EXHIBIT 10.19
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SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
between
PERITUS SOFTWARE SERVICES, INC.
and
THE SEVERAL PURCHASERS NAMED IN SCHEDULE I
Dated as of October 28, 1996
TABLE OF CONTENTS
Page
ARTICLE I -- THE SHARES................................................................. 1
SECTION 1.01 Issuance, Sale and Delivery of the Shares.................................. 1
SECTION 1.02 Closing.................................................................... 1
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................. 2
SECTION 2.01 Organization, Qualifications and Corporate Power........................... 2
SECTION 2.02 Authorization of Agreements, Etc........................................... 3
SECTION 2.03 Validity................................................................... 3
SECTION 2.04 Authorized Capital Stock................................................... 4
SECTION 2.05 Financial Statements....................................................... 5
SECTION 2.06 Events Subsequent to the Date of the Balance Sheet......................... 5
SECTION 2.07 Litigation; Compliance with Law............................................ 5
SECTION 2.08 Proprietary Information of Third Parties................................... 6
SECTION 2.09 Patents, Trademarks, Etc................................................... 7
SECTION 2.10 Title to Properties........................................................ 7
SECTION 2.11 Leasehold Interests........................................................ 7
SECTION 2.12 Insurance.................................................................. 8
SECTION 2.13 Taxes...................................................................... 8
SECTION 2.14 Other Agreements........................................................... 8
SECTION 2.15 Loans and Advances......................................................... 10
SECTION 2.16 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons............. 10
SECTION 2.17 Significant Customers and Suppliers........................................ 10
SECTION 2.18 Governmental Approvals..................................................... 11
SECTION 2.19 Disclosure................................................................. 11
SECTION 2.20 Offering of the Shares..................................................... 11
SECTION 2.21 Brokers.................................................................... 12
SECTION 2.22 Officers................................................................... 12
SECTION 2.23 Transactions With Affiliates............................................... 12
SECTION 2.24 Employees.................................................................. 12
SECTION 2.25 U.S. Real Property Holding Corporation..................................... 12
SECTION 2.26 Environmental Protection................................................... 13
SECTION 2.27 ERISA...................................................................... 13
SECTION 2.28 Foreign Corrupt Practices Act.............................................. 15
SECTION 2.29 Federal Reserve Regulations................................................ 15
SECTION 2.30 Qualified Small Business Stock............................................. 15
SECTION 2.31 Equal Employment Opportunity............................................... 15
SECTION 2.32 Labor Relations............................................................ 16
ARTICLE III-- REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS........................... 16
ARTICLE IV -- CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS............................ 17
ARTICLE V -- COVENANTS OF THE COMPANY................................................... 19
SECTION 5.01 Financial Statements, Reports, Etc......................................... 19
SECTION 5.02 Right of Participation..................................................... 20
SECTION 5.03 Reserve for Conversion Shares.............................................. 21
SECTION 5.04 Corporate Existence........................................................ 22
SECTION 5.05 Properties, Business, Insurance............................................ 22
SECTION 5.06 Inspection, Consultation and Advice........................................ 00
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XXXXXXX 0.00 Xxxxxxxxxxx Agreements Prohibited.......................................... 23
SECTION 5.08 Transactions with Affiliates............................................... 23
SECTION 5.09 Expenses of Directors...................................................... 23
SECTION 5.10 Use of Proceeds............................................................ 23
SECTION 5.11 Board of Directors Meetings................................................ 23
SECTION 5.12 Compensation Committee..................................................... 23
SECTION 5.13 Charter.................................................................... 24
SECTION 5.14 Performance of Contracts................................................... 24
SECTION 5.15 Employee Nondisclosure and Developments Agreements......................... 24
SECTION 5.16 Activities of Subsidiaries................................................. 24
SECTION 5.17 Compliance with Laws....................................................... 24
SECTION 5.18 Keeping of Records and Books of Account.................................... 24
SECTION 5.19 Change in Nature of Business............................................... 25
SECTION 5.20 U.S. Real Property Interest Statement...................................... 25
SECTION 5.21 International Investment Survey Act of 1976................................ 25
SECTION 5.22 Rule 144A Information...................................................... 25
SECTION 5.23 Advisory Committee......................................................... 26
SECTION 5.24 Qualified Small Business Stock............................................. 26
SECTION 5.25 Equal Employment Opportunity............................................... 26
SECTION 5.26 Status of the Shares as Qualified Investments.............................. 26
SECTION 5.27 Termination of Covenants................................................... 27
ARTICLE VI -- MISCELLANEOUS.............................................................. 27
SECTION 6.01 Expenses................................................................... 27
SECTION 6.02 Survival of Agreements..................................................... 27
SECTION 6.03 Brokerage.................................................................. 27
SECTION 6.04 Parties in Interest........................................................ 28
SECTION 6.05 Notices.................................................................... 28
SECTION 6.06 Governing Law.............................................................. 28
SECTION 6.07 Entire Agreement........................................................... 28
SECTION 6.08 Counterparts............................................................... 28
SECTION 6.11 Amendments................................................................. 28
SECTION 6.12 Severability............................................................... 29
SECTION 6.13 Titles and Subtitles....................................................... 29
SECTION 6.14 Certain Defined Terms...................................................... 29
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INDEX TO SCHEDULES
SCHEDULE I Purchasers
SCHEDULE II Disclosure Schedule
SCHEDULE III Subsidiaries
SCHEDULE IV(A) Security Holders
SCHEDULE IV(B) Stock Registration and Voting Agreements
SCHEDULE V Agreements
INDEX TO EXHIBITS
EXHIBIT A Form of Registration Rights Amendment
EXHIBIT B Form of Stock Restriction Amendment
EXHIBIT C Charter and All Amendments Thereto
EXHIBIT D Form of Employee Nondisclosure and Developments Agreement
EXHIBIT E Form of Opinion of Xxxx and Xxxx
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SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as of October 28,
1996 between Peritus Software Services, Inc., a Massachusetts corporation (the
"Company"), and the several purchasers named in the attached Schedule I
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(individually a "Purchaser" and collectively the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers an
aggregate of 1,818,182 shares of the authorized but unissued Series B
Convertible Preferred Stock, no par value, of the Company (the "Shares"); and
WHEREAS, the Purchasers, severally, wish to purchase the Shares on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE I
THE SHARES
SECTION 1.01 Issuance, Sale and Delivery of the Shares. The Company
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agrees to issue and sell to each Purchaser, and each Purchaser hereby agrees to
purchase from the Company, the number of Shares set forth opposite the name of
such Purchaser under the heading "Number of Shares to be Purchased" on Schedule
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I, at the aggregate purchase price set forth opposite the name of such Purchaser
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under the heading "Aggregate Purchase Price for Shares" on Schedule I.
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SECTION 1.02 Closing. The closing shall take place at the offices of
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Xxxxx, Xxxxxxx & Xxxxxxxxx, High Street Tower, 000 Xxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, at or about 1:00 p.m., Boston time, on October 28, 1996, or
at such other location, date and time as may be agreed upon between the
Purchasers and the Company (such closing being called the "Closing" and such
date and time being called the "Closing Date"). At the Closing, the Company
shall issue and deliver to each Purchaser a stock certificate or certificates in
definitive form, registered in the name of such Purchaser, representing the
Shares being purchased by such Purchasers at the Closing. As payment in full
for the Shares being purchased by such Purchasers under this Agreement, and
against delivery of the stock certificate or certificates therefor as aforesaid,
on the Closing Date each Purchaser shall (i) deliver to the Company a check
payable to the order of the Company, in the amount set forth opposite the name
of such Purchaser under the heading "Aggregate Purchase Price for Shares" on
Schedule I, or (ii) transfer such sum to the account of the Company by wire
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transfer.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers that, except as set
forth in the Disclosure Schedule attached as Schedule II (which Disclosure
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Schedule makes explicit reference to the particular representation or warranty
as to which exception is taken, which in each case shall constitute the sole
representation and warranty as to which such exception shall apply):
SECTION 2.01 Organization, Qualifications and Corporate Power.
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(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts and is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification and where the failure to be so licensed
or qualified would have a material adverse effect on the Company. The Company
has the corporate power and authority to own and hold its properties and to
carry on its business as now conducted and as proposed to be conducted, to
execute, deliver and perform this Agreement, Amendment No. 1 (the "Registration
Rights Amendment"), in the form attached as Exhibit A hereto, to the
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Registration Rights Agreement dated March 15, 1996 among the Company, the
Purchasers and Bull HN Information Systems Inc. ("Bull HN") (as amended by the
Registration Rights Amendment, the "Registration Rights Agreement"), Amendment
No. 1 (the "Stock Restriction Amendment"), in the form attached as Exhibit B
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hereto, to the Stock Restriction Agreement dated March 15, 1996 among the
Company, the Purchasers and the other parties thereto (as amended by the Stock
Restriction Amendment, the "Stock Restriction Agreement"), to issue, sell and
deliver the Shares and to issue and deliver the shares of Class A Common Stock
issuable upon conversion of the Series B Convertible Preferred Stock (the
"Conversion Shares").
(b) The attached Schedule III contains a list of all subsidiaries of
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the Company. Except for such subsidiaries, the Company does not (i) own of
record or beneficially, directly or indirectly, (A) any shares of capital stock
or securities convertible into capital stock of any other corporation or (B) any
participating interest in any partnership, joint venture or other non-corporate
business enterprise or (ii) control, directly or indirectly, any other entity.
Each of the subsidiaries is a corporation duly incorporated, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation and is duly licensed or qualified to transact business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of the business transacted by it or the character of the properties owned
or leased by it requires such licensing or qualification and where the failure
to be so licensed or qualified would have a material adverse effect on the
Company. Each of the subsidiaries has the corporate power and authority to own
and hold its properties and to carry on its business as now conducted and as
proposed to be conducted. Except as set forth in Schedule III, all of the
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outstanding shares of capital stock of each of the subsidiaries are owned
beneficially and of record by the Company, one of its other subsidiaries, or any
combination of the Company and/or one or more of its other
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subsidiaries, in each case free and clear of any liens, charges, restrictions,
claims or encumbrances of any nature whatsoever; and there are no outstanding
subscriptions, warrants, options, convertible securities, or other rights
(contingent or other) pursuant to which any of the subsidiaries is or may become
obligated to issue any shares of its capital stock to any person other than the
Company or one of the other subsidiaries. Unless otherwise specified, the term
"Company" shall mean the Company and each of the subsidiaries.
SECTION 2.02 Authorization of Agreements, Etc.
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(a) The execution and delivery by the Company of this Agreement, the
Registration Rights Amendment and the Stock Restriction Amendment, the
performance by the Company of its obligations hereunder and thereunder, the
issuance, sale and delivery of the Shares and the issuance and delivery of the
Conversion Shares have been duly authorized by all requisite corporate action
and will not violate any provision of law, any order of any court or other
agency of government, the Amended and Restated Articles of Organization of the
Company, as amended (the "Charter") or the By-laws of the Company, as amended,
or any provision of any indenture, agreement or other instrument to which the
Company, any of its subsidiaries or any of their respective properties or assets
is bound, or conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company or any of its subsidiaries.
(b) The Shares have been duly authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid and
nonassessable shares of Series B Convertible Preferred Stock, with no personal
liability attaching to the ownership thereof and will be free and clear of all
liens, charges, restrictions, claims and encumbrances imposed by or through the
Company except as set forth in the Registration Rights Agreement and the Stock
Restriction Agreement. The Conversion Shares have been duly reserved for
issuance upon conversion of the Series B Convertible Preferred Stock and, when
so issued, will be duly authorized, validly issued, fully paid and nonassessable
shares of Class A Common Stock with no personal liability attaching to the
ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in the Registration Rights Agreement. Neither the issuance, sale
or delivery of the Shares nor the issuance or delivery of the Conversion Shares
is subject to any preemptive right of stockholders of the Company, or to any
right of first refusal or other right in favor of any person, which has not been
duly and validly waived.
SECTION 2.03 Validity. This Agreement has been duly executed and
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delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms. The Registration
Rights Amendment and the Stock Restriction Amendment, when executed and
delivered in accordance with this Agreement, will constitute the legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
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SECTION 2.04 Authorized Capital Stock. The authorized capital stock of
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the Company consists of (i) 3,721,707 shares of Preferred Stock, of which
1,818,182 shares have been designated Series B Convertible Preferred Stock, no
par value, and 1,903,525 shares have been designated Series A Convertible
Preferred Stock, no par value, (ii) 12,474,000 shares of Class A Common Stock,
no par value, and (iii) 275,000 shares of Class B Non-Voting Common Stock, no
par value (the "Class B Common Stock" and, collectively with the Class A Common
Stock, the "Common Stock"). Immediately prior to the Closing, 1,903,525 shares
of Series A Convertible Preferred Stock, 5,778,602 shares of Class A Common
Stock and 99,290 shares of Class B Non-Voting Common Stock, will be validly
issued and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof and no shares of Series B Convertible
Preferred Stock will have been issued. The stockholders of record and holders
of subscriptions, warrants, options, convertible securities, and other rights
(contingent or other) to purchase or otherwise acquire equity securities of the
Company, and the number of shares of Common Stock and the number of such
subscriptions, warrants, options, convertible securities, and other such rights
held by each, are as set forth in the attached Schedule IV(A). The
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designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Company are as set forth in the Charter, a copy of which is attached as
Exhibit C, and all such designations, powers, preferences, rights,
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qualifications, limitations and restrictions are valid, binding and enforceable
and in accordance with all applicable laws (subject, as to enforcement, to the
discretion of courts in awarding equitable relief as to applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally and to general principals of equity). Except as set forth
in the attached Schedule IV(A), (i) no person owns of record or is known to the
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Company to own beneficially any share of Common Stock, (ii) no subscription,
warrant, option, convertible security, or other right (contingent or other) to
purchase or otherwise acquire equity securities of the Company is authorized or
outstanding and (iii) there is no commitment by the Company to issue shares,
subscriptions, warrants, options, convertible securities, or other such rights
or to distribute to holders of any of its equity securities any evidence of
indebtedness or asset. Except as provided for in the Charter or as set forth in
the attached Schedule IV(A), the Company has no obligation (contingent or other)
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to purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. Except as set forth in Schedule IV(B), the Stock Restriction
Agreement, and the Voting Agreement of the Company and certain of its
stockholders dated as of March 15, 1996 (the "Voting Agreement"), to the best of
the Company's knowledge there are no voting trusts or agreements, stockholders'
agreements, pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights or proxies relating to any securities of the Company or any of
its subsidiaries (whether or not the Company or any of its subsidiaries is a
party thereto). All of the outstanding securities of the Company were issued in
compliance with all applicable Federal and state securities laws.
SECTION 2.05 Financial Statements. The Company has furnished to the
--------------------
Purchasers the audited consolidated balance sheet of the Company and its
subsidiaries as of December 31, 1995, and the related audited consolidated
statements of income, stockholders' equity and cash flows of the Company and its
subsidiaries for the year ended December 31, 1995, and the unaudited
consolidated balance sheet of the Company and its subsidiaries as of September
30, 1996 (the
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"Balance Sheet") and the related unaudited consolidated statements of income,
stockholders' equity and cash flows of the Company and its subsidiaries for the
nine months ended September 30, 1996. All such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied (except that such unaudited financial statements do not
contain all of the required footnotes) and fairly present the consolidated
financial position of the Company and its subsidiaries as of December 31, 1995,
and September 30, 1996, respectively, and the consolidated results of their
operations and cash flows for the year ended December 31, 1995 and the nine
months ended September 30, 1996, respectively. Since the date of the Balance
Sheet, (i) there has been no change in the assets, liabilities or financial
condition of the Company and its subsidiaries (on a consolidated basis) from
that reflected in the Balance Sheet except for changes in the ordinary course of
business which in the aggregate have not been materially adverse and (ii) none
of the business, prospects, financial condition, operations, property or affairs
of the Company and its subsidiaries (on a consolidated basis) has been
materially adversely affected by any occurrence or development, individually or
in the aggregate, whether or not insured against.
SECTION 2.06 Events Subsequent to the Date of the Balance Sheet. Since
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the date of the Balance Sheet, the Company has not (i) issued any stock, bond or
other corporate security, (ii) borrowed any amount or incurred or become subject
to any liability (absolute, accrued or contingent), except current liabilities
incurred and liabilities under contracts entered into in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrance or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown on the Balance Sheet and current liabilities incurred
since the date of the Balance Sheet in the ordinary course of business, (iv)
declared or made any payment or distribution to stockholders or purchased or
redeemed any share of its capital stock or other security, (v) mortgaged,
pledged, encumbered or subjected to lien any of its assets, tangible or
intangible, other than liens of current real property taxes not yet due and
payable, (vi) sold, assigned or transferred any of its tangible assets except in
the ordinary course of business, or canceled any debt or claim, (vii) sold,
assigned, transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service xxxx, copyright, trade secret or other
intangible asset, (viii) suffered any loss of property or waived any right of
substantial value whether or not in the ordinary course of business, (ix) made
any change in officer compensation except in the ordinary course of business and
consistent with past practice, (x) made any material change in the manner of
business or operations of the Company, (xi) entered into any transaction except
in the ordinary course of business or as otherwise contemplated hereby or (xii)
entered into any commitment (contingent or otherwise) to do any of the
foregoing.
SECTION 2.07 Litigation; Compliance with Law. There is no (i) action,
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suit, claim, proceeding or investigation pending or, to the best of the
Company's knowledge, threatened against or affecting the Company, at law or in
equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Company pending under
collective bargaining agreements or otherwise or (iii) governmental inquiry
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company (including without limitation any inquiry as to the
qualification of the Company to hold or receive any
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license or permit). The Company is not in default with respect to any order,
writ, injunction or decree known to or served upon the Company of any court or
of any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, where such
litigation, proceeding or investigation, either individually or in the
aggregate, would have a material adverse effect on the Company or which might
call into question the validity of this Agreement or the various transactions
and agreements contemplated hereby. There is no action or suit by the Company
pending or threatened against others. The Company has complied with all laws,
rules, regulations and orders applicable to its business, operations,
properties, assets, products and services, the Company has all necessary
permits, licenses and other authorizations required to conduct its business as
conducted and as proposed to be conducted, and the Company has been operating
its business pursuant to and in compliance with the terms of all such permits,
licenses and other authorizations where the failure to comply or to be so
licensed or qualified would have a material adverse effect on the Company.
SECTION 2.08 Proprietary Information of Third Parties. To the best of the
----------------------------------------
Company's knowledge, no third party has claimed that any person employed by or
affiliated with the Company has (a) violated or may be violating any of the
terms or conditions of his employment, non-competition or non-disclosure
agreement with such third party, (b) disclosed or may be disclosing or utilized
or may be utilizing any trade secret or proprietary information or documentation
of such third party or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from the Company which
suggests that such a claim might be contemplated. To the best of the Company's
knowledge, no person employed by or affiliated with the Company has employed or
proposes to employ any trade secret or any information or documentation
proprietary to any former employer, and to the best of the Company's knowledge,
no person employed by or affiliated with the Company has violated any
confidential relationship which such person may have had with any third party,
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of the Company, and the Company has no reason to believe there will be any such
employment or violation. To the best of the Company's knowledge, none of the
execution or delivery of this Agreement, or the carrying on of the business of
the Company as officers, employees or agents by any officer, director or key
employee of the Company, or the conduct or proposed conduct of the business of
the Company, will conflict with or result in a breach of the terms, conditions
or provisions of or constitute a default under any contract, covenant or
instrument under which any such person is obligated.
SECTION 2.09 Patents, Trademarks, Etc. Set forth in Schedule II is a list
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and brief description of all domestic and foreign patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee or in which the
Company has any right, and in each case a brief description of the nature of
such right. The Company owns or possesses adequate licenses or other rights to
use all patents, patent applications, trademarks, trademark applications,
service marks, service xxxx applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists and know
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how (collectively, "Intellectual Property") necessary or desirable to the
conduct of its business as conducted and as proposed to be conducted, and no
claim is pending or, to the best of the Company's knowledge, threatened to the
effect that the operations of the Company infringe upon or conflict with the
asserted rights of any other person under any Intellectual Property. No claim is
pending or threatened to the effect that any such Intellectual Property owned or
licensed by the Company, or which the Company otherwise has the right to use, is
invalid or unenforceable by the Company. To the best of the Company's knowledge,
all technical information developed by and belonging to the Company which has
not been patented has been kept confidential. The Company has not granted or
assigned to any other person or entity any right to manufacture, have
manufactured, assemble or sell the products or proposed products or to provide
the services or proposed services of the Company.
SECTION 2.10 Title to Properties. The Company and its subsidiaries have
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good, clear and marketable title to their respective properties and assets
reflected on the Balance Sheet or acquired by them since the date of the Balance
Sheet (other than properties and assets disposed of in the ordinary course of
business since the date of the Balance Sheet), and, except as set forth in
Schedule II, all such properties and assets are free and clear of mortgages,
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pledges, security interests, liens, charges, claims, restrictions and other
encumbrances (including without limitation, easements and licenses), except for
liens for or current taxes not yet due and payable and minor imperfections of
title, if any, not material in nature or amount and not materially detracting
from the value or impairing the use of the property subject thereto or impairing
the operations or proposed operations of the Company and its subsidiaries,
including without limitation, the ability of the Company and its subsidiaries to
secure financing using such properties and assets as collateral. To the best of
the Company's knowledge after due inquiry, there are no condemnation,
environmental, zoning or other land use regulation proceedings, either
instituted or planned to be instituted, which would adversely affect the use or
operation of the Company's and its subsidiaries' properties and assets for their
respective intended uses and purposes, or the value of such properties, and
neither the Company nor any subsidiary has received notice of any special
assessment proceedings which would affect such properties and assets.
SECTION 2.11 Leasehold Interests. Each lease or agreement to which the
-------------------
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement of the Company, duly authorized and entered
into by the Company, without any default of the Company thereunder and, to the
best of the Company's knowledge, without any default thereunder of any other
party thereto. No event has occurred and is continuing which, with due notice
or lapse of time or both, would constitute a default or event of default by the
Company under any such lease or agreement or, to the best of the Company's
knowledge, by any other party thereto. The Company's possession of such
property has not been disturbed and, to the best of the Company's knowledge
after due inquiry, no claim has been asserted against the Company adverse to its
rights in such leasehold interests.
SECTION 2.12 Insurance. The Company holds valid policies covering all of
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the insurance required to be maintained by it under Section 5.05.
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SECTION 2.13 Taxes. The Company has filed all tax returns, Federal,
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state, county and local, required to be filed by it, and the Company has paid
all taxes shown to be due by such returns as well as all other taxes,
assessments and governmental charges which have become due or payable, including
without limitation all taxes which the Company is obligated to withhold from
amounts owing to employees, creditors and third parties. The Company has
established adequate reserves for all taxes accrued but not yet payable. All
tax elections, if any, have been made by the Company in accordance with
generally accepted practice. The Federal income tax returns of the Company have
never been audited by the Internal Revenue Service. No deficiency assessment
with respect to or proposed adjustment of the Company's Federal, state, county
or local taxes is pending or, to the best of the Company's knowledge,
threatened. There is no tax lien, whether imposed by any Federal, state, county
or local taxing authority, outstanding against the assets, properties or
business of the Company. Neither the Company nor any of its present or former
stockholders has ever filed an election pursuant to Section 1362 of the Internal
Revenue Code of 1986, as amended (the "Code"), that the Company be taxed as an S
corporation.
SECTION 2.14 Other Agreements. Except as set forth in the attached
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Schedule V, the Company is not a party to or otherwise bound by any written or
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oral:
(a) distributor, dealer, manufacturer's representative or sales agency
agreement which is not terminable on less than ninety (90) days' notice
without cost or other liability to the Company (except for agreements which,
in the aggregate, are not material to the business of the Company);
(b) sales agreement which entitles any customer to a rebate or right of
set-off, to return any product to the Company after acceptance thereof or to
delay the acceptance thereof, or which varies in any material respect from
the Company's standard form agreements;
(c) agreement with any labor union (and, to the knowledge of the Company,
no organizational effort is being made with respect to any of its employees);
(d) agreement with any supplier containing any provision permitting any
party other than the Company to renegotiate the price or other terms, or
containing any pay-back or other similar provision, upon the occurrence of a
failure by the Company to meet its obligations under the agreement when due
or the occurrence of any other event;
(e) agreement for the future purchase of fixed assets or for the future
purchase of materials, supplies or equipment in excess of its normal
operating requirements;
(f) agreement for the employment of any officer, employee or other person
(whether of a legally binding nature or in the nature of informal
understandings) on a full-time or consulting basis which is not terminable on
notice without cost or other liability to the Company, except normal
severance arrangements and accrued vacation pay;
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(g) bonus, pension, profit-sharing, retirement, hospitalization,
insurance, stock purchase, stock option or other plan, agreement or
understanding pursuant to which benefits are provided to any employee of the
Company (other than group insurance plans applicable to employees generally);
(h) agreement relating to the borrowing of money or to the mortgaging or
pledging of, or otherwise placing a lien or security interest on, any asset
of the Company;
(i) guaranty of any obligation for borrowed money or otherwise;
(j) voting trust or agreement, stockholders' agreement, pledge agreement,
buy-sell agreement or first refusal or preemptive rights agreement relating
to any securities of the Company;
(k) agreement, or group of related agreements with the same party or any
group of affiliated parties, under which the Company has advanced or agreed
to advance money or has agreed to lease any property as lessee or lessor;
(l) agreement or obligation (contingent or otherwise) to issue, sell or
otherwise distribute or to repurchase or otherwise acquire or retire any
share of its capital stock or any of its other equity securities;
(m) assignment, license or other agreement with respect to any form of
intangible property;
(n) agreement under which it has granted any person any registration
rights, other than the Registration Rights Agreement;
(o) agreement under which it has limited or restricted its right to
compete with any person in any respect;
(p) other agreement or group of related agreements with the same party
involving more than $10,000 or continuing over a period of more than six
months from the date or dates thereof (including renewals or extensions
optional with another party), which agreement or group of agreements is not
terminable by the Company without penalty upon notice of thirty (30) days or
less, but excluding any agreement or group of agreements with a customer of
the Company for the sale, lease or rental of the Company's products or
services if such agreement or group of agreements was entered into by the
Company in the ordinary course of business; or
(q) other agreement, instrument, commitment, plan or arrangement, a copy
of which would be required to be filed with the Securities and Exchange
Commission (the "Commission") as an exhibit to a registration statement on
Form S-1 if the Company were registering securities under the Securities Act
of 1933, as amended (the "Securities Act").
-10-
The Company, and to the best of the Company's knowledge after due inquiry, each
other party thereto has in all material respects performed all the obligations
required to be performed by it to date (or each non-performing party has
received a valid, enforceable and irrevocable written waiver with respect to its
non-performance), have received no notice of default and are not in default
(with due notice or lapse of time or both) under any agreement, instrument,
commitment, plan or arrangement to which the Company is a party or by which it
or its property may be bound. The Company has no present expectation or
intention of not fully performing all its obligations under each such agreement,
instrument, commitment, plan or arrangement, and the Company has no knowledge of
any breach or anticipated breach by the other party to any agreement,
instrument, commitment, plan or arrangement to which the Company is a party.
The Company is in full compliance with all of the terms and provisions of its
Charter and By-laws, as amended.
SECTION 2.15 Loans and Advances. The Company does not have any
------------------
outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except, in each case, for advances to employees of the
Company in respect of reimbursable business expenses anticipated to be incurred
by them in connection with their performance of services for the Company.
SECTION 2.16 Assumptions, Guaranties, Etc. of Indebtedness of Other
------------------------------------------------------
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
-------
directly or contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
SECTION 2.17 Significant Customers and Suppliers. No customer or supplier
-----------------------------------
which was significant to the Company during the period covered by the financial
statements referred to in Section 2.05 or which has been significant to the
Company thereafter, has terminated, materially reduced or threatened to
terminate or materially reduce its purchases from or provision of products or
services to the Company, as the case may be.
SECTION 2.18 Governmental Approvals. Subject to the accuracy of the
----------------------
representations and warranties of the Purchasers set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement, the Registration Rights Agreement or, the Stock Restriction
Agreement, the issuance, sale and delivery of the Shares or, upon conversion of
the Series B Convertible Preferred Stock, the issuance and delivery of the
Conversion Shares, other than (i) filings pursuant to state securities laws (all
of which filings have been made by the Company, other than those which are
required to be made after the Closing and which will be duly made on a timely
basis) in connection with the sale of the Shares and (ii) with respect to the
Registration Rights Agreement, the registration of the shares covered thereby
with the Commission and filings pursuant to state securities laws.
-11-
SECTION 2.19 Disclosure. Neither this Agreement, nor any Schedule or
----------
Exhibit to this Agreement, contains an untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein not misleading. None of the statements, documents, certificates or
other items prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
There is no fact within the special knowledge of the Company which the Company
has not disclosed to the Purchasers and their counsel in writing and of which
the Company is aware which materially and adversely affects or could materially
and adversely affect the business, prospects, financial condition, operations,
property or affairs of the Company or any of its subsidiaries. Any financial
projections and other estimates prepared by the Company in the course of the
transactions contemplated hereby were based on the Company's experience in the
industry and on assumptions of fact and opinion as to future events which the
Company, at the date of any such projection, believed to be reasonable, but
which the Company cannot and does not assure or guarantee the attainment of in
any manner. As of the date hereof no facts have come to the attention of the
Company which would, in its opinion, require the Company to revise or amplify
the assumptions underlying such projections and other estimates or the
conclusions derived therefrom.
SECTION 2.20 Offering of the Shares. Neither the Company nor any person
----------------------
authorized or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Shares or any security of the
Company similar to the Shares has offered the Shares or any such similar
security for sale to, or solicited any offer to buy the Shares or any such
similar security from, or otherwise approached or negotiated with respect
thereto with, any person or persons, and neither the Company nor any person
acting on its behalf has taken or will take any other action (including, without
limitation, any offer, issuance or sale of any security of the Company under
circumstances which might require the integration of such security with Shares
under the Securities Act or the rules and regulations of the Commission
thereunder), in either case so as to subject the offering, issuance or sale of
the Shares to the registration provisions of the Securities Act.
SECTION 2.21 Brokers. The Company has no contract, arrangement or
-------
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
SECTION 2.22 Officers. Set forth in Schedule II is a list of the names of
-------- -----------
the officers of the Company, together with the title or job classification of
each such person and the total compensation anticipated to be paid to each such
person by the Company and its subsidiaries in 1996. None of such persons has an
employment agreement or understanding, whether oral or written, with the Company
or any of its subsidiaries, which is not terminable on notice by the Company or
such subsidiary without cost or other liability to the Company or such
subsidiary.
SECTION 2.23 Transactions With Affiliates. No director, officer, employee
----------------------------
or stockholder of the Company, or member of the family of any such person, or
any corporation,
-12-
partnership, trust or other entity in which any such person, or any member of
the family of any such person, has a substantial interest or is an officer,
director, trustee, partner or holder of more than 5% of the outstanding capital
stock thereof, is a party to any transaction with the Company (other than in
connection with an Employee Plan set forth in Schedule II) including any
------------
contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such person or firm, other than employment-at-will
arrangements in the ordinary course of business.
SECTION 2.24 Employees. Each of the officers of the Company, each key
---------
employee and each other employee now employed by the Company who has access to
confidential information of the Company has executed an Employee Nondisclosure
and Developments Agreement substantially in the form of Exhibit D (collectively,
---------
the "Employee Nondisclosure and Developments Agreements"), and such agreements
are in full force and effect. No officer or key employee of the Company has
advised the Company (orally or in writing) that he intends to terminate
employment with the Company. The Company has complied in all material respects
with all applicable laws relating to the employment of labor, including
provisions relating to wages, hours, equal opportunity, collective bargaining
and the payment of Social Security and other taxes.
SECTION 2.25 U.S. Real Property Holding Corporation. The Company is not
--------------------------------------
now and has never been a "United States real property holding corporation", as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service, and the Company has
filed with the Internal Revenue Service all statements, if any, with its United
States income tax returns which are required under Section 1.897-2(h) of such
Regulations.
SECTION 2.26 Environmental Protection. The Company has not caused or
------------------------
allowed, or contracted with any party for, the generation, use, transportation,
treatment, storage or disposal of any Hazardous Substances (as defined below) in
connection with the operation of its business or otherwise. The Company has not
received any citation, directive, letter or other communication, written or
oral, or any notice of any proceeding, claim or lawsuit, from any person arising
out of the ownership or occupation of any real property that the Company owns,
leases or otherwise occupies or uses (the "Premises"), or the conduct of its
operations, and the Company is not aware of any basis therefor. The Company has
obtained and is maintaining in full force and effect all necessary permits,
licenses and approvals required by all Environmental Laws applicable to the
Premises and the business operations conducted thereon (including operations
conducted by tenants on the Premises), and is in compliance with all such
permits, licenses and approvals. The Company has not caused or allowed a
release, or a threat of release, of any Hazardous Substance unto, at or near the
Premises, and, to the best of the Company's knowledge, neither the Premises nor
any property at or near the Premises has ever been subject to a release, or a
threat of release, of any Hazardous Substance. For the purposes of this
Agreement, the term "Environmental Laws" shall mean any Federal, state or local
law or ordinance or regulation pertaining to the protection of human health or
the environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq., the
-- ----
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et
--
seq., and
----
-13-
the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901, et seq. For
-- ---
purposes of this Agreement, the term "Hazardous Substances" shall include oil
and petroleum products, asbestos, polychlorinated biphenyls, urea formaldehyde
and any other materials classified as hazardous or toxic under any Environmental
Laws.
SECTION 2.27 ERISA.
-----
(a) Schedule II lists each Employee Plan that covers any employee of the
-----------
Company, copies or descriptions of all of which have previously been made
available or furnished to the Purchasers. With respect to each Employee Plan,
the Company has, to the best of the Company's knowledge, filed all required
Forms 5500, if any. The Company has provided the Purchasers with complete age
and service data as of the most recent practicable date for employees of the
Company.
(b) Schedule II also includes a list of each Benefit Arrangement of the
-----------
Company, copies or descriptions of all of which have been made available or
furnished previously to the Purchasers.
(c) No Employee Plan is a Multiemployer Plan and no Employee Plan is
subject to Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). The Company and its Affiliates have not incurred any
material liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA.
(d) None of the Employee Plans or other arrangements listed on Schedule II
-----------
covers any non-United States employee or former employee of the Company, except
as required by applicable law.
(e) No "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code, has occurred with respect to any Employee Plan, or
such occurrence will not result in material liability to the Purchasers or the
Company.
(f) 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. The Company has furnished to the
Purchasers copies of the most recent Internal Revenue Service determination
letters with respect to each such plan. Each Employee Plan 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 plan.
(g) Each Employee Plan and each 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 which are applicable to such
Employee Plan and Benefit Arrangement.
-14-
(h) All contributions and payments accrued under each Employee Plan and
Benefit Arrangement, determined in accordance with prior funding and accrual
practices, as adjusted to include proportional accruals for the period ending on
the Closing Date, will be discharged and paid on or prior to the Closing Date
except to the extent reflected on the Balance Sheet. Except as disclosed in
writing to the Purchasers prior to the date hereof, there has been no amendment
to, written interpretation of or announcement (whether or not written) by the
Company or any of its ERISA Affiliates relating to, or change in employee
participation or coverage under, any Employee Plan or Benefit Arrangement that
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 prior to the date hereof.
(i) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code.
(j) No material tax under Section 4980B of the Code has been incurred in
respect of any Employee Plan that is a group health plan, as defined in Section
5000(b)(1) of the Code.
(k) With respect to the employees and former employees of the Company,
there are no employee post-retirement medical or health plans in effect, except
as required by Section 4980B of the Code, or applicable state law.
(l) No employee of the Company will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby.
(m) The Company does not have, nor is it reasonably expected to have, in
the reasonably foreseeable future any material liability under Title IV of
ERISA.
SECTION 2.28 Foreign Corrupt Practices Act. The Company has reviewed its
-----------------------------
practices and policies and to the best of its knowledge and belief it is not
engaged, nor has any officer, director, employee or agent of the Company
engaged, in any act or practice which would constitute a violation of the
Foreign Corrupt Practices Act of 1977, and any rules or regulations promulgated
thereunder.
SECTION 2.29 Federal Reserve Regulations. The Company is not engaged in
---------------------------
the business of extending credit for the purpose of purchasing or carrying
margin securities (within the meaning of Regulation G of the Board of Governors
of the Federal Reserve System), and no part of the proceeds of the Shares will
be used to purchase or carry any margin security or to extend credit to others
for the purpose of purchasing or carrying any margin security or in any other
manner which would involve a violation of any of the regulations of the Board of
Governors of the Federal Reserve System.
-15-
SECTION 2.30 Qualified Small Business Stock. The Shares constitute
------------------------------
"qualified small business stock" as defined in Section 1202(c) of the Code.
SECTION 2.31 Equal Employment Opportunity. The Company has reviewed its
----------------------------
employment practices and policies and, to the best of its knowledge, the Company
is in full compliance with (a) all applicable laws of the United States, of the
Commonwealth of Massachusetts and of each other applicable jurisdiction,
relating to equal employment opportunity (including, without limitation, Title
VII of the Civil Rights Act of 1964, as amended (42 U.S.C. (S)2000e-17), the Age
Discrimination in Employment Act of 1967, as amended (29 U.S.C. (S)(S)621-634),
the Equal Pay Act of 1963 (29 U.S.C. (S)206(d)), and any rules, regulations and
administrative orders and Executive Orders relating thereto; Mass. Gen. Laws. c.
151B, Mass. Gen. Laws. c. 149 (S)24A et seq. and (S)1-5A et seq. and any rules
or regulations relating thereto; and (b) the applicable terms, relating to equal
employment opportunity, of any contract, agreement or grant the Company has
with, from, or relating (by way of subcontract or otherwise) to any other
contract, agreement or grant of, any federal or state governmental unit
("Government Contract"), including, without limitation, any terms required
pursuant to Federal Executive Order No. 11246 and Massachusetts Executive Order
No. 74 (both as amended). To the best of the Company's knowledge, it has kept
all records required to be kept, and has filed all reports, affirmative action
plans and forms (including, without limitation and where applicable, Form EEO-1)
required to be filed pursuant to any such applicable law or the terms of any
such Government Contract. The Company has not been subject to any adverse final
determination or order, with respect to any charge of employment discrimination
made against it, by the United States Equal Employment Opportunity Commission,
the Massachusetts Commission Against Discrimination or any other governmental
unit (including, without limitation, any such governmental unit with which it
has a Government Contract), and the Company is not presently, to the best of its
knowledge, subject to any formal proceedings before, or investigation by, such
commissions or governmental units.
SECTION 2.32 Labor Relations. To the best of the knowledge of the
---------------
Company, no labor union or any representative thereof has made any attempt to
organize or represent employees of the Company. There are no unfair labor
practice charges, pending trials with respect to unfair labor practice charges,
pending material grievance proceedings or adverse decisions of a Trial Examiner
of the National Labor Relations Board against the Company. Furthermore, to the
best of the knowledge of the Company, relations with employees of the Company
are good and the Company does not believe that any labor difficulties will arise
in the foreseeable future.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally represents and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of Rule 501 under
the Securities Act and was not organized for the specific purpose of
acquiring the Shares;
-16-
(b) it has sufficient knowledge and experience in investing in companies
similar to the Company in terms of the Company's stage of development so as
to be able to evaluate the risks and merits of its investment in the Company
and it is able financially to bear the risks thereof;
(c) it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management;
(d) the Shares being purchased by it are being acquired for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof;
(e) it understands that (i) the Shares and the Conversion Shares have not
been registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated under the
Securities Act, (ii) the Shares and, upon conversion thereof, the Conversion
Shares must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration,
(iii) the Shares and the Conversion Shares will bear a legend to such effect
and (iv) the Company will make a notation on its transfer books to such
effect; and
(f) if it sells any Shares or Conversion Shares pursuant to Rule 144A
promulgated under the Securities Act, it will take all necessary steps in
order to perfect the exemption from registration provided thereby, including
(i) obtaining on behalf of the Company information to enable the Company to
establish a reasonable belief that the purchaser is a qualified institutional
buyer and (ii) advising such purchaser that Rule 144A is being relied upon
with respect to such resale.
(g) the Purchaser has no contract, arrangement or understanding with any
broker, finder or similar agent with respect to the transactions contemplated
by this Agreement.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS
The obligation of each Purchaser to purchase and pay for the Shares being
purchased by it on the Closing Date is, at its option, subject to the
satisfaction, on or before the Closing Date, of the following conditions:
(a) Opinion of Company's Counsel. The Purchasers shall have received from
----------------------------
Xxxx & Xxxx, counsel for the Company, an opinion dated the Closing Date, in
form attached as Exhibit E.
---------
-17-
(b) Representations and Warranties to be True and Correct. The
-----------------------------------------------------
representations and warranties contained in Article II shall be true,
complete and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such
date, and the President and Treasurer of the Company shall have certified to
such effect to the Purchasers in writing.
(c) Performance. The Company shall have performed and complied with all
-----------
agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date, and the President and Treasurer of the
Company shall have certified to the Purchasers in writing to such effect and
to the further effect that all of the conditions set forth in this Article IV
have been satisfied.
(d) All Proceedings to be Satisfactory. All corporate and other
----------------------------------
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory
in form and substance to the Purchasers and their counsel, and the Purchasers
and their counsel shall have received all such counterpart originals or
certified or other copies of such documents as they reasonably may request.
(e) Purchase by Other Purchasers. Each Purchaser shall have purchased and
----------------------------
paid for the Shares being purchased by it on the Closing Date, and the
aggregate purchase price paid by all of the Purchasers for the Shares being
purchased by them on the Closing Date shall be at least $6,000,000.
(f) Supporting Documents. The Purchasers and their counsel shall have
--------------------
received copies of the following documents:
(i) (A) the Charter, certified as of a recent date by the Secretary
of State of the Commonwealth of Massachusetts, (B) a certificate of said
Secretary dated as of a recent date as to the due incorporation and good
standing of the Company, the payment of all excise taxes by the Company
and listing all documents of the Company on file with said Secretary; and
(C) a certificate of the Secretary of State of the jurisdiction of
incorporation of each of the Company's subsidiaries dated as of a recent
date as to the due incorporation and good standing of such subsidiary;
(ii) a certificate of the Clerk or an Assistant Clerk of the Company
dated the Closing Date and certifying: (A) that attached thereto is a
true and complete copy of the By-laws of the Company as in effect on the
date of such certification; (B) that attached thereto is a true and
complete copy of all resolutions adopted by the Board of Directors or the
stockholders of the Company authorizing the execution, delivery and
performance of this Agreement, the Registration Rights Amendment and the
Stock Restriction Amendment, the issuance, sale and delivery of the
Shares and the reservation, issuance and delivery of the Conversion
Shares, and that all such resolutions are in full force and effect and
are all the resolutions adopted in connection with the transactions
contemplated by this Agreement, the Registration Rights Amendment and the
Stock Restriction Amendment; (C) that the Charter has
-18-
not been amended since the date of the last amendment referred to in the
certificate delivered pursuant to clause (i)(B) above; and (D) to the
incumbency and specimen signature of each officer of the Company
executing this Agreement, the Registration Rights Amendment or the Stock
Restriction Amendment, the stock certificates representing the Shares and
any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate referred to in this
clause (ii); and
(iii) such additional supporting documents and other information with
respect to the operations and affairs of the Company as the Purchasers or
their counsel reasonably may request.
(g) Registration Rights Amendment. The Company shall have executed and
-----------------------------
delivered the Registration Rights Amendment.
(h) Stock Restriction Amendment. The Stock Restriction Amendment shall
---------------------------
have been executed and delivered by the Company, Xxxxxxx X. Xxxx and Bull HN.
(i) Charter. The Charter shall read in its entirety as set forth in
-------
Exhibit C.
---------
(j) Employee Agreements. Copies of the Employee Nondisclosure and
-------------------
Developments Agreements executed since March 15, 1996 shall have been made
available to counsel for the Purchasers.
(k) Preemptive Rights. All stockholders of the Company having any
-----------------
preemptive, first refusal or other rights with respect to the issuance of the
Shares or the Conversion Shares shall have irrevocably waived the same in
writing.
(l) Fees of Purchasers' Counsel. The Company shall have paid in accordance
---------------------------
with Section 6.01 the fees and disbursements of Purchasers' counsel invoiced
at the Closing.
All such documents shall be satisfactory in form and substance to the Purchasers
and their counsel.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Purchasers that:
SECTION 5.01 Financial Statements, Reports, Etc. The Company shall
----------------------------------
furnish to each Purchaser:
-19-
(a) within one hundred and eighty (180) days after the end of the 1995
fiscal year, and within ninety (90) days after the end of each fiscal year
thereafter, of the Company a consolidated balance sheet of the Company and
its subsidiaries as of the end of such fiscal year and the related
consolidated statements of income, stockholders' equity and cash flows for
the fiscal year then ended, prepared in accordance with generally accepted
accounting principles and certified by a firm of independent public
accountants of recognized national standing selected by the Board of
Directors of the Company;
(b) within thirty (30) days after the end of each month in each fiscal
year (other than the last month in each fiscal year) a consolidated balance
sheet of the Company and its subsidiaries and the related consolidated
statements of income, stockholders' equity and cash flows, unaudited but
prepared in accordance with generally accepted accounting principles (except
that such unaudited financial statements do not contain all of the required
footnotes) and certified by the Chief Financial Officer of the Company, such
consolidated balance sheet to be as of the end of such month and such
consolidated statements of income, stockholders' equity and cash flows to be
for such month and for the period from the beginning of the fiscal year to
the end of such month, in each case with comparative statements for the prior
fiscal year, provided that the Company's obligations under this Section
5.01(b) shall terminate upon the completion of a firm commitment underwritten
public offering of the Company's securities;
(c) within thirty (30) days after the end of each month in each fiscal
year a report of projected cash receipts and disbursements expected over the
six months following the end of such month.
(d) at the time of delivery of each annual financial statement pursuant to
Section 5.01(a), a certificate executed by the Chief Financial Officer of the
Company stating that such officer has caused this Agreement and the Series B
Convertible Preferred Stock to be reviewed and has no knowledge of any
default by the Company in the performance or observance of any of the
provisions of this Agreement or the Series B Convertible Preferred Stock or,
if such officer has such knowledge, specifying such default and the nature
thereof;
(e) no later than sixty (60) days prior to the start of each fiscal year,
consolidated capital and operating expense budgets, cash flow projections and
income and loss projections for the Company and its subsidiaries in respect
of such fiscal year, all itemized in reasonable detail and prepared on a
monthly basis, and, promptly after preparation, any revisions to any of the
foregoing;
(f) promptly following receipt by the Company, each audit response letter,
accountant's management letter and other written report submitted to the
Company by its independent public accountants in connection with an annual or
interim audit of the books of the Company or any of its subsidiaries;
-20-
(g) promptly after the commencement thereof, notice of all actions, suits,
claims, proceedings, investigations and inquiries of the type described in
Section 2.07 that could materially adversely affect the Company or any of its
subsidiaries;
(h) promptly upon sending, making available or filing the same, all press
releases, reports and financial statements that the Company sends or makes
available to its stockholders or directors or files with the Commission; and
(i) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property or affairs of
the Company and its subsidiaries as such Purchaser reasonably may request.
SECTION 5.02 Right of Participation. Subject to the termination provisions
----------------------
of Section 5.27 below, the Company shall, prior to any proposed issuance by the
Company of any of its securities (other than debt securities with no equity
feature), offer to each Purchaser by written notice the right, for a period of
thirty (30) days, to purchase for cash at an amount equal to the price or other
consideration for which such securities are to be issued, a number of such
securities so that, after giving effect to such issuance (and the conversion,
exercise and exchange into or for (whether directly or indirectly) shares of
Class A Common Stock of all such securities that are so convertible, exercisable
or exchangeable), such Purchaser will continue to maintain its same
proportionate equity ownership in the Company as of the date of such notice
(treating each Purchaser, for the purpose of such computation, as the holder of
the number of shares of Class A Common Stock which would be issuable to such
Purchaser upon conversion, exercise and exchange of all securities (including
but not limited to the shares of Series B Convertible Preferred Stock) held by
such Purchaser on the date such offer is made, that are convertible, exercisable
or exchangeable into or for (whether directly or indirectly) shares of Class A
Common Stock and assuming the like conversion, exercise and exchange of all such
other securities held by other persons); provided, however, that the
participation rights of the Purchasers pursuant to this Section 5.02 shall not
apply to securities issued (A) upon conversion of any of the shares of Series A
Convertible Preferred Stock or Series B Convertible Preferred Stock, (B) as a
stock dividend or upon any subdivision of shares of Common Stock, provided that
the securities issued pursuant to such stock dividend or subdivision are limited
to additional shares of Common Stock, (C) pursuant to subscriptions, warrants,
options, convertible securities, or other rights which are listed in Schedule IV
-----------
as being outstanding on the date of this Agreement, (D) solely in consideration
for the acquisition (whether by merger or otherwise) by the Company or any of
its subsidiaries of all or substantially all of the stock or assets of any other
entity, (E) pursuant to a firm commitment public offering, (F) pursuant to the
exercise of options to purchase Common Stock granted or to be granted to
directors, officers, employees or consultants of the Company in connection with
their service to the Company, not to exceed in the aggregate 2,835,695 shares
(appropriately adjusted to reflect stock splits, stock dividends, combinations
of shares and the like with respect to the Class A Common Stock) less the number
of shares (as so adjusted) issued pursuant to subscriptions, warrants, options,
convertible securities, or other rights outstanding on the date of this
Agreement and listed in Schedule IV pursuant to clause (C) above (the shares
-----------
exempted by this clause (F) being hereinafter referred to as the "Reserved
Employee Shares"), and (G) upon the exercise of any right which was not itself
-21-
in violation of the terms of this Section 5.02. The Company's written notice to
the Purchasers shall describe the securities proposed to be issued by the
Company and specify the number, price and payment terms. Each Purchaser may
accept the Company's offer as to the full number of securities offered to it or
any lesser number, by written notice thereof given by it to the Company prior to
the expiration of the aforesaid thirty (30) day period, in which event the
Company shall promptly sell and such Purchaser shall buy, upon the terms
specified, the number of securities agreed to be purchased by such Purchaser.
The Company shall be free at any time prior to ninety (90) days after the date
of its notice of offer to the Purchasers, to offer and sell to any third party
or parties the remainder of such securities proposed to be issued by the Company
(including but not limited to the securities not agreed by the Purchasers to be
purchased by them), at a price and on payment terms no less favorable to the
Company than those specified in such notice of offer to the Purchasers.
However, if such third party sale or sales are not consummated within such
ninety (90) day period, the Company shall not sell such securities as shall not
have been purchased within such period without again complying with this Section
5.02.
SECTION 5.03 Reserve for Conversion Shares. The Company shall at all
-----------------------------
times reserve and keep available out of its authorized but unissued shares of
Class A Common Stock, for the purpose of effecting the conversion of all
outstanding shares of Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock (together, the "Investor Preferred") and otherwise
complying with the terms of this Agreement, such number of its duly authorized
shares of Class A Common Stock as shall be sufficient to effect the conversion
of the Investor Preferred from time to time outstanding or otherwise to comply
with the terms of this Agreement. If at any time the number of authorized but
unissued shares of Class A Common Stock shall not be sufficient to effect the
conversion of the Investor Preferred or otherwise to comply with the terms of
this Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Class A Common Stock
to such number of shares as shall be sufficient for such purposes. The Company
will obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Class A Common Stock upon conversion of the Investor Preferred.
SECTION 5.04 Corporate Existence. The Company shall maintain and, except
-------------------
as otherwise permitted by Section 5.16 cause each of its subsidiaries to
maintain, their respective corporate existence, rights and franchises in full
force and effect.
SECTION 5.05 Properties, Business, Insurance. The Company shall maintain
-------------------------------
and cause each of its subsidiaries to maintain as to their respective properties
and business, with financially sound and reputable insurers, insurance against
such casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall be deemed by
the Company to be sufficient. The Company shall also maintain in effect "key
person" life insurance policy, payable to the Company, on the life of Xxxxxxx X.
Xxxx (so long as he remains an employee of the Company), in the amount of $5
million. The Company shall not cause or permit any assignment or change in
beneficiary and shall not borrow against such policy. If requested by
Purchasers holding at least a majority of the outstanding Preferred
-22-
Stock, the Company will add one designee of such Purchasers as a notice party
for each such policy and shall request that the issuer of the policy provide
such designee with ten (10) days' notice before such policy is terminated (for
failure to pay premiums or otherwise) or assigned or before any change is made
in the beneficiary thereof.
SECTION 5.06 Inspection, Consultation and Advice. The Company shall
-----------------------------------
permit and cause each of its subsidiaries to permit each Purchaser and such
persons as it may designate, at such Purchaser's expense, to visit and inspect
any of the properties of the Company and its subsidiaries, examine their books
and take copies and extracts therefrom, discuss the affairs, finances and
accounts of the Company and its subsidiaries with their officers, employees and
public accountants (and the Company hereby authorizes said accountants to
discuss with such Purchaser and such designees such affairs, finances and
accounts), and consult with and advise the management of the Company and its
subsidiaries as to their affairs, finances and accounts, all at reasonable times
and upon reasonable notice; provided, however, that each Purchaser shall use its
-------- -------
best efforts to hold in confidence any proprietary or confidential information
and to use such information for monitoring the status of its investment in the
Company and for no other purpose.
SECTION 5.07 Restrictive Agreements Prohibited. Neither the Company nor
---------------------------------
any of its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of this Agreement, the Registration Rights
Agreement, the Stock Restriction Agreement, the Voting Agreement or the Charter.
SECTION 5.08 Transactions with Affiliates. Except for transactions
----------------------------
contemplated by this Agreement or as otherwise approved by the Board of
Directors, neither the Company nor any of its subsidiaries shall enter into any
transaction with any director, officer, employee or holder of more than 5% of
the outstanding capital stock of any class or series of capital stock of the
Company or any of its subsidiaries, member of the family of any such person, or
any corporation, partnership, trust or other entity in which any such person, or
member of the family of any such person, is a director, officer, trustee,
partner or holder of more than 5% of the outstanding capital stock thereof,
except for transactions on customary terms related to such person's employment.
SECTION 5.09 Expenses of Directors. The Company shall promptly reimburse
---------------------
in full, each director of the Company who is not an employee of the Company and
who was elected as a director solely or in part by the holders of Series A
Convertible Preferred Stock, for all of his reasonable out-of-pocket expenses
incurred in attending each meeting of the Board of Directors of the Company or
any Committee thereof.
SECTION 5.10 Use of Proceeds. The Company shall use the proceeds from the
---------------
sale of the Shares solely for (i) working capital, (ii) general corporate
purposes and (iii) acquisitions.
SECTION 5.11 Board of Directors Meetings. The Company shall use its best
---------------------------
efforts to ensure that meetings of its Board of Directors are held at least four
times each year and at least once each quarter.
-23-
SECTION 5.12 Compensation Committee. The Company shall establish and
----------------------
maintain a Compensation Committee of the Board of Directors, which shall consist
of no more than three (3) directors who are not employees of the Company and
will include the two (2) directors elected by the holders of the Series A
Convertible Preferred Stock and a non-employee director elected (if any) by a
vote of the holders of the Preferred Stock and the Common Stock, voting together
as a single class. The Compensation Committee shall establish policies
regarding all executive compensation matters, including but not limited to
matters regarding salaries and bonuses and shall establish policies, subject to
approval of the Board of Directors, regarding employee stock option plans,
employee stock purchase plans, employee restricted stock plans or other employee
stock plans and any grants of stock or options pursuant to such plans. The
parties hereto agree that the compensation currently being paid to the executive
officers of the Company is reasonable.
SECTION 5.13 Charter. The Company shall at all times cause its Charter to
-------
provide that, unless otherwise required by the laws of the Commonwealth of
Massachusetts, any two directors shall have the right to call a meeting of the
Board of Directors or stockholders. The Company shall at all times maintain
provisions in its By-laws indemnifying all directors against liability and
absolving all directors from liability to the Company and its stockholders to
the maximum extent permitted under the laws of the Commonwealth of
Massachusetts.
SECTION 5.14 Performance of Contracts. The Company shall not amend,
------------------------
modify, terminate, waive or otherwise alter, in whole or in part, any of the
Employee Nondisclosure and Developments Agreement or the Non-Competition
Agreement with Xxxxxxx X. Xxxx dated as of March 15, 1996 without the unanimous
written consent of those members of the Company's Board of Directors elected
solely by the holders of Series A Convertible Preferred Stock.
SECTION 5.15 Employee Nondisclosure and Developments Agreements. The
--------------------------------------------------
Company shall use its best efforts to obtain, and shall cause its subsidiaries
to use their best efforts to obtain, an Employee Nondisclosure and Developments
Agreement in substantially the form of Exhibit D from all future officers, key
---------
employees and other employees who will have access to confidential information
of the Company or any of its subsidiaries, upon their employment by the Company
or any of its subsidiaries.
SECTION 5.16 Activities of Subsidiaries. The Company shall not permit any
--------------------------
subsidiary to consolidate or merge into or with or sell or transfer all or
substantially all its assets, except that any subsidiary may (i) consolidate or
merge into or with or sell or transfer assets to any other subsidiary, or (ii)
merge into or sell or transfer assets to the Company. The Company shall not
sell or otherwise transfer any shares of capital stock of any subsidiary other
than a minority interest in any such subsidiary, except to the Company or
another subsidiary, or permit any subsidiary to issue, sell or otherwise
transfer any shares of its capital stock or the capital stock of any subsidiary,
except to the Company or another subsidiary. The Company shall not permit any
subsidiary to purchase or set aside any sums for the purchase of, or pay any
dividend or make any distribution on, any shares of its stock, except for
dividends or other distributions payable to the Company or another subsidiary.
-24-
SECTION 5.17 Compliance with Laws. The Company shall comply, and cause
--------------------
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could materially adversely affect its business
or condition, financial or otherwise.
SECTION 5.18 Keeping of Records and Books of Account. The Company shall
---------------------------------------
keep, and cause each subsidiary to keep, adequate records and books of account,
in which complete entries will be made in accordance with generally accepted
accounting principles consistently applied, reflecting all financial
transactions of the Company and such subsidiary, and in which, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
SECTION 5.19 Change in Nature of Business. The Company shall not make, or
----------------------------
permit any subsidiary to make, any material change in the nature of its business
as set forth in the Business Plan.
SECTION 5.20 U.S. Real Property Interest Statement. The Company shall
-------------------------------------
provide prompt written notice to each Purchaser following any "determination
date" (as defined in Treasury Regulation Section 1.897-2(c)(i)) on which the
Company becomes a United States real property holding corporation. In addition,
upon a written request by any Purchaser, the Company shall provide such
Purchaser with a written statement informing the Purchaser whether such
Purchaser's interest in the Company constitutes a U.S. real property interest.
The Company's determination shall comply with the requirements of Treasury
Regulation Section 1.897-2(h)(1) or any successor regulation, and the Company
shall provide timely notice to the Internal Revenue Service, in accordance with
and to the extent required by Treasury Regulation Section 1.897-2(h)(2) or any
successor regulation, that such statement has been made. The Company's written
statement to any Purchaser shall be delivered to such Purchaser within ten (10)
days of such Purchaser's written request therefor. The Company's obligation to
furnish a written statement pursuant to this Section 5.20 shall continue
notwithstanding the fact that a class of the Company's stock may be regularly
traded on an established securities market.
SECTION 5.21 International Investment Survey Act of 1976. The Company
-------------------------------------------
shall use its best efforts to file on a timely basis all reports required of it
under 22 U.S.C. Section 3104, or any similar statute, relating to a foreign
person's direct or indirect investment in the Company.
SECTION 5.22 Rule 144A Information. The Company shall, at all times
---------------------
during which it is neither subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange
Act, provide in writing, upon the written request of any Purchaser or a
prospective buyer of Shares or Conversion Shares from any Purchaser, all
information required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the Commission under the Securities Act ("Rule 144A
Information"). The Company also shall, upon the written request of any
Purchaser, cooperate with and assist such Purchaser or any member of the
National Association of Securities Dealers, Inc. PORTAL system in applying to
designate and thereafter maintain the eligibility of the Shares or Conversion
Shares, as the case may be, for trading through PORTAL. The Company's
obligations under this Section 5.22 shall
-25-
at all times be contingent upon the relevant Purchaser's obtaining from the
prospective buyer of Shares or Conversion Shares a written agreement to take all
reasonable precautions to safeguard the Rule 144A Information from disclosure to
anyone other than a person who will assist such buyer in evaluating the purchase
of any Shares or Conversion Shares.
SECTION 5.23 Advisory Committee. The Company shall establish and maintain
------------------
an Advisory Committee of the Board of Directors, the purpose of which will be to
promote frequent communication between the management and the Board of
Directors. The Advisory Committee shall consist of not more than four (4)
directors, two (2) of whom shall be directors elected solely by the holders of
Series A Convertible Preferred Stock. The Company shall use its best efforts to
ensure that meetings of the Advisory Committee of the Board of Directors are
held at least eight times each year and at least twice each quarter. All
members of the Board of Directors shall be notified of meetings of the Advisory
Committee and those members of the Board of Directors who are not members of the
Advisory Committee shall be allowed to attend such meetings as observers with
the right to participate therein, but not vote thereat. The Company shall
distribute copies of the minutes of such meetings to the full Board of
Directors.
SECTION 5.24 Qualified Small Business Stock. The Company shall submit to
------------------------------
its stockholders (including the Purchasers) and to the Internal Revenue Service
any reports that may be required under Section 1202(d)(1)(C) of the Code and any
related Treasury Regulations. In addition, within ten (10) days after any
Purchaser has delivered to the Company a written request therefor, the Company
shall deliver to such Purchaser a written statement informing the Purchaser
whether such Purchaser's interest in the Company constitutes "qualified small
business stock" as defined in Section 1202(c) of the Code. The Company's
obligation to furnish a written statement pursuant to this Section 5.24 shall
continue notwithstanding the fact that a class of the Company's stock may be
traded on an established securities market.
SECTION 5.25 Equal Employment Opportunity. Comply, and cause each
----------------------------
Subsidiary to comply, with all applicable laws of the United States, the
Commonwealth of Massachusetts, and of each other applicable jurisdiction
relating to equal employment opportunity, any rules, regulations, administrative
orders and Executive Orders relating thereto and the applicable terms, relating
to equal employment opportunity, of any Government Contract; and keep, and cause
each Subsidiary to file, all reports, affirmative action plans and forms
required to be filed, pursuant to any such applicable law or the terms of any
such Government Contract; provided, however, the Company or any Subsidiary shall
-------- -------
not be considered to have failed to comply with the foregoing during any period
that any matter relating to the Company's or such Subsidiary's employment
practices is being contested by the Company or such Subsidiary in appropriate
proceedings, or thereafter, if the Company or such Subsidiary complies with any
final determination issued in such proceedings.
SECTION 5.26 Status of the Shares as Qualified Investments. In the event
---------------------------------------------
that any of the statements, information and related data provided by or on
behalf of the Company or any Subsidiary and relied upon by MCRC in determining
that the Shares constitute "qualified investments" within the meaning of that
term in the Capital Resource Company Act shall be put in issue in any formal or
informal proceedings initiated or conducted by or on behalf of the
-00-
Xxxxxxxxxxxx xx Xxxxxxxxxxxxx, the Company shall, upon reasonable notice and at
its expense, provide, and, cause each Subsidiary to provide, such additional
information, witnesses and related data as may be reasonably necessary or
appropriate to support the representations and warranties set forth in Article
II.
SECTION 5.27 Termination of Covenants. The covenants set forth in Section
------------------------
5.02 above shall terminate upon the earlier to occur of (i) the closing of a
firm commitment underwritten public offering of the Company's Common Stock in
which the aggregate price paid for the shares by the public is at least $15
million, or (ii) at such time as there are fewer than 745,000 shares of
Preferred Stock outstanding. The covenants set forth in Sections 5.13, 5.20,
5.21, 5.22 and 5.24 shall terminate and be of no further force or effect as to
each of the Purchasers when such Purchaser no longer holds any shares of capital
stock of the Company. All of the other covenants set forth in this Article V
shall terminate and be of no further force or effect as to each of the
Purchasers when such Purchaser owns less than 50,000 Shares of Preferred Stock
(appropriately adjusted to reflect stock splits, stock dividends, combinations
of shares and the like with respect to the Preferred Stock).
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Expenses. Each party hereto will pay its own expenses in
--------
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, provided, however, that the Company shall pay
the fees and disbursements of the Purchasers' special counsel, Xxxxx, Xxxxxxx &
Xxxxxxxxx, in connection with such transactions and any subsequent amendment,
waiver, consent or enforcement thereof, up to a maximum of $15,000.
SECTION 6.02 Survival of Agreements. All covenants, agreements,
----------------------
representations and warranties made herein or in the Registration Rights
Agreement, the Stock Restriction Agreement, or any certificate or instrument
delivered to the Purchasers pursuant to or in connection with this Agreement,
the Registration Rights Agreement or the Stock Restriction Agreement, shall
survive the execution and delivery of this Agreement, the Registration Rights
Amendment and the Stock Restriction Amendment, the issuance, sale and delivery
of the Shares, and the issuance and delivery of the Conversion Shares, and all
statements contained in any certificate or other instrument delivered by the
Company hereunder or thereunder or in connection herewith or therewith shall be
deemed to constitute representations and warranties made by the Company.
SECTION 6.03 Brokerage. Each party hereto will indemnify and hold
---------
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
-27-
SECTION 6.04 Parties in Interest. All representations, covenants and
-------------------
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefiting the Purchasers shall inure to the benefit of any and all subsequent
holders from time to time of Preferred Stock.
SECTION 6.05 Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(a) if to the Company, at Peritus Software Services, Inc., 000 Xxxxxxx
Xxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000, Attention: President, with a copy to
Xxxxx X. Xxxx, Esq., Xxxx and Xxxx, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000; and
(b) if to any Purchaser, at the address of such Purchaser set forth in
Schedule I, with a copy to Xxxxxx X. Xxxxxx, Esq., Xxxxx, Xxxxxxx &
----------
Xxxxxxxxx, High Street Tower, 000 Xxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 6.06 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the Commonwealth of Massachusetts.
SECTION 6.07 Entire Agreement. This Agreement, including the Schedules
----------------
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto
are hereby incorporated herein by reference.
SECTION 6.08 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 6.09 Amendments. Except as set forth in the next sentence, this
----------
Agreement may not be amended or modified, and no provisions hereof may be waived
without the written consent of the Company and the holders of at least two-
thirds of the then outstanding shares of Class A Common Stock issued or issuable
upon conversion of the Series B Convertible Preferred Stock. Article V of this
Agreement (other than provisions specifically setting forth certain powers of
the directors elected solely by holders of Series A Convertible Preferred Stock
(the "Series A Provisions")) may not be amended or modified, and no provisions
thereof may be waived without the written consent of the Company and the holders
of at least two-thirds of the then outstanding shares of Class A Common Stock
issued or issuable upon conversion of the Preferred Stock. The Series A
Provisions may not be waived, amended or modified without the written consent of
the Company and the holders of at least two-thirds of the then outstanding
-28-
shares of Class A Common Stock issued or issuable upon conversion of the Series
A Convertible Preferred Stock.
SECTION 6.10 Waiver and Termination of Certain Provisions of Series A
--------------------------------------------------------
Convertible Preferred Stock Purchase Agreement. The Company and the holders of
----------------------------------------------
two-thirds of the outstanding shares of Common Stock issuable upon conversion of
the Series A Convertible Preferred stock hereby agree that effective immediately
prior to the consummation of the Closing, the covenants of the Company in
Article V of the Series A Purchase Agreement shall be terminated in their
entirety, shall be of no further force or effect, and shall be replaced in their
entirety by Article V of this Agreement. The Company, the holders of two-thirds
of the outstanding shares of Common Stock issuable upon conversion of the Series
A Convertible Preferred Stock, MCRC and Bull HN hereby agree that the provisions
of Section 5.02 of the Series A Purchase Agreement and any other rights of first
refusal or preemptive rights held by such parties are hereby waived with respect
to the transactions contemplated herein. The parties hereto agree that solely
for purposes of Article V of this Agreement, the term "Purchasers" shall be
deemed to mean the Purchasers and the holders of the Series A Convertible
Preferred Stock.
SECTION 6.11 Severability. If any provision of this Agreement shall be
------------
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 6.12 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
SECTION 6.13 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Benefit Arrangement" means each employment, severance or other
-------------------
similar contract, arrangement or policy (written or oral) and each plan or
arrangement (written or oral) providing for severance benefits, insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an Employee
Plan and (ii) covers any employee or former employee of the Company.
(b) "Employee Plan" means each "employee benefit plan," as such term is
-------------
defined in Section 3(3) of ERISA, that (A)(i) is subject to any provision of
ERISA and (ii) is maintained or contributed to by the Company, or (B)(i) is
subject to any provision of Title IV of ERISA and (ii) is maintained or
contributed to by any of the Company's ERISA Affiliates.
(c) "ERISA" means the Employment Retirement Income Security Act of 1974,
-----
as amended.
-29-
(d) "ERISA Affiliate" of any entity means any other entity that, together
---------------
with such entity, would be treated as a single employer under Section 414 of the
Code.
(e) "Multiemployer Plan" means each Employee Plan that is a multiemployer
------------------
plan, as defined in Section 3(37) of ERISA.
(f) "person" shall mean an individual, corporation, trust, partnership,
------
joint venture, unincorporated organization, government agency or any agency or
political subdivision thereof, or other entity.
(g) "subsidiary" shall mean, as to the Company, any corporation of which
----------
more than 50% of the outstanding stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (irrespective of whether
or not at the time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly owned by the Company, or by one or more of
its subsidiaries, or by the Company and one or more of its subsidiaries.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-31-
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Series B Convertible Preferred Stock Purchase Agreement as of the day and year
first above written.
COMPANY:
PERITUS SOFTWARE SERVICES, INC.
By:/s/ Xxxxxxx X. Xxxx
------------------------------------
Title:
---------------------------------
[Corporate Seal]
Attest:
/s/ Xxxxx Xxxxx
----------------------------
Clerk
PURCHASERS:
Y2K Partners, Ltd.
By: JPW Partners, Ltd.
By: Cross Matrix Corp.
By:/s/ Xxxx X. Xxxxxxx
----------------------------
Xxxx X. Xxxxxxx
Essex Special Growth Opportunities Fund L.P.
By: illegible
------------------------------------
Title:
---------------------------------
-32-
Essex High Technology Fund L.P.
By: illegible
------------------------------------
Title:
---------------------------------
One & Co.
By: illegible
------------------------------------
Title:
---------------------------------
/s/ Xx. Xxxxxxx X. Xxxxx
---------------------------------------
Xx. Xxxxxxx X. Xxxxx
/s/ Xx. Xxxxxx X. Xxxxx
---------------------------------------
Xx. Xxxxxx X. Xxxxx
X.X. Xxxxx Trust Under Indenture F/B/O/
Xxxxxx X. Xxxxx
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Title: Trustee
---------------------------------
The Xxxx Xxxxx Fund
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------
Title: Trustee
---------------------------------
The GBC North American Growth Fund Inc.
By: illegible
------------------------------------
Title:
---------------------------------
-33-
The Xxxxxx Organization III L.P.
By: Xxxxxx Partners L.P., its general partner
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------------
Title:
-----------------------------
Saturn & Co.
By: illegible
------------------------------------
Title:
---------------------------------
/s/ Xxxx X. Xxxxxxxxx
---------------------------------------
Xxxx X. Xxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxxx X. Xxxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxxx
Doctor Xxxxxxx & Nessa Profit Sharing Plan
u/a Trust dtd 10-1-85 FBO Doctor Xxxxxx X.
Xxxxxxx
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Title: Trustee
---------------------------------
/s/ Xxxxx XxXxxxx
---------------------------------------
Xxxxx XxXxxxx
/s/ Xxxxxx X. Close, Jr.
---------------------------------------
Xxxxxx X. Close, Jr.
/s/ Xxxx Xxxxxx
---------------------------------------
Xxxx Xxxxxx
-34-
Xxxxxxxx Family Partnership
By: /s/ Xxxx Xxxxxxxx
------------------------------------
Title:
----------------------------------
/s/ Xxxxxx Xxxxxxxx
----------------------------------------
Xxx. Xxxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
----------------------------------------
Xx. Xxxxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxx
----------------------------------------
Xxx. Xxxxxxx Xxxxxxxx
/s/ Xxxxxx Xxxx
----------------------------------------
Xxxxxx Xxxx
/s/ Xxxxxxxx X. Xxxx
----------------------------------------
Xxxxxxxx X. Xxxx
First Xxxxxxxxx Charitable Remainder Unitrust
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Xxxxx X. Xxxxx, Trustee
/s/ Xxxxx X. Xxxxx
--------------------------------------
Xxxxx X. Xxxxx
-35-
For purposes of Section 6.10 only:
MATRIX PARTNERS IV, L.P.
By: /s/ W. Xxxxxxx Xxxxxxxxx
-------------------------------------
Name: W. Xxxxxxx Xxxxxxxxx
Title: General Partner of Matrix IV
Management Co., L.P., the General
Partner of Matrix Partners IV,L.P.
MATRIX IV ENTREPRENEURS FUND, L.P.
By: /s/ W. Xxxxxxx Xxxxxxxxx
-------------------------------------
Name: W. Xxxxxxx Xxxxxxxxx
Title: General Partner of Matrix IV
Management Co., L.P., the General
Partner of Matrix IV Entrepreneurs Fund,
L.P.
GREYLOCK EQUITY LIMITED PARTNERSHIP
By: Greylock Equity GP Limited Partnership
By: /s/ Xxxxx XxXxxxx
-----------------------------------
General Partner
MASSACHUSETTS CAPITAL RESOURCE COMPANY
By: /s/ Xxx Xxxxxx III
-----------------------------------
Title:__________________________________
-36-
/s/ Xx. Xxxxx Xxxxxx
----------------------------------------
Xx. Xxxxx Xxxxxx
/s/ Xx. Xxxxxx Xxxxx
----------------------------------------
Xx. Xxxxxx Xxxxx
/s/ Xx. Xxxxxxx Xxxxx
----------------------------------------
Xx. Xxxxxxx Xxxxx
/s/ Mr. Xxxxx Xxxxxxx
----------------------------------------
Mr. Xxxxx Xxxxxxx
/s/ Ms. Xxxx Xxxxxxx
----------------------------------------
Ms. Xxxx Xxxxxxx
/s/ Xx. Xxxxxx Xxxx
----------------------------------------
Xx. Xxxxxx Xxxx
/s/ Xx. Xxxxxxx Xxxxx
----------------------------------------
Xx. Xxxxxxx Xxxxx
/s/ Xx. Xxxxx Xxxxx
----------------------------------------
Xx. Xxxxx Xxxxx
SCHEDULE I
----------
Purchasers
----------
Aggregate Number of
Series B Convertible
Name and Preferred Stock Shares
Address of Purchaser to be Purchased Purchase Price
-------------------- -------------- --------------
Y2K Partners, Ltd. 606,061 2,000,001.30
c/o EFO Holdings, Inc.
0000 Xxxx Xxxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
Essex Special Growth 234,848 $ 774,998.40
Opportunities Fund L.P.
000 Xxxx Xx.
00xx Xxxxx
Xxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxxxx
Essex High Technology Fund 75,758 $ 250,001.40
L.P.
000 Xxxx Xx.
00xx Xxxxx
Xxxxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxxxx
One & Co. 187,897 $ 620,060.10
x/x Xxxxx & Xxxxxx
00 Xxxxxx Xx.
Xxxxxx, XX 00000
Attn: Xxxx X. Spring
Xx. Xxxxxxx X. Xxxxx 10,600 $ 34,980.00
c/o Xxxxxx Xxxxxx
Fiduciary Trust Company
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Aggregate Number of
Series B Convertible
Name and Preferred Stock Shares
Address of Purchaser to be Purchased Purchase Price
-------------------- -------------- --------------
Xx. Xxxxxx X. Xxxxx 10,600 $ 34,980.00
c/o Xxxxxx Xxxxxx
Fiduciary Trust Company
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
X.X. Xxxxx Trust Under 30,300 $ 99,990.00
Indenture F/B/O Xxxxxx X. Xxxxx
c/o Xxxxxx Xxxxxx
Fiduciary Trust Company
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
The Xxxx Xxxxx Fund 30,300 $ 99,990.00
c/o Xxxxxxx X. Xxxxx
00 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
The GBC North American 151,515 $ 499,999.50
Growth Fund Inc.
c/o Pembroke Management Ltd.
0000 Xxxxxxxxxx Xx. X.
Xxxxx 000
Xxxxxxxx, Xxxxxx X0X 0X0
The Xxxxxx Organization III L.P. 151,515 $ 499,999.50
c/o Palmer Partners
000 Xxxxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
Saturn & Co. 151,515 $ 499,999.50
c/o Xxxxxxx Xxxxxx
Investors Bank & Trust
Company
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Aggregate Number of
Series B Convertible
Name and Preferred Stock Shares
Address of Purchaser to be Purchased Purchase Price
-------------------- -------------- --------------
Xxxx X. Xxxxxxxxx 15,152 $ 50,001.60
c/o Xxxxx Xxxxxxxxx
000 Xxxxxxx Xxxxx Xx.
Xxxxxxx, XX 00000
Xxxxx X. Xxxxxxxxx 15,151 $ 49,998.30
c/o Xxxxx Xxxxxxxxx
000 Xxxxxxx Xxxxx Xx.
Xxxxxxx, XX 00000
Xxxxx X. Xxxxxxxx 15,152 $ 50,001.60
0 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Doctor Xxxxxxx & Nessa Profit 15,152 $ 50,001.60
Sharing Plan
u/a Trust dtd 10-1-85 FBO Doctor
Xxxxxx X. Xxxxxxx
c/o Xxxxxx Xxxxxxx, M.D.
0 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Xxxxx XxXxxxx 15,152 $ 50,001.60
0 Xxxxxxxxx Xxxxx
Xxxxx Xxxxxx, XX 00000-0000
Xxxxxx X. Close, Jr 7,576 $ 25,000.80
00 Xxxxxxxxxx Xx.
Xxxxxx, XX 00000-0000
Xxxx Xxxxxxx 8,000 $ 26,400.00
The World Times
000 Xxxxx Xxxxx Xxxxxx
Xxxxxx, XX 00000
Aggregate Number of
Series B Convertible
Name and Preferred Stock Shares
Address of Purchaser to be Purchased Purchase Price
-------------------- -------------- --------------
Xxxxxxxx Family Partnership 10,000 $ 33,000.00
c/o Xx. Xxxx Xxxxxxxx
0000 Xxxxx Xxxxxx Xxxxx
Xxxx 000
Xxxxxxxx, XX 00000
Xxx. Xxxxxx Xxxxxxxx 10,000 $ 33,000.00
0000 Xxxxx Xxxxxx Xxxxx
Xxxx 000
Xxxxxxxx, XX 00000
Mr. and Xxx. Xxxxxxx Xxxxxxxx 6,000 $ 19,800.00
0 Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
Xxxxxxxx X. Xxxx 10,000 $ 33,000.00
00 Xxxxxxxx Xxxxx
Xxxxx, XX 00000
Art Xxxx 10,000 $ 33,000.00
00 Xxxxxxxx Xxxxx
Xxxxx, XX 00000
First Xxxxxxxxx Charitable 30,303 $ 99,999.90
Remainder Trust
Xxxxx X. Xxxxx, Trustee
00000 Xxxxxxxxxx
Xxxxxxx Xxxxxxx, XX 00000
Xxxxx X. Xxxxx 9,635 $ 31,795.50
00000 Xxxxxxxxxx
Xxxxxxx Xxxxxxx, XX 00000
------------- -------------
Total 1,818,182 $6,000,000.40
