
(domestic or foreign) in which the conduct of its business or
the ownership or leasing of its properties requires it to be
so licensed, authorized or qualified, except where its failure
to be so licensed, authorized or qualified would not have a
material adverse effect, singularly or in the aggregate, on
the condition (financial or otherwise) of the properties,
business, operations or prospects of CSI.
5.2 AUTHORIZATION. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on
the part of CSI. This Agreement has been duly executed and
delivered by CSI, and constitutes the legal, valid and binding
obligation of CSI, as applicable, enforceable against it in
accordance with its terms, except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally
and (ii) the availability of equitable remedies may be limited
by equitable principles of general applicability.
5.3 VALIDLY ISSUED SHARES. The shares of Stock to be issued, sold
and delivered in accordance with the terms of this Agreement
for the consideration set out herein, will, upon issuance in
accordance with the terms hereof, be duly authorized and
validly issued, fully paid and non-assessable, free and clear
of any and all liens, pledges, claims and encumbrances other
than restrictions on transfer under this Agreement the
Multi-Year Agreement and under applicable federal and state
securities laws and regulations. The issuance of the Stock to
Xxxxxx pursuant to this
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Agreement will comply with all applicable laws, including
federal and state securities laws and regulations.
5.4 SUBSIDIARIES; INVESTMENTS. Except as set forth on Schedule
5.4, CSI does not own of record or beneficially any notes,
obligations, instruments, stock, securities or ownership
interests in or of any other corporation, limited liability
company, partnership, trust or other person, firm or entity
("Investment"). Schedule 5.4 correctly sets forth the name of
each corporation, association or other business entity of
which more than fifty percent (50%) of the voting stock or
other equity interests is owned or controlled by CSI
("Subsidiary"), the jurisdiction of its incorporation and the
persons owning the outstanding capital stock of such
Subsidiary. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation, possesses all requisite
corporate power and authority and all material licenses,
permits and authorizations necessary to own its properties and
to carry on its businesses as now being conducted and as
presently proposed to be conducted and is qualified to do
business in every jurisdiction in which its ownership of
property or the conduct of business requires it to qualify
except where the failure to so quality would not have a
material adverse effect on CSI. All of the outstanding shares
of capital stock of each Subsidiary are validly issued, fully
paid and nonassessable and all such shares are owned by CSI or
another Subsidiary free and clear of any lien and not subject
to any option or right to purchase any such shares. Except as
set forth on Schedule 5.4, neither CSI nor any Subsidiary owns
or holds the right to acquire any shares of stock or any other
security or interest in any other person, firm or entity.
5.5 CAPITALIZATION. As of the date of this Agreement, CSI's
authorized capital stock consists of (a) 3,000,000 Common
Shares and (b) 1,000,000 Series A Preferred Shares. There are
no declared but unpaid dividends or undeclared dividend
arrearages on any shares of capital stock of CSI. After giving
effect to the exercise of the Purchase Option by Xxxxxx, the
only shares of capital stock of CSI issued and outstanding,
reserved for issuance or committed to be issued as of the date
of this Agreement are:
(a) 706,390 fully paid and non-assessable shares of
voting, no par common stock, duly issued and outstanding and
owned of record and beneficially by the persons, and issued on
the dates and for the consideration listed on Schedule 5.5;
(b) 237,658 shares of common stock reserved for
issuance to employees, officers or directors pursuant to an
option or equity incentive plan as approved by the Board;
(c) 179,140 shares of common stock reserved for
issuance to Strategic Ventures, L.P. pursuant to the Equity
Exchange Option Agreement, as amended;
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(d) 550,000 fully paid and non-assessable Series A
Preferred Shares, duly issued and outstanding and owned of
record and beneficially by Healthcare Equity Partners, L.P.
and Healthcare Equity QP Partners, L.P. (the "HEP Parties");
(e) 550,000 shares of common stock reserved for
issuance upon conversion of the Series A Preferred Shares; and
(f) the Warrants issued to the HEP Parties and up to
189,306 shares of common stock issuable upon exercise of the
Warrants.
There are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by
or binding upon CSI for the purchase or acquisition of any
shares of its capital stock, other than those issued,
reserved, committed to be issued pursuant to this Agreement or
as provided for in the Shareholders Agreement, the Articles or
otherwise as referred to in this Agreement. All outstanding
securities of CSI were issued in compliance with all federal
and state securities laws. CSI has no stock appreciation
rights or phantom stock plan.
5.6 FINANCIAL STATEMENTS. CSI has furnished Xxxxxx with (a) the
balance sheets of CSI for years ended December 31, 1995,
December 31, 1996 and December 31, 1997 (the "Balance Sheet"),
together with the statements of operations and changes in
financial position for the fiscal year then ended, with the
unqualified opinion thereon of Clark, Schaefer, Xxxxxxx & Co.
(for 1995) and KPMG Peat Marwick (for 1996 and 1997),
independent certified public accounts, and a balance sheet and
profit and loss statement of CSI for the six (6) months ended
June 30, 1998 (collectively, including the Balance Sheet, the
"Financial Statements"), and (b) the projected statements of
income for CSI for the fiscal years ending December 31, 1998
and 1999 (the "Projected Financial Statements"). The Financial
Statements have been prepared in accordance with GAAP and
fairly and accurately present the financial position of CSI as
of December 31, 1995, December 31, 1996, December 31, 1997 and
June 30, 1998, respectively, and the results of its operations
for the year ended December 31, 1995, the year ended December
31, 1996, the year ended December 31, 1997 and the six-month
period ended June 30, 1998. The Projected Financial Statements
have been prepared by CSI in good faith, based upon
information and assumptions reasonably believed by it to be
sound and accurate, and its officers and directors do not
know, and have no reasonable grounds to know, of any reason
such Projected Financial Statements do not represent
reasonable forecasts as to CSI's future operations and
financial performance. All the books, records and accounts of
CSI are in all material respects accurate and complete, are in
all material respects in accordance with good business
practice and all laws, regulations and rules applicable to CSI
and the conduct of its business and accurately present and
reflect in all material respects all of the transactions
described therein.
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5.7 ABSENCE OF UNDISCLOSED LIABILITIES. CSI does not have any
material debts, liabilities or obligations of any nature
(whether accrued, absolute, contingent, direct, indirect,
perfected, inchoate, unliquidated or otherwise and whether due
or to become due, including (without limitation) any executive
severance compensation arrangements or "golden parachutes")
arising out of transactions entered into on or prior to the
date hereof, or any transaction, series of transactions,
action or inaction occurring on or prior to the date hereof,
or any state of facts or condition existing on or prior to the
date hereof (regardless of when such liability or obligation
is asserted), including, but not limited to, liabilities or
obligations on account of taxes or governmental charges or
penalties, interest or fines thereon or in respect thereof,
except (a) as and to the extent clearly and accurately
reflected and accrued for or reserved against in the Balance
Sheet (b) for liabilities specifically disclosed on Schedule
5.7, and (c) for liabilities and obligations arising after
December 31, 1997 in the ordinary course of business
consistent with past customs and practice, none of which would
exceed $10,000 in the aggregate. CSI and its officers and
directors do not know, and have no reasonable grounds to know,
of any basis for the assertion against CSI as of the date
hereof of any material liabilities not adequately reflected or
reserved against on the Balance Sheet.
5.8 ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, except as
set forth on Schedule 5.8, there has not been (a) any change,
occurrence, condition or development that has materially and
adversely affected, or is likely to materially and adversely
affect, CSI's business, affairs, assets, prospects,
operations, employee or vendor relations or condition
(financial or otherwise), or ability to meet its obligations
hereunder, (b) any dividend or other distribution, or any
recapitalization, combination or subdivision with respect to,
or any purchase or redemption by CSI of, any shares of its
capital stock, (c) any indebtedness incurred by CSI, (d) any
sale, transfer, lease, mortgage or pledge of, grant of
security interest in or other lien against any of CSI's assets
or cancellation of any claims of, or indebtedness or
obligations owing to CSI except as a result of payments of
obligations in the ordinary course of business consistent with
past customs and practice (e) any increase or change, (or
offer or promise thereof, whether or not legally binding) in
salaries or other compensation or employee benefits with
respect to any employees of CSI, (f) any purchase of or
agreement to purchase any additional assets by CSI at a cost
of greater than $5,000 in any one instance, (g) cancellation
or compromise by CSI of any debt or claim or waiver or release
of any right of material value, (h) any physical damage,
destruction or loss (whether or not covered by insurance)
adversely affecting the properties, business or prospects of
CSI, (i) any changes in the accounting principles, methods or
practices followed by CSI or depreciation or amortization
policies or rates theretofore adopted, or (j) any action taken
by CSI, its directors or officers or its shareholders to
authorize any of the actions contemplated by clauses (a) - (i)
above.
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5.9 TAX LIABILITIES. CSI has filed all federal, state and local
tax reports and returns required by any law or regulation to
be filed by it, and such returns are true and correct. CSI has
paid all taxes, interest and penalties, if any, reflected on
such tax returns or otherwise due and payable by it. The
reserves for taxes reflected on the balance sheets included in
the Financial Statements are adequate in amount for the
payment of all liabilities for all taxes (whether or not
disputed) of CSI accrued through the dates of such balance
sheets. Any deficiencies proposed as a result of any
governmental audits of such tax returns have been paid or
settled, and there are no present disputes as to taxes payable
by CSI.
5.10 PROPRIETARY RIGHTS. Schedule 5.10 contains a complete and
correct list of all Proprietary Rights owned, used by or
licensed to or by CSI, all of which are in good standing.
Except as set forth on Schedule 5.10, (a) CSI owns and
possesses all right, title and interest in and to, or has a
valid license to use, all of the Proprietary Rights necessary
for the operation of its business as presently conducted and
as proposed to be conducted by it and none of such Proprietary
Rights have been abandoned by CSI; (b) no claim by any third
person contesting the validity, enforceability, use or
ownership of any such Proprietary Rights has been made, is
currently outstanding or is threatened, and there is no
reasonable basis for any such claim; (c) neither CSI nor any
registered agent of CSI has received any notices of, nor is
CSI aware of any reasonable basis for, an allegation of, any
infringement or misappropriation by, or conflict with, any
third person with respect to such Proprietary Rights, nor has
CSI or any registered agent of CSI received any claims of
infringement or misappropriation of or other conflict with any
Proprietary Rights of any third person; and (d) CSI has not
infringed, misappropriated or otherwise violated any
Proprietary Rights of any third person, and CSI is not aware
of any infringement, misappropriation or conflict which will
occur as a result of the continued operation of its business.
Proprietary Rights means (i) patents, patent applications,
patent disclosures and inventions (ii) trademarks, service
marks, trade dress, trade names and corporate names and
registrations and applications for registration thereof; (iii)
copyrights and registrations and applications for registration
thereof, (iv) mask works and registrations and applications
for registration thereof, (v) computer software, data and
documentation, (vi) trade secrets and other confidential
information (including, but not limited to, ideas, formulas,
compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques,
research and development information, drawings,
specifications, designs, plans, technical data, copyrightable
works, financial and marketing plans and customer and supplier
lists and information), (vii) other intellectual property
rights, and (viii) copies and tangible embodiments thereof (in
whatever form or medium).
5.11 CONSENTS. No consent, approval, qualification, order or
authorization of, or registration, declaration or filing with,
any court, administrative agency or
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commission or other governmental authority or instrumentality,
domestic or foreign, or other third party is required by or
with respect to CSI in connection with the execution and
delivery of this Agreement, or the consummation by CSI of the
transactions contemplated hereby, which has not already been
obtained, except for notices of sale required to be filed with
the Securities and Exchange Commission under Regulation D of
the Securities Act of 1933, as amended ("Securities Act") or
such post closing filings as may be required under applicable
state securities laws which will be timely filed within the
applicable periods therefor.
5.12 LITIGATION. There is no action, suit, proceeding or
investigation pending or to CSI's knowledge currently
threatened against CSI, nor does CSI have any actual knowledge
that there is any basis for the foregoing. CSI is not a party
or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or
investigation by CSI currently pending or that CSI intends to
initiate.
5.13 COMPLIANCE WITH OTHER INSTRUMENTS. CSI is not in violation or
default in any material respect of any provision of its
Articles of Incorporation or Code of Regulations, or in any
material respect of any instrument, judgment, order, writ,
decree or contract to which it is a party or by which it is
bound, or, to the best of its knowledge, of any provision of
any federal or state statute, rule or regulation applicable to
CSI. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby
will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving
of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an
event that results in the creation of any lien, charge or
encumbrance upon any assets of CSI or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any
material permit, license, authorization, or approval
applicable to CSI, its business or operations or any of its
assets or properties.
5.14 MATERIAL FACTS. This Agreement and the documents or written
statements furnished by CSI to Xxxxxx in connection with the
transactions contemplated hereby do not contain any untrue
statement of a material fact or omit to state any material
fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they are made,
not misleading, except, with respect to assumptions,
projections and expressions of opinions or predictions
contained in the documents or written materials furnished by
CSI, CSI makes only those representations set forth in Section
5.6 hereof.
5.15 INVESTMENT. CSI understands that Xxxxxx Shares received
hereunder will not be registered under the Securities Act or
under any state securities laws, and are being offered and
sold in reliance upon federal and state exemptions for
transactions not
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involving any public offering, CSI is acquiring the Xxxxxx
Shares solely for its own account for investment purposes, and
not with a view to the distribution thereof, is a
sophisticated investor with knowledge and experience in
business and financial matters, has received certain
information concerning Xxxxxx and has had the opportunity to
obtain additional information as desired in order to evaluate
the merits and the risks inherent in holding Xxxxxx Shares,
and is able to bear the economic risk and lack of liquidity
inherent in holding Xxxxxx Shares.
SECTION 6. XXXXXX REPRESENTATIONS AND WARRANTIES
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Xxxxxx hereby represents and warrants to the Company, as of the date
hereof and on the date on which Xxxxxx acquires the Stock pursuant to exercise
of the Purchase Option, as follows:
6.1 AUTHORIZATION; BINDING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by Xxxxxx and it
constitutes the legal, valid and binding obligation of Xxxxxx
enforceable against it in accordance with its terms; except as
(i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of
creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of
general applicability.
6.2 CONSENTS. No consent, approval, qualification, order or
authorization of, or registration, declaration or filing with,
any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or
foreign, or other third party is required by or with respect
to Xxxxxx in connection with the execution and delivery of
this Agreement, or the consummation by Xxxxxx of the
transactions contemplated hereby, which has not already been
obtained.
6.3 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such
violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a
default under any such provision, instrument, judgment, order,
writ, decree or contract or an event that results in the
creation of any lien, charge or encumbrance upon any assets of
Xxxxxx or the suspension, revocation, impairment, forfeiture,
or nonrenewal of any material permit, license, authorization,
or approval applicable to Xxxxxx, its business or operations
or any of its assets or properties.
6.4 RECEIPT OF INFORMATION. Xxxxxx acknowledges that the Stock is
not being and will not be registered under the Securities Act
or the securities laws of any other jurisdiction in reliance
on exemptions thereunder. The Stock has not been and will not
be approved or disapproved by the Securities and Exchange
Commission or any other governmental authority or agency of
any jurisdiction. Xxxxxx represents that it has had an
opportunity to ask questions and receive answers from CSI
regarding
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the business, properties, prospects, and financial condition
of CSI and to obtain additional information (to the extent CSI
possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to Xxxxxx or to which
Xxxxxx had access.
6.5 CAPITALIZATION. Xxxxxx'x authorized equity securities consist
of Fifteen Million (15,000,000) shares of common stock, no par
value per share, and One Hundred Thousand (100,000) shares of
undesignated preferred stock, no par value per share. As of
July 31, 1998, Ten Million Nine Hundred Forty One Thousand
Eight Hundred Twenty (10,941,820) shares of common stock were
issued and outstanding and no shares of undesignated preferred
stock were issued and outstanding. The Xxxxxx Shares to be
received by CSI in connection with the transactions
contemplated hereby will be duly authorized, validly issued,
fully paid and non-assessable shares of common stock free and
clear of any and all encumbrances other than restrictions on
transfer imposed by federal and state securities laws and
regulations.
6.6 SEC REPORTS. Xxxxxx has timely filed with the Securities and
Exchange Commission ("SEC") all materials and documents
required to be filed by it under the Securities Exchange Act
of 0000 (xxx "Xxxxxxxx Xxx"). All the material and documents
filed with the SEC by Buyer since July 2, 1997, including its
initial Registration Statement on Form S-1, are hereinafter
referred to as the "Xxxxxx SEC Reports." The Xxxxxx SEC
Reports, copies of which have been delivered to CSI, are true
and correct in all material respects, including the financial
statements and other financial information contained therein,
and do not omit to state any material fact necessary to make
the statements in such Xxxxxx SEC Reports, in light of the
circumstances in which they were made, not misleading. The
financial statements included in the Xxxxxx SEC Reports fairly
present in all material respects the financial condition and
the results of operations, changes in stockholders' equity and
cash flow of Xxxxxx and its subsidiaries as at the respective
dates of and for the periods referred to in such financial
statements, all in accordance with generally accepted
accounting principles.
SECTION 7. TRANSFERABILITY OF OPTION
--------------------------------------------------------------------------------
Neither party may assign this Agreement in whole or in part to any
party without the prior written consent of the other party hereto; provided,
however, that Xxxxxx may assign this Agreement to a wholly-owned subsidiary of
Xxxxxx (directly or indirectly) or a lower tier wholly-owned subsidiary of
Xxxxxx (directly or indirectly) upon at least seven business days' prior written
notice to CSI.
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SECTION 8. NO OBLIGATION TO EXERCISE OPTION
--------------------------------------------------------------------------------
Nothing in this Agreement imposes any obligation upon Xxxxxx to
exercise the Purchase Option.
SECTION 9. CLOSE CORPORATION STOCK TRANSFER RESTRICTIONS
--------------------------------------------------------------------------------
All Stock acquired by Xxxxxx upon exercise of the Purchase Option shall
be subject to the Close Corporation Stock Transfer Restriction and Redemption
Provisions provided on the attached Exhibit X. Xxxxxx shall have piggyback
registration rights as set forth in the attached Exhibit C.
SECTION 10. EXCLUSIVITY
--------------------------------------------------------------------------------
Until the earlier of the Expiration Date or the date that Xxxxxx
notifies CSI in writing that it does not elect to exercise the Purchase Option,
CSI agrees that it will not provide customized information technology
development services for the direct competitors of Xxxxxx as listed or described
on the attached Exhibit D. Notwithstanding the foregoing, nothing within this
Agreement shall in any way limit or restrict CSI's right or ability to continue
to provide services and products for any former or current client of CSI listed
on the attached Exhibit E. In addition, in the event that a then current CSI
customer is acquired (whether by sale of stock, assets, merger or otherwise) by
a Xxxxxx direct competitor, CSI shall be permitted to continue to provide
services for such customer under the terms, and for the remaining term, of the
then existing agreement or work statement (but for no longer period) and in such
event CSI hereby expressly agrees not to disclose any Xxxxxx proprietary
information to such customer.
SECTION 11. MISCELLANEOUS
--------------------------------------------------------------------------------
11.1 BINDING EFFECT; NO THIRD PARTY BENEFICIARIES. This Agreement
shall be binding upon and shall inure to the successors and
permitted assigns of each party. This Agreement is not
intended to confer on any person other than the parties hereto
or their respective successors and permitted assigns any
rights, remedies, obligations or liabilities, expressed or
implied, under or by reason of this Agreement.
11.2 ENTIRE AGREEMENT. This Agreement, together with any Schedules,
Exhibits and other documents contemplated hereby, constitutes
the final written expression of all of the agreements between
the parties, and is a complete and exclusive statement of
those terms. It supersedes all prior or contemporaneous
understandings and negotiations concerning the matters
specified herein. If any representations, promises, warranties
or statements made by any party differ in any way from the
terms of this written Agreement, any schedules and other
documents contemplated hereby, such other representations,
promises, warranties or statements shall be given no force or
effect. The parties specifically represent, each to the other,
that there are no additional or supplemental agreements
between them related in any way to the
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matters herein. No addition to or modification of any
provision of this Agreement shall be binding upon any party
unless made in writing and signed by all parties.
11.3 PUBLIC STATEMENTS. Except as required by applicable law or
regulations or court order or by the rules of any national
securities exchange on which the securities of either Xxxxxx
or CSI are quoted or listed, neither CSI nor Xxxxxx shall,
without the prior written approval of the other parties
hereto, make any press release or other public announcement
concerning the transactions contemplated by this Agreement.
CSI and Xxxxxx may disclose information with respect to the
transaction contemplated hereby to their respective employees,
agents, consultants and third parties only to the extent such
persons have a need to know such information.
11.4 GOVERNING LAW AND DISPUTE RESOLUTION. This Agreement shall be
governed in all respects by the internal substantive laws of
the State of Ohio. Any and all disputes arising out of or in
connection with the execution, interpretation, performance, or
non-performance of this Agreement or any agreement or other
instrument between, involving or affecting the parties
(including the validity, scope and enforceability of this
arbitration clause), shall be submitted to and resolved by
arbitration. The arbitration shall be conducted pursuant to
the terms of the Federal Arbitration Act and the Commercial
Arbitration Rules of the American Arbitration Association. The
arbitration shall be conducted by three arbitrators, who shall
be appointed pursuant to the rules of the American Arbitration
Association. Either party may notify the other party at any
time of the existence of an arbitrable controversy by
certified mail and shall attempt in good faith to resolve
their differences within fifteen (15) days after the receipt
of such notice. If the dispute cannot be resolved within the
fifteen-day period, either party may file a written demand for
arbitration with the American Arbitration Association. The
determination of the arbitrators shall be final and binding on
the parties. The place of arbitration shall be Cincinnati,
Ohio. Judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction.
11.5 WAIVERS. Any party hereto may, by written notice to the other
party hereto, to the extent expressly set forth in such
written notice: (i) extend the time for the performance of any
of the obligations or other actions of the other party under
this Agreement; (ii) waive any inaccuracies in the
representations or warranties of the other party contained in
this Agreement or in any document delivered pursuant to this
Agreement; (iii) waive compliance with any of the conditions
or covenants of the other party contained in this Agreement;
(iv) waive performance of any of the obligations of the other
party under this Agreement; or (v) waive an event of default
by the other party under this Agreement Except as provided in
the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
representations, warranties,
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covenants or agreements contained in this Agreement. No waiver
of any provision of this Agreement shall be deemed or shall
constitute a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver.
11.6 SEVERABILITY. If for any reason whatsoever, any one or more of
the provisions of this Agreement shall be held or deemed to be
illegal, inoperative, unenforceable or invalid, such
circumstances shall not have the effect of rendering such
provision illegal, inoperative, unenforceable or invalid in
any other case or of rendering any of the other provisions of
this Agreement illegal, inoperative, unenforceable or invalid.
In substitution of such illegal, inoperative, unenforceable or
invalid provision, there shall be added automatically, as part
of this Agreement, a provision as similar in terms of such
illegal, invalid, unenforceable or inoperative provision as
may be possible and as shall be legal, valid, enforceable and
operative.
11.7 NOTICES. All notices, demands or other communications which
may be or are required to be given by any party to any other
party pursuant to this Agreement, shall be in writing and
shall be mailed by certified mail, return receipt requested,
postage prepaid, or transmitted by hand delivery, national or
international overnight express, telegram or facsimile
transmission, addressed as follows:
11.7.1 If to CSI:
Component Software International, Inc.
0000 Xxxxxxxxx Xxx
Xxxxx, Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, CEO
with a copy (which shall not constitute notice) to:
Xxxxxxx, Head & Xxxxxxx
0000 Xxxxx Xxxxx Xxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
11.7.2 If to Xxxxxx:
Xxxxxx International Inc.
000 Xxxxx Xxxxx
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, CFO
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with a copy (which shall not constitute notice) to:
Xxxxxx International Inc.
000 Xxxxx Xxxxx
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
with a copy (which shall not constitute notice) to:
Xxxxxxx, Xxxxxxxx & Klekamp, P.L.L.
1800 Provident Tower
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
until such time as either party notifies the other of a change
of address. Each notice or other communication which shall be
mailed, delivered or transmitted in the manner described above
shall be deemed sufficiently given and received for all
purposes at such time as it is delivered to the addressee
(with the return receipt, the delivery receipt, or the
affidavit of messenger or telefax transmission log being
deemed conclusive evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
11.8 COUNTERPARTS; EXECUTION. This Agreement may be executed in as
many counterparts as may be required, and each such
counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall
constitute but a single agreement. This Agreement shall be
deemed to have been executed at the time when and location at
which the last signature of any of the parties is affixed
hereto or to any counterpart hereof.
[signatures on next page]
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--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year hereinabove first
set above.
-----------------------------------------------------------------------------------------------------------------
CSI: CSI SHAREHOLDERS
(FOR PURPOSES OF SECTION 9 AND EXHIBIT C ONLY)
COMPONENT SOFTWARE /S/ XXXXXXX X. XXXX
INTERNATIONAL, INC. ----------------------------------------------
XXXXXXX X. XXXX
BY: BEECH INVESTORS LIMITED PARTNERSHIP
----------------------------
TITLE: BY:/S/ XXXXXX X. XXXXX
------------------------- ----------------------------------------------
XXXXXX X. XXXXX, MANAGING GENERAL PARTNER
XXXXXX: XXXX INVESTORS LIMITED PARTNERSHIP
XXXXXX INTERNATIONAL INC.
BY:/S/ XXXXXXX X. XXXX
BY: ----------------------------------------------
---------------------------- XXXXXXX X. XXXX, MANAGING GENERAL PARTNER
TITLE:
-------------------------
XXXX X. AND XXXXXXXXX X. XXXXXXXXX FAMILY TRUST
BY:
----------------------------------------------
XXXX X. XXXXXXXXX, TRUSTEE
HEALTHCARE EQUITY PARTNERS L.P.
BY:/S/ XXXXXXX X. X'XXXXX
----------------------------------------------
TITLE: XXXXXXX X. X'XXXXX -- MG. DIRECTOR
XXXXXXX XXXXX & COMPANY, LLC.
------------------------------------------
HEALTHCARE EQUITY QP PARTNERS, L.P.
BY:/S/ XXXXXXX X. X'XXXXX
----------------------------------------------
TITLE: XXXXXXX X. X'XXXXX -- MG. DIRECTOR
XXXXXXX XXXXX & COMPANY, LLC.
------------------------------------------
-----------------------------------------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year hereinabove first
set above.
-----------------------------------------------------------------------------------------------------------------
CSI: CSI SHAREHOLDERS
(FOR PURPOSES OF SECTION 9 AND EXHIBIT C ONLY)
COMPONENT SOFTWARE /S/ XXXXXXX X. XXXX
INTERNATIONAL, INC. ----------------------------------------------
XXXXXXX X. XXXX
BY: BEECH INVESTORS LIMITED PARTNERSHIP
----------------------------
TITLE: BY:/S/ XXXXXX X. XXXXX
------------------------- ----------------------------------------------
XXXXXX X. XXXXX, MANAGING GENERAL PARTNER
XXXXXX: XXXX INVESTORS LIMITED PARTNERSHIP
XXXXXX INTERNATIONAL INC. BY:/S/ XXXXXXX X. XXXX
----------------------------------------------
BY: XXXXXXX X. XXXX, MANAGING GENERAL PARTNER
----------------------------
TITLE:
------------------------- XXXX X. AND XXXXXXXXX X. XXXXXXXXX FAMILY TRUST
BY:
----------------------------------------------
XXXX X. XXXXXXXXX, TRUSTEE
HEALTHCARE EQUITY PARTNERS L.P.
BY:
----------------------------------------------
TITLE:
-------------------------------------------
HEALTHCARE EQUITY QP PARTNERS, L.P.
BY:
----------------------------------------------
TITLE:
-------------------------------------------
-----------------------------------------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year hereinabove first
set above.
-----------------------------------------------------------------------------------------------------------------
CSI: CSI SHAREHOLDERS
(FOR PURPOSES OF SECTION 9 AND EXHIBIT C ONLY)
COMPONENT SOFTWARE /S/ XXXXXXX X. XXXX
INTERNATIONAL, INC. ----------------------------------------------
XXXXXXX X. XXXX
BY:/S/ XXXXXX X. XXXXX BEECH INVESTORS LIMITED PARTNERSHIP
----------------------------
TITLE: PRESIDENT AND CEO BY:/S/ XXXXXX X. XXXXX
----------------------------------------------
XXXXXX X. XXXXX, MANAGING GENERAL PARTNER
XXXXXX: XXXX INVESTORS LIMITED PARTNERSHIP
XXXXXX INTERNATIONAL INC.
BY:/S/ XXXXXXX X. XXXX
BY: /S/XXXXXXX X. XXXXXX ----------------------------------------------
---------------------------- XXXXXXX X. XXXX, MANAGING GENERAL PARTNER
TITLE: VICE PRESIDENT AND CFO
XXXX X. AND XXXXXXXXX X. XXXXXXXXX FAMILY TRUST
BY:/S/ XXXX X. XXXXXXXXX
----------------------------------------------
XXXX X. XXXXXXXXX, TRUSTEE
HEALTHCARE EQUITY PARTNERS L.P.
BY:
----------------------------------------------
TITLE:
-------------------------------------------
HEALTHCARE EQUITY QP PARTNERS, L.P.
BY:
----------------------------------------------
TITLE:
-------------------------------------------
-----------------------------------------------------------------------------------------------------------------
