COMMON STOCK AND WARRANT PURCHASE AGREEMENT
This Common Stock and Warrant Purchase Agreement (this "AGREEMENT") is
made and entered into to be effective as of September 29, 1999 ("EFFECTIVE
DATE"), by and between Novell, Inc., a Delaware corporation (the "INVESTOR"),
and Xxxxxxxx-Xxxx, Inc., a Delaware corporation (the "COMPANY").
RECITALS
WHEREAS, the Company desires to sell to the Investor, and the Investor
desires to purchase from the Company, shares of common stock, par value $0.001
per share, of the Company (the "COMMON STOCK") and a Warrant to purchase
additional shares of the Company's Common Stock on the terms and conditions set
forth in this Agreement; and
WHEREAS, the Company and the Investor have entered into a Global
Alliance Agreement dated as of September 29, 1999 relating to certain business
transactions between the Company and the Investor (the "ALLIANCE AGREEMENT").
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises 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. AGREEMENT TO PURCHASE AND SELL STOCK.
(a) AUTHORIZATION. The Company's Board of Directors will,
prior to the Closing (as defined below), authorize the issuance, pursuant to the
terms and conditions of this Agreement, of 3,294,893 shares of Common Stock.
(b) AGREEMENT TO PURCHASE AND SELL SECURITIES. At the Closing,
the Company shall issue and sell to the Investor, and the Investor shall
purchase from the Company, 3,294,893 shares of Common Stock (the "PURCHASED
SHARES"). The aggregate purchase price to be paid by the Investor for all
Purchased Shares shall be One Hundred Million Dollars ($100,000,000) (the
"PURCHASE PRICE").
(c) AGREEMENT TO PURCHASE AND SELL WARRANT. At the Closing,
the Company shall issue to the Investor a warrant (the "WARRANT") to purchase
all or any portion of 400,000 shares of Common Stock (the "Warrant Shares") in
the form of attached hereto as EXHIBIT A.
(d) USE OF PROCEEDS. The Company intends to apply the net
proceeds received from the sale of the Purchased Shares to fund the
development, promotion and implementation of an NDS Solutions Practice (as
defined in the Alliance Agreement), which shall include, but not be limited
to, the hiring and/or redeployment, training and certification of the
Company's consulting personnel in Novell Directory Services-Registered
Trademark- (NDS-Registered Trademark-) and NDS-related technology, and the
development and implementation of methodologies, marketing strategies, public
relations
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programs and facilities, all as more specifically set forth in the Alliance
Agreement and the Services Agreement and other agreements anticipated by the
Alliance Agreement (collectively, the "BUSINESS AGREEMENTS").
(e) HSR COMPLIANCE.
(i) Promptly after the execution hereof, the Company
and Investor shall each complete and file their respective premerger
notification report forms under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Acts of 1976, as amended (the "HSR ACT"). After the filing thereof, the Company
and the Investor shall use all reasonable efforts to comply with any applicable
requirements of the HSR Act (herein the "HSR REQUIREMENTS"); provided, however,
that neither the Company nor the Investor shall be under any obligations to
comply with any request or requirement imposed by the Federal Trade Commission
(the "FTC"), the Department of Justice (the "DOJ") or any other governmental
authority in connection with the compliance with any HSR Requirement, if the
Company or the Investor, determines in its sound, good faith, reasonable
business judgment that compliance with the requirement would have an adverse
impact on its business, contracts, financial position, or prospects. Without
limiting the generality of the foregoing, neither the Company nor the Investor
shall be obligated to comply with any request by, or any requirement of the FTC,
the DOJ or any other governmental authority to; (i) disclose information the
Company or the Investor, as the case may be, in its sound, good faith,
reasonable business judgment believes must be kept confidential to avoid injury
to its respective business; (ii) dispose of any assets or operations; or (iii)
comply with any restriction on the manner in which it conducts its operations.
(ii) In the event an exercise or holding of the
Warrant would require a filing by the Investor under the HSR Act, the Investor
and its respective affiliates (including any "ultimate parent entity," as
defined in the HSR Act), and the Company and its respective affiliates
(including any "ultimate parent entity," as defined in the HSR Act), shall
promptly prepare and make their respective filings, and thereafter shall make
all required or requested submissions under the HSR Act or any analogous
applicable law, if required. In taking such actions or making any such filings,
the parties hereto shall furnish information required in connection therewith
and seek timely to obtain any applicable actions, consents, approvals or waivers
of governmental authorities; PROVIDED, HOWEVER, that the parties hereto shall
cooperate with each other in connection with the making of all such filings to
the extent permitted by applicable law. Without limiting the generality of the
foregoing, to the extent permitted by applicable law and so long as the
following will not involve the disclosure of confidential or proprietary
information of one party hereto to another, each party shall cooperate with the
other by (a) providing copies of all documents to be filed to the non-filing
party and its advisors prior to filing and, if requested, accepting reasonable
additions, deletions or changes suggested in connection therewith and (b)
providing to each other party copies of all correspondence from and to any
governmental authority in connection with any such filing.
2. CLOSING. The purchase and sale of the Purchased Shares shall take
place at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional
Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx, at 10:00 a.m. California
time, within three (3) business days after the
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conditions set forth in Sections 5 and 6 have been satisfied, or at such
other time and place as the Company and the Investor mutually agree upon
(which time and place are referred to in this Agreement as the "CLOSING"). At
the Closing, the Company will deliver to the Investor the Warrant and
certificate representing the Purchased Shares against delivery to the Company
by the Investor of the Purchase Price in cash, paid by wire transfer of funds
to the Company. Closing documents may be delivered by facsimile with original
signature pages sent by overnight courier. The date of the Closing is
referred to herein as the Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor that, except as set forth in the
Disclosure Letter, delivered by the Company to Investor concurrently herewith,
or the SEC Documents (as defined below):
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and authority required
to (a) carry on its business as presently conducted and (b) execute and enter
into this Agreement, the Warrant, the Investor Rights Agreement, the Alliance
Agreement, the Services Agreement, the Confidentiality Agreement, the other
Business Agreements, and the other agreements, instruments and documents
contemplated hereby and thereby (the "TRANSACTION DOCUMENTS"), and to consummate
the transactions contemplated hereby and thereby. The Company is qualified to do
business and is in good standing in each jurisdiction in which the failure to so
qualify, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means (i) a material adverse effect on the execution, delivery, validity or
consummation of the Transaction Documents, (ii) a material adverse effect on the
performance of the Transaction Documents, or (ii) a material adverse effect on,
or a material adverse change in, or a group of such effects on or changes in,
the business, operations, financial condition, results of operations, assets or
liabilities of the applicable party and its subsidiaries, taken as a whole;
provided, however, that changes in the information technology consulting
services industry generally changes in economic conditions generally, or changes
in the securities market generally shall not in and of themselves be deemed a
Material Adverse Effect.
(b) CAPITALIZATION. The authorized stock and other securities
of the Company, without giving effect to the transactions contemplated by this
Agreement, consists only of the following.
(i) COMMON STOCK. The authorized Common Stock
consists only of 75,000,000 shares of Common Stock, of which 55,814,439 shares
were issued and outstanding as of September 21, 1999. All such shares of Common
Stock have been duly authorized, and all such issued and outstanding shares of
Common Stock have been validly issued, are fully paid and nonassessable. No such
outstanding shares of Common Stock were issued in violation of any pre-emptive
rights.
(ii) RESERVED SHARES. As of the date hereof, the
Company has also reserved: 24,000,000 shares of Common Stock for issuance upon
exercise of options granted to
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employees, consultants and directors of the Company under the Company's 1995
Incentive Stock Plan. As of the date hereof, 24,000,000 shares of Common Stock
reserved for issuance under the above plans, approximately 17,800,000 shares
remained subject to outstanding options or warrants and have a weighted average
exercise price of approximately $19.11, and approximately 6,200,000 shares were
reserved for future grant. In addition, the Company has reserved approximately
1,100,000 shares of Common Stock for issuance to employees of the Company under
the Company's Employee Stock Purchase Plan. All shares of Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no other equity
securities, options, warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which it is bound, obligating
the Company to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of the capital
stock of the Company or obligating the Company to grant, extend or enter into
any such equity security, option, warrant, call, right, commitment or agreement.
(c) SUBSIDIARIES. The Company does not have any subsidiaries,
nor does the Company own any capital stock, assets comprising the business of,
obligations of, or any other interest (including any equity, limited liability
company, joint venture or partnership interest) in, or any outstanding loan or
advance to or from, any person or entity, except as described in Section 3(c) of
the Disclosure Letter. Each such identified subsidiary is duly organized,
validly existing and in good standing under the laws of the state indicated for
such subsidiary in the Disclosure Letter and has all corporate power and
authority required to carry on its business as presently conducted. Each such
identified subsidiary is qualified to do business and is in good standing in
each jurisdiction in which the failure to so qualify has had or is reasonably
likely to have, individually or collectively, a Material Adverse Effect.
(d) DUE AUTHORIZATION. All corporate actions on the part of
the Company necessary for the authorization, execution, delivery of, and the
performance of all obligations of the Company under, the Transaction Documents,
and the authorization, issuance, reservation for issuance, and delivery of all
of the Purchased Shares being sold under this Agreement and all of the Warrant
Shares issuable upon exercise of the Warrant have been taken. The Transaction
Documents, when executed, will constitute, legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their terms,
except (a) as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or others laws of general application relating to or affecting
the enforcement of creditors' rights generally and (ii) the effect of rules of
law governing the availability of equitable remedies, and (b) as rights to
indemnity or contribution may be limited under federal or state securities laws
or by principles of public policy thereunder.
(e) VALID ISSUANCE OF STOCK.
(i) VALID ISSUANCE. The Purchased Shares and the
Warrant Shares have been duly and validly reserved for issuance and, upon
payment of the Purchase Price therefor by the Investor in accordance with this
Agreement or the Warrant, will be duly
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authorized, validly issued, fully paid and non-assessable and free of any lien,
claim, encumbrance or transfer restriction, except as expressly provided in the
Warrant and/or the Investor Rights Agreement. The Warrant Shares have been duly
and validly reserved for issuance and, upon issuance, sale and delivery in
accordance with the terms of the Warrant, for the consideration provided for
therein, will be duly and validly issued, fully paid and nonassessable.
(ii) COMPLIANCE WITH SECURITIES LAWS. Assuming the
correctness of the representations made by the Investor in Section 4, the
Purchased Shares, the Warrant and (assuming no change in applicable law and no
unlawful distribution of Purchased Shares or the Warrant by the Investor or
other parties) the Warrant Shares will be issued to the Investor in compliance
with applicable exemptions from (i) the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and (ii) the registration and qualification requirements of all applicable
securities laws of the states of the United States.
(f) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration qualification, designation, declaration or
filing with, or notice to, any federal, state or local governmental authority on
the part of the Company is required in connection with the issuance of the
Purchased Shares, the Warrant or the Warrant Shares to the Investor, or the
consummation of the other transactions contemplated by the Transaction
Documents, except for (i) compliance with the HSR Requirements, (ii) any filing
that may be required pursuant to Regulation D promulgated under the Securities
Act and (iii) such other consents, approvals, orders, authorizations,
qualifications, registrations, designations, declarations or filings as are not
material. All such qualifications and filings will, in the case of
qualifications, be effective on the Closing and will, in the case of filings, be
made within the time prescribed by law.
(g) NON-CONTRAVENTION. The execution, delivery and performance
of the Transaction Documents by the Company, and the consummation by the Company
of the transactions contemplated hereby and by the Warrant (including issuance
of the Purchased Shares and the Warrant, and the issuance of the Warrant Shares
upon exercise of the Warrant), do not and will not (i) contravene or conflict
with the Certificate of Incorporation or Bylaws of the Company or its
subsidiaries; (ii) constitute a material violation of any provision of any
federal, state, local or foreign law binding upon or applicable to the Company
or its subsidiaries; or (iii) constitute a default or require any consent under,
give rise to any right of termination, cancellation or acceleration of, or to a
loss of any material benefit to which the Company or its subsidiaries is
entitled under, or result in the creation or imposition of any lien, claim or
encumbrance on any assets of the Company or its subsidiaries under, any contract
to which the Company or its subsidiaries is a party or any material permit,
license or similar right relating to the Company or its subsidiaries or by which
the Company or its subsidiaries may be bound or affected, except, in each of the
foregoing cases, as has not had and is not reasonably likely to have,
individually or collectively, a Material Adverse Effect.
(h) LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation ("ACTION") pending or, to the Company's knowledge,
threatened nor is there any basis for any action: (a) against the Company or its
subsidiaries, with respect to their activities,
5
properties or assets, or against any officer, director or employee of the
Company or its subsidiaries in connection with such officer's, director's or
employee's relationship with, or actions taken on behalf of, the Company or its
subsidiaries, (b) that seeks to prevent, enjoin, alter or delay the transactions
contemplated by the Transaction Documents (including issuance of the Purchased
Shares, the Warrant and the Warrant Shares), or which is reasonably likely to
have a material adverse effect on the execution, delivery, validity or
consummation of the Transaction Documents or the performance of the Transaction
Documents by the Company, or (c) relating to the current or prior employment of
a current or former employee or consultant of the Company or its subsidiaries,
their use of any information in connection with the business, technology,
techniques, or other assets allegedly proprietary to any person other than the
Company or its wholly owned subsidiaries of the Company to which the Company is,
or, to the Company's knowledge, would likely be, a party. Neither the Company
nor its subsidiaries is a party to or is subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. No Action by the Company or any of its subsidiaries is pending.
(i) COMPLIANCE WITH LAW AND CHARTER DOCUMENTS. Neither the
Company nor any of its subsidiaries is in violation or default of any provisions
of its Certificate of Incorporation or Bylaws, both as amended. The Company and
its subsidiaries have complied in all respects and are in compliance with all
applicable statutes, laws, rules, regulations and orders of the United States of
America and all states thereof, foreign countries and other governmental bodies
and agencies having jurisdiction over their business or properties, except for
any instance of non-compliance that has not had, and would not reasonably be
expected to have, individually or collectively, a Material Adverse Effect.
(j) SEC DOCUMENTS.
(i) REPORTS. The Company has furnished to the
Investor prior to the date hereof (or the Investor can obtain from the internet)
copies of its Annual Report on Form 10-K for the fiscal year ended December 31,
1998 (the "FORM 10-K"), and all other registration statements, reports and proxy
statements, including the exhibits thereto, filed by the Company with the
Securities and Exchange Commission ("SEC") on or after said date (the Form 10-K
and such registration statements, reports and proxy statements, including the
exhibits thereto, are collectively referred to herein as the "SEC DOCUMENTS").
Since the Balance Sheet Date (as defined below), the Company has duly filed with
the SEC all registration statements, reports and proxy statements required to be
filed by it under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"). Each of the SEC Documents, as of the respective date thereof (or if
amended or superseded by a filing prior to the Closing Date, then on the date of
such filing), did not, and each of the registration statements, reports and
proxy statements filed by the Company with the SEC after the date hereof and
prior to the Closing will not, as of the date thereof (or if amended or
superseded by a filing after the date of this Agreement, then on the date of
such filing), contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Neither the
Company nor any of its subsidiaries is a party
6
to any material contract, agreement or other arrangement that was required to
have been filed as an exhibit to the SEC Documents that was not so filed.
(ii) FINANCIAL STATEMENTS. The Form 10-K includes the
Company's audited balance sheet ("DECEMBER 31 BALANCE SHEET") and its other
financial statements (collectively, the "AUDITED FINANCIAL STATEMENTS") for the
fiscal year ended December 31, 1998. The SEC Documents also include the
Company's unaudited balance sheet (the "JUNE 30 BALANCE SHEET") as of June 30,
1999 (the "BALANCE SHEET DATE"), and its other unaudited financial statements
(collectively, the "UNAUDITED 1999 QUARTERLY FINANCIAL STATEMENTS") for the
quarters ending March 31, 1999 and June 30, 1999. The Audited Financial
Statements, the June 30 Balance Sheet, and the Unaudited 1999 Quarterly
Financial Statements of the Company included in the SEC Documents filed prior to
the date hereof fairly presented, as of their issuance, in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis,
the financial position of the Company as at the dates thereof and the results of
its operations and cash flows for the periods covered thereby.
(k) ABSENCE OF CERTAIN CHANGES SINCE BALANCE SHEET DATE. Since
the Balance Sheet Date, the business and operations of the Company and its
subsidiaries have been conducted in the ordinary course consistent with past
practice, and there has not been:
(i) any declaration, setting aside or payment of any dividend
or other distribution of the assets of the Company or its subsidiaries
with respect to any shares of capital stock of the Company or any
repurchase, redemption or other acquisition by the Company or its
subsidiaries of any outstanding shares of the Company's capital stock;
(ii) any damage, destruction or loss, whether or not covered
by insurance, which has had or is reasonably likely to have,
individually or collectively, a Material Adverse Effect;
(iii) any waiver by the Company or any of its subsidiaries of
a valuable right or of a material debt owed to any of them, except for
such waivers, that have not had nor are reasonably likely to have,
individually or collectively, a Material Adverse Effect;
(iv) any change or amendment to, or any waiver of any right
under a contract or arrangement by which the Company or any of its
assets or properties is bound or subject which has had or is reasonably
likely to have, individually or collectively, a Material Adverse
Effect;
(v) any change by the Company in its accounting principles,
methods or practices or in the manner it keeps its accounting books and
records, except any such change required by a change in GAAP which has
not had and is not reasonably likely to have, individually or
collectively, a Material Adverse Effect;
7
(vi) any other circumstance, condition or event of any
character which constitutes, either individually or collectively, a
Material Adverse Effect.
(l) INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT. Each
employee and consultant or independent contractor of the Company or its
subsidiaries whose duties include the development of products or Intellectual
Property (as defined below), and each former employee and consultant or
independent contractor whose duties included the development of products or
Intellectual Property, has entered into and executed an invention assignment and
confidentiality agreement in the form provided to the Investor prior to the
Effective Date, or an employment or consulting agreement containing
substantially similar terms, except where the absence of such assignment and/or
agreement has not had and is not reasonably likely to have, individually or
collectively, a Material Adverse Effect.
(m) INTELLECTUAL PROPERTY
(i) COMPANY RIGHTS TO INTELLECTUAL PROPERTY. The
Company or its wholly owned subsidiaries have sole title to and own, or are
licensed or otherwise possess valid, subsisting, and legally enforceable rights
to use, all (i) patents, and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof ("PATENTS"); (ii) inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating to
any of the foregoing ("TRADE SECRETS"); (iii) copyrights, copyright
registrations and applications therefor, and all other rights corresponding
thereto throughout the world ("COPYRIGHTED WORKS"); (iv) domain names, uniform
resource locators and other names and locators associated with the Internet; (v)
industrial designs and any registrations and applications therefor; (vi) trade
names, logos, common law trademarks and service marks, trademark and service
xxxx registrations and applications therefor ("TRADEMARKS"); (vii) all databases
and data collections and all rights therein; (viii) all moral and economic
rights of authors and inventors, however denominated; (ix) mask work rights and
other rights in semiconductor designs; and (x) any similar or equivalent rights
to any of the foregoing (collectively "INTELLECTUAL PROPERTY") necessary to
enable the Company and its subsidiaries to carry on their business as currently
conducted in all material respects ("COMPANY INTELLECTUAL PROPERTY"). All
licenses, sublicenses, agreements, and permissions relating to such Company
Intellectual Property are in full force and effect and there exists no breach or
default on the part of the Company or, to the Company's knowledge, any other
party thereunder, except for such circumstances of unenforceability, invalidity,
or breach that, have not had and are not reasonably likely to have, individually
or collectively, a Material Adverse Effect. The Company Intellectual Property is
free and clear of any lien, license, lease, claim or encumbrance (other than
non-exclusive out-licenses granted by the Company in the ordinary course of
business which do not materially reduce the value or utility to the Company or
its subsidiaries of such Company Intellectual Property), except as had not had,
and is not reasonably likely to have, a Material Adverse Effect.
(ii) MAINTENANCE OF RIGHTS. After the Closing, the
Company and its subsidiaries will use all reasonable business efforts to obtain
and maintain protection for all
8
Patents, Trade Secrets, Copyrighted Works, Trademarks, and other Company
Intellectual Property.
(iii) OTHER CLAIMS. No person, other than the Company
and its subsidiaries, holds any license, agreement or other right of any kind in
or to the Company Intellectual Property, to manufacture, modify, or create
derivative works of any of the Company Intellectual Property, or to receive any
copy of any source code or any software included within the Company Intellectual
Property, except for such licenses, agreements and rights that, have not had and
are not reasonably likely to have, individually or collectively, a Material
Adverse Effect.
(iv) NO INFRINGEMENT. Neither the Company nor any of
its subsidiaries has violated or infringed in any respect, and is not currently
violating or infringing in any respect the Intellectual Property of any third
party in any manner that, has had and is reasonably likely to have, individually
or collectively, a Material Adverse Effect. Neither the Company nor any of its
subsidiaries has received any written communications and has no other basis to
believe that any person is (a) alleging that the Company (or any of its
employees or consultants) has violated or infringed, any Intellectual Property
of any other person or entity in any material respect, (b) seeking to restrict
in any manner the use, transfer, or licensing of any Company Intellectual
Property, (c) which may reasonably be expected to effect the validity or
enforceability of any Company Intellectual Property, (d) restricting the
provision of any material product or service of the Company or its subsidiaries,
or (e) otherwise relating to the Company Intellectual Property, except where
such violations, infringements, restrictions or other effects, have not had and
are not reasonably likely to have, individually or collectively, a Material
Adverse Effect. The Company knows of no information, material facts, or
circumstances that would render any of the Company Intellectual Property invalid
or unenforceable and the Company has not made any material misrepresentation or
concealment in any application for registration of any Company Intellectual
Property.
(v) JOINT DEVELOPMENT. To the extent that any Company
Intellectual Property has been developed or created independently or jointly by
a third party for the Company or any of its subsidiaries, or is incorporated
into any of the products or services of the Company or any of its subsidiaries,
the Company has a written agreement with such third party with respect thereto
and the Company thereby either: (a) has obtained ownership of, and is the
exclusive owner of, or (b) has obtained a perpetual, non-terminable license
(sufficient for the conduct of the business of the Company and its subsidiaries
as currently conducted and as required to be conducted under the Transaction
Documents) to all of such third party's right title and interest in said
Intellectual Property by operation of law or by valid assignment, to the fullest
extent legally possible, except where the absence of such ownership or
agreement, has not had and is not reasonably likely to have, individually or
collectively, a Material Adverse Effect
(vi) OUT-LICENSES. Neither the Company nor any of its
subsidiaries has transferred ownership of, or granted any exclusive license with
respect to, any Company Intellectual Property to any third party (herein "OUT
LICENSE"), except where such transfer or license has not had and is not
reasonably likely to have, individually or collectively, a Material Adverse
Effect.
9
(vii) NO CONFLICT. The consummation of the transactions
contemplated by the Transaction Documents will not violate nor result in the
breach, modification, cancellation, termination or suspension of any Out
License or of any material license, contract or other agreement to which the
Company or any of its subsidiaries is a party pursuant to which a third party
has licensed or transferred Intellectual Property to the Company or any of its
subsidiaries ("IN LICENSE"), except where the violation, breach, modification,
cancellation, termination, or suspension has not had and is not reasonably
likely to have, individually or collectively, a Material Adverse Effect.
(viii) MISAPPROPRIATION. To the Company's knowledge, no
third party is infringing or misappropriating the Company's Intellectual
Property in any manner that, has had or is reasonably likely to have,
individually or collectively, a Material Adverse Effect.
(ix) TRADE SECRETS, EMPLOYEES AND CONSULTANTS. The
Company and its subsidiaries have taken reasonable and practicable steps
designed to safeguard and maintain the secrecy and confidentiality of, and
their proprietary rights in, all trade secrets or other confidential
information constituting Intellectual Property, except where the absence of
such measures, has not had and is not reasonably likely to have, individually
or collectively, a Material Adverse Effect. To the Company's knowledge, no
employee of or consultant to the Company or its subsidiaries is in default
under any term of any employment contract, agreement or arrangement relating to
Intellectual Property of the Company or its subsidiaries or any non-competition
arrangement, other contract or restrictive covenant relating to Intellectual
Property, except where such default, has not had and is not reasonably likely
to have, individually or collectively, a Material Adverse Effect.
(x) INDEPENDENT DEVELOPMENT. The Company Intellectual
Property (other than any Company Intellectual Property duly acquired or
licensed from third parties) was developed entirely by the employees of or
consultants to the Company and its subsidiaries during the time they were
employed or retained by the Company or its subsidiaries, except under
circumstances that, have not had and are not reasonably likely to have,
individually or collectively, a Material Adverse Effect.
(xi) YEAR 2000 ISSUES. Except where a failure has not
had and is not reasonably likely to have, individually or collectively, a
Material Adverse Effect, (a) all of the products of the Company and its
subsidiaries (including products currently under development) will record,
store, process, calculate and present calendar dates falling on and after
January 1, 2000, and will calculate any information dependent on or relating to
such dates in the same manner and with the same functionality, data integrity
and performance as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates (collectively "YEAR 2000 COMPLIANT"),
and (b) none of the products of the Company and its subsidiaries will lose
functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000.
(n) REGISTRATION RIGHTS. Except as provided in the Investor
Rights Agreement, neither the Company nor any of its subsidiaries is subject to
any agreement providing any person
10
or entity any rights (including piggyback registration rights) to have any
securities of the Company or its subsidiaries registered with the SEC or
registered or qualified with any other governmental authority.
(o) TITLE TO PROPERTY AND ASSETS. The properties and assets
of the Company and its subsidiaries reasonably necessary for the Company to
conduct its business as currently conducted are owned or leased by the Company
free and clear of all mortgages, deeds of trust, liens, charges, encumbrances
and security interests, except for statutory liens for the payment of current
taxes that are not yet delinquent and liens, encumbrances and security
interests that arise in the ordinary course of business and are not reasonably
likely to have, individually or collectively, a Material Adverse Effect. With
respect to the property and assets it leases, the Company is in compliance with
such leases and such leases are in full force and effect, except where such
non-compliance or invalidity has not had and is not reasonably likely to have,
individually or collectively, a Material Adverse Effect.
(p) TAX MATTERS. Except as has not had and is not reasonably
likely to have, individually or collectively, a Material Adverse Effect, the
Company and its subsidiaries have filed all tax returns required to be filed,
which returns are true and correct in all material respects, and the Company
and its subsidiaries have paid in full all federal, state, local an other net
income, gross income, gross receipts, sales, use, ad valorem, value added,
intangible unitary, capital gains, transfer, franchise, profits, license,
permit, lease, service, service use, withholding, backup withholding, payroll
employment, estimated, excise, severance stamp, occupation, premium, property,
prohibited transaction, windfall, or excess profits, customs, duties, or other
taxes, fees, assessment or charges of any kind whatsoever, together with any
penalties and interest, assessments, fees and other charges, addition to tax or
additional amount with respect thereto due and owing to any governmental or
quasi-governmental authority and has discharged any obligations for payment of
the foregoing under any tax sharing, tax indemnity or other arrangement binding
upon the Company or its subsidiaries, other than those being contested in good
faith and for which adequate reserves have been provided for in the June 30
Balance Sheet. Neither the Company nor any of its subsidiaries has received
notice that the Internal Revenue Service (IRS) or any other taxing authority
has asserted against the Company or its subsidiaries any deficiency or claim
for additional taxes, and no issues have been raised (and are currently
pending) by any taxing authority in connection with any tax return filed by the
Company or any of its subsidiaries which have had or are reasonably likely to
have, individually or collectively, a Material Adverse Effect. Neither the
Company nor any of its subsidiaries has received notice that it is or may be
subject to tax in a jurisdiction in which it has not filed or does not
currently file tax returns.
(q) FINDER'S FEE. The Company neither is, nor will be,
obligated for any finder's or broker's fee or commission in connection with
this transaction, other than the fee payable to Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation in the amount disclosed to Investor in the Disclosure
Letter.
(r) ERISA.
11
(i) As used in this Section 3(r), the following terms
have the following meanings: (1) "BENEFIT ARRANGEMENT" means any material
benefit arrangement that is not an Employee Benefit Plan, including (i) each
material employment or consulting agreement, (ii) each material arrangement
providing for insurance coverage or workers' compensation benefits, (iii) each
material bonus or deferred bonus arrangement, (iv) each material arrangement
providing any termination allowance, severance or similar benefits, (v) each
equity compensation plan, (vi) each deferred compensation plan and (vii) each
material compensation policy and practice maintained by the Company or ERISA
Affiliate covering the employees, former employees, officers, former officers,
directors and former directors of the Company, any ERISA Affiliate, and the
beneficiaries of any of them; (2) "BENEFIT PLAN" means an Employee Benefit Plan
or Benefit Arrangement; (3) "COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, as set forth in Section 4980B of the
Internal Revenue Code (the "Code") and Part 6 of Title I of ERISA; (4)
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan, as defined in Section
3(3) of ERISA, that is sponsored or contributed to by the Company, any ERISA
Affiliate, or any ERISA Affiliate covering employees or former employees of the
Company; (5) "EMPLOYEE PENSION BENEFIT PLAN" means any employee pension benefit
plan, as defined in Section 3(2) of ERISA that is regulated under Title IV or
ERISA, other than a Multiemployer Plan; (6) "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended; (7) "ERISA AFFILIATE" of
the Company means any other person or entity that, together with the Company as
of the relevant measuring date under ERISA, was or is required to be treated as
a single employer under Section 414 of the Code; (8) "GROUP HEALTH PLAN" means
any group health plan, as defined in Section 5000(b)(1) of the Code; (9)
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section 3(37)
and 4001(a)(3) of ERISA; and (10) "PROHIBITED TRANSACTION means a transaction
that is prohibited under Section 4975 of the Code or Section 406 of ERISA and
not exempt under Section 4975 of the Code or Section 408 of ERISA, respectively.
(ii) No Employee Benefit Plan has participated in,
engaged in or been a party to any Prohibited Transaction which has had or is
reasonably likely to have a Material Adverse Effect, and neither the Company
nor any of its ERISA Affiliates has had asserted against it any claim for any
material tax or material penalty imposed under ERISA or the Code with respect
to any Employee Benefit Plan nor, to the Company's knowledge, is there a basis
for any such claim. To the Company's knowledge, no officer, director or
employee of the Company has committed a breach of any responsibility or
obligation imposed upon fiduciaries by Title I of ERISA with respect to any
Employee Benefit Plan, with respect to which breach the Company is directly or
indirectly liable which has had or is reasonably likely to have, individually
or collectively, a Material Adverse Effect.
(iii) No violation of any reporting or disclosure
requirement imposed by ERISA or the Code and which has had or is reasonably
likely to have, individually or collectively, a Material Adverse Effect exists
with respect to any Employee Benefit Plan.
(iv) Except for non-compliance which has not had and
is not reasonably likely to have, individually or collectively, a Material
Adverse Effect, each Benefit Plan has been maintained in all material respects,
by its terms and in operation, in accordance
12
with ERISA (if applicable), the Code and all other applicable federal, state,
local and foreign laws. The Company and its ERISA Affiliates have made full and
timely payment of all amounts required to be (i) contributed under the terms of
each Benefit Plan and such laws, or (ii) required to be paid as expenses under
such Benefit Plan except for non-compliance which has not had and is not
reasonably likely to have, individually or collectively, a Material Adverse
Effect. Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code either has received a favorable determination letter
with respect to such qualified status from the IRS or has filed a request for
such a determination letter with the IRS within the remedial amendment period
such that such determination of qualified status will apply from and after the
effective date of any such Employee Benefit Plan, except where the failure to
qualify such plan has not had and is not reasonably likely to have,
individually or collectively, a Material Adverse Effect.
(v) With respect to any Group Health Plans maintained
by the Company or its ERISA Affiliates, whether or not for the benefit of the
Company's employees, the Company and its ERISA Affiliates have complied with
the provisions of COBRA, except for non-compliance which has not had and is not
reasonably likely to have, individually or collectively, a Material Adverse
Effect.
(s) LABOR MATTERS.
(i) No collective bargaining agreement exists that is
binding on the Company or any of its subsidiaries, and no petition has been
filed or proceedings instituted against the Company or any of its subsidiaries
by an employee or group of employees with any labor relations board seeking
recognition of a bargaining representative. To the Company's knowledge, no
organizational effort is currently being made or threatened by or on behalf of
any labor union to organize any employees of the Company.
(ii) There is no labor strike, dispute, slow down or
stoppage pending or threatened against or directly affecting the Company or any
of its subsidiaries. No grievance or arbitration proceedings arising out of or
under any collective bargaining agreement is pending, and no claims therefor
exist. Neither the Company nor any of its subsidiaries has received any notice,
and they have no knowledge of any threatened labor or civil rights dispute,
controversy or grievance or any other unfair labor practice proceeding, or
breach of contract claims or action with respect to claims of, or obligations
to, any employee or group of employees of the Company or its subsidiaries,
which in any such case is reasonably likely to have, individually or
collectively, a Material Adverse Effect.
(iii) All individuals who are performing or have
performed services for the Company or any of its subsidiaries, and who are or
were classified by the Company as "independent contractors," qualify for such
classification under Section 530 of the Revenue Act of 1978 or Section 1706 of
the Tax Reform Act of 1986, as applicable, except for such instances which are
not, reasonably likely to have, individually or collectively, a Material
Adverse Effect.
(t) FULL DISCLOSURE. The representations made in this
Section 3 and in the Company Disclosure Letter with respect to the matters
therein addressed, are true and complete in all material respects and do not
omit to state any material fact or facts necessary in order to
13
make the statements therein, in light of the circumstances under which they
were made, not misleading.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
INVESTOR. The Investor hereby represents and warrants to the Company, and
agrees that, except as disclosed in the Disclosure Letter delivered by the
Investor to the Company concurrently herewith:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Investor is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all corporate power and
authority required to enter into the Transaction Documents and to consummate
the transactions contemplated hereby and thereby.
(b) AUTHORIZATION. The execution, delivery and performance
of the Transaction Documents have been duly authorized by all necessary
corporate action on the part of the Investor. This Agreement and the Alliance
Agreement constitutes, and the Warrant, Investor Rights Agreement and other
Transaction Documents to which the Investor will be a party, when executed,
will constitute the Investor's legal, valid and binding obligations,
enforceable in accordance with their terms, except (i) as may be limited by (A)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (B) the effect of rules of law governing the availability of
equitable remedies and (ii) as rights to indemnity or contribution may be
limited under federal or state securities laws or by principles of public
policy thereunder. The Investor has full corporate power and authority to enter
into the Transaction Documents.
(c) LITIGATION. There is no Action pending, or to the
Investor's knowledge, threatened, that seeks to prevent, enjoin, alter or delay
the transactions contemplated by the Transaction Documents or which is
reasonably likely to have a Material Adverse Effect on the execution, delivery,
validity, consummation or performance of the Transaction Documents by the
Company.
(d) PURCHASE FOR OWN ACCOUNT. The Purchased Shares and the
Warrant are being acquired for investment for the Investor's own account, not
as a nominee or agent, and not with a view to the public resale or distribution
thereof within the meaning of the Securities Act, and the Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. The Investor also represents that it has not been formed
for the specific purpose of acquiring the Purchased Shares and the Warrant.
(e) INVESTMENT EXPERIENCE. The Investor understands that the
purchase of the Purchased Shares and the Warrant involves substantial risk. The
Investor has experience as an investor in securities of companies and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment in the Purchased Shares and the Warrant and has such knowledge
and experience in financial or business matters that it is capable of
evaluating the merits and risks of this investment in the Purchased Shares and
the Warrant and protecting its own interests in connection with this
investment. The foregoing, however, does not in any way limit or modify the
representations or warranties of the Company in Section 3 or any rights of the
Investor under
14
the Transaction Documents entered into or benefiting Investor in connection
with the transactions contemplated by the Transaction Documents.
(f) ACCREDITED INVESTOR STATUS. The Investor is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act.
(g) RESTRICTED SECURITIES. The Investor understands that the
Purchased Shares and the Warrant to be purchased by the Investor hereunder, and
any Warrant Shares to be purchased by the Investor upon exercise of the
Warrant, are characterized as "restricted securities" under the Securities Act,
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under the Securities Act and applicable
regulations thereunder, such securities may be resold without registration
under the Securities Act only in certain limited circumstances. The Investor is
familiar with Rule 144 of the SEC, as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act. The Company
understands that, except as required by the Investors Rights Agreement executed
concurrently herewith, the Company is under no obligation to register any of
the securities sold hereunder.
(h) LEGENDS. The Investor agrees that the certificates for
the Purchased Shares, the Warrant and the Warrant Shares shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR WITH
ANY STATE SECURITIES COMMISSION, AND MAY NOT BE
TRANSFERRED OR DISPOSED OF BY THE HOLDER IN THE ABSENCE OF
A REGISTRATION STATEMENT WHICH IS EFFECTIVE UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE LAWS AND
RULES, OR, UNLESS, IMMEDIATELY PRIOR TO THE TIME SET FOR
TRANSFER, SUCH TRANSFER MAY BE EFFECTED WITHOUT VIOLATION
OF THE SECURITIES ACT OF 1933 AND OTHER APPLICABLE STATE
LAWS AND RULES.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS SPECIFIED IN A CERTAIN INVESTOR
RIGHTS AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL
HOLDER OF THESE SECURITIES, A COPY OF WHICH IS AVAILABLE
FOR EXAMINATION AT THE ISSUER'S PRINCIPAL OFFICE."
The appropriate portion of the legend will be removed promptly upon delivery to
the Company of an opinion of counsel reasonably satisfactory to the Company or
such other satisfactory evidence as reasonably may be required by the Company,
that such legend is not required to ensure compliance with the Securities Act
or that the security is hereby freely transferable in a public sale under the
Securities Act.
15
(i) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration qualification, designation, declaration or
filing with, or notice to, any federal, state or local governmental authority
on the part of the Investor is required for the performance by the Investor of
its obligations under the Transaction Documents, except for (i) compliance with
HSR Requirements, (ii) any filing that may be required pursuant to Regulation D
promulgated under the Securities Act and (iii) such other consents, approvals,
orders, authorizations, qualifications, registrations, designations,
declarations, or filings as are not material. All such qualifications and
filings will, in the case of qualifications, be effective on the Closing and
will, in the case of filings, be made within the time prescribed by law.
(j) NON-CONTRAVENTION. The execution, delivery and
performance of the Transaction Documents by the Investor, and the consummation
by the Investor of the transactions contemplated thereby do not and will not
(i) contravene or conflict with the Certificate of Incorporation or Bylaws of
the Investor, (ii) constitute a material violation of any provision of federal,
state, local or foreign law binding upon or applicable to the Investor, or
(iii) constitute a default or require any consent under, give rise to any right
of termination, cancellation or acceleration of, or to a loss of any material
benefit to which the Investor is entitled under any contract to which the
Investor is a party in a manner which is reasonably likely to have,
individually or collectively, an adverse impact on the Investor's ability to
perform its obligations under said Transaction Documents.
(k) FULL DISCLOSURE. The representation made in this Section
4 and in the Investor Disclosure Letter with respect to the matters therein
addressed, are true and complete in all material respects and do not omit to
state any material fact or facts necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
5. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING. The
obligations of the Investor under Sections l and 2 of this Agreement are
subject to the fulfillment or waiver, on or before the Closing, of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and correct on and as of the date of the Disclosure Letter and on and as
of the date of the Closing, with the same effect as though such representations
and warranties had been made as of the Closing.
(b) PERFORMANCE. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing in all material respects and shall have obtained all approvals,
consents and qualifications necessary to complete the purchase and sale
described herein.
(c) COMPLIANCE CERTIFICATE. The Company will have delivered
to the Investor at the Closing a certificate signed on its behalf by its Chief
Executive Officer or Chief Financial Officer certifying that the conditions
specified in Sections 5(a) and 5(b) hereof have been fulfilled.
16
(d) SECURITIES EXEMPTIONS. The offer and sale of the
Purchased Shares and the Warrant to the Investor pursuant to this Agreement
and/or the Warrant shall be exempt from the registration requirements of the
Securities Act, and the registration and/or qualification requirements of all
applicable state securities laws, except to the extent such failure to be
exempted results from the inaccuracy of any of the representations made by the
Investor pursuant to Section 4.
(e) HSR COMPLIANCE. The HSR Requirements applicable to the
transactions contemplated hereby shall have been fulfilled.
(f) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor, and the Investor shall have received all such
counterpart originals, and certified or other copies of such documents, as it
may reasonably request. Such documents shall include but not be limited to the
following:
(i) CERTIFIED CHARTER DOCUMENT. A copy of (i) the
Restated Certificate of Incorporation of the Company, as amended, certified as
of a recent date by the secretary of state for Delaware as a complete and
correct copy thereof and (ii) the Bylaws of the Company (as amended through the
date of the Closing), certified by the Secretary of the Company as a true and
correct copy thereof as of the Closing.
(ii) BOARD RESOLUTIONS. A copy, certified by the
Secretary of the Company, of the resolutions of the Board of Directors of the
Company providing for the approval of the Transaction Documents and the
issuance of the Purchased Shares and the Warrant and the other matters
contemplated hereby and thereby.
(g) OPINION OF COMPANY COUNSEL. The Investor will have
received an opinion on behalf of the Company, dated as of the date of the
Closing, from Xxxxxx Xxxxxx & Xxxxx, counsel to the Company, as to the matters
attached in EXHIBIT B-1, with such customary assumptions and qualifications as
is appropriate to such matters.
(h) NO MATERIAL ADVERSE EFFECT. Between the date hereof and
the Closing, there shall not have occurred any Material Adverse Effect to the
Company.
(i) NASDAQ REQUIREMENTS. All requirement of the Nasdaq
National Market in connection with the transactions contemplated by this
Agreement and the Warrant shall have been complied with by the Company.
(j) BUSINESS AGREEMENTS. The Company shall have entered into
the Business Agreements and shall have timely performed the obligations on its
part to be performed under the Alliance Agreement prior to the Closing in all
material respects.
(k) WARRANT. The Company will have issued the Warrant
substantially in the form attached hereto as EXHIBIT A.
17
(l) INVESTOR RIGHTS AGREEMENT. The Company will have executed
and delivered the Investor Rights Agreement substantially in the form attached
hereto as EXHIBIT C (the "INVESTOR RIGHTS AGREEMENT").
(m) OTHER ACTIONS. The Company shall have executed such
certificates, agreements, instruments and other documents, and taken such other
actions as shall be customary or reasonably requested by the Investor in
connection with the transactions contemplated hereby.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of the Investor contained in Section 4 shall be true and correct
in all respects on and as of the date hereof and on and as of the date of the
Closing with the same effect as though such representations and warranties had
been made as of the Closing.
(b) PERFORMANCE. The Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing in all material respects and shall have obtained any approvals,
consents and qualifications necessary to perform its obligations to purchase the
Purchased Shares and Warrant at the Closing.
(c) COMPLIANCE CERTIFICATE. The Investor will have delivered
to the Company at the Closing a certificate signed on its behalf by its Chief
Executive Officer or Chief Financial Officer, certifying that the conditions
specified in Sections 6(a) and 6(b) hereof have been fulfilled.
(d) HSR COMPLIANCE. The HSR Requirements applicable to the
transactions contemplated hereby shall have been fulfilled.
(e) PAYMENT OF PURCHASE PRICE. The Investor shall have
delivered to the Company (if directed to do so by the Company) the Purchase
Price as specified in Section 1.
(f) BUSINESS AGREEMENTS. The Investor shall have entered into
the Business Agreements and shall have timely performed the obligations on its
part to be performed under the Alliance Agreement prior to the Closing in all
material respects.
(g) OPINION OF COUNSEL. The Company shall have received an
opinion on behalf of the Company, dated as of the date of the Closing, from
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel to the Investor, as to matters
attached in Exhibit B-2, with such customary assumptions and qualifications as
is appropriate to such matters.
(h) OTHER ACTIONS. The Investor shall have executed such
certificates, agreements, instruments and other documents, and taken such other
actions as shall be customary
18
or reasonably requested by the Company in connection with the transactions
contemplated hereby.
7. INDEMNIFICATION.
(a) AGREEMENT TO INDEMNIFY.
(i) COMPANY INDEMNITY. The Investor, its Affiliates and
Associates, any successor in interest to the Purchased Shares, Warrant and
Warrant Shares, and each of the officers, directors, shareholders, employees,
representatives and agents of any of the foregoing (collectively, the "INVESTOR
INDEMNITEES") shall each be indemnified and held harmless to the extent set
forth in this Section by the Company with respect to any and all Damages (as
defined below) incurred by any Investor Indemnitee as a proximate result of (i)
any inaccuracy or misrepresentation in, or breach of, any representation,
warranty, covenant or agreement made by the Company in the Transaction
Documents.
(ii) INVESTOR INDEMNITY. The Company, its respective
Affiliates and Associates, and each officer, director, shareholder, employer,
representative and agent of any of the foregoing (collectively, the "COMPANY
INDEMNITEES") shall each be indemnified and held harmless to the extent set
forth in this Section, by the Investor, in respect of any and all Damages
incurred by any Company Indemnitee as a proximate result of any inaccuracy or
misrepresentation in, or breach of, any representation warranty, covenant or
agreement made by the Investor in the Transaction Documents.
(iii) EQUITABLE RELIEF. Nothing set forth in this
Section shall be deemed to prohibit or limit any Investor Indemnitee's or
Company Indemnitee's right at any time before, on or after the Closing, to seek
injunctive or other equitable relief for the failure of a party required to
provide indemnity pursuant to subparts (i) and (ii) above (a "INDEMNIFYING
PARTY") to perform or comply with any covenant or agreement contained herein.
(b) SURVIVAL. All representations and warranties of the
Investor and the Company contained herein or in the Warrant and all claims of
any Investor Indemnitee or Company Indemnitee (each an "Indemnitee") in respect
of any inaccuracy or misrepresentation in or breach hereof, shall survive the
Closing until the third anniversary of the Closing, regardless of whether the
applicable statute of limitations, including extensions thereof, may expire. All
covenants and agreements of the Investor and the Company contained in this
Agreement or the Warrant shall survive the Closing in perpetuity (except to the
extent any such covenant or agreement shall expire by its terms). All claims of
any Indemnitee in respect of any breach of such covenants or agreements shall
survive the Closing until the expiration of three (3) years following the
non-breaching party's obtaining actual knowledge of such breach.
(c) CLAIMS FOR INDEMNIFICATION. If any Indemnitee shall
believe that such Indemnitee is entitled to indemnification pursuant to this
Section in respect of any Damages, such Indemnitee shall give the appropriate
Indemnifying Party (which for purposes hereof, in the case of an Investor
Indemnitee, means the Company, and in the case of a Company Indemnitee, means
the Investor) prompt written notice thereof. Any such notice shall set forth in
reasonable
19
detail and to the extent then known the basis for such claim for
indemnification. The failure of such Indemnitee to give notice of any claim
for indemnification promptly shall not adversely affect such Indemnitee's
right to indemnity hereunder except to the extent that such failure adversely
affects the right of the Indemnifying Party to assert any reasonable defense
to such claim. Each such claim for indemnity shall expressly state that the
Indemnifying Party shall have only the twenty (20) business day period
referred to in the next sentence to dispute or deny such claim. The
Indemnifying Party shall have twenty (20) business days following its receipt
of such notice either (a) to acquiesce in such claim by giving such
Indemnitee written notice of such acquiescence or (b) to object to the claim
by giving such Indemnitee written notice of the objection. If the
Indemnifying Party does not object thereto within such twenty (20) business
day period, such Indemnitee shall be entitled to be indemnified for all
Damages reasonably and proximately incurred by such Indemnitee in respect of
such claim. If the Indemnifying Party objects to such claim in a timely
manner, the senior management of the Company and the Investor shall meet to
attempt to resolve such dispute. If the dispute cannot be resolved by the
senior management, either party may make a written demand for formal dispute
resolution and specify therein the scope of the dispute. Within thirty (30)
days after such written notification, the parties agree to meet for one (1)
day with an impartial mediator and consider dispute resolution alternatives
other than litigation. If an alternative method of dispute resolution is not
agreed upon within thirty (30) days after the one (1) day mediation, either
party may begin litigation proceedings. Nothing in this Section shall be
deemed to require arbitration.
(d) DEFENSE OF CLAIMS. In connection with any claim that may
give rise to indemnity under this Section resulting from or arising out of any
claim or Proceeding against an Indemnitee by a person or entity that is not a
party hereto, the Indemnifying Party may (unless such Indemnitee elects not to
seek indemnity hereunder for such claim), but shall not be obligated to, upon
written notice to the relevant Indemnitee, assume the defense of any such claim
or Proceeding if the Indemnifying Party provides assurances, reasonably
satisfactory to such Indemnitee, that the Indemnifying Party will be financially
able to satisfy such claim to the extent provided herein if such claim or
Proceeding is decided adversely; PROVIDED, HOWEVER, that nothing set forth
herein shall be deemed to require the Indemnifying Party to waive any
crossclaims or counterclaims the Indemnifying Party may have against the
Indemnitee for damages. The Indemnitee shall be entitled to retain separate
counsel, reasonably acceptable to the Indemnifying Party, if the Indemnitee
shall determine, upon the written advice of counsel, that an actual or potential
conflict of interest exists between the Indemnifying Party and the Indemnitee in
connection with such Proceeding. The Indemnifying Party shall be obligated to
pay the reasonable fees and expenses of such separate counsel to the extent the
Indemnitee is entitled to indemnification by the Indemnifying Party with respect
to such claim or Proceeding under this subpart (d). If the Indemnifying Party
assumes the defense of any such claim or Proceeding, the Indemnifying Party
shall select counsel reasonably acceptable to such Indemnitee to conduct the
defense of such claim or Proceeding, shall take all steps necessary in the
defense or settlement thereof and shall at all times diligently and promptly
pursue the resolution thereof. If the Indemnifying Party shall have assumed the
defense of any claim or Proceeding in accordance with this subpart (d), the
Indemnifying Party shall be authorized to consent to a settlement of, or the
entry of any judgment arising from, any such claim or Proceeding, with the prior
written consent of such Indemnitee, not to be unreasonably withheld; PROVIDED,
HOWEVER, that the
20
Indemnifying Party shall pay or cause to be paid all amounts arising out of
such settlement or judgment concurrently with the effectiveness thereof;
PROVIDED, FURTHER, that the Indemnifying party shall not be authorized to
encumber any of the assets of any Indemnitee or to agree to any restriction
that would apply to any Indemnitee or to its conduct of business; and
PROVIDED, FURTHER, that a condition to any such settlement shall be a
complete release of such Indemnitee and its Affiliates, directors, officers,
employees and agents with respect to such claim, including any reasonably
foreseeable collateral consequences thereof. Such Indemnitee shall be
entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. Each Indemnitee shall, and shall
cause each of its Affiliates, directors, officers, employees and agents to,
cooperate fully with the Indemnifying Party in the defense of any claim or
Proceeding being defended by the Indemnifying Party pursuant to this subpart
(d). If the Indemnifying Party does not assume the defense of any claim or
Proceeding resulting therefrom in accordance with the terms of this subpart
(d), such Indemnitee may defend against such claim or Proceeding in such
manner as it may deem appropriate, including settling such claim or
Proceeding after giving notice of the same to the Indemnifying Party, on such
terms as such Indemnitee may deem appropriate. If any Indemnifying Party
seeks to question the manner in which such Indemnitee defended such claim or
Proceeding or the amount of or nature of any such settlement, such
Indemnifying Party shall have the burden to prove by a preponderance of the
evidence that such Indemnitee did not defend such claim or Proceeding in a
reasonably prudent manner.
(e) CERTAIN DEFINITIONS. As used in this Section, (i)
"AFFILIATE" means, with respect to any person or entity, any person or entity
directly or indirectly controlling, controlled by or under direct or indirect
common control with such other person or entity; (ii) "ASSOCIATE" means, when
used to indicate a relationship with any person or entity, (A) any other person
or entity of which such first person or entity is an officer, director or
partner or is, directly or indirectly, beneficial owner of ten percent (10%) or
more of any class of equity securities, membership interests or other comparable
ownership interests issued by such other person or entity, (B) any trust or
other estate in which such first person or entity has a ten percent (10%) or
more beneficial interest or as to which such first person or entity serves as
trustee or in a similar fiduciary capacity, and (C) any relative or spouse of
such first person or entity who has the same home as such first person or entity
or who is a director or officer of such first person or entity; (iii) "DAMAGES"
means all demands, claims, actions or causes of action, assessments, losses,
damages, costs, expenses, liabilities, judgments, awards, fines, response costs,
sanctions, taxes, penalties, charges and amounts paid in settlement, including
(A) interest on cash disbursements in respect of any of the foregoing at the
prime rate of the Bank of America, as in effect from time to time, compounded
quarterly, from the date each such cash disbursement is made until the date the
party incurring such cash disbursement shall have been indemnified in respect
thereof, and (B) reasonable out-of-pocket costs, fees and expenses (including
reasonable costs, fees and expenses of attorneys, accountants and other agents
of, or other parties retained by, such party), and (iv) "PROCEEDING" means any
action, suit, hearing, arbitration, audit, proceeding (public or private) or
investigation that is brought or initiated by or against any federal, state,
local or foreign governmental authority or any other person or entity.
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8. TERMINATION. Prior to the Closing, this Agreement may be terminated
and the purchase and sale of the Common Stock and the issuance of the Warrant as
contemplated by this Agreement may be abandoned only in accordance with the
following provisions:
(a) by mutual written consent of the Investor and the Company;
(b) by the Investor or the Company if any court of competent
jurisdiction in the United States or other United States federal or state
governmental authority shall have issued a final order, decree or ruling, or
taken any other final action, restraining, enjoining or otherwise prohibiting
the purchase and sale of the Common Stock, and such order, decree, ruling or
other action is or shall have become nonappealable;
(c) by the Investor or the Company, upon five (5) days written
notice to the other party, if the Closing shall not have occurred by December
14, 1999 (the "OUTSIDE DATE"); PROVIDED, HOWEVER, that neither the Investor nor
the Company may terminate this Agreement pursuant to this clause (c) if such
party's failure to fulfill any of its obligations under this Agreement shall
have been a principal reason that the Closing shall not have occurred on or
before said date;
In the event of the termination of this Agreement, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders;
PROVIDED, HOWEVER, nothing contained herein shall relieve any party from
liability for any breach of this Agreement prior to such termination.
9. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement will inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties.
(b) GOVERNING LAW. This Agreement will be governed by, and
construed under, the internal laws of the State of Delaware, without reference
to principles of conflict of laws or choice of laws.
(c) COUNTERPARTS. This Agreement may be executed in two (2) or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(d) HEADINGS. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules will, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
(e) NOTICES. Any notice required or permitted under this
Agreement shall be given in writing, shall be effective when received, and shall
in any event be deemed received and
22
effectively given upon personal delivery to the party to be notified or three
(3) business days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid, or one (1) business day after
deposit with a nationally recognized courier service (such as Federal Express)
for next business day delivery under circumstances in which such service
guarantees next business day delivery at the address for notices set forth at
the end of this Agreement, or at such other address as the Investor or the
Company may designate by giving at least ten (10) days advance written notice
pursuant to this Section.
(f) NO FINDER'S FEES. The parties acknowledge that they have
dealt with no finder, broker or investment banker in this transaction, other
than Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation, on behalf of the
Company, and Xxxxxx Xxxxxxx Xxxx Xxxxxx, on behalf of the Investor. The Investor
will be solely responsible for any compensation owing to Xxxxxx Xxxxxxx Xxxx
Xxxxxx and shall indemnify and hold harmless the Company from any liability for
any commission or compensation in the nature of a finders' or broker's fee
asserted by any finder, broker or investment banker (other than Xxxxxxxxx,
Lufkin & Xxxxxxxx Securities Corporation) with whom Investor or any of its
officers, partners, employees, consultants, or representatives has dealt in
connection with this transaction. The Company will be solely responsible for any
compensation owing to Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation and
shall indemnify and hold harmless the Investor from any liability for any
commission or compensation in the nature of a finder's or broker's fee asserted
by any broker, finder, or investment banker (other than Xxxxxx Xxxxxxx Xxxx
Xxxxxx) with whom the Company or any of its officers, employees, consultants or
representatives has dealt in connection with this transaction.
(g) AMENDMENTS AND WAIVERS. This Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and, prior to the Closing, the Investor, and
after the Closing, the holders of Purchased Shares and Warrant Shares
representing at least a majority of the total aggregate number of Purchased
Shares and Warrant Shares then outstanding (excluding any of such shares that
have been sold in a transaction in which registration rights are not assigned in
accordance with the Investor Rights Agreement or sold to the public pursuant to
SEC Rule 144 or otherwise). Any amendment or waiver effected in accordance with
this Section 10(g) will be binding upon the Investor, the Company and their
respective successors and assigns. Notwithstanding the foregoing, the provisions
of Section 8 may not be amended without the written consent of the Company and
the Investor, which may be withheld in either of their sole and absolute
discretion.
(h) SEVERABILITY. If any provision of this Agreement is held
to be unenforceable under applicable law, such provision will be excluded from
this Agreement and the balance of the Agreement will be interpreted as if such
provision was so excluded and will be enforceable in accordance with its terms.
(i) ENTIRE AGREEMENT. This Agreement, together with the other
Transaction Documents and all exhibits and schedules hereto and thereto
constitute the entire agreement and understanding of the parties with respect to
the subject matter hereof and supersedes any and all
23
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties with respect to the subject matter hereof.
(j) FURTHER ASSURANCES. From and after the date of this
Agreement upon the request of the Company or the Investor, the Company and the
Investor will execute and deliver such instruments, documents or other writings,
and take such other actions, as may be reasonably necessary or desirable to
confirm and carry out and to effectuate fully the intent and purposes of this
Agreement.
(k) MEANING OF INCLUDE AND INCLUDING. Whenever in this
Agreement the word "include" or "including" is used, it shall be deemed to mean
"include, without limitation" or "including, without limitation," as the case
may be, and the language following "include" or "including" shall not be deemed
to set forth an exhaustive list.
(l) FEES, COSTS AND EXPENSES. All fees, costs and expenses
(including attorneys' fees and expenses) incurred by either party hereto in
connection with the preparation, negotiation and execution of the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby (including the costs associated with any filings with, or compliance
with any of the requirements of, any governmental authorities), shall be the
sole and exclusive responsibility of such party.
(m) COMPETITION. Nothing set forth herein shall be deemed to
preclude, limit or restrict the Company's or the Investor's ability to compete
with the other.
(n) STOCK SPLITS, DIVIDENDS AND OTHER SIMILAR EVENTS. The
provisions of this Agreement (including the number of shares of Common Stock and
other securities described herein) shall be appropriately adjusted to reflect
any stock split, stock dividend, reorganization, or other similar event that may
occur with respect to the Company after the date hereof.
(o) JOINT PRESS RELEASE. Prior to the execution of this
Agreement, the parties will agree on the content of a joint press release
announcing the existence of this Agreement, which press release will be issued
as mutually agreed by the parties. Thereafter, the Company and the Investor
shall cooperate and consult, to the extent feasible, concerning any additional
press release, conference, advertising, announcements, professional or trade
publication, mass marketing materials, with respect to Transaction Documents and
the transactions contemplated thereby.
(p) ATTORNEYS' FEES. If Investor or the Company institutes any
action, suit or other Proceeding to enforce or interpret any Transaction
Document, then the prevailing party in such action, suit or Proceeding shall be
entitled to recover its attorneys' fees, experts' fees and court costs as
awarded by the court in the proceeding or a separate proceeding.
[The balance of this page is intentionally left blank.]
24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
NOVELL, INC. XXXXXXXX-XXXX, INC.
By: /s/ Xxxxxx Xxxxx By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------ ----------------------------------
Name: Xxxxxx Xxxxx Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President and Title: Chairman of the Board and
Chief Financial Officer Chief Executive Officer
Novell, Inc. Xxxxxxxx-Xxxx, Inc.
Date Signed: October 1, 1999 Date Signed:
-------------------------------- -----------------------------
Address: 000 Xxxx 0000 Xxxxx Xxxxxxx: 000 Xxxxx Xxxxxx Xx.,
Xxxxx, Xxxx 00000 Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Telephone No: 000-000-0000 Telephone No: 000-000-0000
with copies to: with copies to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx Xxxx X. Xxxx, Esq.
650 Page Mill Rd. Xxxxxx Xxxxxx & Zavis
Xxxx Xxxx, Xxxxxxxxxx 00000 000 Xxxx Xxxxxx Xx., Xxxxx 0000
Attn: Xxxxx X. Xxxxxxx, Esq. Xxxxxxx, Xxxxxxxx 00000
Xxxxx Xxxxxx, Esq.
Xxxxxxxx-Xxxx, Inc.
000 Xxxxx Xxxxxx Xx.,
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
