Exhibit 10
PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT ("Agreement") is made and entered
into as of the 10th day of July, 1997, by and between DISTINCTION SOFTWARE,
INC., a Georgia corporation (the "Company"), and DATASTREAM SYSTEMS, INC., a
Delaware corporation (the "Investor").
WHEREAS, the Investor desires to make an investment in the Company in
accordance with the terms and conditions set forth in this Agreement;
WHEREAS, the Company desires that the Investor make such an
investment;
WHEREAS, in connection with this Agreement, the Investor and the Company
desire to enter into certain other agreements including, but not limited to, the
Software Agreement (as hereinafter defined) whereby the Investor shall acquire
from the Company and the Company, shall license to the Investor, the Software
and related rights described therein;
WHEREAS, the parties desire to enter into this Agreement and the related
agreements in order that they may share confidential and proprietary information
and trade secrets in an effort to provide enhanced software and related services
to the purchasers of computerized maintenance management systems (the 'CMMS
Customers');
WHEREAS, the Company and the Investor therefore agree, as a condition to
the making of the investment contemplated hereby, to the restrictions on
proprietary information set forth in Section 9 of the Software Agreement and to
the restrictions on co-marketing arrangements set forth in Section 7.12 hereof,
which restrictions are intended by the parties as reasonable restraints on their
future conduct entered into in order to give economic effect to the relationship
created hereby, including without limitation to the terms of the exclusive
license for Custom Software in the CMMS Market set forth in Section 3.1 of the
Software Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, representations, warranties and covenants hereinafter set forth and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. AUTHORIZATION AND SALE OF THE SHARES; OTHER AGREEMENTS
1.1. Authorization of the Shares. The Company shall, as of the
Series A Closing (as hereinafter defined), adopt and file with the Secretary of
State of the State of Georgia an Amendment to the Articles of Incorporation so
as to authorize Two Hundred Twenty-Two Thousand (222,000) shares of Series A
Convertible Preferred Stock, $.01 par value per share (the "Series A Stock")
having the rights, restrictions, privileges, redemption rights and preferences
as set forth herein and in the Articles of Incorporation of the Company, as
amended.
1.2. Sale of the Shares. Subject to the terms and conditions hereof, the
Investor agrees to purchase, and the Company agrees to sell and issue to the
Investor a total of Two Hundred Twenty-One Thousand Nine Hundred Ten
(221,910 ) shares of the Company's Series A Stock (the "Series A Shares") for
the aggregate purchase price of Two Million Dollars ($2,000,000) (the "Purchase
Price"), which shall be equivalent to approximately $9.01266 per Series A Share,
all of which shall be paid and issued as set forth in Section 2.2 hereof. The
Purchase Price and number of Series A Shares issued and sold pursuant hereto
shall be subject to adjustment under the circumstances and subject to the terms
and conditions of Article 9 hereof.
1.3 Limited Purchase. Notwithstanding anything to the contrary herein or
in the Software Agreement, in the event that the Software (as defined in the
Software Agreement) is not finally accepted by the Investor pursuant to the
terms of the Software Agreement, the provisions of Section 9 hereof shall be
applicable.
2. CLOSING; DELIVERIES
2.1. Series A Closing. The initial closing of the purchase and sale of the
Series A Shares hereunder (the "Series A Closing") shall be held at the offices
of Hunton & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000,
on July 10, 1997 (the date of the Series A Closing is hereinafter referred to as
the "Series A Closing Date").
2.2. Series A Share Certificates; Purchase Price; Payment Procedures. At
the Series A Closing, (a) the Company shall deliver to the Investor one stock
certificate (the "First Certificate"), registered in the Investor's name,
representing Seventy-Three Thousand Nine Hundred Seventy (73,970) Series A
Shares to be purchased by the Investor from the Company, which shall represent
the first of three stock certificates to be issued to the Investor hereunder,
and (b) the Investor will deliver to the Company Six Hundred Sixty-Six Thousand
Six Hundred Sixty-Seven and 00/100 Dollars ($666,667), which shall represent the
first of three installment payments (the "First Payment") of the Purchase Price.
No later than the first business day after the initial delivery of the Software
(as defined in the Software Agreement) to the Investor as provided in the
Software Agreement and Exhibit B thereto, (a) the Company shall deliver to the
Investor the second stock certificate (the "Second Certificate"), registered in
the Investor's name, which shall represent Seventy-Three Thousand Nine Hundred
Seventy (73,970) Series A Shares, and (b) in exchange for the Second
Certificate, the Investor shall pay to the Company the second installment of the
Purchase Price, in the amount of Six Hundred Sixty-Six Thousand Six Hundred
Sixty-Six and 50/100 Dollars ($666,666.50) (the "Second Payment"). Subject to
the provisions of Section 9 hereof, no later than the first business day after
Final Acceptance of the Software by the Investor as provided in the Software
Agreement and Exhibit B thereto, (a) the Company shall deliver to the Investor
the third stock certificate (the "Third Certificate"), registered in the
Investor's name, which shall represent Seventy-Three Thousand Nine Hundred
Seventy (73,970) Series A Shares, and (b) in exchange for the Third Certificate,
the Investor shall pay to the Company the third installment of the Purchase
Price, in the amount of Six Hundred Sixty-Six Thousand Six Hundred Sixty-Six and
50/100 Dollars ($666,666.50) (the "Third Payment"). Payments of the First
Payment, Second Payment and Third Payment, if applicable, shall be by wire
transfer of immediately available funds to an account specified by the Company
or certified check (in the Investor's sole discretion). The Second Certificate
and Third Certificate shall be delivered to Hunton & Xxxxxxxx, counsel to the
Investor, as escrow agent, at the Series A Closing, and held in escrow for
future delivery pursuant to the terms of this Agreement and the Escrow Agreement
entered into contemporaneously herewith.
2.3. Series A Closing Documents. At the Series A Closing, the
parties hereto shall execute and deliver the following documents:
(a) A First Amendment to Shareholders' Agreement (the "Amendment")
by and among the Company and its several shareholders, dated May
1, 1997 (the "Shareholders' Agreement"), in the form attached
hereto as Exhibit A;
(b) A Registration Rights Agreement, in the form attached
hereto as Exhibit B (the "Registration Rights Agreement");
(c) Articles of Amendment to the Articles of Incorporation of the
Company establishing the Series A Stock, in the form attached
hereto as Exhibit C (the "Articles of Amendment"), together with
a Certificate from the Georgia Secretary of State evidencing the
filing thereof;
(d) The Escrow Agreement, in the form attached as Exhibit C
hereto;
(e) Actions by Unanimous Written Consent of the Shareholders
of the Company electing Xxxxx X. Xxxxxxxxx to the Board
of Directors of the Company;
(f) An opinion of Xxxxxx, Xxxxxxx & Xxxxxx, LLP, counsel to
the Company;
(g) A Certificate dated as of the Series A Closing Date by an
officer of the Company certifying that conditions contemplated
by Section 5 have been satisfied;
(h) A Certificate dated as of the Series A Closing Date by the
Secretary or other officer of the Company certifying as to the
incumbency of the Company's officers and the authenticity of the
amended Articles of Incorporation and Bylaws;
(i) A Certificate as to the existence and good standing of the
Company from the Georgia Secretary of State, dated within five
days of the Series A Closing;
(j) The Software Development and License Agreement between the
Company and the Investor in the form attached as Exhibit D
hereto (the "Software Agreement"); and
(k) The Promissory Note described and defined in Section 5.6
hereof.
The documents identified in Subsection 2.3(a) through (j) above are hereinafter
referred to as the "Series A Closing Documents."
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Investor as follows:
3.1. Organization and Standing; Articles and Bylaws The Company is a
corporation duly incorporated and existing under, and by virtue of, the laws of
the State of Georgia and is in good standing under such laws. The Company is
qualified to do business as a foreign corporation in every other jurisdiction in
which such qualification is required, except for such failures that would not
have a material adverse effect on the business or financial condition of the
Company (a "Material Adverse Effect"). The Company has the requisite corporate
power to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. True and
accurate copies of the Company's Articles of Incorporation, as amended, and
Bylaws, as presently in effect, have been delivered to the Investor.
3.2. Corporate Power. The Company has all requisite legal and corporate
power (i) to enter into, execute and deliver this Agreement and the Series A
Closing Documents; (ii) when the Articles of Amendment have been adopted and
filed, to sell the Series A Shares as set forth herein; and (iii) to carry out
and perform all its obligations under the terms of this Agreement and the Series
A Closing Documents.
3.3. Subsidiaries. Except as set forth on Schedule 3.3, the
Company does not own or control, directly or indirectly, any interest or
investment in any corporation, association or other business entity.
3.4. Capitalization. The authorized capital stock of the Company consists,
upon filing of the Articles of Amendment, (a) of 1,500,000 shares, $.01 par
value, of common stock ("Common Stock"), 888,000 shares of which are issued and
outstanding and 55,400 of which are reserved for issuance pursuant to employee
plans and agreements (the "Employee Plans"); and (b) 222,000 shares of the
Series A Stock, 221,910 shares of which will be issued pursuant to this
Agreement on the Series A Closing Date, 73,970 shares of which will be delivered
to the Investor on the Series A Closing Date and 147,940 shares of which will be
delivered at later dates, all as set forth in Section 2.2 hereof. On each date
the Series A Shares are issued and delivered to Investor as set forth herein,
all such issued and outstanding shares will have been duly authorized and
validly issued, will be fully paid and nonassessable. As of the Series A Closing
Date, all such shares will be owned beneficially and of record by the
shareholders in the amounts set forth in Schedule 3.4 attached hereto and have
been offered, issued, sold and delivered by the Company in compliance with
applicable federal and state securities laws. The Common Stock issuable upon
conversion of the Series A Stock, as set forth in the Articles of Amendment, has
been reserved for issuance and when issued, will be duly authorized and validly
issued, fully paid and non-assessable. Except for the 55,400 shares reserved for
issuance pursuant to the Employee Plans, there are no outstanding rights,
options, warrants, conversion rights or agreements for the purchase or
acquisition from the Company of any shares of its capital stock (or any other
securities convertible into such capital stock), other than the purchase of the
Series A Shares by the Investor as provided in this Agreement.
3.5. Authorization; Enforceability. All corporate action on the part of
the Company and its directors, officers and shareholders necessary for the
authorization, execution, delivery and performance of all obligations of the
Company under this Agreement and the Series A Closing Documents has been taken
as of or prior to the Series A Closing. Each of this Agreement, the Registration
Rights Agreement, the Shareholders' Agreement and the Software Agreement
constitutes the valid and binding obligation of the Company and is enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency or other laws affecting the enforcement of
creditors' rights generally.
3.6. Validity of Stock. The Series A Shares, when issued in compliance
with the provisions of this Agreement, will be validly issued, fully paid and
nonassessable, will be free of any liens or encumbrances, and shall not be
subject to any preemptive rights, rights of first refusal, redemption rights or
other similar rights, other than as provided in (i) the Articles of Amendment
setting forth the terms of the Series A Shares, and (ii) the Shareholders'
Agreement, as amended by the Amendment. All shares of Common Stock of the
Company outstanding as of the date hereof and all warrants, options or other
rights to purchase or acquire such stock outstanding, as of the date hereof,
were validly issued pursuant to applicable exemptions from the registration
requirements of federal and state securities law.
3.7. Disclosure. No representation or warranty by the Company in this
Agreement or in any written statement, business plan, certificate or other
materials furnished or to be furnished to the Investor pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements made therein
not misleading in light of the circumstances under which they were made. Set
forth in Schedule 3.7 hereto is a true and correct copy of the Company's most
recent Business Plan, dated as of March 17, 1997 (the "Business Plan").
3.8. Compliance with Other Instruments; None Burdensome, etc. The Company
is not in violation of any term of (i) its Articles of Incorporation, as
amended, or Bylaws, or other governance document, (ii) any provision of any
material mortgage, indenture, contract, agreement or instrument ("Material
Agreements") to which the Company is a party or by which it is bound, or (iii)
any judgment, decree or order binding upon the Company or to the Company's
knowledge any statute, rule or regulation applicable to the Company. The
execution, delivery and performance of and compliance with this Agreement and
the Series A Closing Documents, and the issuance of the Series A Shares, will
not result in any such violation or be in conflict with or constitute a default
under any such Material Agreement, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company. There is no such term which materially and adversely affects the
business, condition, affairs, operations, financial conditions, properties or
assets of the Company.
3.9. Litigation. There are no lawsuits, actions, proceedings or
investigations ("Actions") pending against the Company, its properties or its
shareholders (nor to the Company's knowledge is there any basis therefor or
threat thereof) which, either individually or in the aggregate, could reasonably
be expected to result in any material adverse change in the business or
financial condition of the Company or any of its properties or assets or in any
material impairment of the right or ability of the Company to carry on its
business as now conducted or as proposed to be conducted, or in any material
liability on the part of the Company, and none of which challenges the validity
of this Agreement or any action taken or to be taken in connection herewith. All
pending and threatened Actions have been disclosed to Investor and as set forth
on Schedule 3.9 hereof.
3.10.Governmental Consents. No consent, approval or authorization of, or
registration, declaration, designation, qualification or filing with, any
governmental authority on the part of the Company is required in connection with
the valid execution and delivery of this Agreement or any of the Series A
Closing Documents, the offer, sale or issuance of the Series A Shares or the
consummation of any other transaction contemplated hereby except the filing of
the Articles of Amendment and for filings under state securities laws where such
filings are required and the filing of a Form D with the Securities and Exchange
Commission, which filings have been made or will be timely made, as appropriate.
3.11.Title to Property and Assets. The Company has good and marketable
title to its properties and assets, and has good title to all its leasehold
interests, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge of any type, except as pertaining to taxes not yet due and payable.
3.12.Contracts. True, correct and complete copies of all the Company's
organizational and governance documents and all Material Agreements have been
provided to the Investor. Except as set forth on Schedule 3.12, the Company is
not a party to any contract, agreement or instrument, the consummation or
performance of which would have a material adverse effect on the operations of
the Company.
3.13.Intellectual Property. Except as set forth on Schedule 3.13, the
Company has sufficient title and ownership of all patents, trademarks, service
marks, trade names, copyrights, trade secrets, information, proprietary rights
and processes (collectively, the "Intellectual Property") necessary for its
business as now conducted, and to the Company's knowledge as proposed to be
conducted, without any conflict with or infringement of the rights of others.
Except as set forth on Schedule 3.13, there are no outstanding licenses or
agreements of any kind to which the Company is a party or by which it is bound
relating to any Intellectual Property. The Company has not received any
communications alleging (and is not aware of any facts that could reasonably be
expected to lead to an allegation) that the Company has violated or, by
conducting its business as proposed, would violate any of the Intellectual
Property or other proprietary rights of any other person or entity. The Company
does not presently utilize or intend to utilize any inventions of its employees
(or people it currently intends to hire) made prior to their employment by the
Company. To the Company's knowledge, no employee working at the Company (an
"employee") is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the right of
any such employee to be working at the Company because of the nature of the
business conducted or to be conducted by the Company or for any other reason,
and to the Company's knowledge, the continued employment by the Company of
persons currently working at the Company will not result in any such violations.
3.14.Registration Rights. The Company has not granted or agreed to grant
any registration rights to any person or entity with respect to any of its
securities except those described in the Registration Rights Agreement.
3.15. No Conflict of Interest. Except as set forth on Schedule 3.15, the
Company is not indebted, directly or indirectly, to any of its officers or
directors or to their respective spouses or children, in any amount whatsoever
other than in connection with expenses or advances of expenses incurred in the
ordinary course of business or relocation expenses of employees. None of the
Company's officers or directors, or any members of their immediate families are,
directly or indirectly, indebted to the Company (other than in connection with
purchases of the Company's stock) or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation which
competes with the Company except that officers, directors and/or shareholders of
the Company may own stock in (but not exceeding two percent of the outstanding
capital stock of) any publicly traded company that may compete with the Company.
None of the Company's officers or directors or any member of their immediate
families has, directly or indirectly, any financial or other interest in any
material contract with the Company. The Company is not a guarantor or indemnitor
of any indebtedness of any other person, firm or corporation.
3.16. Voting Rights. To the Company's knowledge, except as
contemplated in the Shareholders' Agreement, no shareholders of the
Company have entered into any agreements with respect to the voting of
capital shares of the Company.
3.17. Private Placement. Assuming the truth and accuracy of the Investor's
representations set forth herein, the offer, sale and issuance of the Series A
Shares as contemplated herein is exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and neither the
Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
3.18. Employee Benefits. Except as set forth on Schedule 3.18, the Company
has no pension, retirement, bonus, stock option, profit sharing, health,
disability, life insurance, hospitalization or similar plans or arrangements
maintained for the benefit of, or relating to, present or former officers,
directors or employees. The Company does not have any employee benefit plan as
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
3.19. Tax Returns and Payments. The Company has timely filed all tax
returns and reports as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments when due. The provision for taxes in the Financial Statements (as
hereinafter defined) is adequate in all material respects for taxes due or
accrued as of the dates thereof.
3.20. Labor Agreements and Actions. Except as set forth on Schedule 3.20,
the Company is not bound by or subject to (and none of its assets or properties
is bound by or subject to) any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the knowledge of the Company, has sought to represent any of the
employees, representatives or agents of the Company. There is no strike or other
labor dispute involving the Company pending, or to the knowledge of the Company
threatened, which could have a material adverse effect on the assets,
properties, financial condition, operating results, or business of the Company
(as such business is presently conducted and as it is proposed to be conducted),
nor is the Company aware of any labor organization activity involving its
employees. The employment of each officer and employee of the Company is
terminable at the will of the Company. The Company has complied in all material
respects with all applicable state and federal equal employment opportunity laws
and with other laws related to employment.
3.21. Proprietary Information and Inventions Agreements. Each employee,
consultant and officer of the Company has executed an agreement with the Company
regarding confidentiality and proprietary information substantially in the form
or forms delivered to the counsel for the Investor. The Company, after
reasonable investigation, is not aware that any of its employees or consultants
is in violation thereof, and the Company will use all reasonable efforts to
prevent any such violation. All consultants to or vendors of the Company with
access to confidential information of the Company are parties to a written
agreement substantially in the form or forms provided to counsel for the
Investor under which, among other things, each such consultant or vendor is
obligated to maintain the confidentiality of confidential information of the
Company. The Company, after reasonable investigation, is not aware that any of
its consultants or vendors are in violation thereof, and the Company will use
its reasonable best efforts to prevent any such violation.
3.22. Financial Statements. The Company's (a) unaudited balance sheet at
December 31, 1996 and the income statements for the year then ended, and (b)
unaudited balance sheet at May 31, 1997 and the income statements the five
months then ended (collectively, the "Financial Statements"), have been prepared
in accordance with the books and records of the Company and in accordance with
generally accepted accounting principles consistently applied, and present
fairly the financial position of the Company on the dates therein indicated.
Schedule 3.22 sets forth certain contingent liabilities not reflected as
liabilities of the Company on the balance sheets included in the Financial
Statements.
3.23. Material Changes. Since December 31, 1996, there has not been any
(a) event or condition of any character that has had or may reasonably be
expected to have a materially adverse effect on the Company or its business,
including without limitation changes to the financial condition of the Company,
(b) declaration or payment of any dividend or other distribution in respect of
the capital stock of the Company, (c) waiver by the Company of a material right
or material debt owed to it, (d) amendment to a material contract or
arrangement (written or verbal) by which the Company or any of its assets is
bound or subject, (e) material change in any compensation arrangement with any
employee, or (f) change in the assets, liabilities, financial condition or
operating results of the Company as reflected in the Financial Statements,
except as disclosed in the Financial Statements and except changes in the
ordinary course of business which have not been, individually or in the
aggregate, materially adverse.
4. INVESTOR'S REPRESENTATIONS. The Investor hereby represents and
warrants as follows:
4.1. Authorization; Enforceability. The Investor has full power and
authority to enter into this Agreement and all the Series A Closing Documents,
and each of this Agreement, the Registration Rights Agreement, the Shareholders'
Agreement and the Software Agreement constitutes its valid and legally binding
obligation, enforceable against the Investor in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the enforcement of
creditors' rights generally.
4.2. Purchase Entirely for Own Account. The Series A Shares to be received
by the Investor will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and the Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same, provided, that
transfers by the Investor of all or less than all of the Series A Shares in
compliance with applicable federal and state securities laws shall not be deemed
a violation of this Section 4.2.
4.3. Disclosure of Information. The Investor has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Series A Shares. The foregoing, however, does
not limit or modify the representations and warranties of the Company in Section
3 of this Agreement or the right of the Investor to rely thereon.
4.4. Investment Experience. The Investor is an experienced investor in
securities and acknowledges that it can bear the economic risk of its investment
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment in the Series A
Shares. The Investor also represents it is an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Act.
4.5. Restricted Securities. The Investor understands that the Series A
Shares are characterized as "restricted securities" under the federal securities
laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may not be resold without registration under the Act and
applicable state securities laws or pursuant to exemptions therefrom. In this
connection, the Investor represents that it is familiar with Rule 144 under the
Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Act. The Investor understands that the Company is under no
obligation to register any of the securities sold hereunder except as provided
in the Registration Rights Agreement as described therein. The Investor
understands that no public market now exists for the Series A Shares and that it
is uncertain whether a public market will ever exist for the Series A Shares.
4.6. Legends. It is understood that the certificates evidencing
the Series A Shares (and the Common Stock issuable upon conversion or
exercise thereof) shall bear the following legend as well as any other
legend as may be required by applicable federal and state securities laws:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF
ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED, RESOLD, PLEDGED OR OTHERWISE DISPOSED OF
EXCEPT IN ACCORDANCE WITH AND SUBJECT TO ALL THE TERMS AND CONDITIONS OF A
CERTAIN SHAREHOLDERS' AGREEMENT DATED AS OF JULY 10, 1997 AND EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS."
5. CONDITIONS TO CLOSING OF THE INVESTOR. The obligation of the
Investor to purchase and pay for the Series A Shares at the Series A
Closing is subject to the fulfillment to its satisfaction on or prior to
the Series A Closing Date of the following conditions:
5.1. Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct
when made, and shall be true and correct on the Series A Closing Date with the
same force and effect as if they had been made on and as of said date.
5.2. Performance. All covenants, agreements and conditions contained in
this Agreement and in the Series A Closing Documents to be performed or complied
with by the Company on or prior to the Series A Closing Date shall have been
performed or complied with in all respects.
5.3. Articles of Amendment. The Articles of Amendment shall have
been properly filed with the Secretary of State of Georgia effective as
of or prior to the Series A Closing Date.
5.4. Board of Directors and Bylaws. The Bylaws of the Company
shall provide for up to seven directors. As of the Series A Closing
Date, the directors shall consist of the following persons: Xxxxxx X.
XxXxxxxxx, Xxxx X. XxXxxxxxx, Xxxx X. Xxxxxxxxx and Xxxxx X.
Xxxxxxxxx.
5.5. Closing Documents. The Series A Closing Documents shall have
been executed and delivered by the respective parties identified thereon.
5.6. Refinancing of Debt. The Company shall have (i) executed the final
Commitment Letter, dated June 30, 1997 and as provided to the Investor (the
"Commitment Letter"), from Silicon Valley Bank (the "Bank") pertaining to the
$250,000 term loan from the Bank to the Company (the "Refinancing") and agreed
to use the proceeds of the Refinancing as contemplated in the Commitment Letter
and the underlying loan documentation (the "Loan Documents"), and (ii) issued a
promissory note (the "Promissory Note") to Xxxxxx X. XxXxxxxxx to evidence
$157,499 of debt owed by the Company to him (the "Remaining McKaskill Debt"),
which Promissory Note shall have the following terms: (a) principal amount of
$157,499, (b) an interest rate equal to 80% of the interest rate to be paid to
the Bank in the Refinancing, (c) a final maturity date of three years from the
date of the Promissory Note, (d) the provisions set forth in Section 5.7 hereof,
and (e) monthly installment repayments of principal and interest
("Installments"), provided, that such Installments shall be paid only if
and while: (x) the Company is not in default under any provision of any of the
Loan Documents, (y) the Company is meeting its required payment obligations for
trade payables and other ongoing obligations on a timely basis, and (z) the
Company has sufficient unrestricted cash from operations for each such
Installment payment, exercised in good faith, all as determined from time to
time by the Board of Directors in its sole discretion. No interest accrued with
respect to the Remaining McKaskill Debt prior to the Series A Closing Date,
other than as included in the initial principal amount of the Promissory Note,
shall be included on the books and records of the Company at any time.
5.7 Interest Payment Recapture. The principal amount of the Promissory
Note shall be reduced by an amount equal to 20% of the interest paid by the
Company to the Bank pursuant to the Refinancing, as set forth in the Loan
Documents, as and when repaid by the Company to the Bank in accordance with the
Loan Documents.
6. CONDITION TO CLOSING OF COMPANY. The Company's obligation to sell
the Series A Shares at the Series A Closing is subject to the fulfillment
on or prior to the Series A Closing Date of the following conditions:
6.1. Representations. The representations and warranties made by the
Investor in Section 4 hereof shall be true and correct when made and shall be
true and correct on the Series A Closing Date with the same force and effect as
if they had been made on and as of said date.
6.2. Performance. All covenants, agreements and conditions contained in
this Agreement and in the Series A Closing Documents to be performed or complied
with by the Investor on or prior to the Series A Closing Date shall have been
performed or complied with in all respects.
6.3. Closing Documents. The Series A Closing Documents shall have
been executed and delivered by the respective parties identified thereon.
7. COVENANTS OF THE COMPANY. The Company hereby covenants and agrees
with the Investor that it shall:
7.1. Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in good standing in the
jurisdiction of its incorporation, and qualify and remain qualified as a foreign
corporation in each jurisdiction in which such qualification is necessary or
desirable in view of its business and operations or the ownership or lease of
its properties, except where the failure to so qualify would have a Material
Adverse Effect.
7.2. Compliance with Laws; Taxes. Comply in all material respects, with
all applicable laws, rules, regulations and orders, such compliance to include,
without limitation, paying all taxes, assessments and governmental charges
imposed upon it or upon its property before the same become delinquent except to
the extent contested in good faith.
7.3. Maintenance of Insurance. Maintain insurance with responsible and
reputable insurance companies in such amounts and covering such risks as is
customarily carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Company operates.
7.4. Keeping of Records and Books of Account. 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 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.
7.5. Maintenance of Properties. Maintain and preserve all of its
material properties and assets, which are necessary or useful in the
proper conduct of its business in good repair, working order and
condition, ordinary wear and tear excepted.
7.6. Securities; Changes. At all times when any shares of the Series A
Shares are outstanding, secure the written consent of the Investor prior to any
action which (i) alters or changes the rights, preferences or privileges of the
Series A Stock, (ii) increases or decreases the authorized number of shares of
Series A Stock, (iii) issues or authorizes the issuance of any shares of Common
Stock or Series A Stock (or other securities convertible into or options to
acquire such stock) at a purchase price that is less than fair market value,
other than the Option Stock pursuant to Section 7.7, (iv) creates (by
reclassification or otherwise) any new class or series of shares having rights,
preferences or privileges senior to or on a parity with the Series A Stock, or
(v) amends or waives any provision of the Articles of Incorporation, as amended
by the Articles of Amendment, relative to the Series A Stock.
7.7 Option Stock. Notwithstanding the provisions of Section 7.6 hereof,
the Company may issue up to an aggregate of the reserved 55,400 shares of Common
Stock to its employees and non-employee directors by stock awards or stock
option grants pursuant to one or more stock option or stock incentive plans
("Stock Option Plans") established by the Company and approved by the Board of
Directors (the "Option Stock"). Stock options and stock awards issuable pursuant
to such Stock Option Plans shall provide for the following vesting periods:
(a) 25% vest twelve months after the grant date; and
(b) 1/24th of the remaining 75% vest at the end of each
consecutive calendar month thereafter.
All shares of Common Stock issued pursuant to such Stock Option Plans
shall bear a legend stating that the Company retains (i) the right to redeem all
of such shares at the higher of the exercise price or fair market value at any
time after an employee terminates his/her employment with the Company for any
reason (or is terminated by the Company for any reason), and (ii) the right of
first refusal to purchase any shares proposed to be sold, which rights are
governed by the Shareholders' Agreement. Such redemption and first refusal
rights shall expire on the date a registration statement for an initial public
offering of the Company's Common Stock becomes effective. All persons who
receive Option Stock shall execute a counterpart of the Shareholders' Agreement
as a condition to such person's receipt of the shares of Option Stock.. Each
grant to "affiliates" (as defined below) of the Company of options to acquire
Option Stock (as contemplated herein and as authorized after the date of this
Agreement) shall be made only with an exercise/purchase price which is equal to
or greater than fair market value for such stock at the time of each such grant.
For purposes of this Agreement, "affiliate" shall be defined as set forth in
Rule 405 under the Securities Act.
7.8. Confidentiality Agreements. Require all of its employees and
consultants to execute and deliver a confidentiality and trade secrets
agreement in a form that has been approved by the Board of Directors
prior to dissemination and execution.
7.9. Key Man Life Insurance. Within 30 days after the Series A
Closing Date, the Company shall purchase a key man life insurance policy
on the life of Xxxxxx X. XxXxxxxxx in the amount of $250,000 with the
Company as the beneficiary.
7.10.Related Party Transactions. The Company shall not enter into,
directly or indirectly, any agreement, contract, arrangement or understanding of
any type or for any purpose, whether written or verbal (a "Related Party
Transaction"), with (a) Xxxxxx X. XxXxxxxxx, (b) Xxxx X. XxXxxxxxx, (c) Xxxx X.
Xxxxxxxxx, and/or (d) any other director or executive officer of the Company,
and/or any of their respective affiliates or immediate family members (as
defined in Instruction 2 to Item 404 of Regulation S-K under the Securities Act)
(individually, a "Related Party," and collectively, the "Related Parties")
without the prior written consent of the Investor, which shall not be
unreasonably withheld. Notwithstanding the foregoing, the Company shall not be
precluded from entering into an employment agreement or having an employment
relationship with any Related Party on terms not more favorable than those
disclosed on Schedule 7.10 hereto or as otherwise approved in good faith by the
Compensation Committee of the Company's Board of Directors.
7.11 Use of Proceeds. The Company shall use the Purchase Price paid by
Investor for the Series A Shares hereunder (the "Proceeds") for capital
investments and the expansion of its sales channels (including without
limitation hiring additional sales and marketing personnel) and otherwise in a
manner consistent with the Business Plan. Without limiting the generality of the
foregoing, the Company agrees specifically not to use the Proceeds to: (a) pay
for or finance any Related Party Transactions; (b) use the Proceeds to reimburse
officers, directors, employees or independent contractors of the Company for
past due salaries, expenses, loans or other similar items payable by the
Company; or (c) pay fees for professional services in excess of $45,000
(including amounts paid directly to its counsel and accountants and amounts paid
to the Investor's counsel) in connection with the transactions contemplated by
this Agreement.
7.12 Restrictions. For a period of four years from the date hereof, the
Company shall not enter into any written or oral agreement, arrangement or
understanding with any person or entity engaged in the sale, license or
distribution of computerized maintenance management systems (including software
or services related thereto) with respect to the development, licensing, sale,
resale, marketing, co-marketing or distribution of any product that is the same
as or substantially similar to the Software, in terms of functionality, for use
by CMMS Customers. The foregoing limitation shall not be deemed to prohibit the
Company from developing, licensing, selling, reselling, marketing or
distributing its software products directly to end users.
8. INDEMNIFICATION
8.1. Obligation to Indemnify. Subject to the limitations set forth in this
section 8, each party hereto shall indemnify and hold the other party harmless
from and against any and all losses, claims, damages, expenses or liabilities
(including, without limitation, the costs of any investigation or suit and
counsel fees related thereto) asserted against, imposed upon or incurred by such
other party resulting from a breach by the indemnifying party of any of its
representations, warranties or covenants made in this Agreement or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished pursuant to this Agreement.
8.2. Survival of Representations, Warranties and Covenants. All
representations and warranties made by the Company and the Investor in this
Agreement shall survive until the earlier to occur of (a) the closing
date of a Qualifying Public Offering (as defined in the Articles of Amendment),
(b) the closing date of a Control Transaction (as defined in the Articles of
Amendment), and three (3) years from the date of the Third Payment (as set forth
in Section 2.2 hereof); and the covenants made by the Company and the Investor
in this Agreement shall survive until the earlier to occur of (a) and (b) above.
8.3. Gross-Up of Indemnification Payments by the Company. In the event
that the indemnifying party under Section 8 of this Agreement is the Company,
any amounts due to the Investor under the provisions of this Section 8 (the
"Unadjusted Loss") shall be grossed up so that the amount due to the Investor
after the gross-up required by this Section 8.3 shall equal the Unadjusted Loss
divided by .8001, provided, that if the Investor purchases the reduced amount of
Series A Shares pursuant to the terms of Section 9 hereof, such number shall be
.8478.
9. LIMITED PURCHASE OF STOCK. In the event that the Software (as defined in the
Software Agreement) is not Finally Accepted (as defined in the Software
Agreement) by the Investor pursuant to the terms of the Software Agreement (and
Exhibits thereto), this Section 9 shall be applicable.
9.1. (a) In the event the Software is not Finally Accepted and the
Investor elects to proceed under Section 9(a)(i) of the Software Agreement, then
this Agreement shall be automatically amended (without further action by either
party ) to reflect the following: the total number of shares of the Series A
Stock to be purchased by Investor hereunder shall be reduced to One Hundred
Fifty-Nine Thousand Four Hundred and Five (159,405), and the total Purchase
Price for such shares shall equal One Million Three Hundred Thirty-Three
Thousand Three Hundred Thirty-Three and 50/100 Dollars ($1,333,333.50).
(b) In such event, the following definitional changes shall be made:
(i) the definition of "Series A Shares" in Section 1.2 shall be amended to be
"One Hundred Fifty-Nine Thousand Four Hundred and Five (159,405);" and (ii) the
definition of "Purchase Price" in Section 1.2 shall be amended to "One Million
Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three and 50/100
Dollars ($1,333,333.50)," an effective Purchase Price of $8.36 per Series A
Share.
(c) Except for the amendments set forth in this Section 9.1 above and
appropriate amendments to Section 1, Section 2 and Section 3.4 hereof and other
provisions hereof as required to reflect the reduction in the amount of Series A
Shares purchased as described herein, all remaining provisions of this Agreement
shall remain in full force and effect, pursuant to their terms.
(d) In the event the number of shares of Series A Stock to be
purchased by the Investor hereunder shall be reduced as provided in this Section
9.1, each party agrees in good faith to execute such documents and take any
actions reasonably required to effectuate such agreement.
(e) In the event that the reduced number of Series A Shares is
purchased by the Investor pursuant to the terms of this Section 9.1, the parties
agree that the Investor (acting through the Escrow Agent) will tender promptly
the Third Certificate to the Company and the Company shall accept such tendered
Third Certificate and promptly issue to the Investor a new stock certificate for
11, 465 shares of Series A Stock.
9.2 In the event the Software is not Finally Accepted and the
Investor elects to exercise the option reflected in Section 9(a)(ii) of
the Software Agreement and make the Third Payment notwithstanding that
the Software has not been Finally Accepted, then, upon receipt of the
Third Payment, the Company (acting through the Escrow Agent) shall
release the Third Certificate to the Investor.
10. MISCELLANEOUS
10.1.Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Georgia.
10.2.Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
Investor. The Investor may assign its rights and obligations hereunder to (a) an
affiliate, without the consent of the Company, or (b) an entity which as a
result of such assignment would acquire the registration rights of the Investor
as set forth in the Registration Rights Agreement, with the consent of the
Company, which shall not be unreasonably withheld. The Company may not assign
its rights and obligations hereunder.
10.3.Entire Agreement; Amendment. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement among the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated orally, except pursuant to a written consent by the Company and the
Investor.
10.4.Notices, etc. All notices and other communications required or
permitted hereunder shall be given in writing and shall be deemed effectively
given upon personal delivery or upon deposit with the United States Postal
Service, by certified mail, return receipt requested, postage prepaid, or
otherwise delivered by hand or by messenger, addressed (a) if to the Investor at
00 Xxxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000, or to such other address
as the Investor shall have furnished to the Company in writing, with a copy to
J. Xxxxxxx Xxxxxxx, Esq. at Hunton & Xxxxxxxx, NationsBank Plaza, 000 Xxxxxxxxx
Xxxxxx, X.X., Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000-0000 or (b) if to the Company,
at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X000, Xxxxxxx, Xxxxxxx 00000, or to such
other address as the Company shall have furnished to the Investor in writing,
with a copy to Xxxxx Xxxxxxxxxxxxx, Esq. at Xxxxxx Xxxxxxx & Xxxxxx, LLP 0000
Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx 00000.
10.5.Expense of Transaction. Each party hereto shall bear its own expenses
in connection with the transaction described herein; provided, however, that the
Company shall pay up to $20,000 to Hunton & Xxxxxxxx, as counsel for the
Investor, in connection with this transaction.
10.6.Titles and Subtitles. The titles of the Sections, paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
10.7.Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
10.8.Timely Performance. Time is of the essence as to the
performance of the obligations required of the respective parties under
this Agreement.
00.0.Xxxxxxxx's Fees. If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
10.11. Severability. Except as set forth below, if one or more provisions
of this Agreement are held to be unenforceable under applicable law, the parties
agree to renegotiate such provision in good faith. In the event that the
parties cannot reach a mutually agreeable and enforceable replacement for such
provision, then (a) such provision shall be excluded from this Agreement, (b)
the balance of the Agreement shall be interpreted as if such provision were so
excluded and (c) the balance of the Agreement shall be enforceable in accordance
with its terms. In the event Section 7.12 or any provision thereof is held to be
unenforceable in its current form under applicable law, the parties hereby
instruct any court of competent jurisdiction construing or interpreting such
provision to modify such provision to the extent necessary to make the
objectionable provision legally enforceable, and such provision shall, after
such modification, be fully enforceable pursuant to the terms thereof.
10.12. Delays or Omission. No delay or omission to exercise any right,
power or remedy accruing to any holder of any of the Series A Stock upon any
breach or default of the Company under this Agreement shall impair any such
right, power or remedy of such holder nor shall it be construed to be a waiver
of any such breach or default, or an acquiescence therein, or of or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
therefore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any holder of any breach or default under
this Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
10.13Initial Balance Sheet. The Company and the Investor agree that they
shall cause KPMG Peat Marwick, at the Investor's expense, to prepare and deliver
to each party within 45 days of the date hereof an audited balance sheet,
statement of operations, and statement of cash flow of the Company, reflecting
the Company's assets and liabilities as of and for the six-month period ended
June 30, 1997. Such audited financial statements, upon being furnished to the
parties by KPMG Peat Marwick, shall be deemed to conclusively represent the
assets and liabilities and results of operations of the Company as of such date
and for such period. Without limiting the generality of the representations and
warranties of the Company set forth in Article 3 hereof or the indemnification
provisions of Article 8 hereof, but subject to all of the provisions of such
Article 8, the Company agrees to indemnify and hold the Investor harmless from
and against any and all losses, claims, damages, expenses or liabilities
(including, without limitation, the costs of any investigation or suit and
counsel fees related thereto) asserted against, imposed upon or incurred by the
Investor attributable to a material liability of the Company existing as of June
30, 1997, or resulting from the Company's business or operations as conducted
through June 30, 1997, which liability is not reflected in such audited
financial statements, excluding (i) liabilities incurred in the ordinary course
of business after the date of such audited financial statements but before the
date hereof or (ii) liabilities disclosed in this Agreement or the schedules
hereto (including the financial statements referenced in Section 3.22 hereof).
[Signatures on following page]
IN WITNESS WHEREOF, the Company and the Investor have executed and
delivered this Preferred Stock Purchase Agreement as of the day and year first
above written.
DISTINCTION SOFTWARE, INC.
By:
Name: Xxxxxx X. XxXxxxxxx
Title: President
DATASTREAM SYSTEMS, INC.
By:
Name:Xxxxx X. Xxxxxxxxx
Title: Chairman and Chief Executive Officer
