EXHIBIT 99.1.1
EXECUTION COPY
SYBARI SOFTWARE, INC.
SECURITIES PURCHASE AND REDEMPTION AGREEMENT
DATED AS OF MARCH 30, 2001
SYBARI SOFTWARE, INC.
SECURITIES PURCHASE AND REDEMPTION AGREEMENT
Dated as of March 30, 2001
TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE AND SALE OF SECURITIES; REDEMPTION ................................... 1
1.1 Purchase and Sale of Subordinated Debentures ................................... 1
1.2 Purchase and Sale of Series A Redeemable Preferred Stock ....................... 2
1.3 Purchase and Sale of Series B Convertible Redeemable Preferred Stock ........... 2
1.4 Use of Proceeds ................................................................ 2
1.5 Closing ........................................................................ 3
1.6 Options ........................................................................ 3
1.7 Distributions .................................................................. 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL
SHAREHOLDERS ............................................................................ 4
2.1 Organization and Corporate Power ............................................... 4
2.2 Authorization .................................................................. 4
2.3 Government Approvals ........................................................... 5
2.4 Authorized and Outstanding Stock ............................................... 5
2.5 Subsidiaries ................................................................... 6
2.6 Financial Information .......................................................... 6
2.7 Events Subsequent to the Date of the Financial Statements ...................... 7
2.8 Litigation ..................................................................... 7
2.9 Compliance with Laws and Other Instruments ..................................... 7
7.10 Taxes ......................................................................... 8
2.11 Real Property; Environmental Matters .......................................... 10
2.12 Personal Property ............................................................. 12
2.13 Intellectual Property; Proprietary Rights; Employee Restrictions .............. 12
2.14 Agreements of Directors, Officers and Employees ............................... 15
2.15 Governmental Approvals ........................................................ 16
2.16 Contracts and Commitments ..................................................... 16
2.17 Registration Rights ........................................................... 16
2.18 Insurance Coverage ............................................................ 16
2.19 Employee Matters .............................................................. 16
2.20 Customers ..................................................................... 18
2.21 No Brokers or Finders ......................................................... 18
2.22 Transactions with Affiliates .................................................. 18
2.23 Assumptions, Guarantees, etc. of Indebtedness of Other Persons ................ 18
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2.24 Federal Reserve Regulations ......................................................... 18
2.25 Restrictions on Subsidiaries ........................................................ 18
2.26 Status Under Certain Laws ........................................................... 18
ARTICLE III AFFIRMATIVE COVENANTS OF THE COMPANY .................................................. 19
3.1 Accounts and Reports ................................................................. 19
3.2 Payment of Taxes ..................................................................... 21
3.3 Maintenance of Key Man Insurance ..................................................... 21
3.4 Compliance with Laws, etc. ........................................................... 21
3.5 Inspection ........................................................................... 22
3.6 Corporate Existence; Ownership of Subsidiaries ....................................... 22
3.7 Compliance with ERISA ................................................................ 22
3.8 Board Approval ....................................................................... 22
3.9 Financings ........................................................................... 23
3.10 Meetings of the Board of Directors .................................................. 23
3.11 Rule 144A Information ............................................................... 23
3.12 Indebtedness ........................................................................ 23
3.13 Trading Policy ...................................................................... 23
3.14 Stay, Extension and Usury Laws ...................................................... 23
3.15 Increase Authorized Common Stock .................................................... 24
ARTICLE IV NEGATIVE COVENANTS OF THE COMPANY ...................................................... 24
4.1 Investments in Other Persons ......................................................... 24
4.2 Distributions ........................................................................ 25
4.3 Dealings with Affiliates ............................................................. 25
4.4 Merger ............................................................................... 26
4.5 Limitation on Options ................................................................ 26
4.6 Limitation on Restrictions on Subsidiary Dividends and Other Distributions ........... 26
4.7 No Conflicting Agreements ............................................................ 26
4.8 Change in Business ................................................................... 26
4.9 Indebtedness ......................................................................... 27
4.10 Liens ............................................................................... 27
4.11 Compensation; Consulting and Other Agreements ....................................... 27
4.12 Net Cash from Operations ............................................................ 27
4.13 EBITDA .............................................................................. 27
ARTICLE V INVESTMENT REPRESENTATIONS .............................................................. 27
5.1 Representations and Warranties ....................................................... 27
5.2 Permitted Transfers; Legends ......................................................... 29
ARTICLE VI SUBORDINATION OF DEBENTURES ............................................................ 30
6.1 Agreement to Subordinate ............................................................. 30
6.2. Acceleration of Senior Debt ......................................................... 30
6.3. Insolvency, Etc. .................................................................... 31
6.4. Payments Held in Trust .............................................................. 31
6.5. The Company's Obligations Unconditional ............................................. 31
6.6. Subrogation Upon Payment of Senior Debt ............................................. 31
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6.7. Notice ................................................................ 32
6.8. Knowledge ............................................................. 32
ARTICLE VII CONDITIONS OF PURCHASERS' OBLIGATIONS ......................................... 32
7.1 Effect of Conditions ................................................... 32
7.2 Intentionally Omitted .................................................. 32
7.3 Performance ............................................................ 32
7.4 Intentionally Omitted .................................................. 32
7.5 Opinion of Counsel ..................................................... 33
7.6 Intentionally Omitted .................................................. 33
7.7 Completion of Audit .................................................... 33
7.8 Intentionally Omitted .................................................. 33
7.9 Certificate of Incorporation ........................................... 33
7.10 Consents and Waivers .................................................. 33
7.11 Registration Rights Agreement ......................................... 33
7.12 Shareholders' Agreement ............................................... 33
7.13 Non-Competition, Non Solicitation and Non Disclosure Agreements ....... 33
7.14 Redemption Agreement .................................................. 33
7.15 Series A and B Preferred Stock Certificates Debentures ................ 33
7.16 Intentionally Omitted ................................................. 34
7.17 Stock Repurchase Agreement ............................................ 34
7.18 Secretary's Certificate ............................................... 34
7.19 Management Rights Letter .............................................. 34
7.20 FIRPTA Certificate; Form W-9 .......................................... 34
7.21 Intentionally Omitted ................................................. 34
7.22 Evidence of Cancellation of Outstanding Loans ......................... 34
ARTICLE VIII CONDITIONS OF THE COMPANY'S OBLIGATIONS ...................................... 34
8.1 Effect of Conditions ................................................... 34
8.2 Intentionally Omitted .................................................. 34
8.3 Shareholders' Agreement ................................................ 34
8.4 Registration Rights Agreement .......................................... 34
8.5 Performance ............................................................ 35
8.6 Consents and Waivers ................................................... 35
8.7 Redemption Agreement ................................................... 35
ARTICLE IX DEFAULTS AND REMEDIES .......................................................... 35
9.1 Events of Default; Acceleration ........................................ 35
9.2 Rescission of Acceleration ............................................. 37
ARTICLE X SURVIVAL; INDEMNIFICATION AND LIMITS ON LIABILITY ............................... 38
10.1 Survival of Representations and Warranties ............................ 38
10.2 Indemnification by the Principal Shareholders ......................... 38
10.3 Notice of Claim ....................................................... 39
ARTICLE XI CERTAIN DEFINITIONS ............................................................ 40
ARTICLE XII MISCELLANEOUS ................................................................. 43
12.1 Debenture Payments .................................................... 43
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12.2 Form, Registration, Transfer and Exchange of Debentures ........ 43
12.3 Parties in Interest ............................................ 44
12.4 Debentures Owned by Affiliates ................................. 44
12.5 Amendments and Waivers.......................................... 44
12.6 Notices ........................................................ 45
12.7 Expenses ....................................................... 45
12.8 Counterparts ................................................... 46
12.9 Effect of Headings ............................................. 46
12.10 Governing Law ................................................. 46
12.11 Certain Tax Matters ........................................... 46
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March 30, 2001
To: The Persons listed on
Schedule 1.1 attached hereto:
Re: Securities Purchase and Redemption Agreement
Ladies and Gentlemen:
Sybari Software, Inc., a New York corporation (the "Company"), and each of
Xxxxxx X. Xxxxxxx, Xxxxxx Xxxxxx, Xxxxxxx X. Xxxxxxxx and Xxxxxxx X. XxxxXxxxxxx
(each a "Principal Shareholder" and collectively the "Principal Shareholders")
hereby agree with you as follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES; REDEMPTION
1.1 Purchase and Sale of Subordinated Debentures. At the Closing (as
such term and other terms are defined in Article XI), the Company will sell to
you (the "Purchasers") 12% Senior Subordinated Debentures of the Company (the
"Debentures") in the aggregate principal amount of $15,000,000. The Debentures
shall be in the form of Exhibit A attached hereto. The Debentures shall have the
following terms, and shall be entitled to the following rights and benefits:
(a) The principal amount of the Debentures, plus all accrued, but
unpaid interest thereon, shall be payable in full on the earlier of (i) the
fifth anniversary of the Closing or (ii) the consummation of a Liquidity Event.
The Company may prepay the Debentures in whole or from time to time in
installments of not less than $50,000, without premium or penalty. Each such
optional prepayment shall be preceded by two (2) Business Days' notice. At any
time the Company prepays the Debentures, it shall also pay any accrued interest.
Any partial prepayment of the Debentures shall be allocated among all holders of
Debentures pro rata in proportion to the principal amount of the Debentures held
by each.
(b) The Debentures shall bear interest from the date of issuance
until the date of payment in principal in full. Interest shall be computed on
the basis of a 360 day year and the actual number of days elapsed, on the unpaid
principal amount of the Debentures at the
Applicable Interest Rate (as herein defined). Interest shall be payable on a
quarterly basis after the last day of each of calendar quarter commencing on the
first such date following Closing, or if any such date is not a Business Day, on
the next succeeding Business Day.
(c) The "Applicable Interest Rate" shall mean the rate of twelve
percent (12%) per annum; provided, however, that if an Event of Default shall
have occurred and be continuing, the Applicable Interest Rate shall increase to
15%.
(d) All payments of principal and interest on the Debentures shall
be made by the Company in lawful money of the United States in immediately
available federal funds (or at the request of the holder of a Debenture by a
certified or a bank check or wire transfer) on the date such payment is due.
(e) The indebtedness evidenced by the Debentures shall be junior
and subordinate in right of payment to all Senior Debt, as that term is defined
in Article VI hereof.
(f) The parties agree that the issue price of the Debentures shall
be their face amount for federal income tax purposes.
1.2 Purchase and Sale of Series A Redeemable Preferred Stock. At the
Closing, the Company will sell to the Purchasers 1,000,000 shares of Series A
Redeemable Preferred Stock of the Company, par value $.01 per share (the "Series
A Preferred Stock"), at a price of $5.00 per share, for a total purchase price
for the Series A Preferred Stock of $5,000,000. The Series A Preferred Stock
shall have the rights, terms, preferences and privileges set forth in the
Description of Preferred Stock attached hereto as Exhibit B.
1.3 Purchase and Sale of Series B Convertible Redeemable Preferred
Stock. At the Closing, the Company will sell to the Purchasers fifty (50) shares
of Series B Convertible and Redeemable Preferred Stock of the Company, par value
$.01 per share (the "Series B Preferred Stock" and, together with the Debentures
and the Series A Preferred Stock, the "Securities"). The Series B Preferred
Stock shall be sold at a price of $200,000 per share, for a total purchase price
of $10,000,000 for the Series B Preferred Stock. The Series B Preferred Stock
shall have rights powers and privileges set forth on Exhibit B attached hereto.
The shares of Series A Preferred Stock and Series B Preferred Stock purchased
pursuant to the foregoing shall be referred to herein as the "Purchased Shares."
Shares of Common Stock issued or issuable upon conversion of the Series B
Preferred Stock are herein referred to as the "Conversion Shares." Subject to
Section 3.15, the Company hereby covenants that it will reserve from its
authorized but unissued shares of Common Stock a sufficient number of shares to
issue the Conversion Shares which may be issuable upon conversion of the Series
B Preferred Stock from time to time.
1.4 Use of Proceeds. The proceeds from the sale of the Securities, shall
be used as follows: (i) $25,000,000 of the proceeds shall be used for the
redemption an aggregate of fifty (50) shares of Common Stock (the "Redemption
Shares") from the Principal Shareholders in the
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share amounts set forth on Schedule 1.4 attached hereto (the "Redemption"),
pursuant to a Stock Redemption Agreement to be entered into among the Company
and the Principal Shareholders in substantially the form of Exhibit C attached
hereto (the "Stock Redemption Agreement"); and (ii) $5,000,000 shall be used for
working capital and other corporate purposes. Each Principal Shareholder shall
have redeemed from him that number of shares of Common Stock set forth opposite
his or her name on Schedule 1.4 attached hereto. After giving effect to the
issuance of the Securities and the redemption of the Redemption Shares, the
outstanding shares of Common Stock shall be held by the Principal Shareholders
and in such amounts as are set forth on Schedule 1.4 attached hereto. At the
Closing, each Principal Shareholder, upon the execution of a Stock Redemption
Agreement, shall cease to have any rights as a shareholder with respect to the
Redemption Shares. At the Closing, each Principal Shareholder shall be entitled
to receive, upon surrender to the Company of a certificate or certificates or
other documents or instruments representing the Redemption Shares, accompanied
by a duly completed and executed stock transfer power, the proceeds due such
Principal Shareholder in accordance with Schedule 1.4 attached hereto, which
amount shall be paid by wire transfer of immediately available funds to an
account specified by such Principal Shareholder.
1.5 Closing. The purchase of the Securities shall be made at a closing
(the "Closing") to be held at the offices of Xxxx Xxxxxxx LLP, 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, at 10:00 A.M. on March 30, 2001 (the "Closing Date").
Payment at the Closing for the Securities shall be by wire transfer payable in
immediately available federal funds. Each Purchaser shall pay that amount for
the Securities being acquired by it at the Closing as described on Schedule 1.1
hereof. At the Closing, the Company will deliver to each Purchaser one or more
certificates and debentures representing the Securities purchased by such
Purchaser, in such denominations and issued in such names as may be requested by
such Purchaser.
1.6 Options. Within ninety (90) days of the Closing Date, the Company
shall establish an employee stock option plan (the "Employee Stock Option
Plan"), in a form reasonably acceptable to the Purchasers, pursuant to which
options for a total of up to ten (10) shares of Common Stock (the "Non-Founder
Options") may be granted by the Principal Shareholders to members of senior
management and Directors specified by the Principal Shareholders, other than the
other Principal Shareholders, during the eighteen (18) month period immediately
following the Closing Date. The shares of Common Stock which are subject to the
Non-Founder Options shall be provided by the Principal Shareholders in
accordance with their respective contribution percentages set forth on Schedule
1.6 attached hereto, and the proceeds from the exercise of such Non-Founder
Options shall be paid to the Principal Shareholders in accordance therewith.
Non-Founder Options shall be issued to such Persons (other than the Principal
Shareholders), upon such terms, including vesting and exercise price, as shall
be as set forth in the Employee Stock Option Plan. On or before the date
eighteen (18) months following the Closing Date, the Company shall establish an
option plan upon such terms, including vesting, as shall be determined by the
compensation committee of the Company's Board of Directors.
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1.7 Distributions. The Company shall make no distributions to any of its
Shareholders on or before the Closing Date, except (i) the Company shall
distribute funds to the Shareholders equal to the net amount of income of the
Company that is passed through to its Shareholders pursuant to Section 1366 of
the Code and that is not tax-exempt income (the "S Corporation Earnings") for
fiscal year 2000; and (ii) within thirty (30) days after the Closing Date, the
Company shall distribute to the Shareholders their respective share of the
Company's Fiscal Year 2001 S Corporation Tax Liability. For purposes of this
Agreement, the term "Fiscal Year 2001 S Corporation Tax Liability" means the
highest marginal federal income Tax rate applicable to any Principal Shareholder
multiplied by the Company's S Corporation Earnings for the Short S Year, as that
term is defined in Section 12.11(h). Notwithstanding the foregoing, no such
distributions shall be made by the Company unless: immediately after (i) the
distributions described in the foregoing sentence; (ii) the receipt of funds
from any Shareholder as repayment for any outstanding loans from the Company to
such Shareholder described on Schedule 1.7 attached hereto, which loans shall
represent any and all outstanding loans from the Company to any Shareholder as
of the Closing Date; and (iii) the accounting for the proceeds of the sale of
the Securities, less the payment of any and all Transaction Fees (as such term
is defined herein), the Company shall have a minimum of $1,500,000 in Cash or
Cash Equivalents on the Closing Date. The term "Transaction Expenses" shall
include all fees and expenses incurred or payable by the Company with respect to
this Agreement and the transactions contemplated hereunder, including, without
limitation, reasonable fees and expense of legal counsel, accountants,
investment bankers and any other advisors for the Principal Shareholders, the
Company and the Purchasers.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL
SHAREHOLDERS
In order to induce the Purchasers to purchase the Securities, the Company
and the Principal Shareholders, acting severally and not jointly, make the
following representations and warranties which shall be true, correct and
complete in all respects on the date hereof.
2.1 Organization and Corporate Power. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own its properties and to carry on
its business as presently conducted. The Company and each of its Subsidiaries is
qualified as a foreign corporation in good standing in each jurisdiction in
which it owns or leases real property or maintains employees, except where such
failure to be so qualified would not have a Material Adverse Effect.
2.2 Authorization. (a) The Company has all necessary corporate power and
has taken all necessary corporate action required for the due authorization,
execution, delivery and performance by the Company of this Agreement and the
Related Agreements, and any other
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agreements or instruments executed by the Company in connection herewith or
therewith and the consummation of the transactions contemplated herein or
therein, and for the due authorization, issuance and delivery of the Securities
and the Conversion Shares, and the redemption of the Redemption Shares. The
issuance of the Securities and the Conversion Shares does not require any
further corporate action and is not and will not be subject to any preemptive
right, right of first refusal or the like. This Agreement, the Related
Agreements and the other agreements and instruments executed by the Company in
connection herewith or therewith will each be a valid and binding obligation of
the Company enforceable in accordance with its respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(b) Each Principal Shareholder has full legal capacity and
unrestricted power to execute and deliver this Agreement and the Related
Agreements to which he is a party, and any other agreements or instruments
executed by him in connection herewith or therewith and to consummate the
transactions contemplated herein or therein. This Agreement, the Related
Agreements and the other agreements and instruments executed by the Principal
Shareholders in connection herewith or therewith, each will be a valid and
binding obligation of each Principal Shareholder enforceable in accordance with
its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws relating to or affecting enforcement of creditors' rights generally and
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
2.3 Government Approvals. No consent, approval, license or authorization
of, or designation, declaration or filing with, any court or governmental
authority is or will be required on the part of the Company or the Principal
Shareholders in connection with the execution, delivery and performance by the
Company or the Principal Shareholders of this Agreement, any of the Related
Agreements and any other agreements or instruments executed by the Company or
the Principal Shareholders in connection herewith or therewith, or in connection
with the issuance of the Securities and the Conversion Shares, except for (i)
those which have already been made or granted, and (ii) the filing of
registration statements with the Securities and Exchange Commission (the
"Commission") and any applicable state securities commission as specifically
provided for in the Registration Rights Agreement.
2.4 Authorized and Outstanding Stock. The authorized capital stock of
the Company consists of (i) 200 shares of Common Stock, of which 200 shares are
validly issued and outstanding and held of record and owned beneficially by the
Persons set forth on Schedule 2.4 attached hereto, free and clear of all liens,
security interests, restrictions on transfer, and other encumbrances.
Immediately after the Closing, the authorized capital stock of the Company will
consist of (a) 400 shares of Common Stock, 150 of which will be issued and
outstanding and held of record by the Persons set forth on Schedule 1.4 attached
hereto; (b) 1,000,000 shares of
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Series A Preferred Stock with the rights, terms and privileges set forth in
Exhibit B and of which 1,000,000 shares will be issued are outstanding and held
of record by the Purchasers as set forth on Schedule 1.1; and (c) 50 shares of
Series B Preferred Stock with the rights, terms, and privileges set forth in
Exhibit B and of which 50 shares will be issued and outstanding and held of
record by the Purchasers as set forth on Schedule 1.1 attached hereto. All
issued and outstanding shares of capital stock are, and when issued in
accordance with the terms hereof, all Securities and the Conversion Shares will
be, duly and validly authorized, validly issued and fully paid and
non-assessable and free from any restrictions on transfer, except for
restrictions imposed by federal or state securities or "blue-sky" laws and
except for those imposed pursuant to any Related Agreement. Except as set forth
on Schedule 2.4, there are no outstanding warrants, options, commitments,
preemptive rights, rights to acquire or purchase, conversion rights or demands
of any character relating to the capital stock or other securities of the
Company. All issued and outstanding shares of capital stock of the Company were
issued (i) in transactions exempt from the registration provisions of the Act,
and (ii) in compliance with or in transactions exempt from the registration
provisions of applicable state securities or "blue-sky" laws.
2.5 Subsidiaries. Except as set forth on Schedule 2.5 attached hereto,
the Company does not have any Subsidiaries or other equity investment in any
other Person. All of the Company's Subsidiaries are either directly or
indirectly wholly owned by the Company.
2.6 Financial Information. The Company has previously delivered to the
Purchasers the audited consolidated financial statements of the Company and its
Subsidiaries for the years ended December 31, 1999 and December 31, 2000,
accompanied by the audit report of Xxxxx, Xxxxxx & Company, (collectively the
"Audited Financial Statements) and the unaudited financial statements as of
February 28, 2001, and the two (2) months then ended (the "Unaudited Financial
Statements" together with the Audited Financial Statements the "Financial
Statements"). The Financial Statements are in accordance with the books and
records of the Company and present fairly in accordance with generally accepted
accounting principles ("GAAP") applied on a basis consistent with prior periods
the financial condition and results of operations of the Company and its
Subsidiaries as of the dates and for the periods shown; provided, however, that
the Unaudited Financial Statements (i) do not have footnotes required by GAAP,
(ii) are subject to normal and customary year end adjustments, none of which
will be material and (iii) are not consolidated. Neither the Company nor any of
its Subsidiaries has any material liability or obligation, contingent or
otherwise, which is required to be reserved against or reflected and is not
adequately reserved against or reflected in the Financial Statements, except for
liabilities and obligations incurred in the ordinary course of business since
December 31, 2000. Except as set forth on Schedule 2.6, since December 31, 2000,
there has been no change in the business, assets, liabilities, condition
(financial or otherwise) or operations of the Company and its Subsidiaries
except for changes which, individually or in the aggregate, would not have a
Material Adverse Effect, whether or not insured against. As of the Closing Date,
after giving effect to the payments and distributions to be made in accordance
with Section 1.7, Cash or Cash Equivalents of the Company shall equal a minimum
of $1,500,000.
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2.7 Events Subsequent to the Date of the Financial Statements. Except as
set forth on Schedule 2.7, since December 31, 2000, the Company has not, except
in the ordinary course of business, (i) issued any stock, stock options,
warrants or other securities convertible into or exchangeable for capital stock,
or any bond or other corporate security, (ii) borrowed any money or mortgaged,
pledged or subjected to any lien any of its assets, tangible or intangible,
(iii) sold, assigned or transferred any of its tangible assets, or cancelled any
debt or claim, or (iv) suffered any loss of property or waived any right of
substantial value. Except as set forth on Schedule 2.7, since December 31, 2000,
the Company has not declared or made any payment or distribution to stockholders
in any capacity or purchased or redeemed any shares of its capital stock or
other securities.
2.8 Litigation. Except as otherwise set forth on Schedule 2.8, there is
no litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company and the Principal Shareholders threatened, against the
Company or any of its Subsidiaries or affecting any of its properties or assets,
or against any officer, key employee or shareholder of the Company or any of its
Subsidiaries in his capacity as such, and, to the knowledge of the Company and
the Principal Shareholders, no event has occurred nor does there exist any
condition on the basis of which any litigation, proceeding or investigation is
reasonably likely to be instituted with any substantial likelihood of recovery
where such recovery would have a Material Adverse Effect. Neither the Company,
any of its Subsidiaries nor any officer, key employee or shareholder of the
Company or any of its Subsidiaries in his capacity as such is, to the knowledge
of the Company and the Principal Shareholders, in material default with respect
to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency.
2.9 Compliance with Laws and Other Instruments. The Company is in
compliance with all of the provisions of this Agreement and of its charter and
by-laws, and, in all material respects with the provisions of each mortgage,
indenture, lease, license, other agreement or instrument, judgment, decree,
judicial order, federal, state and local statute (including, without limitation,
any import or export laws), and regulation by which it is bound or to which it
or its properties are subject. Neither (i) the execution, delivery or
performance of this Agreement and the Related Agreements nor (ii) the
consummation of the transactions contemplated hereby and thereby, nor (iii) the
offer, issuance, sale or delivery of the Securities and the Conversion Shares,
nor (iv) the redemption of the Redemption Shares, will, with or without the
giving of notice or passage of time, or both, (a) violate, or result in any
breach of, or constitute a default under, or result in the imposition of any
encumbrance upon any asset of the Company pursuant to any provision of the
Company's charter or by-laws, or any statute, rule or regulation, contract,
lease, judgment, decree or other document or instrument by which the Company is
bound or to which it or any of its properties are subject, or (b) to the
knowledge of the Company and the Principal Shareholders, cause the Company to
lose the benefit of any right or privilege it presently enjoys, or (c) to the
knowledge of the Company and the Principal Shareholders, cause any Person who is
expected to normally do business with the Company or any of its Subsidiaries to
discontinue to
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do so on the same basis, except in each case for violations, breaches, defaults,
encumbrances or losses which would not have a Material Adverse Effect.
2.10 Taxes. Except as set forth on Schedule 2.10, (i) the Company is an S
corporation and has been since its incorporation an S corporation within the
meaning of Subchapter S of Chapter 1 of Subtitle A of the Code, for federal
income Tax purposes and for any state and local income Tax purposes; (ii) the
Company and each of its Subsidiaries has timely filed all Tax Returns required
to be filed by it within the applicable periods for such filings, except where
the failure to do so would not have a Material Adverse Effect, and all such Tax
Returns are true, correct, complete in all material respects and in compliance
with law; (iii) all Taxes shown to be payable on such Tax Returns or on
subsequent assessments with respect thereto have been paid in full on a timely
basis, and no other Taxes are payable by the Company or any of its Subsidiaries
with respect to items or such periods (whether or not shown on or reportable on
such Tax Returns) or with respect to any period prior to the Closing Date; (iv)
the amount of the Company's and each of its Subsidiary's liability for unpaid
Taxes for all periods ending on or before December 31, 2000 does not, in the
aggregate, exceed to a material extent the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) reflected on the
Financial Statements, and the amount of the Company's and each of its
Subsidiary's liability for unpaid Taxes for all periods ending on or before the
Closing Date shall not, in the aggregate, exceed to a material extent the amount
of the current liability accruals for Taxes (excluding reserves for deferred
Taxes) as such accruals are reflected on the Financial Statements, as adjusted
for operations and transactions in the ordinary course of business of the
Company and each of its Subsidiaries since the Financial Statements in
accordance with past custom and practice; (v) the Company and each Subsidiary
has withheld and paid over all material Taxes required to have been withheld and
paid over, and complied with all information reporting and back-up withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party; (vi) no deficiencies for any Tax are currently
assessed or are proposed for assessment against the Company or any of its
Subsidiaries, no Tax Return of the Company and each of its Subsidiaries has ever
been audited, and there is no such audit pending or contemplated; there is no
Tax lien, whether imposed by any federal, state, local or foreign Taxing
authority, outstanding or threatened against the assets, properties or business
of the Company or any of its Subsidiaries, other than any lien for Taxes not yet
due and payable; neither the Company nor any of its Subsidiaries has waived any
statute of limitations in respect to Taxes nor agreed to any extension of time
with respect to any Tax assessment or deficiency, or the collection of any Tax,
which remains outstanding; and the Company or any of its Subsidiaries has made
available to the Purchasers for inspection true and complete copies of (A)
relevant portions of income Tax audit reports, statements of deficiencies,
closing or other agreements received by the Company or any of its Subsidiaries
or on behalf of the Company or any of its Subsidiaries relating to Taxes, and
(B) all material federal, state and foreign income or franchise Tax Returns for
the Company and each of its Subsidiaries for all periods for which the statute
of limitations has not run; (vii) no Shareholder or director or officer (or
employee responsible for Tax matters) of the Company or any of its Subsidiaries
is aware of or has notice
8
of any impending action by any authority to assess any additional Taxes for any
period for which a Tax Return has been filed, there is no pending dispute or
claim concerning any Tax liability of the Company or any of its Subsidiaries
claimed or raised by any authority, and there are no proposed assessments of any
Tax against the Company or any of its Subsidiaries; (viii) no claim has ever
been made by any authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction, and the Company and each of its Subsidiaries does not do
business in or derive income from any state, local, territorial or foreign
taxing jurisdiction other than those for which all Tax Returns have been
furnished to the Purchasers; (ix) neither the Company nor any of its
Subsidiaries has filed a consent under Section 341(f) of the Code concerning
collapsible corporations, or agreed to have Section 341(f)(2) apply to any
disposition of an asset owned by the Company and each of its Subsidiaries; (x)
neither the Company nor any of its Subsidiaries has been, nor will it be at the
Closing, a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code; (xi) neither the Company nor any of its
Subsidiaries has liability for the Taxes of any person under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, pursuant to a tax
sharing agreement, indemnification, or guaranty, or otherwise; (xii) neither the
Company nor any of its Subsidiaries has agreed, or is required, to make an
adjustment under Section 481 of the Code (or any comparable provisions of state,
local or foreign law) by reason of a change in accounting method, including on
account of the transactions contemplated herein or in related agreements, and
the Company's use of the cash method of accounting and each of its Subsidiary's
use of the accrual method of accounting complies with all applicable law; (xiii)
for federal income Tax purposes, neither the Company nor any of its Subsidiaries
is a partner nor is it treated as a partner in any partnership, joint venture or
any other entity treated as a partnership for federal income Tax purposes; (xiv)
no power of attorney that is currently in force has been granted with respect to
any matter relating to Taxes that could affect the Company or any of its
Subsidiaries; (xv) neither the Company nor any of its Subsidiaries has received
any written ruling of a taxing authority relating to Taxes or entered in any
written and legally binding agreement with a taxing authority relating to taxes,
including any closing agreements under Section 7121 of the Code; (xvi) neither
the Company nor any of its Subsidiaries shall be liable for any amount
attributable to the recapture of previous material Tax benefits or losses of the
Company or any of its Subsidiaries or otherwise required by law to pay, reserve
or provide for any material Tax payable in connection with the earnings,
operations, business, employees or assets of the Company or any of its
Subsidiaries in each case attributable to periods on or prior to the Closing
Date; (xvii) neither the Company nor any of its Subsidiaries would be liable for
any Tax under Code Section 1374 if its assets were sold at their fair market
value at the Closing Date, and neither the Company nor any of its Subsidiaries
has in the past ten (10) years (A) acquired assets from another corporation in a
transaction in which the Company's or any of its Subsidiary's Tax basis for the
acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of the
transferor, or (B) acquired the stock of any corporation that is a qualified
subchapter S subsidiary; (xviii) neither the Company nor any of its Subsidiaries
has used the installment method to defer any material liability for Taxes for
9
any Tax period ending at or before the Closing Date; and (xix) neither the
Company nor any of its Subsidiaries has been the "distributing corporation"
(within the meaning of Section 355(c)(2) of the Code) with respect to a
transaction described in Section 355 of the Code within the three (3) year
period ending as of the date of this Agreement. For purposes of this Agreement,
the term "Tax" shall include all federal, state, local and foreign taxes,
including income, franchise, property, sales, use, gross receipts, excise,
withholding, payroll and employment taxes or other similar assessments of any
kinds whatsoever, including, without limitation, any and all interest, penalties
and additional imposed with respect to such amounts, and the term "Tax Returns"
means all reports, returns, declarations, statements, or other information
required to be supplied to a taxing authority in connection with Taxes.
2.11 Real Property; Environmental Matters.
(a) Schedule 2.11 sets forth the addresses and uses of all real
property that the Company and each of its Subsidiaries owns or leases or
subleases, and any lien (exclusive of any statutory landlord's lien or any
Permitted Lien) or encumbrance for which the Company and each of its
Subsidiaries is liable and which the Company and each of its Subsidiaries has
secured with any such owned real property or leasehold interest, specifying in
the case of each such lease or sublease, the name of the lessor or sublessor, as
the case may be, the lease term and the obligations of the lessee thereunder (or
in lieu thereof, attaching a copy of such lease or sublease). There are no
defaults by the Company or any of its Subsidiaries, or to the knowledge of the
Company and the Principal Shareholders, by any other party thereto, which might
curtail in any material respect the present use by the Company of the property
listed on Schedule 2.11. The performance by the Company of this Agreement and
the Related Agreements will not result in the termination of, or in any increase
of any amounts payable under, any lease listed on Schedule 2.11.
(b) There is no material violation by the Company or any of its
Subsidiaries of any law, regulation or ordinance (including, without limitation,
laws, regulations or ordinances relating to zoning, environmental, city planning
or similar matters) relating to any real property or part thereof, as the case
may be, owned, leased or subleased by the Company or any of its Subsidiaries.
(c) All real property, owned or leased by the Company or any of
its Subsidiaries complies, in all material respects, with all applicable laws,
rules, regulations, order, ordinances, judgments and decrees of any governmental
authorities with respect to all environmental statutes, rules and regulations.
Neither the Company nor any of its Subsidiaries has received notice of, nor does
the Company or any Principal Shareholder have knowledge of, any past or present
events, conditions, circumstances, activities, practices, incidents, actions or
plans of the Company or any of its Subsidiaries which are likely to cause
material noncompliance with, or which may give rise to any liability in excess
of $25,000 for any claim, action, suit, proceeding, hearing, or investigation,
based on or related to the disposal, storage, handling, manufacture, processing,
distribution, use, treatment or transport, or the emission,
10
discharge, release or threatened release into the environment, of any Substance
(as defined herein). As used in this Section 2.11, the term "Substance" or
"Substances" shall mean any pollutant, hazardous substance, hazardous material,
hazardous waste or toxic waste, as defined in any presently enacted federal,
state or local statute or any regulation that has been promulgated pursuant
thereto. No part of any of the real property owned or leased by the Company has
been listed or proposed for listing on the National Priorities List established
by the United States Environmental Protection Agency, or any other such similar
list by any federal, state or local authorities.
(d) To the knowledge of the Company and the Principal
Shareholders, no event has occurred and no condition exists or operating
practice is being employed, which event, condition or practice is or was caused
by or is under the control of the Company, or was caused by any third party
including a prior owner, that could give rise to liability on the part of the
Company or any of its Subsidiaries, at the present time, for any losses,
liabilities, damages (whether consequential or otherwise), settlements,
penalties, interest, expenses and costs of responses, including any such
liability on account of the right of any governmental or private entity or
person, and including closure expenses, costs of assessment, containment,
removal, or response (other than monitoring or transportation or disposal of
materials required to be transported or disposed of in the ordinary course of
business consistent with past practice) arising under any rule or federal,
state, or local statute, or any regulation that has been promulgated pursuant
thereto, or common law, as a result of or in connection with, or alleged to be
as a result of or in connection with, the following:
(A) the handling, storage, use, transportation or disposal
by the Company or any of its Subsidiaries of any
Substances in or near or from the real property owned or
leased by the Company or any of its Subsidiaries;
(B) the handling, storage, use, transportation or disposal
of any Substances by the Company or any of its
Subsidiaries which Substances were a product, by-product
or otherwise resulted from the operations conducted by
or on behalf of the Company or any of its Subsidiaries;
(C) any intentional or unintentional emission, discharge or
release of any Substances by or on behalf of the Company
or any of its Subsidiaries in or near or from any real
property owned or leased by the Company or any of its
Subsidiaries into or upon the air, surface water, ground
water or land or any disposal, handling, manufacturing,
processing, distribution, use, treatment, or transport
of such Substances in or near or from facilities by or
on behalf of the Company or any of its Subsidiaries; or
11
(D) the presence of any friable asbestos-containing
materials on any real property owned or leased by the
Company or any of its Subsidiaries, including, but not
limited to, the inclusion of such materials in the
interior walls, floors, ceilings, tile or insulation of
the real property owned or leased by the Company or any
of its Subsidiaries; provided that the parties
acknowledge that no testing has been done at any of the
Company's or any Subsidiary's real properties relating
to asbestos.
(e) The Company and each of its Subsidiaries has all
registrations, permits, licenses, and approvals issued by or on behalf of any
federal, state or local governmental body or agency if any ("Environmental
Permits") that are required in connection with the operation by the Company of
its business, the discharge or emission of Substances by the Company and each of
its Subsidiaries from real property owned or leased by the Company and each of
its Subsidiaries or the generation, treatment, storage, transportation, or
disposal of any such Substances by the Company.
2.12 Personal Property. Except as set forth on Schedule 2.12 and except
for property sold or otherwise disposed of in the ordinary course of business
since December 31, 2000, the Company owns free and clear of any material liens
or encumbrances, other than Permitted Liens, all of the personal property
reflected as owned by the Company and each of its Subsidiaries in the Last
Balance Sheet, and all other material items of personal property acquired by the
Company and each of its Subsidiaries through the date hereof. All material items
of such personal property are in normal operating condition, wear and tear
excepted.
2.13 Intellectual Property; Proprietary Rights; Employee Restrictions.
For the purposes of this Agreement, the following terms have the following
definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, computer programs and
other computer software, user interfaces, processes and formulae, source code,
object code, algorithims, architecture, structure, display screens, layouts,
development tools, instructions, templates and marketing materials, designs and
all documentation relating to any of the foregoing; (iii) all copyrights,
copyrights registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (iv) all industrial designs and any
registrations and applications therefor throughout the world; (v) all trade
names, logos, common law trademarks and service marks, trademark and service
xxxx registrations, intent-to-use applications and other registrations and
applications therefor throughout the world; (vi) all databases and data
collections and all rights therein throughout the world; (vii) all domain names;
(viii) all economic rights of authors and inventors,
12
however denominated, throughout the world, and (ix) any similar or equivalent
rights to any of the foregoing anywhere in the world.
"Company Intellectual Property" shall mean any Intellectual Property that
is owned by or exclusively licensed to, either the Company or any of the
Company's Subsidiaries.
(a) Except as set forth on Schedule 2.13, no Company Intellectual
Property or product or service of the Company or any of its subsidiaries is
subject to any proceeding or outstanding decree, order, judgment, contract,
license, agreement, or stipulation restricting in any manner the use, transfer,
or licensing thereof by Company or any of its Subsidiaries, or which may affect
the validity, use or enforceability of such Company Intellectual Property.
(b) Set forth on Schedule 2.13 hereto is a list of all material
Company Intellectual Property or other material Intellectual Property used by
the Company (other than generally available software such as WordPerfect and the
like). True and correct copies of all licenses, assignments and releases
relating to such Intellectual Property have been provided to the Purchasers
prior to the date hereof, all of which are valid and binding agreements of the
parties thereto, enforceable in accordance with their terms. The Company and
each of its Subsidiaries owns and has good and exclusive right, title and
interest to, or (x) has exclusive license to, each material item of Company
Intellectual Property and (y) has non-exclusive license to other material
Intellectual Property used by Company and each of its Subsidiaries, in each
case, free and clear of any material lien or encumbrance; and all such
Intellectual Property rights are in full force and effect. The Company and/or
any of its Subsidiaries is the exclusive owner of all trademarks and trade names
used in connection with the operation or conduct of the business of Company,
including the sale of any products or the provision of any services by Company
or any of its Subsidiaries. The Company and/or each of its Subsidiaries owns
exclusively, and has good title to, all copyrighted works that are products of
the Company of any of its Subsidiaries or which Company or any of its
Subsidiaries otherwise expressly purports to own. No university, government
agency (whether federal or state) or other organization has sponsored research
and development conducted by the Company or any of its Subsidiaries or has any
claim of right to or ownership of or other encumbrance upon the Intellectual
Property Rights of the Company or any of its Subsidiaries.
(c) All patents, patent applications, trademarks, service marks,
copyrights, mask work rights and domain names of the Company or any of its
Subsidiaries have been duly registered and/or filed with or issued by each
appropriate governmental entity in the jurisdictions indicated on Schedule 2.13
hereto, all necessary affidavits of continuing use have been filed, and all
necessary maintenance fees have been paid to continue all such rights in effect,
except where the failure to have made any such registration or filing would have
a Material Adverse Effect.
(d) To the extent that any Intellectual Property (including
without limitation software, hardware, copyrightable works and the like) has
been developed, created, modified or improved by a third party for the Company,
the Company and each of its Subsidiaries has a
13
written agreement with such third party that assigns to the Company or any of
its Subsidiaries ownership of such Intellectual Property, each of which is a
valid and binding agreement of the parties thereto, enforceable in accordance
with its terms; and the Company thereby has obtained ownership of, and is the
exclusive owner of such work, material or invention by operation of law or by
valid assignment, to the fullest extent it is legally possible to do so. To the
knowledge of the Company and the Principal Shareholders, the Company and each of
its Subsidiaries has the right to use all trade secrets, data, customer lists,
log files, hardware designs, programming processes, software and other
information required for or incident to its products or its business (including,
without limitation, the operation of its Web sites) as presently conducted and
has no reason to believe that any of such information that is provided to the
Company or any of its Subsidiaries by third parties will not continue to be
provided to the Company or any of its Subsidiaries on the same terms and
conditions as currently exist.
(e) Neither the Company nor any of its Subsidiaries has
transferred ownership of, or granted any exclusive license with respect to, any
Intellectual Property that is or was Company Intellectual Property, to any third
party.
(f) To the knowledge of the Company and the Principal
Shareholders, the operation of the business of the Company and each of its
Subsidiaries as such business currently is conducted, including the Company's
and each of its Subsidiary's design, development, manufacture, marketing and
sale of the products or services of the Company (including products currently
under development) has not, does not and will not infringe or misappropriate the
Intellectual Property of any third party or constitute unfair competition or
trade practices under the laws of any jurisdiction.
(g) Except as set forth on Schedule 2.13(g), neither the Company
nor any of its Subsidiaries has received any notice or other claim from any
third party that the operation of the business of the Company or any act,
product or service of the Company or any of its Subsidiaries infringes, may
infringe or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(h) To the knowledge of the Company and the Principal Shareholder,
no person has or is infringing or misappropriating any the Company Intellectual
Property or other Intellectual Property Rights in any of its products,
technology or services, or has or is violating the confidentiality of any of its
proprietary information.
(i) The Company and each of its Subsidiaries has taken reasonable
steps to protect the Company's rights in the Company's proprietary and/or
confidential information and material trade secrets or any trade secrets or
confidential information of third parties provided to Company, and, without
limiting the foregoing, Company has and enforces a policy requiring each
employee and contractor to execute a proprietary information/confidentiality
agreement substantially in the form provided to the Purchasers, and all current
and former employees and contractors of the Company and any of its Subsidiaries
have executed such an agreement. To the
14
knowledge of the Company and the Principal Shareholders, all trade secrets and
other confidential information of the Company and each of its Subsidiaries are
not part of the public domain or knowledge, nor, to the knowledge of the Company
and the Principal Shareholder, have they been misappropriated by any person
having an obligation to maintain such trade secrets or other confidential
information in confidence for the Company and each of its Subsidiaries. To the
knowledge of the Company and the Principal Shareholders, no employee or
consultant of the Company or any of its Subsidiaries has used any material trade
secrets or other confidential information of any other person in the course of
their work for the Company. To the knowledge of Company and the Principal
Shareholders, neither the Company nor any of its Subsidiaries is making unlawful
use of any confidential information or material trade secrets of any past or
present employees of the Company.
All material Intellectual Property Rights purported to be owned by the
Company and each of its Subsidiaries which were developed, worked on or
otherwise held by any employee, officer or consultant are owned free and clear
by the Company by operation of law or have been validly assigned to the Company,
each of its Subsidiaries, and such assignments have been provided to Parent and
are valid binding agreements of the parties thereto, enforceable in accordance
with their terms. Neither the Company, any of its Subsidiaries, nor any
Principal Shareholder, nor, to the knowledge of the Company and the Principal
Shareholders, any of the Company's or Subsidiary's employees, have any
agreements or arrangements with current or former employers relating to (i)
confidential information or trade secrets of such employers, or (ii) the
assignment of rights to any inventions, know-how or intellectual property of any
kind. To the knowledge of the Company and the Principal Shareholders, no such
persons are bound by any consulting agreement relating to confidential
information or trade secrets of another entity that are being violated by such
persons. The activities of the Company's and each of its Subsidiary's employees
and consultants on behalf of the Company and such Subsidiary do not violate in
any material respects any agreements or arrangements known to the Company or any
Principal Shareholder which any such employees or consultants have with former
employers or any other entity to whom such employees or consultants may have
rendered consulting services.
(j) To the knowledge of the Company and the Principal
Shareholders, all information and content of the Company's and each Subsidiary's
World Wide Web sites (other than information provided by users, customers and
advertisers) is accurate and complete in all material respects.
2.14 Agreements of Directors, Officers and Employees. To the knowledge of
the Company and the Principal Shareholders, no director, officer or employee of,
or consultant to the Company or any of its Subsidiaries is in violation of any
terms of any employment contract, non-competition agreement, non-disclosure
agreement, patent disclosure or assignment agreement or other contract or
agreement containing restrictive covenants relating to the right of any such
director, officer, employee or consultant to be employed or engaged by the
Company and each of its Subsidiaries because of the nature of the business
conducted or proposed to be
15
conducted by the Company and each of its Subsidiaries, or relating to the use of
trade secrets or proprietary information of others.
2.15 Governmental Approvals. The Company and each of its Subsidiaries has
all the material permits, licenses, import and export licenses, orders,
franchises and other rights and privileges of all federal, state, local or
foreign governmental or regulatory bodies necessary for the conduct of its
business as presently conducted. All such material permits, licenses, orders,
franchises and other rights and privileges are in full force and effect and, to
the knowledge of the Company and the Principal Shareholders, no suspension or
cancellation of any of them is threatened. None of such permits, licenses,
orders, franchises or other rights and privileges will be affected by the
consummation of the transactions contemplated in this Agreement and the Related
Agreements.
2.16 Contracts and Commitments. Except as set forth on Schedule 2.16
attached hereto, neither the Company nor any of the Company's Subsidiaries has
any written or oral contract, obligation or commitment which is material or
which involves a potential material commitment, or any stock redemption or stock
purchase agreement, stock option plan, shareholders' agreement, financing
agreement, license or real or personal property lease. For purposes of this
Section 2.16, a contract, obligation or commitment shall be deemed material if
it requires future expenditures by the Company or any of its Subsidiaries in
excess of $50,000 or requires payment to the Company or any of its Subsidiaries
in excess of $50,000 or is not cancelable by the Company or any of its
Subsidiaries without penalty within thirty (30) days.
2.17 Registration Rights. The Company has not granted any rights relating
to registration of its capital stock under the Act or state securities laws
other than those contained in the Registration Rights Agreement.
2.18 Insurance Coverage. Schedule 2.18 hereto contains an accurate list
of the material insurance policies currently maintained by the Company and its
Subsidiaries. Except as described on Schedule 2.18, there are currently no
claims pending against the Company or any of the Company's Subsidiaries under
any insurance policies currently in effect and covering the property, business
or employees of the Company and its Subsidiaries, and all premiums due and
payable with respect to the policies maintained by the Company have been paid to
date. All such policies are in full force and effect and, to the knowledge of
the Company and the Principal Shareholders, provide insurance, including without
limitation, liability insurance, in such amounts and against such risks as is
customary for companies engaged in similar businesses to the Company or any of
the Company's Subsidiaries to protect employees, properties, assets, businesses
and operations of the Company or any of the Company's Subsidiaries.
2.19 Employee Matters. Except as set forth on Schedule 2.19, neither the
Company nor any of its Subsidiaries has in effect any oral or written consulting
agreements or employment agreements in excess of $50,000 or labor or collective
bargaining agreements, written or oral. The Company and the Principal
Shareholders have no knowledge that any of the officers or other
16
key employees of the Company or any of its Subsidiaries presently intends to
terminate his employment. The Company and each of its Subsidiaries is in
compliance in all material respects with all applicable laws and regulations
relating to labor, employment, fair employment practices, terms and conditions
of employment, and wages and hours. Schedule 2.19 lists and identifies: each
"employee pension benefit plan" (as such term is defined in section 3(2) of
ERISA); each "employee welfare benefit plan" (as such term is defined in section
3(3) of the Employee Retirement Income Security Act of 1974, as amended, and all
of the regulations promulgated thereunder ("ERISA")); each stock purchase, stock
option, stock bonus, restricted stock, deferred compensation, severance pay,
incentive compensation, salary continuation, vacation, sick pay, or disability
plan, policy, or arrangement; each material fringe benefit plan, policy,
arrangement, or practice; and each employment, separation, termination,
stay-with-bonus, change-of-control, retention, or similar contract, agreement,
policy, or understanding, which is maintained or contributed to by the Company
or any ERISA Affiliate for, on behalf of, or with respect to, any current or
former employee, officer, director, or dependent thereof, to which the Company
or any of its Subsidiaries is a party, or for which the Company has any
liability or contingent liability (individually a "Plan" and collectively the
"Plans"). True and complete copies of all Plans and all amendments thereto (and
where written Plan documents do not exist, detailed written summaries thereof)
have been furnished to the Purchaser. For purposes of this Agreement, "ERISA
Affiliate" means, with respect to Title IV of ERISA, any trade or business,
whether or not incorporated, that together with the Company, would be deemed to
be a "single employer" within the meaning of Section 4001 of ERISA, and, with
respect to the Code, any member of any group that, together with the Company or
any of its Subsidiaries, is treated as a "single employer" under section 414 of
the Code. Each Plan complies and has been administered in form and operation
with all material requirements of law and regulation applicable thereto. The
Company and the ERISA Affiliates have performed all of their obligations under
all such Plans, except for any obligations which would not have a Material
Adverse Effect. There have been no acts or omissions which have given rise to,
or which could give rise to, any penalty, tax, or fine under sections 409,
502(c) or 502(i) of ERISA, or sections 4975 or 4976 of the Code, for which the
Company and each of its Subsidiaries may be liable. None of the assets of any
Plan are invested in any employer securities, employer real property, or any
insurance contract of any company subject to rehabilitation proceedings. All
contributions required with respect to any Plan for all periods ending prior to
the Closing (including periods from the first day of the current plan year to
the Closing) will be completely and timely made prior to the Closing by the
Company or the ERISA Affiliates. All required reports and descriptions of each
Plan (including IRS Form 5500 Annual Reports, summary annual reports, and
summary plan descriptions) have been timely filed and distributed. None of the
Company or any ERISA Affiliate has any plan or commitment to establish any
additional Plans or to amend any existing Plan, other than as may be required by
applicable statute. Other than coverage mandated by applicable statute, none of
the Company or any ERISA Affiliate is under any obligation or liability to
provide medical benefits or death benefits (including through insurance) to
retirees or former employees, officers or directors of the Company or any ERISA
Affiliate or to their respective dependents. The consummations of the
transactions contemplated hereby will not entitle any employee of the Company to
receive any bonus, severance or other payment.
17
2.20 Customers. The Company has disclosed to the Purchasers the ten (10)
most significant (measured by revenues) customers for the fiscal year ended
December 31, 2000, and the dollar amount of revenues attributable to such
companies (the "Large Customers"). Except as set forth on Schedule 2.20, no
Large Customer has canceled or, otherwise terminated, or, to the knowledge of
the Company and the Principal Shareholders, has threatened to cancel or
otherwise terminate, its relationship with the Company or has during the last
twelve (12) months decreased materially or, to the knowledge of the Company and
the Principal Shareholders, threatened to decrease or limit materially, its
purchases from or sales to the Company.
2.21 No Brokers or Finders. Except for a fee payable to Xxxxxxx Xxxxx &
Co., which fee shall be paid by the Company at the Closing in accordance with
Section 1.7 hereof, no person has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or claim against or upon the
Company for any commission, fee or other compensation as a finder or broker
because of any act or omission by the Company.
2.22 Transactions with Affiliates. Except as set forth on Schedule 2.22,
there are no loans, leases or other continuing transactions in excess of $25,000
between the Company on the one hand, and any officer or director of the Company
or any person owning five percent (5%) or more of the Common Stock of the
Company or any respective family member or affiliate of such officer, director
or shareholder on the other hand.
2.23 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.
Except as set forth on Schedule 2.23, the Company has not assumed, guaranteed,
endorsed or otherwise become directly or contingently liable on or for any
indebtedness in excess of $50,000 for borrowed money of any other Person, except
guarantees by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business.
2.24 Federal Reserve Regulations. Neither the Company nor any of its
Subsidiaries has engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System), and no part of the proceeds
of the sale of the Securities will be used to purchase or carry any margin
security or to extend credit to others for the purpose of purchasing or carrying
any margin security or in any other manner which would involve a violation of
any of the regulations of the Board of Governors of the Federal Reserve System.
2.25 Restrictions on Subsidiaries. There are no restrictions on the
Company or any of its Subsidiaries which prohibit or otherwise restrict the
transfer of cash or other assets between the Company and any of its
Subsidiaries, except where such restriction would not have a Material Adverse
Effect.
2.26 Status Under Certain Laws. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. Neither the Company nor any of
18
its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended.
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe the following covenants on and after
the Closing Date and until any Securities shall no longer remain outstanding.
3.1 Accounts and Reports. The Company will, and will cause each of its
Subsidiaries to, maintain a system of accounts in accordance with GAAP
consistently applied and the Company will, and will cause each of its
Subsidiaries to, keep full and complete financial records. The Company will
furnish to each Purchaser the information set forth in this Section 3.1.
(a) Within ninety (90) days after the end of each fiscal year, a
copy of the consolidated and consolidating balance sheet for the Company and its
Subsidiaries as at the end of such year, together with consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Company and its Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all in
reasonable detail and accompanied by the unqualified report of one of the five
(5) largest public accounting firms (measured by total revenues), which firm
shall be selected by the Board of Directors of the Company.
(b) (i) For the period beginning with April 2001 and ending with
December 2001, within sixty (60) days after each month, a preliminary
consolidated and consolidating balance sheet for each of (A) the Company and its
United States Subsidiaries and (B) the Company's Non-United States Subsidiaries,
as of the end of such month and preliminary consolidated and consolidating
statements of income, shareholders' equity and cash flow for each of (A) the
Company and its United States Subsidiaries and (B) the Company's Non-United
States Subsidiaries, for such month for the period commencing at the end of the
previous fiscal year and ending with the end of such month, (ii) For the period
beginning with January 2002, within thirty (30) days after each month, a
preliminary consolidated and consolidating balance sheet of the Company and its
Subsidiaries as of the end of such month and preliminary consolidated and
consolidating statements of income, shareholders' equity and cash flow for such
month and for the period commencing at the end of the previous fiscal year and
ending with the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the preceding
fiscal year, all in reasonable detail.
(c) (i) For the fiscal quarters ending March 31, 2001, June 30,
2001, September 30, 2001 and December 31, 2001, within (A) seventy-five (75)
days after the end of
19
the fiscal quarter ending March 31, 2001, and (B) within forty-five (45) days
after the end of each other such fiscal quarter an unaudited consolidated and
consolidating accrual basis balance sheet of the Company as of the end of such
quarter and accrual basis preliminary statements of income, shareholders' equity
and cash flow for such quarter, and for the period commencing with the end of
the previous fiscal year and ending with the end of such quarter. (ii) For each
quarter beginning with the quarter ending March 31, 2002, within forty-five (45)
days after the end of each fiscal quarter an unaudited consolidated and
consolidating accrual basis balance sheet of the Company as of the end of such
quarter and accrual basis preliminary statements of income, shareholders' equity
and cash flow for such quarter and for the period commencing with the end of the
previous fiscal year and ending with the end of such quarter, setting forth,
beginning with the first anniversary of the Closing Date, in each case in
comparative form (i) the corresponding figures for the corresponding period of
the preceding fiscal year and (ii) the corresponding figures for the
corresponding period set forth in the operating plan and budget submitted to the
Board of Directors of the Company pursuant to paragraph (e) herein, all in
reasonable detail.
(d) At the time of delivery of each monthly, quarterly and annual
statement, a certificate, executed by either the president or chief financial
officer of the Company stating that such officer has caused the provisions of
Articles III, IV and IX of this Agreement to be reviewed and has no knowledge of
any default by the Company or any Subsidiary in the performance or observance of
any of the provisions thereof or, if such officer has such knowledge, specifying
such default.
(e) Not later than thirty (30) days prior to the end of each
fiscal year, a copy of the operating plan and budget for the next fiscal year
required under Section 3.8.
(f) Promptly upon receipt thereof, any written report, so called
"management letter", and any other reports submitted to the Company or any
Subsidiary by its independent public accountants relating to the business,
prospects or financial condition of the Company and its Subsidiaries;
(g) Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company (or any Subsidiary) which, if successful, would have a
Material Adverse Effect; and (ii) all material defaults by the Company or any
Subsidiary (whether or not declared) under any agreement for money borrowed
(unless waived or cured within applicable grace periods);
(h) Promptly upon sending, making available, or filing the same,
all reports and financial statements as the Company or any Subsidiary shall send
or make available generally to the shareholders of the Company as such or to the
Commission;
20
(i) Such other information with regard to the business, properties
or the condition or operations, financial or otherwise, of the Company or its
Subsidiaries as the Purchasers may from time to time reasonably request; and
(j) Immediately following the Closing Date, the Company shall
engage one of the five (5) largest public accounting firms (defined by total
revenue), which firm shall be selected by the Board of Directors of the Company,
to prepare an audited, consolidated and consolidating balance sheet of the
Company and its Subsidiaries for fiscal year ended December 31, 2000, together
with consolidated and consolidating statements of income, shareholders' equity
and cash flow of the Company and its Subsidiaries for such year, setting forth,
in each case, in comparative form, the corresponding figures for the preceding
fiscal year, all in reasonable detail and accompanied by the unqualified report
of such public accounting firm, and which shall be delivered to the Purchasers
on or before August 1, 2001.
3.2 Payment of Taxes. The Company shall pay and discharge (and cause any
Subsidiary to pay and discharge) all material Taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a lien or charge
upon any properties of the Company or any Subsidiary, provided that neither the
Company nor any Subsidiary shall be required to pay any such Tax, assessment,
charge, levy or claim which (i) has not been asserted or is not owed, or (ii) is
being contested in good faith and by proper proceedings if the Company or such
Subsidiary shall have set aside on its books adequate reserves in the opinion of
management and the Company's independent accountants with respect thereto.
3.3 Maintenance of Key Man Insurance. The Company will, at its expense,
maintain a life insurance policy in the face amount of $1,000,000 with a
responsible and reputable insurance company payable to the Company on the life
of each of the Principal Shareholders. The Company will maintain such policies
and will not cause or permit any assignment of the proceeds of such policies and
will not borrow against such policies. The Company will add one designee of the
Purchasers as a notice party to such policies, and will request that the issuer
of each policy provide such designee with ten (10) days' notice before such
policy is terminated (for failure to pay premium or otherwise) or assigned, or
before any change is made in the designation of the beneficiary thereof. Each of
the Principal Shareholders hereby represents and warrants that he has not prior
to the Closing Date been denied insurance on usual and customary rates available
for an insured without a pre-existing condition, and that he has no knowledge of
any fact or circumstance which would prevent the Company from obtaining life
insurance on his life at such usual and customary rates.
3.4 Compliance with Laws, etc. The Company will comply (and cause each
of its Subsidiaries to comply) with all applicable laws, rules, regulations and
orders of any governmental authority, the noncompliance with which would have a
Material Adverse Effect on
21
the business, condition or results of operations of the Company and its
Subsidiaries, taken as a whole.
3.5 Inspection. Upon prior written notice, at any reasonable time during
normal business hours and from time to time, but not more frequently than once
per calendar quarter, respectively, for all Purchasers and transferees of
Purchasers as a group, the Company (and each of its Subsidiaries) will permit
(i) any one or more of the Purchasers so long as it shall own any Securities or
Conversion Shares and (ii) any of the agents or representatives of the foregoing
Persons, to examine and make copies of and extracts from the records and books
of account of and visit the properties of the Company (and any of its
Subsidiaries) and to discuss the Company's affairs, finances and accounts with
any of its officers or directors; provided that any Person or Persons exercising
rights under this Section 3.5 shall (i) use all reasonable efforts to ensure
that any such examination or visit results in a minimum of disruption to the
operations of the Company and (ii) shall agree in writing to keep any
proprietary information of the Company disclosed to him in the course of such
inspection confidential in a manner consistent with prudent business practices
and treatment of such Person's or Persons' own confidential information and not
use such proprietary information for any purpose in competition with the
Company's business. The rights granted under this Section 3.5 shall be in
addition to any rights which any Purchaser may have under applicable law.
3.6 Corporate Existence; Ownership of Subsidiaries. The Company will,
and will cause its Subsidiaries to, at all times preserve and keep in full force
and effect their corporate existence, and rights and franchises material to the
business of the Company and its Subsidiaries, taken as a whole, and will
qualify, and will cause each of its Subsidiaries to qualify, to do business as a
foreign corporation in any jurisdiction where the failure to do so would have a
Material Adverse Effect. The Company shall at all times own of record and
beneficially, free and clear of all liens, charges, restrictions, claims and
encumbrances of any nature, all of the issued and outstanding capital stock of
each of its Subsidiaries.
3.7 Compliance with ERISA. The Company will comply (and cause each of
its Subsidiaries to comply) in all material respects with all minimum funding
requirements applicable to any pension or other employee benefit plans which are
subject to ERISA or to the Code, and comply in all other material respects with
the provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any of its
Subsidiaries will permit any event or condition to exist which could permit any
such plan to be terminated under circumstances which cause the lien provided for
in section 4068 of ERISA to attach to the assets of the Company or any of its
Subsidiaries.
3.8 Board Approval. Not later than thirty (30) days prior to the end of
each fiscal year, the Company will prepare and submit to its Board of Directors
for its approval prior to such year end an operating plan and budget, cash flow
projections and profit and loss projections, all itemized in reasonable detail
for the immediately following year.
22
3.9 Financings. The Company will promptly provide to the Board of
Directors the details and terms of, and any brochures or investment memoranda
prepared by the Company related to, any possible financing of any nature in
excess of $100,000 for the Company (or any of its Subsidiaries), whether
initiated by the Company or any other Person.
3.10 Meetings of the Board of Directors. The Directors shall schedule
regular meetings not less frequently than once every fiscal quarter. The Company
shall reimburse all members of the Board of Directors of the Company for all
direct out-of-pocket expenses incurred by them in attending such meetings.
3.11 Rule 144A Information. The Company shall, upon the written request
of any Purchaser, provide to such Purchaser and to any prospective institutional
transferee of the Debentures designated by such Purchaser, such financial and
other information as is available to the Company or can be obtained by the
Company without material expense and as such Purchaser may reasonably determine
is required to permit such transfer to comply with the requirements of Rule 144A
promulgated under the Act.
3.12 Indebtedness. The Principal Shareholders shall concurrently with the
Closing and with the proceeds from the redemption repay any and all interest
bearing indebtedness of the Company.
3.13 Trading Policy. After the Company has consummated its first public
offering of securities pursuant to a registration statement filed under the
Securities Act of 1933, as amended, the Company shall establish a trading policy
(the "Trading Policy") relating to the sale of shares of the Company by
officers, directors and principal shareholders. The Trading Policy shall provide
that any such person may purchase or sell securities of the Company only (i)
during the period commencing forty-eight (48) hours after release of the
Company's operating results, and ending on the day which is two weeks prior to
expiration of the fiscal quarter within which such announcement is made or (ii)
in accordance with Rule 10b-5-1 promulgated by the Commission in accordance with
the Securities Exchange Act of 1934, as amended.
3.14 Stay, Extension and Usury Laws. For so long as any of the Debentures
remain outstanding, the Company covenants (to the extent it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Agreement; and the Company hereby expressly
waives (to the extent it may lawfully do so) all benefit or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Purchasers, but
will suffer and permit the execution of every such power as though no such law
has been enacted. Notwithstanding anything herein or in the Debentures to the
contrary, in no event shall interest payable hereunder with respect to the
Debentures exceed the maximum amount permitted by applicable law. If any
payments in the nature of interest, additional interest and other charges made
under this Agreement or under any
23
of the Debentures are held to be in excess of the applicable limits imposed by
any applicable federal or state law, the amount held to be in excess shall be
considered payment of principal under the Debentures and the indebtedness
evidenced thereby shall be reduced by such amount, pro-rata, in the inverse
order of maturity so that the total liability for payments in the nature of
interest, additional interest and other charges shall not exceed the applicable
limits imposed by any applicable federal or state interest rate laws.
3.15 Increase Authorized Common Stock. Immediately prior to the
conversion of all or any portion of the Series B Preferred Stock, upon the
request of the Purchasers, the Company shall take any and all actions necessary
to increase the number of authorized shares of Common Stock of the Company such
that, upon any such conversion, the Purchasers shall not receive fractional
shares of Common Stock.
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will comply (and will cause each Subsidiary to
comply) for the benefit of the Purchasers with each of the provisions of this
Article IV on and after the Closing Date and until the repayment in full of all
obligations under the Debentures and the redemption of the Series A Preferred
Stock and the redemption or conversion of the Series B Preferred Stock, except
where action is taken by the Company with the prior written consent of each of
the Purchasers. In each instance where this Article IV provides for action to be
taken only with the approval of the Purchasers, such approval may be evidenced
either (i) by the prior written consent or waiver of each of the Purchasers, or
(ii) by the prior written consent or waiver of each of the members of the
Company's Board of Directors designated by the Purchasers, provided in each case
that the document evidencing such consent or waiver accurately describes the
action to be taken and clearly references the section or sections of this
Agreement affected thereby.
4.1 Investments in Other Persons. The Company will not make or permit
any Subsidiary to make any loan or advance to any Person, or purchase, otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, the capital
stock or assets of any Person except:
(i) investments by the Company or a Subsidiary in evidences of
indebtedness issued or fully guaranteed by the United States of America
and having a maturity of not more than one year from the date of
acquisition;
(ii) investments by the Company or a Subsidiary in certificates of
deposit, notes, acceptances and repurchase agreements having a maturity of
not more than one year from the date of acquisition issued by a bank
organized in the United States having a combined capital and surplus of at
least $50,000,000;
24
(iii) loans or advances from the Company to any Subsidiary, a
Subsidiary to the Company or from a Subsidiary to another Subsidiary;
(iv) investments by the Company or a Subsidiary in A-rated or better
commercial paper having a maturity of not more than one year from the date
of acquisition;
(v) investments by the Company or a Subsidiary in shares of a "money
market" fund registered under the Investment Company Act of 1940, or in
"money market" accounts fully insured by the Federal Deposit Insurance
Corporation and sponsored by banks and other financial institutions,
provided that such "money market" fund or "money market" accounts invest
principally in investments of the types described in clauses (i), (ii) or
(iv) of this subsection 4.1; and
(vi) any advance and/or loans to any employees of the Company or any
of its Subsidiaries, other Principal Shareholders, in amounts not to
exceed $25,000 individually or $100,000 in the aggregate.
4.2 Distributions. The Company will not declare or pay any dividends,
purchase, redeem, retire, or otherwise acquire for value any of its capital
stock (or rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its shareholders as such, or make any
distribution of assets to its shareholders as such, or permit any Subsidiary to
do any of the foregoing, except that the Subsidiaries may declare and make
payment of cash and stock dividends to the Company, return capital to the
Company and make distributions of assets to the Company and except that nothing
herein contained shall prevent the Company from:
(i) effecting a stock split or declaring or paying any dividend
consisting of shares of any class of capital stock to the holders of
shares of such class of capital stock;
(ii) complying with any specific provision of the terms of the
Preferred Stock relating to the payment of dividends, liquidation
preferences or redemption payments on or with respect to the Preferred
Stock or redemption of the Preferred Stock;
(iii) redeeming the Redemption Shares as provided in Section 1.4; or
(iv) making distributions expressly provided for in Section 1.7
hereof.
4.3 Dealings with Affiliates. Except for those transactions listed in
Schedule 4.3 attached hereto, the Company will not enter into any transaction
with any officer or director of the Company or any Subsidiary or holder of any
class of capital stock of the Company, or any member of their respective
immediate families or any corporation or other entity directly or indirectly
controlling, controlled by or under common control with one or more of such
officers, directors or shareholders or members of their immediate families,
unless (i) the interest of such person is disclosed in advance to the Board of
Directors, (ii) such transaction is on arm's-length
25
terms which are no less favorable to the Company or any Subsidiary as those
which could have been obtained from an unaffiliated third party, and (iii) such
transaction is approved by a disinterested majority of the Board of Directors of
the Company or such Subsidiary.
4.4 Merger. The Company shall not, and shall not permit any Subsidiary
to, merge or consolidate with any other corporation, or sell, assign, lease or
otherwise dispose of or voluntarily part with the control of (whether in one
transaction or in a series of transactions) all, or substantially all, of its
assets (whether now owned or hereinafter acquired) or sell, assign or otherwise
dispose of (whether in one transaction or in a series of transactions) any of
its accounts receivable (whether now in existence or hereinafter created) at a
discount or with recourse, to any Person, or permit any Subsidiary to do any of
the foregoing; provided, however (i) the Company may make sales or other
dispositions of assets in the ordinary course of business; (ii) any wholly owned
Subsidiary may merge into or consolidate with or transfer assets to any other
wholly owned Subsidiary; and (iii) any wholly owned Subsidiary may merge into or
transfer assets to the Company.
4.5 Limitation on Options. Neither the Company nor the Principal
Shareholders shall grant any options, warrants or other rights to acquire shares
of Common Stock or other equity securities of the Company, except that (i) the
Principal Shareholders may grant options for up to ten (10) shares of Common
Stock to employees of the Company at any time prior to the expiration of
eighteen (18) months from the Closing Date, pursuant to the Employee Stock
Option Plan as described in Section 1.6 hereof, and (ii) at any time subsequent
to such date, the Company may grant options for up to ten (10) shares of Common
Stock, pursuant to grants which are approved by the compensation committee of
the Company's Board of Directors.
4.6 Limitation on Restrictions on Subsidiary Dividends and Other
Distributions. The Company shall not permit any of its Subsidiaries, directly or
indirectly, to create or suffer to exist or become effective any encumbrances or
restrictions on the ability of any of its Subsidiaries to (i) pay dividends or
make any other distributions on its capital stock or any other interest or
participation in its profit owned by any of the Company or any of its
Subsidiaries, or pay any indebtedness owed by any of the Subsidiaries, (ii) make
loans or advances to the Company, or (iii) transfer any of its properties or
assets to the Company.
4.7 No Conflicting Agreements. The Company agrees that neither it nor
any Subsidiary will, without the consent of the Purchasers, enter into or amend
any agreement, contract, commitment or understanding which would restrict or
prohibit the exercise by the Purchasers of any of their rights under this
Agreement or any of the Related Agreements.
4.8 Change in Business. The Company will continue to remain principally
engaged in its present line of business, and will not, without the consent of
the Purchasers, enter into any unrelated business.
26
4.9 Indebtedness. Neither the Company nor any of its Subsidiaries will
create, incur, guarantee, assume or otherwise become directly or indirectly
liable for Indebtedness other than the Indebtedness (including any refinancing
thereof, or including in connection with any payments to be issued to holders of
Debentures provided the terms of any such refinancing are more advantageous to
the Company than the terms of the debt to be so refinanced) evidenced by (i)
this Agreement, or (ii) current liabilities of the Company or any of its
Subsidiaries incurred in the ordinary course of business on an open account
basis customarily and in fact extended in connection with the normal purchase of
goods and services.
4.10 Liens. Neither the Company nor any of its Subsidiaries will create
or suffer to exist any Lien upon any of its assets, now owned or hereafter
acquired, securing any Indebtedness or other obligation except Permitted Liens.
4.11 Compensation; Consulting and Other Agreements. The Company shall not
pay to its management or consultants compensation for the calendar year 2001 in
excess of those compensation levels set forth on Schedule 4.11 attached hereto,
and such compensation levels may not be adjusted in subsequent years unless
otherwise determined by a unanimous vote of the Compensation Committee of the
Board of Directors established pursuant to the Shareholders' Agreement.
4.12 Net Cash from Operations. The Company's Net Cash from Operations
shall not be less than $3,600,000 for any fiscal year, and the Company's Net
Cash from Operations shall not be less than $0.00 in any two (2) consecutive
fiscal quarters.
4.13 EBITDA. The Company's EBITDA for the fiscal year ending December 31,
2001 shall not be less than <$1,000,000>. Commencing on January 1, 2002, the
Company's EBITDA for any fiscal year shall not be less than $0.00, and, the
Company's EBITDA shall not be less than $0.00 in any two (2) consecutive fiscal
quarters.
ARTICLE V
INVESTMENT REPRESENTATIONS
5.1 Representations and Warranties. Each Purchaser hereby represents and
warrants to the Company as follows:
(a) Such Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite partnership power and authority and has taken all
necessary partnership action required for the due authorization, execution,
delivery and performance by such Purchaser of this Agreement and the Related
Agreements, and any other agreements or instruments executed by such Purchaser
in connection herewith or therewith and the consummation of the transactions
contemplated herein or therein;
27
(b) This Agreement, the Related Agreements and the other
agreements and instruments executed by such Purchaser in connection herewith or
therewith will each be a legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms;
(c) No consent, approval, license or authorization of, or
designation, declaration or filing with, any court or governmental authority is
or will be required on the part of such Purchaser in connection with the
execution, delivery and performance by such Purchaser of this Agreement, any
Related Agreements and any other agreements or instruments executed by such
Purchaser in connection herewith or therewith;
(d) Such Purchaser is in compliance with all the provisions of
this Agreement and their organizational and partnership documents, and, to such
Purchaser's knowledge, in all material respects with the material provisions of
each other agreement or instrument, judgment, decree, judicial order, statute
and regulation by which it is bound or to which it is subject. Neither the
execution, delivery or performance of this Agreement and the Related Agreements
nor the consummation of the transactions contemplated hereby and thereby, will
materially violate, or result in any material breach of, or constitute a default
under any provision of such Purchaser's organization or partnership documents,
or any statute, rule or regulation, contract, lease, judgment, decree or other
document or instrument by which such Purchaser is bound;
(e) Such Purchaser is acquiring the Securities solely for its own
account as an investment and not with a view to any distribution or resale
thereof in violation of the Securities Act. Such Purchaser has been advised that
the Securities have not been registered under the Securities Act or under the
provisions of any state securities or "blue sky" law. Such Purchaser, by
accepting the Securities, agrees and acknowledges that it will not directly or
indirectly, offer, transfer, sell, assign, pledge, encumber, hypothecate or
dispose of any of such Securities (or solicit any offers to purchase or
otherwise acquire or take a pledge of any of the Securities) unless such offer,
transfer, sale, assignment, pledge, encumbrance, hypothecation or other
disposition is made (i) pursuant to an effective registration statement under
the Securities Act and in compliance with all applicable state securities or
"blue sky" laws or (ii) pursuant to an available exemption from registration
under, or otherwise in compliance with, the Securities Act and all applicable
state securities or "blue sky" laws. Such Purchaser understands and agrees that
in the case of a transfer or other disposition made pursuant to clause (ii)
above, such Purchaser of Securities shall be required to provide to the Company
an opinion of counsel reasonably satisfactory to the Company to the effect that
registration under the Securities Act is not required and a written
certification (or in the Company's discretion, an opinion of counsel reasonably
acceptable to the Company (who may be counsel employed by such Purchaser)) that
qualification or registration under any such state securities laws and
regulations is not required (or that any applicable state qualification or
registration requirements have been satisfied in full);
(f) Such Purchaser is an "Accredited Investor" (as such term is
defined in Rule 501 of Regulation D of the Securities Act). The financial
situation of such Purchaser is
28
such that it can afford to bear the economic risk of holding the unregistered
Securities for an indefinite period of time. Such Purchaser can afford to suffer
the complete loss of its investment in the Securities. The knowledge and
experience of such Purchaser in financial and business matters is such that it
is capable of evaluating the risk of the investment in the Securities. Such
Purchaser acknowledges that it has had access to such financial and other
information, and has been afforded the opportunity to ask such questions of
representatives of the Company and receive answers thereto, as such Purchaser
has deemed necessary in connection with its decision to purchase the Securities,
and that no representation or warranty, express or implied, is being made by the
Company with respect to the Company or the Securities, other than those
expressly set forth herein;
(g) Such Purchaser has been advised and understands that the
Securities and Conversion Shares have not been registered under the Act, on the
grounds that no distribution or public offering of the Securities is to be
effected, and that in this connection, the Company is relying in part on the
representations of such Purchaser set forth in this Article V;
(h) Such Purchaser has been further advised and understands that
no public market now exists for any of the securities issued by the Company and
that a public market may never exist for the Securities or Conversion Shares;
(i) Such Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities;
provided, however, that nothing in this Section 5.1 shall be deemed to vitiate
or limit the representations, warranties and covenants of the Company or the
Principal Shareholders contained in this Agreement; and
(j) No person has or will have, as a result of the transaction
contemplated by this Agreement, any right, interest or claim against or upon the
Purchasers or the Company or any of its Subsidiaries for any commission, fee or
other compensation as a finder or broker because of any act or omission by such
Purchaser.
5.2 Permitted Transfers; Legends. The Company agrees that it will permit
(i) a transfer of the Securities by a partnership to one or more of its
partners, where no consideration is exchanged therefor by such partners, or to a
retired or withdrawn partner who retires or withdraws after the date hereof in
full or partial distribution of his interest in such partnership, or to the
estate of any such partner or the transfer by gift will or intestate succession
of any partner to his spouse or to his siblings, lineal descendants or ancestors
of such partner of his spouse, or to a trust created for the benefit of one or
more of the foregoing and (ii) a sale or other transfer of any of the Securities
or Conversion Shares, in each case, if the transferee agrees in writing to be
subject to the terms hereof to the same extent as if it were an original
Purchaser hereunder and upon obtaining assurance satisfactory to the Company
that such transaction is exempt from the registration requirements of, or is
covered by an effective registration statement under the Act and applicable
state securities or "blue-sky" laws, including without limitation, receipt of an
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unqualified opinion of counsel reasonably satisfactory to the Company. The
certificates representing the Securities shall bear a legend evidencing such
restriction on transfer substantially in the following form:
"These Securities have been acquired for investment and have not
been registered under the Securities Act of 1933 (the "Act") or the
securities laws of any state. These Securities may not be
transferred by sale, assignment, pledge or otherwise unless (i) a
registration statement for these securities under the Act is in
effect or (ii) the corporation has received an opinion of counsel,
which opinion is reasonably satisfactory to the corporation to the
effect that such registration is not required under the Act or the
securities laws of any state."
ARTICLE VI
SUBORDINATION OF DEBENTURES
6.1 Agreement to Subordinate. The Company agrees, and each holder of the
Debentures by its acceptance thereof agrees, that notwithstanding any other
provision of this Agreement or the Debentures, the payment of the principal of
and interest on each and all of the Debentures shall be subordinate and junior
in right of payment, to the extent and in the manner hereinafter set forth, to
the prior payment in full of all Indebtedness of the Company at any time
outstanding for money borrowed from banks, other financial institutions or other
organizations or entities which provide a similar function, including any
extensions, renewals, modifications or refinancings thereof, whether outstanding
on the date hereof or hereafter created or incurred, which is not by its terms
subordinate and junior to or on parity with the Debentures and which is
permitted hereby at the time it is created or incurred, and that such
subordination is for the benefit of and may be enforced by the holder(s) of
Senior Debt (as hereinafter defined) against the Company and any holder of the
Debentures. Such Indebtedness of the Company to which the Debentures are
subordinate and junior is referred to herein as "Senior Debt." Each holder of
Debentures by its acceptance thereof agrees to execute, acknowledge and deliver
such instruments, subordination agreements, inter-creditor agreements and other
agreements as any holder of Senior Debt may from time to time request which are
not on terms inconsistent with the terms hereunder in order to confirm, reflect
and implement such subordination.
6.2. Acceleration of Senior Debt. Upon maturity of any Senior Debt,
whether by acceleration (unless waived or rescinded in writing), lapse of time
or otherwise, no payment shall be made on account of principal of or interest on
the Debentures until all principal of and accrued and unpaid interest on all
such matured Senior Debt shall have been paid in full or such payment shall have
been duly provided for.
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6.3. Insolvency, Etc. In the event of any insolvency or bankruptcy
proceeding, or any receivership, liquidation, reorganization or similar
proceedings in connection therewith (or upon the distribution of the assets of
the Company in connection therewith) relative to the Company or to its property,
or in the event of any proceedings for voluntary liquidation, dissolution or
other winding-up of the Company, whether or not involving insolvency or
bankruptcy, upon any assignment for the benefit of creditors, or any other
marshaling of the assets and liabilities of the Company, then and in such event
the holders of Senior Debt shall be entitled to receive payment in full of all
obligations of principal and accrued and unpaid interest with respect to Senior
Debt before the holders of Debentures shall be entitled to receive any payment
of principal or interest upon the Debentures, provided, however, that if a
payment or distribution in respect of the Debentures (i) is authorized by a
final, non-appealable order or decree giving explicit effect to the
subordination of the Debentures to Senior Debt and made by a court of competent
jurisdiction in a reorganization or bankruptcy proceeding or (ii) is in the form
of securities or obligations which by their terms are subordinate and junior (at
least to the extent provided in this Article VI) to the payment of all Senior
Debt then outstanding, then such payment or distribution may be made to the
holders of Debentures notwithstanding the occurrence of the events described in
this Section 6.3.
6.4. Payments Held in Trust. If the holder of any Debenture receives any
payment or distribution of any character, whether in cash, securities or other
property, or whether in the form of a payment from the Company or any guarantor
or any other party, with respect to such Debentures which such holder is not
entitled to receive on account of the provisions of this Article VI and has
knowledge or has received notice that it is not so entitled, such holder will
hold any amounts so received in trust for the benefit of the holders of Senior
Debt and will forthwith turn over such payment or distribution to the holders of
Senior Debt and upon receipt such payment or distribution shall be applied to
Senior Debt until the same shall have been paid in full.
6.5. The Company's Obligations Unconditional. The provisions of this
Article VI are for the purpose of defining the relative rights of holders of
Senior Debt on the one hand, and the holders of Debentures on the other hand,
against the Company and its property. Nothing herein shall impair, as between
the Company, its creditors other than the holders of Senior Debt, and the
holders of Debentures, the obligation of the Company, which is unconditional and
absolute, to pay to the holders thereof the full amount of the principal and
accrued and unpaid interest on the Debentures, in accordance with the terms
thereof and the provisions hereof, and to comply with all of its covenants and
agreements contained herein; nor shall anything herein prevent the holder of any
Debentures from exercising all remedies otherwise permitted by applicable law or
hereunder upon default hereunder or under any Debenture, subject to the rights,
if any, under this Article VI of holders of Senior Debt to receive payments and
distributions otherwise payable to the holders of Debentures.
6.6. Subrogation Upon Payment of Senior Debt. Subject to such conditions
as the holder(s) of Senior Debt may require, upon payment in full of all Senior
Debt, the holders of the
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Debentures shall be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of assets of the Company applicable to Senior
Debt, to the extent that distributions otherwise payable to the holders of
Debentures have been applied to the payment of Senior Debt, until the principal
of and accrued and unpaid interest on the Debentures shall have been paid in
full. For the purposes of such subrogation, no payments or distributions to the
holders of Senior Debt of any cash, property or securities which the holders of
Debentures would be entitled to receive except for the provisions of this
Article VI shall, as between the Company and its creditors (other than the
holders of Senior Debt) and the holders of Debentures, be deemed to be a payment
by the Company to or on account of Senior Debt.
6.7. Notice. The Company shall promptly notify the holders of Debentures
of any facts known to the Company that would cause a payment of any obligations
with respect to the Debentures to violate this Article VI, but failure to give
such notice shall not affect the subordination of the Debentures to Senior Debt
provided herein.
6.8. Knowledge. No holder of any Debenture shall at any time be charged
with knowledge of any of the events described in Sections 6.2 or 6.3 hereof or
the existence of any other facts which would prohibit the making of any payment
of monies to such holder or the taking of any acceleration or other action by
such holder by virtue of the provisions of this Article VI unless and until such
holder shall have obtained actual knowledge of such event or shall have received
written notice of such events or facts signed, as the case may be, by an officer
of the Company or by the holder of Senior Debt.
ARTICLE VII
CONDITIONS OF PURCHASERS' OBLIGATIONS
7.1 Effect of Conditions. The obligations of the Purchasers to purchase
and pay for the Securities at the Closing shall be subject at its election to
the satisfaction of each of the conditions stated in the following Sections of
this Article.
7.2 Intentionally Omitted.
7.3 Performance. A certificate dated as of the Closing Date and signed
on behalf of the Company and the Principal Shareholders to the effect that the
Company and the Principal Shareholders shall have performed and complied in all
material respects with all of the agreements, covenants and conditions contained
in this Agreement required to be performed or complied with by it and them at or
prior to such Closing Date, and the Purchasers shall have received.
7.4 Intentionally Omitted.
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7.5 Opinion of Counsel. The Purchasers shall have received an opinion,
dated the Closing Date, from Xxxx Xxxxxxx, LLP, counsel to the Company and the
Principal Shareholders, in the form attached as Exhibit D.
7.6 Intentionally Omitted.
7.7 Completion of Audit. The Company shall have provided to the
Purchasers audited financial statements, prepared by Xxxxx, Xxxxxx & Company,
and accompanied by management letters, for the fiscal years of the Company ended
December 31, 1999 and 2000.
7.8 Intentionally Omitted.
7.9 Certificate of Incorporation. The Certificate of Incorporation of
the Company which shall have been amended to provide for the authorization of
the Series A Preferred Stock and Series B Preferred Stock.
7.10 Consents and Waivers. The Company shall have obtained all consents
or waivers necessary to execute this Agreement and the other agreements and
documents contemplated herein, to issue the Securities and the Conversion
Shares, and to carry out the transactions contemplated hereby and thereby. All
corporate and other action and governmental filings necessary to effectuate the
terms of this Agreement and the Related Agreements and other agreements and
instruments executed and delivered by the Company in connection herewith shall
have been made or taken.
7.11 Registration Rights Agreement. The Company, the Purchasers and the
Principal Shareholders shall have executed and delivered into a registration
rights agreement (the "Registration Rights Agreement") in the form of Exhibit E
attached hereto.
7.12 Shareholders' Agreement. The Company, the Purchasers and the
Principal Shareholders shall have executed and delivered into a Shareholders'
Agreement in the form of Exhibit F attached hereto.
7.13 Non-Competition, Non Solicitation and Non Disclosure Agreements. The
Company and the Principal Shareholders shall have executed and delivered a
Non-Competition, Non-Solicitation and Non-Disclosure Agreement in the form of
Exhibit G attached hereto.
7.14 Redemption Agreement. The Company shall have executed and delivered
a Redemption Agreement in the form of Exhibit H attached hereto.
7.15 Series A and B Preferred Stock Certificates; Debentures. The Company
shall have delivered a stock certificate to each Purchaser representing that
number of shares of Series A Preferred Stock and Series B Preferred Stock set
forth beside such Purchaser's name on Schedule 1.1 attached hereto and a
Debenture to each certain Purchaser designated on Schedule 1.1 attached hereto.
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7.16 Intentionally Omitted.
7.17 Stock Redemption Agreement. Each Principal Shareholder shall have
executed and delivered to the Company the Stock Redemption Agreement, and shall
have delivered to the Company to be held in accordance with the terms of such
agreement a certificate evidencing the Redeemable Shares which may be
repurchased from such Principal Shareholder.
7.18 Secretary's Certificate. A certificate of the Secretary of the
Company certifying (x) the incumbency and genuineness of signatures of all
officers of the Company executing this Agreement and any document delivered by
the Company at the Closing and any other document, instrument or agreement
executed in connection herewith, (y) the truth and correctness of resolutions of
the Company authorizing the entry by the Company into this Agreement, the
Related Agreements, and the transactions contemplated hereby and thereby and (z)
the truth, correctness and completeness of the by-laws of the Company.
7.19 Management Rights Letter. The Company shall have executed and
delivered a Management Rights Letter in the form of Exhibit I attached hereto.
7.20 FIRPTA Certificate; Form W-9. The Company shall have received a
FIRPTA certificate under Section 1445 of the Code and Regulation Section
1.1445-2(b)(2) in the form of Exhibit J attached hereto, from each Principal
Shareholder. Each Principal Shareholder shall have delivered to the Company a
properly executed Form W-9 prior to the Redemption.
7.21 Intentionally Omitted.
7.22 Evidence of Repayment of Outstanding Shareholder Loans. The Company
shall have provided the Purchasers with evidence of the repayment of all
outstanding loans to Principal Shareholders described in Section 1.4 hereto.
ARTICLE VIII
CONDITIONS OF THE COMPANY'S OBLIGATIONS
8.1 Effect of Conditions. The obligation of the Company to sell the
Securities at the Closing shall be subject at its election to the satisfaction
of each of the conditions stated in the following Sections of this Article.
8.2 Intentionally Omitted.
8.3 Shareholders' Agreement. The Shareholders' Agreement shall have been
executed and delivered by the Purchasers.
8.4 Registration Rights Agreement. The Registration Rights Agreement
shall have been executed and delivered by the Purchasers.
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8.5 Performance. A certificate dated as of the Closing and signed on
behalf of the Purchasers to that effect that the Purchasers have performed and
complied in all material respects with all of the agreements, covenants and
conditions contained in the Agreement required to be performed or complied with
by them at or prior to such Closing.
8.6 Consents and Waivers. The Purchasers shall have obtained all
consents or waivers necessary to execute this Agreement and the other agreements
and documents contemplated herein, and to carry out the transactions
contemplated hereby and thereby.
8.7 Redemption Agreement. The Redemption Agreement shall have been
executed and delivered by the Purchasers.
ARTICLE IX
DEFAULTS AND REMEDIES
9.1 Events of Default; Acceleration.
An "Event of Default" occurs if:
(1) The Company defaults in the payment of any principal of any
Debenture when the same shall become due, either by the terms thereof or
otherwise as herein provided; or
(2) The Company defaults in the payment of interest on any Debenture
when the same becomes due and payable and the default continues for a period
of ten (10) days; or
(3) The Company or any Subsidiary shall fail to perform or observe in
any material respect any covenant contained in Article III or Article IV of this
Agreement and such default shall not have been remedied within forty-five (45)
days after such default shall first have become known to any officer of the
Company or written notice thereof shall have been received by the Company
(regardless of the source of such notice); or
(4) The Company or any of its Subsidiaries defaults in any material
respect in the performance or observance of any other agreement, term or
condition contained in the Debentures, this Agreement or the Related Agreements
and such default shall not have been remedied within forty-five (45) days after
such default shall first have become known to any officer of the Company or
written notice thereof shall have been received by the Company (regardless of
the source of such notice); or
(5) The Company or any Subsidiary shall default (subject to any
applicable grace period) in the payment of any principal of or premium, if any,
or interest on any other Indebtedness or obligation with respect to borrowed
money the outstanding principal of which is, at the time of such default, in an
aggregate amount greater than $50,000 or shall default in the performance of any
material term of any instrument evidencing such Indebtedness or of any
35
mortgage, indenture or agreement relating thereto, and the effect of such
default is to cause, or to permit the holder or holders of such obligation to
cause, such Indebtedness or obligation to become due and payable prior to its
stated maturity, unless such failure to pay or perform shall have been waived in
writing by the requisite holders of such Indebtedness or other obligation; or
(6) The Company or any Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(D) makes a general assignment for the benefit of its creditors, or
(E) is the debtor in an involuntary case which is not dismissed
within 60 days of the commencement thereof; or
(7) A court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(A) provides for relief against the Company or any Subsidiary in an
involuntary case,
(B) appoints a Custodian of the Company or any Subsidiary for all or
substantially all of its property, or
(C) orders the liquidation of the Company or any Subsidiary; or
(8) A final judgment for the payment of money in an amount in excess of
$250,000 shall be rendered against the Company or any of its Subsidiaries (other
than any judgment as to which a reputable insurance company shall have accepted
full liability in writing) and shall remain undischarged for a period (during
which execution shall not be effectively stayed) of thirty (30) days after the
date on which the right to appeal has expired; or
(9) Any representation or warranty made by the Company in this Agreement
or in the Related Agreements shall prove to be materially false or incorrect on
the date as of which made;
then and in any such case (a) upon the occurrence of any Event of Default
described in clause (6) or (7) above, the unpaid principal amount of and accrued
and unpaid interest on the Debentures shall automatically become due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby waived by the Company, and (b) upon the occurrence of any
36
other Event of Default, in addition to any other rights, powers and remedies
permitted by law or in equity, the holder or holders of greater than 50% in
principal amount of the Debentures then outstanding may, at its or their option,
by notice in writing to the Company, declare all of the Debentures to be, and
all of the Debentures shall thereupon be and become, immediately due and payable
together with interest accrued and unpaid thereon and all other sums due
hereunder, without presentment, demand, protest or other notice of any kind, all
of which are waived by the Company.
Upon the occurrence of any such Event of Default, the holders of
Debentures may proceed to protect and enforce their rights by an action at law,
suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein or in the Debentures held by them,
for an injunction against a violation of any of the terms hereof or thereof, or
for the pursuit of any other remedy which it may have by virtue of this
Agreement or pursuant to applicable law. The Company shall pay to the holders of
Debentures upon demand the reasonable costs and expenses of collection and of
any other actions referred to in this Article IX, including without limitation
reasonable attorney's fees, expenses and disbursements.
No course of dealing and no delay on the part of the holders of Debentures
in exercising any of their rights shall operate as a waiver thereof or otherwise
prejudice the rights of any holder of the Debentures, nor shall any single or
partial exercise of any right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
No right, power or remedy conferred hereby or by the Debentures on the holders
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute or
otherwise.
9.2 Rescission of Acceleration. At any time after any declaration of
acceleration of all the Debentures shall have been made pursuant to Section 9.1
by any holder or holders of the Debentures and before a judgment or decree for
the payment of money due has been obtained by such holder or holders, the holder
or holders of at least a majority in aggregate principal amount of the
Debentures at the time outstanding may, by written notice to the Company and to
the other holders of the Debentures rescind and annul such declaration and its
consequences, provided that (i) the principal of and accrued and unpaid interest
on the Debentures which shall have become due otherwise than by such declaration
of acceleration shall have been duly paid, and (ii) all Events of Default other
than the nonpayment of principal of and accrued and unpaid interest on the
Debentures which have become due solely by such declaration of acceleration
shall have been cured or waived by the holders of a majority in aggregate
principal amount of the Debentures at the time outstanding. No rescission or
annulment referred to above shall affect any subsequent Default or any right,
power or remedy arising out of such subsequent Default.
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ARTICLE X
SURVIVAL; INDEMNIFICATION AND LIMITS ON LIABILITY
10.1 Survival of Representations and Warranties. The representations and
warranties contained in this Agreement shall survive the Closing until the later
of (i) eighteen (18) months after the date hereof, or (ii) ninety (90) days
after receipt by the Purchasers of audited financial statements for the Company
for its year ending December 31, 2002; and written notice of any claim for
indemnification under Section 10.2 must be delivered to the Principal
Shareholders within such time period; provided that if a claim is brought within
such period it shall remain valid thereafter until ultimately resolved; and
provided further, that the time limitation set forth in this Section 10.1 shall
not apply to matters described in Sections 2.2, 2.4, 2.10 and 2.21, which, in
each case, shall survive until the termination of the applicable statute of
limitations. The covenants of the Company contained in Articles III and IV
hereof shall survive the Closing in accordance with their terms.
10.2 Indemnification by the Principal Shareholders.
(a) Subject to the conditions and limitations set forth in Section
10.1 hereof, and in this Section 10.2, the Principal Shareholders shall,
severally in proportion to each Principal Shareholder's share percentage as set
forth on Schedule 1.4 attached hereto, and not jointly, defend, indemnify and
hold harmless the Company, from and against any loss, liability, diminution in
value, damage, claim, action or cause of action, assessment, cost, penalty and
expense, including reasonable legal and accounting fees (a "Loss," and
collectively, the "Losses") to the extent not covered by insurance, asserted
against, resulting to, imposed upon or incurred by the Company by reason of or
resulting from the breach of any representation or warranty made by the Company
or the Principal Shareholders set forth in Article II of this Agreement, or any
facts or circumstances constituting such a breach. The Principal Shareholders
each agree that they shall have no right to seek damages, reimbursement,
indemnification, contribution or similar rights from the Company for any
indemnification payments for which the Principal Shareholders are liable under
this Section 10.2.
(b) Notwithstanding the provisions of Section 10.2(a), the Principal
Shareholders shall not be required to provide indemnity under this Section 10.2
until, the aggregate Losses equal or exceed $200,000 and then the Principal
Shareholder shall provide indemnity for all losses sustained by the Company in
excess of $200,000 (the "Deductible"); provided, however, that the Deductible
shall not apply to a breach of a representation or warranty contained in
Sections 2.2, 2.4, 2.10 and 2.21.
(c) In no event shall the Principal Shareholders be liable to make
indemnification payments hereunder in excess of $25,000,000 in the aggregate
(the "Cap"), provided that each Principal Shareholder individually shall only be
liable in proportion to such Principal Shareholder's share percentage as set
forth on Schedule 1.4 attached hereto; provided
38
that the Cap shall not apply to a breach of a representation or warranty
contained in Sections 2.2, 2.4, 2.10 and 2.21.
(d) In the event the Principal Shareholders are required to make an
indemnification payment hereunder, the amount of any such payment shall be
deemed to be a reduction in the purchase price paid and received under the this
Agreement.
(e) In the event of any litigation arising from a dispute under this
Section 10.2, the non-prevailing party in such litigation shall pay the
prevailing party's attorneys' fees and costs relating thereto.
10.3 Notice of Claim.
(a) The Company shall give the Principal Shareholders prompt written
notice of any threatened, potential or actual claim or the commencement of
any action in respect of which indemnity may be sought hereunder, provided
that the failure of the Company to give notice as provided herein shall
not relieve the Principal Shareholders of their obligations under this
Article X except if and to the extent the Principal Shareholders have been
materially prejudiced thereby. Nothing in this Section 10.3(a) shall
affect the notice of claim restrictions contained in Section 10.1. The
Company shall not settle any such action unless the Principal Shareholders
consent to the terms of such settlement, which consent may not be
unreasonably withheld.
(b) If any action is brought against the Company, the Principal
Shareholders shall have the right to participate in or control any such
action at their own expense, with counsel reasonably acceptable to the
Company and the Purchasers, and the Company shall have the right (but not
the duty) to participate in the defense thereof, which shall be at the
Company's expense, respectively, unless the Principal Shareholders do not
assume the defense, in which case such defense shall be at the Principal
Shareholders' expense. The Principal Shareholders shall not settle any
such action unless the Purchasers consent to the terms of such settlement,
which consent may not be unreasonably withheld. Whether or not the
Principal Shareholders choose to control the defense of Company's action,
the Company and the Principal Shareholders will cooperate in the defense
and shall take all actions in connection with such defense as may be
reasonably requested. If the Company shall fail to provide the Principal
Shareholders with notice of any threatened, potential or actual claim on
the commencement of any action in respect of which indemnity may be sought
hereunder, the Purchasers shall be entitled to enforce any rights of the
Company under this Article X on behalf of the Company by providing notice
to such effect to the Principal Shareholders.
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ARTICLE XI
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Act" means the Securities Act of 1933, as amended.
"Agreement" means this Securities Purchase and Redemption Agreement as
from time to time amended and in effect between the parties.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Business Day" shall mean a day which is not a legal holiday, Saturday or
Sunday in The Commonwealth of Massachusetts or the City of Boston.
"Cash and Cash Equivalents" means cash and investments in certificates of
deposit, money market funds and obligations issued or guaranteed by the United
States Government or any instrumentality thereof, in each case only if due and
payable on demand or within thirty (30) days after the date of purchase.
"Closing" shall have the meaning set forth in Section 1.5.
"Closing Date" shall have the meaning set forth in Section 1.5.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" shall have the meaning set forth in Section 2.3.
"Company" means and shall include Sybari Software. Inc., a New York
corporation, its successors and assigns.
"Consolidated Net Income" means the consolidated net income of the Company
and its Subsidiaries, after deduction of all expenses, taxes, and other proper
charges, and after excluding all extraordinary, nonrecurring items, all as
determined in accordance with GAAP.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Default" shall mean an Event of Default or any event which, with notice
or lapse of time or both, would become an Event of Default.
40
"EBITDA" means, with respect to the Company and its Subsidiaries for any
fiscal period, an amount equal to Consolidated Net Income for such period, plus,
to the extent deducted in the calculation of Consolidated Net Income and without
duplication, (a) depreciation and amortization for such period, (b) other
noncash charges for such period, (c) income tax expense for such period, (d)
consolidated total interest expense for such period, and minus, to the extent
added in computing Consolidated Net Income and without duplication, all noncash
gains (including income tax benefits) for such period, all as determined in
accordance with GAAP.
"Event of Default" shall have the meaning set forth in Section 9.1.
"Indebtedness" means all obligations, contingent or otherwise, whether
current or long-term, which in accordance with GAAP would be classified upon the
obligor's balance sheet as indebtedness (other than deferred taxes) and shall
also include capitalized leases, guarantees, endorsements (other than for
collection in the ordinary course of business) or other arrangements whereby
responsibility is assumed for the obligations of others, including any agreement
to purchase or otherwise acquire the obligations of others or any agreement,
contingent or otherwise, to furnish funds for the purchase of goods, supplies or
services for the purpose of payment of the obligations of others, excluding
accounts payable incurred in the ordinary course of business.
"Knowledge of the Company and the Principal Shareholders" means, with
respect to a particular fact or other matter, (i) the actual knowledge of any of
Xxxxxx X. Xxxxxxx, Xxxxxx Xxxxxx, Xxxxxxx X. Xxxxxxxx, Xxxxxxx X. XxxxXxxxxxx
and Xxx Xxxxxxx, in each case after due inquiry and review of the Company's and
each of its Subsidiary's books and records; (ii) the actual knowledge of Xxxx
Xxxxx after due inquiry of the employees and officers of each of the Company's
Subsidiaries and review of the books and records of each of the Company's
Subsidiaries, and (iii) the actual knowledge of each of Rocco Doninno and Xxx
Xxxxxxxxx.
"Last Balance Sheet" shall mean the balance sheet of the Company as of
December 31, 2000.
"Lien" shall mean any mortgage, deed of trust, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction).
"Liquidity Event" shall mean any one or more of the following: (i) a
liquidation, dissolution or winding-up of the Company, whether voluntary or
involuntary; (ii) a sale, merger or similar transaction involving the Company,
as the result of which those Persons who held 100% of the voting stock of the
Company immediately prior to such transaction do not hold more than 50% of the
voting stock of the Company (or the surviving or resulting entity) after giving
effect to such transaction; (iii) the sale of all or substantially all of the
assets of the Company; or (iv) consummation of the first public offering of
securities of the Company
41
pursuant to a registration statement filed under the Act, pursuant to which (i)
the aggregate proceeds received by the Company exceeds $50,000,000, (ii) the
price per share equals at least three times the original purchase price of the
Series B Preferred Stock, and (iii) all of the Series A Preferred Stock has been
redeemed and all amounts due and owing under the Debentures shall have been paid
in full.
"Material Adverse Effect" means a material and adverse effect on the
assets, liabilities, properties, business, results of operation, prospects or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole.
"Net Cash from Operations" means, with respect to the Company and its
Subsidiaries for any given period, an amount equal to Consolidated Net Income
for such period plus (a) depreciation and amortization for such period and (b)
other non-cash charges (or minus non-cash gains) for such period, and less Net
Working Capital Changes.
"Net Working Capital Changes" shall mean for any fiscal period, the net
change from the immediately preceding like fiscal period, with respect to the
Company and its Subsidiaries, in the amount of (i) current assets of the Company
and its Subsidiaries, excluding Cash and Cash Equivalents, and including all
long term deferred royalty cost assets, minus (ii) current liabilities of the
Company and its Subsidiaries excluding current maturities of long-term debt and
including all long term deferred revenue liabilities, determined in accordance
with GAAP.
"Permitted Liens" shall mean: (i) Liens for taxes not yet due or payable
under law or being contested in good faith by appropriate proceedings and for
which adequate reserves have been provided; (ii) carriers', warehouseman's,
mechanics', materialmen's, repairmen's and similar Liens arising in the ordinary
course of business to secure amounts owing for the provision of goods or
services; (iii) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation; (iv) easements,
rights of way and similar encumbrances incurred in the ordinary course of
business which do not individually or in the aggregate, materially detract from
the value of the property subject thereto or interfere with the ordinary course
of business of the Company or any Subsidiary; (v) Liens on goods to secure the
payment of the purchase price of such goods; and (vi) Liens existing on the date
hereof on equipment used in the ordinary course of business to secure the
payment of the cost of acquisition or leasing thereof.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Purchasers" shall have the meaning set forth in Section 1.1.
"Related Agreements" shall mean the Debentures, the Registration Rights
Agreement, the Redemption Agreement, Stock Redemption Agreement and the
Shareholders' Agreement.
"Senior Debt" shall have the meaning set forth in Section 6.1.
42
"Shareholder" means a shareholder of the Company, other than a Purchaser,
including, without limitation, a Principal Shareholder.
"Subsidiary" or "Subsidiaries" means any corporation, association or other
business entity of which the Company and/or any of its other Subsidiaries (as
herein defined) directly or indirectly owns at the time more than fifty percent
(50%) of the outstanding voting shares of every class of such corporation or
trust other than directors' qualifying shares.
ARTICLE XII
MISCELLANEOUS
12.1 Debenture Payments. The Company agrees that, so long as any Purchaser
shall hold any Debentures, it will make payments of principal and interest on
any Debenture held by such Purchaser not later than 2:00 p.m., Boston,
Massachusetts time, on any date for which such a payment is required to be made,
in immediately available federal funds, by credit to the Purchaser's account, as
specified in Schedule 1.1 hereto, or such other account or accounts as the
Purchaser may designate in writing, notwithstanding any contrary provision
contained herein or any Debenture with respect to the place of payment. Each
Purchaser agrees that, before disposing of any Debenture, it or its nominee will
make a notation thereon of all principal payments previously paid thereon and of
the date to which interest thereon has been paid, and will notify the Company of
the name and address of the transferee of such Debenture. At the election of any
subsequent holder of any Debenture which has made the same agreements relating
to such Debenture as the Purchaser has made in this Section 12.1, the Company
will make payments of principal and interest to the account of such successor
holder in the same manner as set forth above.
12.2 Form, Registration, Transfer and Exchange of Debentures. The
Debentures are issuable as registered notes and in denominations of not less
than $10,000. The Company shall keep at its principal office the register in
which the Company shall provide for the registration of the Debentures and for
transfers of the Debentures. Upon surrender for registration of transfer of any
Debenture at such office, the Company shall execute and deliver, at its expense,
one or more new such Debenture or Debentures of like tenor and of like aggregate
principal amount, which new Debenture or Debentures shall each be a registered
Debenture. At the option of the holder of any Debenture, such Debenture may be
exchanged for other Debentures, of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Debenture to be exchanged at
the office of the Company. Whenever any Debenture is so surrendered for
exchange, the Company shall execute and deliver, at its expense, the Debentures
which the holder thereof making the exchange is entitled to receive. Every
Debenture presented or surrendered for registration of transfer shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed by
the holder of such Debenture or such holder's attorney-in-fact duly authorized
in writing. Any Debenture issued in exchange for any Debenture or upon transfer
thereof shall carry the rights to unpaid interest and interest to accrue which
were carried
43
by the Debenture so exchanged or transferred, and neither gain nor loss of
interest shall result from any such transfer or exchange. Upon receipt by the
Company of an affidavit of the treasurer, assistant treasurer, or other
responsible official of any Purchaser (or, in the case of holders of Debentures
other than a Purchaser, evidence reasonably satisfactory to the Company) of the
ownership of and the loss, theft, destruction or mutilation of a Debenture and
(i) in case of loss, theft or destruction of a Debenture, of indemnity
reasonably satisfactory to it or (ii) in the case of the mutilation of any
Debenture, upon surrender and cancellation thereof, the Company, at its expense,
shall execute and deliver in lieu thereof a new Debenture of like tenor and of a
like principal amount and dated and bearing interest from the date to which
interest has been paid on such lost, stolen, destroyed or mutilated Debenture.
12.3 Parties in Interest. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the parties
hereto and the respective successors and assigns of the parties hereto
(including transferees of any of the Debentures).
12.4 Debentures Owned by Affiliates. For the purposes of applying all
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
principal amount of Debentures, the Debentures or shares owned of record by any
affiliate of a Purchaser shall be deemed to be owned by such Purchaser. For the
purpose of this Agreement, the term "affiliate" shall mean any Person
controlling, controlled by or under common control with, a Purchaser and any
general or limited partner of any Purchaser. Without limiting the foregoing,
each Purchaser shall be considered an affiliate of each other Purchaser.
12.5 Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of not less than a majority in aggregate principal amount of the
Debentures at the time outstanding; and each holder of any Debenture at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 12.5, whether or not such Debenture shall have been marked to indicate
such consent, but any Debenture issued thereafter shall contain a reference or
bear a notation referring to any such consent; provided that notwithstanding
anything in this Section 12.5 to the contrary, without the written consent of
(a) the holder or holders of all Debentures at the time outstanding, no consent,
amendment or waiver to or under this Agreement shall extend or reduce the
maturity of any Debenture, or reduce the rate or affect the time of payment of
interest with respect to any Debenture, or affect the time, amount or allocation
of any required prepayments, or reduce the proportion of the principal amount of
the Debentures required with respect to any consent, amendment or waiver, and
(b) the holder or holders of all Debentures at the time outstanding, no
amendment to this Agreement shall affect the provisions of Article VI. The
Company shall promptly send copies of any amendment, consent or waiver (and any
requests for any such amendment, consent or waiver) relating to this Agreement
or the Debentures to each holder of
44
the Debentures and, to the extent practicable, shall consult with holders of the
Debentures, in connection with each such amendment, consent and waiver. No
course of dealing between the Company and the holder of any of the Debentures
nor any delay in exercise any rights hereunder or any of the Debentures shall
operate as a waiver of any rights of any holder of such Debentures. The Company
will reimburse the Purchasers for the reasonable fees and expenses of counsel
incurred in connection with any amendment or modification of this Agreement or
any of the Related Agreements or any waiver hereof or thereof.
12.6 Notices. All notices, requests, consents, reports and demands shall
be in writing and shall be hand delivered, sent by facsimile or other electronic
medium, or mailed, postage prepaid, to the Company or to the Purchasers at the
address set forth below or to such other address as may be furnished in writing
to the other parties hereto:
The Company: Sybari Software, Inc.
And the Principal 000 Xxxxxxxxx Xxxx
Xxxxxxxxxxxx Xxxx Xxxxxxxxx, Xxx Xxxx 00000
Attention: President
Fax: (000)000-0000
with copy to: Xxxx Xxxxxxx LLP
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxxxx, Esq.
Fax: (000)000-0000
The Purchasers: The address set forth opposite the Purchaser's name on
Schedule 1.1 attached hereto.
with copy to: Xxxxxxxx, Xxxxxxx & Xxxxxxx,
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Fax:(000)000-0000
12.7 Expenses. Immediately upon consummation of the Closing, the Company
shall pay all reasonable costs and expenses of the Purchasers and the Principal
Shareholders in connection with the investigation, preparation, execution and
delivery of this Agreement (and due diligence related thereto) and the other
instruments and documents to be delivered hereunder and the transactions
contemplated hereby and thereby, including the reasonable fees and disbursements
of Xxxxxxxx, Xxxxxxx & Xxxxxxx, A Professional Corporation, special counsel to
the Purchasers, their accountants and other advisers not to exceed $150,000.
45
12.8 Counterparts. This Agreement and any exhibit hereto may be executed
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any exhibit hereto may be delivered via telecopier, with
the intention that they shall have the same effect as an original counterpart
hereof.
12.9 Effect of Headings. The article and section headings herein are for
convenience only and shall not affect the construction hereof.
12.10 Governing Law. This Agreement shall be deemed a contract made under
the laws of The Commonwealth of Massachusetts and together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such Commonwealth.
12.11 Certain Tax Matters.
(a) Neither the Company nor any Principal Shareholder will revoke the
Company's election to be taxed as an S corporation within the meaning of
Sections 1361 and 1362 of the Code. The Company and the Principal Shareholders
will not take or allow any action (other than pursuant to this Agreement) that
would result in the termination of the Company's status as validly electing
S corporation within the meaning of Code Sections 1361 and 1362.
(b) The Company shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns for the Company and each of its Subsidiaries for all
periods ending on or prior to the Closing Date which are filed after the Closing
Date in a manner that is consistent with prior tax returns of the Company. The
Company shall provide the Principal Shareholders with the opportunity to review
and comment on each such Tax Return described in the preceding sentence prior
to filing and shall adopt any reasonable changes or adjustments proposed by the
Principal Shareholders. To the extent permitted by applicable law, the Principal
Shareholders shall include any income, gain, loss, deduction or other tax items
for such periods on their respective Tax Returns in a manner consistent with the
Schedule K-1s furnished by the Company to the Principal Shareholders for such
periods.
(c) The Company shall prepare or cause to be prepared and file or cause to
be filed any Tax Returns of the Company and each of its Subsidiaries for periods
which begin before the Closing Date and end after the Closing Date. For purposes
of this section, in the case of any Taxes that are payable for a period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such period ending on the Closing Date shall (i) in
the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire period
multiplied by a fraction the numerator of which is the number of days in the
period ending on the Closing Date and the denominator of which is the number of
days in the entire period, and (ii) in the case of any Tax based upon or related
to income or receipts, be deemed equal to the amount which would be payable if
the relevant period ended on the Closing Date. With respect to any credits
relating to a period that
46
begins before and ends after the Closing Date, the portion of such credits which
relate to the portion of such period ending on the Closing Date shall be deemed
to be the amount of such credits for the entire period multiplied by a fraction,
the numerator of which is the number of days in the period ending on the Closing
Date and the denominator of which is the number of days in the entire period.
All determinations necessary to give effect to the foregoing allocations shall
be made in a manner consistent with prior practice of the Company and each of
its Subsidiaries.
(d) (i) The Company, each of its Subsidiaries and the Principal
Shareholders shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of Tax Returns pursuant to this
Section 12.11 and any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Company, its Subsidiaries and the
Principal Shareholders agree (A) to retain all books and records with respect to
Tax matters pertinent to the Company relating to any period beginning before the
Closing Date until the expiration of the statute of limitations (and to the
extent notified by the Company or the Principal Shareholders, any extensions
thereof) of the respective periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Company or
the Principal Shareholders, as the case may be, shall allow the other party to
take possession of such books and records.
(ii) The Principal Shareholders further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(e) All Tax sharing agreements or similar agreements with respect to or
involving the Company and each of its Subsidiaries shall be terminated as of the
Closing Date and after the Closing Date, the Company shall not be bound thereby
or have any liability thereunder.
(f) All transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any corporate-level gains tax
triggered by the sale of the Company stock, and any similar tax imposed in other
states or subdivisions) shall be paid by the Shareholders when due, and the
Shareholders will, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and, if required by applicable
law, the Company will, and will cause its affiliates to, join in the execution
of any such Tax Returns and other documentation.
47
(g) The Company agrees with each of the holders of the Series A Preferred
Stock and each of the holders of the Series B Preferred Stock for Tax purposes
that the holders thereof will not receive actually or constructively any
dividends (other than Cash Dividends as that term is defined below) within the
meaning of any of the provisions of the Code, including, without limitation,
Subchapter C of Chapter 1 of Subtitle A of the Code, or any provisions of any
foreign, state, or local law, and the regulations promulgated under any of the
foregoing at any time, including upon redemption, liquidation, or conversion or
exchange thereof, or upon any adjustment to the conversion rate, or during the
period that any shares of Series A Preferred Stock and Series B Preferred Stock
are held by the holders of any such shares, and that, accordingly, the Company
will not report to any governmental authority the distribution of a dividend to
the holders of the Series A Preferred Stock or to the holders of the Series B
Preferred Stock other than cash dividends that are declared by the Board of
Directors of the Company and paid to the holders ("Cash Dividends") of the
Series A Preferred Stock or the Series B Preferred Stock and will not take any
inconsistent position on any Tax Return filed with any governmental authority.
The Company agrees with each holder of the Series A Preferred Stock and each
holder of the Series B Preferred Stock that such stock shall be treated as stock
for tax purposes and not as debt.
(h) The Company shall elect under Section 1362(e)(3) of the Code not to
have the pro rata allocation of S corporation items under Section 1362(e)(2) of
the Code apply to the period beginning on January 1, 2001 and ending on the day
prior to the termination of its S election (the "Short S Year"), as a result of
which items shall be allocated between the Short S Year of the Company and the
period commencing on the date of the termination of the S election and ending on
December 31, 2001 (the "Short C Year") under normal tax accounting rules, that
is, the closing of the books method of accounting. Each Principal Shareholder
shall consent in writing on a timely basis to such election.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
48
SYBARI SOFTWARE, INC.
SECURITIES PURCHASE AND REDEMPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon, this letter shall become a binding agreement among us.
Very truly yours,
COMPANY:
SYBARI SOFTWARE, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
PRINCIPAL SHAREHOLDERS:
/s/ Xxxxxx X. Xxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxxx Xxxxxx
----------------------------------
Xxxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ Xxxxxxx X. XxxxXxxxxxx
----------------------------------
Xxxxxxx X. XxxxXxxxxxx
S-1
SYBARI SOFTWARE, INC.
SECURITIES PURCHASE AND REDEMPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
Summit Ventures V, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By: /s/ Xxx Xxxxxxx
-----------------------
Member
Summit V Companion Fund, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By: /s/ Xxx Xxxxxxx
-----------------------
Member
S-2
SYBARI SOFTWARE, INC.
SECURITIES PURCHASE AND REDEMPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
Summit V Advisors Fund, L.P.
By: Summit Partners, LLC
Its General Partner
By: /s/ Xxx Xxxxxxx
------------------------------
Member
Summit V Advisors Fund (QP), L.P.
By: Summit Partners, LLC
Its General Partner
By: /s/ Xxx Xxxxxxx
------------------------------
Member
Summit Subordinated Debt Fund II, L.P.
By: Summit Partners SD II, LLC
Its General Partner
By: /s/ Xxx Xxxxxxx
------------------------------
Member
Summit Investors III, L.P.
By: /s/ Xxx Xxxxxxx
----------------------------------
General Partner
S-3
EXHIBIT A
SUBORDINATED DEBENTURE
THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE SECURITIES LAWS
OF ANY STATE. THIS DEBENTURE MAY NOT BE TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE
OR OTHERWISE UNLESS (i) A REGISTRATION STATEMENT FOR THE DEBENTURES UNDER THE
ACT IS IN EFFECT OR (ii) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, WHICH
OPINION IS REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR THE SECURITIES LAWS OF ANY STATE.
Subordinated Debenture
Due March 30, 2006
$______________ March 30, 2001
No. D-1
FOR VALUE RECEIVED, Sybari Software, Inc., a New York corporation (the
"Company"), hereby promises to pay to [Summit entity] or its registered
assigns, the sum of [ _______] ($ ) upon the earlier of (i) March 30, 2006 or
(ii) a "Liquidity Event" (as such term is defined herein), together with
interest, computed on the basis of the actual number of days elapsed over a
360-day year, on the unpaid principal balance hereof until paid in full at the
rate of twelve percent (12%) per annum from the date hereof, payable in cash
quarterly in arrears on the fifteenth (15th) day after the last day of each of
calendar quarter of each year during which any amounts due hereunder remain
outstanding, commencing on the first such date following the date hereof, and
until such unpaid balance becomes due and payable (whether at maturity or at a
date fixed for mandatory or optional redemption or prepayment or by acceleration
or otherwise). Upon the occurrence of an Event of Default (as hereinafter
defined), the interest rate shall increase to fifteen percent (15%) per annum.
For the purposes of this debenture, the term "Liquidity Event" shall mean any
one or more of the following: (i) the liquidation, dissolution, or winding up of
the Company, whether voluntary or involuntary; (ii) a sale, merger, or similar
transaction involving the Company, the result of which those persons who held
100% of the voting stock of the Company immediately prior to such transaction do
not hold more than 50% of the voting stock of the Company (or the surviving or
resulting entity) after giving effect to such transaction; or (iii) an Initial
Public Offering. The term "Initial Public Offering shall mean the consummation
of the first public offering of securities of the Corporation pursuant to a
registration statement filed under the Securities Act of 1933, as amended (the
"Act"), pursuant to which the aggregate public offering price of the shares
sold by the Corporation equals or exceeds $50,000,000, the price per share of
Common Stock equals or exceeds three (3) times the original purchase of the
Series B Preferred Stock and in which all of
the Series A Preferred Stock has been redeemed and all amounts due and owing
under the Debentures has been paid in full.
All payments of principal (including any prepayments or redemptions) and
interest hereunder shall be made by the Company in lawful money of the United
States of America in immediately available federal funds not later than 2:00
p.m., Boston, Massachusetts, time, on the date each such payment is due, by
crediting an account in the United States as the holder of this Debenture may
designate in writing to the Company before the scheduled payment date.
The Company shall be entitled to prepay this Debenture, either in whole or
in part (but if in part then in a minimum amount of $50,000 and, if greater, in
integral multiples of $10,000), without premium or penalty, at any time, at a
price equal to 100% of the principal amount so prepaid, together with accrued
interest on the principal amount prepaid to the prepayment date. The Company
shall give the Holder irrevocable written notice of each optional prepayment not
less than five (5) days prior to the prepayment date, specifying such prepayment
and the amount of the Debentures proposed to be prepaid on such date, whereupon
such principal amount of the Debentures specified in such notice, together with
accrued interest thereon, shall become due and payable on the prepayment date.
Each and every partial prepayment of the Debentures authorized above shall
be made with respect to all of the Debentures then outstanding, rather than to
any portion thereof, and the aggregate amount of each partial prepayment shall
be allocated among all of the holders of the Debentures at the time outstanding
in proportion to the unpaid principal amounts of the Debentures held by each of
such holders.
Upon the occurrence of any one or more of the following events (each, an
"Event of Default"), the obligations under this Debenture shall, at the option
of the holders of a majority in principal amount of the Debentures then
outstanding, become immediately due and payable without notice or demand: (i)
Company's failure to make any payment within five (5) days when due hereunder or
to pay or perform any other obligation, now existing or hereafter arising, to
Holder or any holder hereof unless cured within ten (10) days after notice in
writing thereof; (ii) the liquidation or dissolution of Company; (iii) with
respect to Company, the commencement, whether voluntary or involuntary, of a
case under the United States Bankruptcy Code or any other proceeding or action
seeking reorganization, liquidation, dissolution or other relief under federal
or state bankruptcy or insolvency statutes or similar laws, or seeking the
appointment of a receiver, trustee or custodian for Company or all or a part of
its assets, which case, proceeding or action is not discharged in sixty (60)
days; (iv) the making by the Company of an assignment for the benefit of
creditors, or the admission in writing by the Company that it is unable to pay
its debts as they mature; or (v) the declaration of any default beyond
applicable grace periods by a bank pursuant to the terms and conditions of any
credit facility that provides the Company with indebtedness senior in all
respects to the Debenture Such declaration may in certain events be rescinded or
annulled by the holders of a majority in principal amount of the Debentures then
outstanding.
This Debenture is one of two duly authorized Debentures issued by the
Company pursuant to that certain Securities Purchase and Redemption Agreement,
dated as of March 30, 2001 (the "Purchase Agreement") by and among the Company,
Xxxxxx X. Xxxxxxx, Xxxxxx Xxxxxx,
-2-
Xxxxxxx X. Xxxxxxxx, Xxxxxxx X. XxxxXxxxxxx and the purchasers listed on
Schedule 1.1 thereto. Reference is hereby made to the Purchase Agreement for a
statement of the respective rights and duties thereunder of the Company and the
holders of the Debentures, and the terms upon which the Debentures are
delivered.
No reference herein to the Purchase Agreement and no provisions of this
Debenture or of the Purchase Agreement shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of and
interest on this Debenture at the times, places, and rates, and in the coin or
currency, herein prescribed.
This Debenture is transferable by the registered owner hereof, in person
or by duly authorized attorney, on the books of the Company to be kept for that
purpose, upon surrender and cancellation of this Debenture and upon presentation
of a duly executed written instrument of transfer satisfactory to the Company,
and thereupon a new Debenture or Debentures, of the same aggregate principal
amount and in authorized denominations, will be issued to the transferee or
transferees in exchange therefor; and this Debenture, with or without other
Debentures may in like manner be exchanged for one or more new Debentures of
other authorized denominations but of the same aggregate principal amount. Any
such transfer or exchange shall be without charge by the Company.
All terms used in this Debenture which are defined in the Purchase
Agreement shall have the meanings assigned to them in the Purchase Agreement.
This Debenture shall be deemed to be a contract made under the laws of The
Commonwealth of Massachusetts and shall for all purposes be construed in
accordance with the laws of said State without giving effect to the conflicts of
laws provisions thereof.
-3-
SUBORDINATED DEBENTURE
SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed as an instrument under seal.
SYBARI SOFTWARE, INC.
By:____________________________
Name:
Title:
-4-
EXHIBIT B
PREFERRED STOCK TERMS
1. Designation and Amount. The Corporation shall be authorized to issue
1,000,000 shares designated Series A Redeemable Preferred Stock, $.01 par value
per share ("Series A Preferred Stock"), and 50 shares designated Series B
Convertible Redeemable Preferred Stock, $.01 par value per share ("Series B
Preferred Stock"). The shares of Series A Preferred Stock and Series B Preferred
Stock are sometimes collectively referred to herein as "Preferred Stock." The
Preferred Stock shall have the preferences, limitations and rights set forth
below.
2. Dividends.
(a) Accrued Dividend. The Corporation shall pay dividends on the
Preferred Stock, when, as and if declared by the Board of Directors at the rate
of 8% of the original purchase price thereof compounded annually. To the extent
not paid, dividends shall cumulate and compound annually.
(b) Limitation on Restrictions. The Corporation shall not, and shall
not permit any of its subsidiaries to, agree to any provision in any agreement
which would impose any restrictions on the Corporation's right to make any
mandatory redemption of the Preferred Stock or, except as set forth in
documentation related to financings for the Corporation approved by the Board of
Directors, on the Corporation's right to declare and pay dividends on the
Preferred Stock as provided for herein.
(c) Dividends in Kind. In the event the Corporation shall make or
issue, or shall fix a record date for the determination of holders of Common
Stock (as hereafter defined) entitled to receive, a dividend or other
distribution with respect to such class of Common Stock payable in (i)
securities of the Corporation other than shares of any class of Common Stock,
(ii) cash, or (iii) assets, then and in each such event the holders of Series B
Preferred Stock shall receive, at the same time such distribution is made with
respect to such class of Common Stock, the number of securities or such cash or
other assets of the Corporation which they would have received had their Series
B Preferred Stock been converted in accordance with Section 5 hereof immediately
prior to the record date for determining holders of such class of Common Stock
entitled to receive such distribution.
3. Liquidation, Dissolution or Winding Up.
(a) Treatment at Liquidation, Dissolution and Winding Up. In the
event of a Liquidity Event (as herein defined), before any distribution or
payment may be made with respect to the Common Stock or any other series or
class of capital stock, holders of each share of Preferred Stock shall be
entitled to be paid out of the assets of the Corporation available for
distribution to holders of the Corporation's capital stock of all classes,
whether such assets are capital, surplus, or capital earnings, an amount in cash
equal to:
(i) with respect to the Series A Preferred Stock (x)$5.00 per share
of Series A Preferred Stock (which amount, together with the other share and per
share numbers used herein shall be subject to equitable adjustment whenever
there shall occur a stock split, combination, reclassification or other similar
event involving the class or series of stock in question), plus (y) an amount
equal to the amount of dividends accumulated but unpaid pursuant to paragraph
2(a) above up to and including the date full payment shall be tendered to the
holders of the Series A Preferred Stock with respect to such Liquidity Event
(such amounts described in this clause (i) being referred to as the "Series A
Liquidation Amount"); and
(ii) with respect to the Series B Preferred Stock, an amount in cash
equal to the greater of (a) the sum of (x) $200,000 per share of Series B
Preferred Stock plus (y) an amount equal to the amount of dividends accumulated
but unpaid pursuant to paragraph 2(a) above up to and including the date full
payment shall be tendered to the holders of the Series B Preferred Stock with
respect to such liquidation, dissolution or winding up or (b) the sum of such
amount per share of Series B Preferred Stock as would have been payable had each
such share been converted into common stock immediately prior to such Liquidity
Event plus the amount of all dividends accumulated but unpaid pursuant to
paragraph 2(a) above up to and including the date full payment shall be tendered
to the holders of the Series B Preferred Stock (such amounts described in this
clause (ii) being referred to as the "Series B Liquidation Amount"); provided,
that those holders of Series B Preferred Stock that elect to have their
securities treated in accordance with the provisions of Section 5(f) hereof
shall not be entitled to receive the Series B Liquidation Amount; provided,
further, that, holders of Series B Preferred Stock shall not be entitled to
receive the Series B Liquidation Amount in the event of a Qualified Public
Offering.
The term "Liquidity Event" shall mean any one or more of the following:
(i) a liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary; (ii) a sale, merger or similar transaction involving
the Corporation, as the result of which those persons who held 100% of the
voting stock of the Corporation immediately prior to such transaction do not
hold more than 50% of the voting stock of the Corporation (or the surviving or
resulting entity) after giving effect to such transaction; (iii) the sale of all
or substantially all of the assets of the Corporation; or (iv) the consummation
of the first public offering of securities of the Corporation pursuant to a
registration statement filed under the Securities Act of 1933, as amended (the
"Act"), pursuant to which the aggregate public offering price of the shares sold
by the Corporation equals or exceeds $50,000,000, the price per share of Common
Stock equals or exceeds three (3) times the original purchase price of the
Series B Preferred Stock and in which all of the Series A Preferred Stock has
been redeemed and all amounts due and owing under those certain Debentures, due
March 30, 2006, have been paid in full ("Qualified Public Offering").
If upon any such Liquidity Event the assets of the Corporation available
for distribution to its shareholders shall be insufficient to permit payment to
the holders of the Series A Preferred Stock the full amount of the Series A
Liquidation Amount to which they are entitled to be paid.
-2-
the holders of shares of Series A Preferred Stock shall share ratably in any
distribution of assets according to the amounts which would be payable with
respect to the shares of Series A Preferred Stock held by them upon such
distribution if all amounts payable on or with respect to said shares were paid
in full.
If, upon any such Liquidity Event after payment to the holders of Series A
Preferred Stock the full amount of the Series A Liquidation Amount to which they
are entitled to be paid, the assets of the Corporation available for
distribution to its Shareholders shall be insufficient to permit payment to the
holders of the Series B Preferred Stock the full amount of the Series B
Liquidation Amount to which they are entitled to be paid, then the holders of
shares of Series B Preferred Stock shall share ratably in any distribution of
assets according to the amounts which would be payable with respect to the
shares of Series B Preferred Stock held by them upon such distribution if all
amounts payable on or with respect to said shares are paid in full.
After the payment of the Series A Liquidation Amount and the Series B
Liquidation Amount shall have been made in full to the holders of the Series A
Preferred Stock and Series B Preferred Stock or funds necessary for such payment
shall have been set aside by the Corporation in trust for the account of holders
of the Series A Preferred Stock and Series B Preferred Stock so as to be
available for such payments, the holders of Series A Preferred Stock and Series
B Preferred Stock shall be entitled to no further participation in the
distribution of the assets of the Corporation legally available for distribution
to holders of all other classes of securities of the Corporation.
(b) Distributions in Cash. The Series A Liquidation Amount and the
Series B Liquidation Amount shall in all events be paid in cash. Whenever a
distribution provided for in this Section 3 is payable in property other than
cash, the value of such distribution shall be the fair market value of such
property as determined in good faith by the Corporation's Board of Directors.
4. Voting Power.
(a) Series A Preferred Stock. Except as otherwise expressly provided
in Section 7 hereof, or as required by law, the holders of the Series A
Preferred Stock shall not be entitled to vote on any corporate matters.
(b) Series B Preferred Stock. Except as otherwise expressly provided
in Section 7 hereof, or as required by law, each holder of Series B Preferred
Stock shall be entitled to vote on all matters and shall be entitled to that
number of votes equal to the largest number of whole shares of Common Stock into
which such holder's shares of Series B Preferred Stock could be converted,
pursuant to the provisions of Section 5 hereof, at the record date for the
determination of shareholders entitled to vote on such matter or, if no such
record date is established, at the date such vote is taken or any written
consent of shareholders is solicited. Except as otherwise expressly provided
herein or as required by law, the holders of shares of Series B Preferred Stock
and Common Stock shall vote together as a single class on all matters.
- 3 -
5. Conversion Rights of the Series B Preferred Stock. The holders of the
Series B Preferred Stock shall have the following rights with respect to the
conversion of the Series B Preferred Stock into shares of Common Stock:
(a) General. Subject to and in compliance with the provisions of
this Section 5, any share of the Series B Preferred Stock may, at the option of
the holder, be converted at any time into fully-paid and non-assessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series B Preferred Stock shall be entitled upon conversion shall be a number of
shares of Common Stock equal to the product obtained by multiplying the
Applicable Conversion Rate (as determined by Section 5(b)) by the number of
shares of Series B Preferred Stock being converted. In addition, at the time of
any conversion of Series B Preferred Stock, the accrued and unpaid dividends on
the shares being converted shall be paid in cash.
(b) Applicable Conversion Rate. The conversion rate in effect at any
time (the "Applicable Conversion Rate") shall be the quotient obtained by
dividing $200,000 by the Applicable Conversion Value, calculated as provided in
Section 5(c).
(c) Applicable Conversion Value. The Applicable Conversion Value
shall be $200,000, except that such amounts shall be adjusted from time to time
in accordance with this Section 5.
(d) Adjustments to Applicable Conversion Values.
(i)(A) Upon Sale of Common Stock. If the Corporation shall,
while there are any shares of Series B Preferred Stock outstanding, issue or
sell shares of its Common Stock without consideration or at a price per share
less than the Applicable Conversion Value in effect immediately prior to such
issuance or sale, then the Applicable Conversion Value upon each such issuance
or sale shall be lowered, except as hereinafter provided, so as to be equal to
an amount determined by multiplying the Applicable Conversion Value by a
fraction:
(1) the numerator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock (calculated on a fully diluted basis
assuming the conversion of all outstanding Series B Preferred Stock and
the conversion or exercise of all outstanding securities then convertible
or exercisable for Common Stock), plus (b) the number of shares of Common
Stock which the net aggregate consideration, if any, received by the
Corporation for the total number of such additional shares of Common Stock
so issued would purchase at the Applicable Conversion Value in effect
immediately prior to such issuance, and
(2) the denominator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock (calculated on a fully diluted basis
assuming the conversion of all outstanding Series B Preferred Stock and
the conversion or exercise of all outstanding securities then convertible
or exercisable for Common Stock) plus (b) the number of such additional
shares of Common Stock so issued.
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(B) Upon Issuance of Warrants, Options and Rights to Common
Stock.
(1) For the purposes of this Section 5(d)(i), the issuance of any
warrants, options, subscriptions, or purchase rights with respect to
shares of Common Stock and the issuance of any securities convertible into
or exchangeable for shares of Common Stock (or the issuance of any
warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance of such Common Stock
at such time if the Net Consideration Per Share (as hereinafter
determined) which may be received by the Corporation for such Common Stock
shall be less than the Applicable Conversion Value at the time of such
issuance. Any obligation, agreement, or undertaking to issue warrants,
options, subscriptions, or purchase rights at any time in the future shall
be deemed to be an issuance at the time such obligation, agreement or
undertaking is made or arises. No adjustment of the Applicable Conversion
Value shall be made under this Section 5(d)(i) upon the issuance of any
shares of Common Stock which are issued pursuant to the exercise of any
warrants, options, subscriptions, or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any convertible
securities if any adjustment shall previously have been made or deemed not
required hereunder, upon the issuance of any such warrants, options, or
subscription or purchase rights or upon the issuance of any convertible
securities (or upon the issuance of any warrants, options or any rights
therefor) as above provided.
Should the Net Consideration Per Share of any such warrants, options,
subscriptions, or purchase rights or convertible securities be decreased
or increased from time to time, then, upon the effectiveness of each such
change, the Applicable Conversion Value shall be adjusted to such
Applicable Conversion Value as would have obtained (1) had the adjustments
made upon the issuance of such warrants, options, rights, or convertible
securities been made upon the basis of the decreased or increased Net
Consideration Per Share of such securities, and (2) had adjustments made
to the Applicable Conversion Value since the date of issuance of such
securities been made to the Applicable Conversion Value as adjusted
pursuant to (1) above. Any adjustment of the Applicable Conversion Value
with respect to this paragraph which relates to warrants, options,
subscriptions, purchase rights or convertible securities with respect to
shares of Common Stock shall be disregarded if, as, when and to the extent
such warrants, options, subscriptions, purchase rights or convertible
securities expire or are canceled without being exercised or converted, so
that the Applicable Conversion Value effective immediately upon such
cancellation or expiration shall be equal to the Applicable Conversion
Value in effect at the time of the issuance of the expired or canceled
warrants, options, subscriptions, purchase rights, or convertible
securities with such additional adjustments as would have been made to
that Applicable Conversion Value had the expired or canceled warrants,
options, subscriptions, purchase rights or convertible securities not been
issued.
(2) For purposes of this paragraph, the "Net Consideration Per
Share" which may be received by the Corporation shall be determined as
follows:
- 5 -
(a) The "Net Consideration Per Share" shall mean the amount
equal to the total amount of consideration, if any, received by the
Corporation for the issuance of such warrants, options,
subscriptions, or other purchase rights or convertible or
exchangeable securities, plus the minimum amount of consideration,
if any, payable to the Corporation upon exercise or conversion
thereof, divided by the aggregate number of shares of Common Stock
that would be issued if all such warrants, options, subscriptions,
or other purchase rights or convertible or exchangeable securities
were exercised, exchanged, or converted.
(b) The Net Consideration Per Share which may be received by
the Corporation shall be determined in each instance as of the date
of issuance of warrants, options, subscriptions, or other purchase
rights or convertible or exchangeable securities without giving
effect to any possible future upward price adjustments or rate
adjustments which may be applicable with respect to such warrants,
options, subscriptions, or other purchase rights or convertible or
exchangeable securities unless and until such upward price or rate
adjustments are in fact made in accordance with the provisions set
forth in subsection (B)(1) above. Notwithstanding anything to the
contrary set forth herein, no adjustment upon any such price or rate
increase shall result in an increase in the Applicable Conversion
Value to an amount in excess of the Applicable Conversion Value in
effect immediately prior to the issuance of such warrants, options,
subscriptions, purchase rights or convertible securities.
(C) Stock Dividends. In the event the Corporation shall make
or issue a dividend or other distribution payable in Common Stock or
securities of the Corporation convertible into or otherwise exchangeable
for the Common Stock of the Corporation, then such Common Stock or other
securities issued in payment of such dividend shall be deemed to have been
issued without consideration (except for dividends payable in shares of
Common Stock payable pro rata to holders of Series B Preferred Stock and
to holders of any other class of stock).
(D) Consideration Other than Cash. For purposes of this
Section 5(d), if a part or all of the consideration received by the
Corporation in connection with the issuance of shares of the Common Stock
or the issuance of any of the securities described in this Section 5(d)
consists of property other than cash, such consideration shall be deemed
to have a fair market value as is reasonably determined in good faith by
the Board of Directors of the Corporation.
(E) Exceptions. This Section 5(d)(i) shall not apply under any
of the circumstances which would constitute an Extraordinary Common Stock
Event (as hereinafter defined in Section 5(d)(ii)). Further, the
provisions of this Section 5(d) shall not apply to (i) shares issued upon
conversion of the Series B Preferred Stock, (ii) up to five percent (5%)
in the aggregate of the issued and outstanding Common Stock (on a fully
diluted basis) as of the original issuance date of the Preferred Stock
issued or reserved for issuance to employees, officers or directors of, or
consultants to, the
- 6 -
Corporation pursuant to plans and agreements approved by a majority of the
Corporation's Board of Directors, (iii) up to two percent (2%) in the
aggregate of the issued and outstanding Common Stock (on a fully diluted
basis) as of the original issuance date of the Preferred Stock as an
"equity kicker" in connection with all debt financings approved by the
Board of Directors, (iv) up to five percent (5%) in the aggregate of the
issued and outstanding Common Stock (on a fully diluted basis) as of the
original issuance date of the Preferred Stock issued as consideration in
connection with all acquisitions which are approved by the Board of
Directors, (v) shares of Common Stock issued in connection with a
Qualified Public Offering, (vi) up to five (5%) in the aggregate of the
issued and outstanding Common Stock (on a fully diluted basis) as of the
original issuance date of the Preferred Stock issued in connection with
all "Strategic Financings" (as such term is defined herein) approved by
the Board of Directors, and (vii) any shares of any class or series of
capital stock (including warrants, options, subscriptions or purchase
rights with respect thereto) approved in writing as being excepted
hereunder by the holders of fifty-one percent (51%) of the Series B
Preferred Stock at the time outstanding, voting separately as a class. The
number of shares in this Section (E) shall be proportionately adjusted to
reflect any stock dividend, stock split or other form of recapitalization
occurring after the date hereof. For purposes of this Section, the term
"Strategic Financing" shall mean the sale or issuance of the Corporation's
Common Stock in connection with an operational or strategic contract where
the primary purpose is not fund raising.
(ii) Upon Extraordinary Common Stock Event. Upon the happening of an
Extraordinary Common Stock Event (as hereinafter defined), the Applicable
Conversion Value for the Series B Preferred Stock shall, simultaneously
with the happening of such Extraordinary Common Stock Event, be adjusted
by multiplying the then effective Applicable Conversion Value with respect
to the Series B Preferred Stock by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately
prior to such Extraordinary Common Stock Event and the denominator of
which shall be the number of shares of Common Stock outstanding
immediately after such Extraordinary Common Stock Event, and the product
so obtained shall thereafter be the Applicable Conversion Value; provided,
however, that the Applicable Conversion Value shall not be adjusted if the
Series B Preferred Stock is subdivided or combined at the same rates and
in the same manner as the Common Stock. The Applicable Conversion Value
for the Series B Preferred Stock shall be readjusted in the same manner
upon the happening of any successive Extraordinary Common Stock Event or
Events.
"Extraordinary Common Stock Event" shall mean (i) a
subdivision of outstanding shares of Common Stock into a greater
number of shares of Common Stock, or (ii) a combination of
outstanding shares of the Common Stock into a smaller number of
shares of Common Stock.
(e) Capital Reorganization or Reclassification. If the Common Stock
issuable upon the conversion of the Series B Preferred Stock shall be changed
into the same or different number of shares of any class or classes of stock,
whether by capital reorganization,
- 7 -
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for elsewhere in this Section 5 or by a Liquidity
Event), then and in each such event, the holder of each share of Series B
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and property receivable
upon such capital reorganization, reclassification or other change by holders of
the number of shares of Common Stock into which such share of Series B Preferred
Stock would have been converted immediately prior to such capital
reorganization, reclassification or other change.
(f) Liquidity Event. If at any time or from time to time there shall
be a Liquidity Event (other than a subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this Section 5), then as a part of
such Liquidity Event, provision shall be made so that the holders of the Series
B Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series B Preferred Stock, the number of shares of stock or other securities or
property of the Corporation, or of the successor corporation resulting from such
Liquidity Event, to which such holder would have been entitled if such holder
had converted its shares of Series B Preferred Stock immediately prior to such
Liquidity Event. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the rights of
the holders of the Series B Preferred Stock after the Liquidity Event, to the
end that the provisions of this Section 5 (including adjustment of the
Applicable Conversion Value then in effect and the number of shares issuable
upon conversion of the Series B Preferred Stock) shall be applicable after that
event in as nearly equivalent a manner as may be practicable.
Except as otherwise provided in Section 3, upon the occurrence of a
Liquidity Event, under circumstances which make the preceding paragraph
applicable, each holder of Series B Preferred Stock shall have the option of
electing treatment for his shares of Series B Preferred Stock under either this
Section 5(f) or Section 3 hereof, notice of which election shall be submitted in
writing to the Corporation at its principal offices no later than ten (10)
business days before the effective date of such event.
(g) Certificate as to Adjustments; Notice by Corporation. In each
case of an adjustment or readjustment of the Applicable Conversion Rate, the
Corporation at its expense will furnish each holder of Series B Preferred Stock
with a certificate, executed by the president and chief financial officer (or in
the absence of a person designated as the chief financial officer, by the
treasurer) showing such adjustment or readjustment, and stating in detail the
facts upon which such adjustment or readjustment is based.
(h) Exercise of Conversion Privilege. To exercise its conversion
privilege, a holder of Series B Preferred Stock shall surrender the certificate
or certificates representing the shares being converted to the Corporation at
its principal office, and shall give written notice to the Corporation at that
office that such holder elects to convert such shares. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Series B Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Corporation or in blank. The date when such written notice is received by
the Corporation, together with the certificate or certificates
- 8 -
representing the shares of Series B Preferred Stock being converted, shall be
the "Conversion Date." As promptly as practicable after the Conversion Date, the
Corporation shall issue and shall deliver to the holder of the shares of Series
B Preferred Stock being converted, or on its written order, such certificate or
certificates as it may request for the number of whole or fractional shares of
Common Stock issuable upon the conversion of such shares of Series B Preferred
Stock in accordance with the provisions of this Section 5. Such conversion shall
be deemed to have been effected immediately prior to the close of business on
the Conversion Date and at such time the rights of the holder as holder of the
converted shares of Series B Preferred Stock shall cease and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Common Stock represented
thereby. The Corporation shall pay any taxes payable with respect to the
issuance of Common Stock upon conversion of the Series B Preferred Stock, other
than any taxes payable with respect to income by the holders thereof.
(i) Cash in Lieu of Fractional Shares. The Corporation may, if it so
elects, issue fractional shares of Common Stock or scrip representing fractional
shares upon the conversion of shares of Series B Preferred Stock. If the
Corporation does not elect to issue fractional shares, the Corporation shall pay
to the holder of the shares of Preferred Stock which were converted a cash
adjustment in respect of such fractional shares in an amount equal to the same
fraction of the market price per share of the Common Stock (as determined in a
reasonable manner prescribed by the Board of Directors) at the close of business
on the Conversion Date. The determination as to whether or not any fractional
shares are issuable shall be based upon the total number of shares of Series B
Preferred Stock being converted at any one time by any holder thereof, not upon
each share of Series B Preferred Stock being converted.
(j) Partial Conversion. In the event some but not all of the shares
of Series B Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted the Corporation shall execute and deliver
to or on the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Series B Preferred Stock which
were not converted.
(k) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Series B Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Series B Preferred Stock, and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series B Preferred Stock,
the Corporation shall take such corporate action as may be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(l) Automatic Conversion. (i) Immediately prior to consummation of a
Qualified Public Offering, all shares of Series B Preferred Stock shall be
automatically converted into shares of Common Stock as provided in this Section
5 without any other action on the part
- 9 -
of the Corporation or the holders of Series B Preferred Stock. The Corporation
shall give holders of Series B Preferred Stock at least thirty (30) days' prior
written notice of the pendency of a Qualified Public Offering, provided that the
failure to give such notice shall not affect the conversion of the Series B
Preferred Stock as herein provided.
6. Redemption.
(a) Redemption of Series A Preferred Stock Upon Public Offering.
Effective upon the closing of a Qualified Public Offering, the Corporation shall
redeem all of the outstanding shares of Series A Preferred Stock at an amount
per share equal to the Series A Liquidation Amount (the "Series A Preferred
Stock Redemption Price"). The Corporation shall send to the holders of the
Series A Preferred Stock forty-five (45) days' written notice (the "IPO
Redemption Notice") of the pendency of a Qualified Public Offering and the
redemption price shall be paid at the closing of a Qualified Public Offering.
(b) Optional Redemption of Series A Preferred Stock. In the event of
a Liquidity Event other than a Qualified Public Offering, the holders of a
majority of the Series A Preferred Stock may, at their election, require the
Corporation to redeem all or any portion of the Series A Preferred Stock. The
Corporation shall give the holders of the Series A Preferred Stock twenty (20)
days' written notice of the pendency of a transaction constituting a Liquidity
Event other than a Qualified Public Offering or a liquidation, dissolution or
winding up of the Corporation. Such notice (the "Redemption Notice") shall be
mailed by the Corporation, postage prepaid, to each holder of record of Series A
Preferred Stock at its address shown on the records of the Corporation. If the
holders of a majority of a series of Series A Preferred Stock elect to require
the redemption of their Series A Preferred Stock, they shall so notify the
Corporation in writing within ten (10) days of receipt of the Corporation's
notice of the Liquidity Event and specify the number of shares to be redeemed.
The holders' election to require the redemption of the Series A Preferred Stock
will be contingent upon the consummation of the Liquidity Event. The Corporation
will be required to redeem the shares of Series A Preferred Stock requested to
be redeemed concurrently with the closing of the event constituting the
Liquidity Event. In addition, the holders of Series A Preferred Stock may, at
their election, require the Corporation to redeem, pro rata from all holders of
Series A Preferred Stock (i) on or after March 30, 2006, an amount equal to 50%
of the aggregate number of shares of Series A Preferred Stock outstanding as of
such date and (ii) on or after March 30, 2007, an amount equal to the aggregate
number of shares of Series A Preferred Stock remaining outstanding as of such
date. Such redemption shall be at the Series A Liquidation Amount, payable in
cash. Any shares subject to such redemption and not so redeemed shall be subject
to redemption as soon thereafter as is permitted by law.
(c) Optional Redemption of Series B Preferred Stock. In the event
the Corporation has not consummated a Liquidity Event on or prior to March 30,
2006, the holders of a majority of the Series B Preferred Stock may, at their
election, require the Corporation to redeem pro rata from all holders of Series
B Preferred Stock (i) on or after March 30, 2006 an amount equal to 50% of the
aggregate number of shares of Series B Preferred Stock outstanding as of such
date and (ii) on or after March 30, 2007, an amount equal to the aggregate
number of shares of Series B Preferred Stock remaining outstanding as of such
date. In the event of a
- 10 -
redemption pursuant to this Section 6(c), each holder of Series B Preferred
Stock wishing to exercise its option hereunder shall give the Corporation
written notice. Such notice shall be mailed to the Corporation postage prepaid
and shall contain the name of the shareholder requesting such redemption and the
number of shares to be so redeemed. The Corporation will be required to redeem
the shares of Series B Preferred Stock requested to be redeemed not less than
thirty (30) days after the receipt of such notice.
(d) Surrender of Certificates. Each holder of shares of Preferred
Stock to be redeemed under this Section 6 shall surrender the certificate or
certificates representing such shares to the Corporation at the place designated
in the Redemption Notice, and thereupon the applicable Redemption Price for such
shares as set forth in this Section 6 shall be paid to the order of the person
whose name appears on such certificate or certificates. Irrespective of whether
the certificates therefor shall have been surrendered, all shares of Preferred
Stock which are the subject of a Redemption Notice shall be deemed to have been
redeemed and shall be canceled effective as of the closing of the Qualified
Public Offering or the Redemption Date, as the case may be, unless the
Corporation shall default in the payment of the applicable Redemption Price.
(e) Rights Offering. In the event the Corporation is obligated to
redeem shares of Preferred Stock pursuant to Section 6(b), (c) or (d), but has
insufficient funds with which to fund such redemption, the Corporation shall
initiate a rights offering to its shareholders (the "Rights Offering"). The
Rights Offering shall be comprised of Common Stock which shall be offered to all
shareholders of the Corporation at a price per share equal to the fair market
value thereof, determined by an independent appraiser selected by the Board of
Directors. Such Rights Offering shall have a net offering price equal to the
amount payable with respect to shares of Preferred Stock to be redeemed. All
shareholders shall have the right to participate in the Rights Offering in
proportion to the shares of Common Stock owned by each (including any such
shares issuable upon exercise of options, warrants or convertible securities
held by such shareholders), with a right of over-subscription. The Rights
Offering shall be commenced within thirty (30) days after the date on which the
Corporation is obligated to redeem the Preferred Stock, and shall remain open
for a maximum of sixty (60) days. The Corporation will have no obligation to
conduct the Rights Offering unless such Rights Offering can be completed
pursuant to an exemption from the registration requirements of the Act, as
amended, and any applicable state securities laws. All proceeds to the Rights
Offering shall be used to fund the redemption of the Preferred Stock which is
then required.
7. Restrictions and Limitations.
(a) Corporate Action. Except as expressly provided herein or as
required by law, so long as any shares of Preferred Stock remain outstanding,
the Corporation shall not, and shall not permit any subsidiary (which shall mean
any corporation, association or other business entity of which the Corporation
and/or any of its other subsidiaries directly or indirectly owns at the time
more than fifty percent (50%) of the outstanding voting securities, other than
directors qualifying shares) to, without the approval by vote or written consent
by the holders of at least a majority of each of (i) the then outstanding shares
of Series A Preferred Stock, and (ii) the then
- 11 -
outstanding shares of Series B Preferred Stock, voting together as a separate
class, provided, however that in the event that all the Series A Preferred
Stock has been redeemed in accordance with Section 6 hereof, then the vote of
the majority of the Series B Preferred Stock, voting as a separate class, shall
be required:
(i) redeem, purchase or otherwise acquire for value (or pay into or
set aside for a sinking fund for such purpose), or declare and pay or set aside
funds for the payment of any dividend or other distribution with respect to, any
shares of capital stock, except as required or permitted under the terms of the
Preferred Stock or the redemption, purchase or other acquisition of up to ten
(10) shares of Common Stock in the aggregate in connection with all employee
benefit plans, employment agreements or other written employment arrangements,
approved by the Board of Directors of the Corporation;
(ii) authorize or issue, or obligate itself to authorize or issue,
additional shares of Series A Preferred Stock or Series B Preferred Stock;
(iii) authorize or issue, or obligate itself to authorize or issue,
any equity security senior to or on parity with the Preferred Stock as to
liquidation preferences, redemption rights or dividend rights;
(iv) merge or consolidate with any other corporation, or acquire the
stock or assets of any other corporation, partnership or business, or sell,
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions) all, or
substantially all, of its assets (whether now owned or hereinafter acquired), or
consent to any liquidation, dissolution or winding up of the Corporation, or
permit any subsidiary to do any of the foregoing, except for (1) the merger or
consolidation of any wholly-owned subsidiary into any other wholly-owned
subsidiary or the Corporation; or (2) the transfer by any wholly-owned
subsidiary of assets to another wholly-owned subsidiary or to the Corporation.
(v) amend, restate, modify or alter the by-laws of the Corporation
in any way which adversely affects the rights of the holders of the Preferred
Stock.
(b) Amendments to Charter. The Corporation shall not amend its
Articles of Incorporation without the approval, by vote or written consent, by
the holders of at least a majority of the then outstanding shares of Preferred
Stock, voting together as a separate class, if such amendment would amend any of
the rights, preferences, privileges of or limitations provided for herein for
the benefit of any shares of Preferred Stock. Without limiting the generality of
the preceding sentence, the Corporation will not amend its Articles of
Incorporation without the approval by the holders of at least a majority of the
then outstanding shares of Series A Preferred Stock and Series B Preferred
Stock, voting together as a separate class, if such amendment would:
(i) change the relative seniority rights of the holders of Preferred
Stock as to the payment of dividends in relation to the holders of any other
capital stock of the Corporation,
- 12 -
or create any other class or series of capital stock entitled to seniority as to
the payment of dividends in relation to the holders of Preferred Stock;
(ii) reduce the amount payable to the holders of Preferred Stock
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, or change the relative seniority of the liquidation preferences of
the holders of Preferred Stock to the rights upon liquidation of the holders of
other capital stock of the Corporation, or change the dividend rights of the
holders of Preferred Stock;
(iii) cancel or modify the redemption rights of the holders of the
Preferred Stock provided for in Section 6 herein; or
(iv) cancel or modify the rights of the holders of the Preferred
Stock provided for in this Section 7.
8. Notices of Record Date. In the event of
(a) any taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger of the Corporation, or any transfer of all or substantially all of
the assets of the Corporation to any other corporation, or any other entity or
person, or
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Corporation.
then and in each such event the Corporation shall mail or cause to be mailed to
each holder of Preferred Stock a notice specifying (i) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right and a description of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
merger, dissolution, liquidation or winding up is expected to become effective
and (iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, merger, dissolution, liquidation or winding up. Such notice shall be
mailed at least ten (10) business days prior to the date specified in such
notice on which such action is to be taken.
9. No Reissuance of Preferred Stock. No share or shares of Preferred Stock
acquired by the Corporation by reason of redemption, purchase or otherwise shall
be reissued, and all such shares shall be canceled, retired and eliminated from
the shares which the Corporation shall be authorized to issue. The Corporation
may from time to time take such appropriate corporate
- 13 -
action as may be necessary to reduce the authorized number of shares of the
Preferred Stock accordingly.
- 14 -
EXHIBIT C
STOCK REDEMPTION AGREEMENT
This Stock Redemption Agreement (this "Agreement") is entered into as of
the________day of March, 2001 by and between Sybari Software, Inc., a New York
corporation (the "Company"), and each of Xxxxxx X. Xxxxxxx, Xxxxxx Xxxxxx,
Xxxxxxx X. Xxxxxxxx and Xxxxxxx X. XxxxXxxxxxx (each individually a "Principal
Shareholder" and collectively the "Principal Shareholders").
WHEREAS, the Company desires to repurchase certain of the shares of its
common stock, no par value per share (the "Common Stock"), from the Principal
Shareholders: and
WHEREAS, the transactions contemplated by this Agreement are conditioned
upon and subject to the closing of the purchase and sale of debentures and
shares of capital stock of the Company as set forth in that certain Securities
Purchase and Redemption Agreement, dated as of March______, 2001 by and among
the Company, the Principal Shareholders, and the investors listed on Schedule
1.1 attached thereto (the "Purchase Agreement").
NOW, THEREFORE, in consideration of the promises and agreements contained
herein, the parties hereto agree as follows:
1. Common Stock Redemption. Upon the terms and subject to the
conditions of this Agreement, at the Closing (as such term is defined in the
Purchase Agreement), the Principal Shareholders shall sell to the Company, and
the Company shall redeem from each Principal Shareholder that number of shares
of Common Stock set forth opposite such Principal Shareholder's name on Schedule
1 attached hereto, free and clear of all liens and encumbrances, at a per share
redemption price equal to $500,000, such that the aggregate amount to be paid to
all of the Principal Shareholders shall be equal to $25,000,000 (the "Redemption
Proceeds").
2. Payments at Closing. At the Closing, subject to the satisfaction of
the other terms and conditions set forth in this Agreement, the Company shall
pay a portion of the Redemption Proceeds to each Principal Shareholder, via wire
transfer of immediately available funds to accounts designated by the Principal
Shareholders at least one (1) business day prior to the Closing, in the amount
set forth opposite each Principal Shareholder's name on Schedule 1 attached
hereto.
3. Actions to Occur at Closing. At the Closing, the following events
shall occur: (i) each Principal Shareholder shall deliver a certificate or
certificates representing the number of shares set forth next to such Principal
Shareholder's name on Schedule 1.1 attached hereto, which amount in the
aggregate shall be fifty (50) shares of Common Stock, endorsed in blank; and
(ii) the Company shall make the payments referred to in Section 2 hereof to each
Principal Shareholder.
4. Closing Conditions. The respective obligations of each party to
effect the transactions contemplated hereby shall be subject to the condition
that all conditions precedent.
except for the transactions contemplated by this Agreement, to the closing of
the transactions contemplated by the Purchase Agreement shall have been
fulfilled, and the closing of the transactions contemplated by the Purchase
Agreement shall occur concurrently with the Closing.
5. Representations. Each Principal Stockholder represents, severally
and not jointly, the following with respect to the Common Stock, to be
repurchased from it:
(a) Such Principal Stockholder owns, of record and beneficially,
the securities of the Company to be repurchased from it, free and clear of any
pledges, security interest, means, charges or other encumbrances.
(b) Neither the execution and delivery of this Agreement by such
Principal Stockholder, nor the repurchase of securities of the Company from such
Principal Shareholders as contained herein, will, with or without the giving of
notice or passage of time, violate, or result in a breach of, or constitute a
default under, any agreement by which such Principal Stockholder is bound, or to
which the securities of the Company owned by such Principal Stockholder are
subject.
6. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts.
7. Counterparts. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
-2-
IN WITNESS WHEREOF, each of the parties hereto has caused this Stock
Redemption Agreement to be executed as of the date first written above.
SYBARI SOFTWARE, INC.
By: _____________________________
Xxxxxx X. Xxxxxxx
President
PRINCIPAL SHAREHOLDERS:
_________________________________
Xxxxxx X. Xxxxxxx
_________________________________
Xxxxxx Xxxxxx
_________________________________
Xxxxxxx X. Xxxxxxxx
_________________________________
Xxxxxxx X. XxxxXxxxxxx
S-1
SCHEDULE 1
Cash Number of Shares
---- ----------------
Xxxxxx X. Xxxxxxx $6,500,000 13
Xxxxxx Xxxxxx $9,000,000 18
Xxxxxxx X. Xxxxxxxx $6,500,000 13
Xxxxxxx X. XxxxXxxxxxx $3,000,000 6
EXHIBIT D
[FORM OF OPINION OF COUNSEL]
March 30, 2001
Summit Ventures V, L.P.
Summit V Companion Fund, L.P.
Summit V Advisors Fund, L.P.
Summit V Advisors Fund (QP), L.P.
Summit Subordinated Debt Fund II, L.P.
Summit Investors III, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Re: Securities Purchase and Redemption Agreement - Sybari Software, Inc.
Ladies and Gentlemen:
We have acted as special counsel to Sybari Software, Inc., a New
York corporation (the "Company") in connection with the transactions
contemplated by the Securities Purchase and Redemption Agreement (the
"Agreement") dated as of March 30, 2001, by and among the Company, each of
Xxxxxx X. Xxxxxxx, Xxxxxx Xxxxxx, Xxxxxxx X. Xxxxxxxx and Xxxxxxx X. XxxxXxxxxxx
(each a "Principal Shareholder," and collectively the "Principal Shareholders")
and the purchasers named in Schedule 1.1 of the Agreement. This opinion is
rendered to you pursuant to Section 7.5 of the Agreement.
Capitalized terms used herein which are defined in the Agreement
shall have the meanings assigned to them in the Agreement unless otherwise
defined herein.
In our capacity as special counsel to the Company, we have examined
the Agreement, the Certificate of Amendment to the Certificate of Incorporation
of the Company, the Debentures, the Series A Preferred Stock, the Series B
Preferred Stock, the Registration Rights Agreement, the Redemption Agreement,
the Stock Redemption Agreement and the Shareholders' Agreement and have reviewed
such questions of law as we have deemed necessary or appropriate for the
purposes of rendering this opinion. As to matters of fact, with your permission
and consent, we have relied upon representations and warranties of the Company
and
2 March 30, 2001
the Principal Shareholders set forth in the Agreement and upon statements,
representations or certificates made by the Company and the Principal
Shareholders, and we have not conducted any independent investigation of any
matter of fact. We have also examined, and, with your permission and consent,
are relying upon the accuracy of, without independent investigation or
confirmation: (i) such certificates of public officials (including, without
limitation, a good standing certificate from the office of the Secretary of
State of the State of New York) and (ii) such other documents, certificates and
records as we have deemed necessary in connection with the opinions hereinafter
set forth.
In rendering our opinions, with your permission and consent, we have
assumed without any independent investigation or confirmation, that:
(A) all signatures are genuine, all documents and records
submitted to us as originals are authentic and complete, all documents and
records submitted to us as copies conform, in all respects to the complete
originals, including with respect to any recording stamps appearing thereon, any
all certificates and reports obtained from officers, representatives or public
officials are true, correct and complete;
(B) each agreement referred to herein has been duly authorized,
executed and delivered by, and constitutes the legal, valid and binding
obligation of each party thereto other than the Company and the Principal
Shareholders; and
(C) neither the Agreement nor any of the Related Agreements has
been amended, modified, terminated or revoked in any respect, and each of such
agreements remains in full force and effect as of the date hereof, and no such
document is subject to rescission, reformation or avoidance for fraud, duress or
mistake.
Based solely upon the foregoing, and subject to the exceptions,
qualifications, limitations and assumptions more particularly herein set forth,
we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York and has all requisite
corporate power and authority to own its properties and to carry on its business
as presently conducted.
2. The Company has all necessary corporate power and has taken all
necessary corporate action required for the due authorization, execution,
delivery and performance by the Company of the Agreement and the Related
Agreements and the consummation of the transactions contemplated therein, and
for the due authorization, issuance and delivery of the Securities. The issuance
of the Securities and the issuance of the Conversion Shares does not require any
further corporate action and is not subject to any pre-emptive right, right of
first refusal or the like as may be imposed by statute or by any provision of
the Company's charter or by-laws. The Agreement and the Related Agreements are
each a valid and binding obligation of
3 March 30, 2001
the Company, enforceable in accordance with its respective terms, except its
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally and except its enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
3. No consent, approval, license or authorization of, or designation,
declaration or filing with, any court or governmental authority is or will be
required on the part of the Company or the Principal Shareholders in connection
with the execution, delivery and performance of the Company or the Principal
Shareholders of the Agreement, any of the Related Agreements and any other
agreements or instruments executed by the Company or the Principal Shareholders
in connection therewith, or in connection with the issuance of the Securities
and the issuance of the Conversion Shares, except for (i) those which have
already been made or granted, and (ii) the filing of registration statements
with the Commission and any applicable state securities commission as
specifically provided for in the Registration Rights Agreement.
4. Immediately prior to the Closing, the authorized capital stock of
the Company consists of 200 shares of Common Stock, of which 200 shares are
validly issued and outstanding and held of record by the Persons set forth on
Schedule 2.4 attached to the Agreement, free and clear of all liens, security
interests, restrictions on transfer and other encumbrances as may be imposed by
statute or by any provision of the Company's charter or by-laws, except for
those imposed by federal and state securities or "blue sky" laws and except for
those imposed pursuant to any Related Agreement. Immediately after the Closing,
the authorized capital stock of the Company will consist of (a) 400 shares of
Common Stock, 150 of which will be issued and outstanding and held of record by
the Persons set forth on Schedule 2.4 attached to the Agreement; (b) 1,000,050
shares of preferred stock, par value $0.01, of the Company, of which (i)
1,000,000 such shares will be Series A Preferred Stock with the rights, terms
and privileges set forth in Exhibit B attached to the Agreement, and of which
1,000,000 shares will be issued and outstanding and held of record by the
Purchasers as set forth on Schedule 1.1 to the Agreement; and (ii) 50 such
shares will be Series B Preferred Stock with the rights and privileges set forth
in Exhibit B attached to the Agreement, and of which 50 shares will be issued
and outstanding and held of record by the purchasers as set forth in Schedule
1.1 of the Agreement. Immediately after the Closing, 50 shares of Common Stock
shall be reserved for issuance as the Conversion Shares. All issued and
outstanding shares of capital stock are duly and validly authorized and issued.
The Securities and the Conversion Shares, when issued in accordance with the
terms of the Agreement, will be duly and validly authorized, validly issued and
fully paid and nonassessable and free from any restrictions on transfer as may
be imposed by statute or by any provision of the Company's charter or by-laws,
except the restrictions imposed by federal and state securities or "blue sky"
laws and except for those imposed pursuant to any Related Agreement.
5. Neither (i) the execution, delivery or performance of this Agreement
and the
4 March 30, 2001
Related Agreements, (ii) consummation of the transactions contemplated thereby,
nor (iii) the offer, issuance, sale or delivery of the Securities and Conversion
Shares or (iv) the redemption of the Redemption Shares, will, with or without
the giving of notice or passage of time, or both, violate, or result in a breach
of, or constitute a default under, or result in the imposition of any
encumbrance upon any asset of the Company pursuant to any provision of the
Company's charter or by-laws, or any statute or rule or regulation of law by
which the Company is bound or to which any of its properties are subject, except
for in each case for violations, breaches, defaults, encumbrances or losses
which would not have a Material Adverse Effect.
6. The issuance, sale and delivery of the Conversion Shares and the
Securities at the Closing, under the circumstances contemplated by the
Agreement, are exempt from the registration requirements of the Securities Act
of 1933, as amended.
With your permission and consent, the opinions expressed above are
subject to the following qualifications, assumptions and exceptions:
(a) We express no opinion with respect to limitations imposed by
law, public policy or court decisions upon the availability of the remedy of
specific performance, injunctive relief and other equitable remedies, whether
sought in legal or equitable proceedings.
(b) We express no opinion with respect to the invalidity or
unenforceability of any provision which expressly or implicitly constitutes any
party as the attorney-in-fact of another.
(c) We express no opinion as to the enforceability of provisions
of the Agreement and the Related Agreements providing for the indemnification of
or contribution to a party with respect to a liability arising under federal or
state securities laws or where such indemnification or contribution is contrary
to public policy.
(d) The foregoing opinions are limited to the specific issues
addressed and to laws existing on the date hereof. By rendering our opinion, we
do not undertake to advise you with respect to any matter or, of any change in,
such laws or in the interpretations thereof which may occur after the date
hereof.
(e) With respect to our opinion set forth in clause (iv) of
Paragraph 5 above, we have assumed that the Company is not insolvent, and will
not be made insolvent upon the consummation of the transactions contemplated by
the Agreement and the Related Agreements, and that the purchase of the
Redemption Shares by the Company will be made out of surplus (as such term is
defined in Section 102(a)(13) of the Business Corporation Law of the State of
New York) of the Company.
(f) We are members of the Bar of the State of New York and do not
purport to
be experts in the laws of any jurisdiction other than the State of New York, the
federal securities laws, and the General Corporation Law of the State of
Delaware, and our opinions set forth above are limited to the laws of such
jurisdictions, and we express no opinion as to the laws of any other
jurisdiction and we assume no responsibility for the applicability or effect of
the law or any other jurisdiction. With respect to our opinion as to
enforceabilty which is set forth in the last sentence of Paragraph 2 above, with
your permission, we have assumed that the laws of the Commonwealth of
Massachusetts are the same as the laws of the State of New York.
(g) We have exclusively relied, without independent investigation,
on a certificate of the Company in respect to matters relating to payments for
shares of Common Stock issued by the Company.
Our opinions as they relate to New York and federal statutes are
based upon a review of those New York and federal statutes, rules and
regulations as in effect on the date hereof which, in our experience, are
normally applicable to transactions of the type contemplated by the Agreement.
This opinion is solely for the benefit of the addressees hereof and
may not be relied upon by any other person or party or in any other context
without our prior written consent.
Very truly yours,
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, made as of the__________day of March, 2001, by and among Sybari
Software, Inc., a New York corporation (the "Company"), those persons set forth
on Schedule 1 as Investors (each an "Investor" and collectively the
"Investors"), and those persons whose names appear on the signature page hereof
and who are designated as shareholders other than the Investors (the
"Non-Investor Shareholders" and, together with the Investors, the
"Shareholders").
WHEREAS, the Investors are acquiring an aggregate of 1,000,000 shares of
Series A Redeemable Preferred Stock, par value $.01 per share, of the Company
(the "Series A Preferred Stock") and 50 shares of Series B Convertible
Redeemable Preferred Stock, par value $.01 per share, of the Company (the
"Series B Preferred Stock"), pursuant to the terms of Securities Purchase and
Redemption Agreement dated as of the date hereof among the Company, the
Investors and the Non-Investor Shareholders (the "Purchase Agreement"); and
WHEREAS, it is a condition to the obligations of the Investors under the
Purchase Agreement that this Agreement be executed by the parties hereto in
order to provide the Investors with certain registration rights with respect to
the shares Series B Preferred Stock being purchased by the Investors under the
Purchase Agreement, and the parties are willing to execute this Agreement and to
be bound by the provisions hereof.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Act" means the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"Commission" means the Securities and Exchange Commission, or any other
Federal agency at the time administering the Act.
"Common Stock" means the Common Stock, par value $.01 per share of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Holder" means the person who is then the record owner of Registrable
Securities which have not been sold to the public.
"Registrable Securities" means (i) all shares of Common Stock now owned or
hereafter acquired by any Investor, (ii) all shares of Common Stock issued or
issuable upon conversion of the Series B Preferred Stock, (iii) all shares of
Common Stock now owned or hereafter acquired by the Non-Investor Shareholders,
and (iv) any Common Stock issued in respect of the shares described in clauses
(i), (ii) or (iii) upon any stock split, stock dividend, recapitalization or
other similar event.
The term "register" means to register under the Act and applicable state
securities laws for the purpose of effecting a public sale of securities.
"Registration Expenses" means all expenses incurred by the Company in
compliance with Sections 2, 3 or 5 hereof, including, without limitation, all
registration and filing fees, printing expenses, transfer taxes, fees and
disbursements of counsel for the Company, blue-sky fees and expenses, fees of
transfer agents and registrars, reasonable fees and disbursements of one counsel
for all the selling Holders, and the expense of any special audits incident to
or required by any such registration.
"Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
2. Requested Registrations
(a) If at any time after the earlier of (i) six (6) months after
the date of the initial public offering by the Company of its Common Stock or
(ii) September 30, 2002, the Company shall receive from one or more Investors a
written request that the Company effect the registration of Registrable
Securities the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use all commercially reasonable
efforts to effect such registration as may be so requested and as
would permit or facilitate the sale and distribution of such portion
of such Registrable Securities as are specified in such request,
together with such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such
written notice from the Company. If the underwriter managing the
offering advises the Holders who have requested inclusion of their
Registrable Securities in such registration that marketing
considerations require a limitation on the number of shares offered,
such limitation or cut-back shall be imposed as follows: (i) shares
of the Non-Investor Shareholders who requested inclusion of
Registrable Securities in such registration pursuant to Section 3
hereof shall be excluded, pro rata on the basis of the shares
requested to be included by each until such time as the Investors
have received aggregate proceeds from prior sales of their
Registrable Securities and any sales proposed hereunder equal to
$30,000,000; and (ii) shares of all Holders who requested inclusion
of Registrable Securities in such registration shall be
-2-
excluded, pro rata on the basis of the shares requested to be
included by each. The Company shall not be obligated to effect, or
take action to effect, any such registration pursuant to this
Section 2(a):
(A) If the Board of Directors of the Company
determines in good faith, after consultation with and acting upon
the advice of outside counsel, which advice and dependence thereon
shall be recorded in the minutes of the Board, and the Chief
Executive Officer execute an officer's certificate to such effect,
that (I) it is in possession of material, non-public information
concerning an acquisition, merger, recapitalization, consolidation,
reorganization, or other material transaction by or of the Company
or concerning pending or threatened litigation and (II) disclosure
of such information would jeopardize any such transaction or
litigation and would be seriously detrimental to the Company
provided, however, that no single black-out period will be longer
than ninety (90) calendar days; provided, further, however, that no
black-out period may be imposed by the Company during the first
thirty (30) calendar days after the effectiveness of the
registration statement filed pursuant to this Section 2, and,
provided, further, that the Company shall only declare one black out
period in any twelve (12) consecutive month period. The period of
effectiveness of any registration statement in effect at the time of
a black-out period and the termination period under shall be
extended for a period equal to the black-out period;
(B) If the Company has effected a registration less
than 180 days prior to the effective date of the registration to be
effected pursuant to this Section 2(a) or if the Company has
commenced preparation of a registration statement and has notified
the Holders in writing that it intends to file such registration
statement within thirty (30) days of such notification; provided
that, in the event the Company fails to file such registration
statement within such thirty (30) day period or such shorter period
as may be specified in such notice, the Company shall be required to
effect the registration requested by the Holders as soon as is
practicable thereafter, but in no extent less than thirty (30) days
thereafter, provided, further, that the Company may not fail to file
a registration statement pursuant to this Subsection (B) for a
period of more than 180 days in any consecutive twelve (12) month
period;
(C) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance,
unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder;
(D) After the Company has effected two (2) such
registrations on behalf of the Investors (an "Investor
Registration") pursuant to this Section 2(a) and, such registrations
have been declared or ordered effective and the sales of such
Registrable Securities shall have closed and the Investors shall
have sold all
-3-
of the Registrable Securities included by them in such registration,
provided, that any registration proceeding commenced pursuant to
this Section 2(a) that is subsequently withdrawn at the request of a
majority of the Investors shall count towards the Investor
Registrations; or
(E) If the Registrable Securities requested by one or
more Holders to be registered pursuant to such request have an
anticipated aggregate public offering price (before any underwriting
discounts and commissions) of less than $5,000,000.
(b) The underwriter of any underwriting requested under this
Section 2 shall be selected the Company, which underwriter must be reasonably
acceptable to Holders holding a majority of the Registrable Securities to be
included therein.
3. "Piggy Back" Registrations.
(a) If the Company shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders exercising their registration rights (subject to the provisions of
Section 2), other than a registration relating solely to employee benefit plans
or a registration on any registration form which does not permit secondary sales
or does not include substantially the same information as would be required to
be included in a registration statement covering the sale of Registrable
Securities or pursuant to Form S-4, the Company will:
(i) Promptly give to each Holder of Registrable Securities
written notice thereof (which shall include the number of shares the
Company or other security holder proposes to register and, if known,
the name of the proposed underwriter); and
(ii) Use its best efforts to include in such registration all
the Registrable Securities specified in a written request or
requests, made by any Holder within twenty (20) days after the date
of delivery of the written notice from the Company described in
clause (i) above. If the underwriter advises the Company that
marketing considerations require a limitation on the number of
shares offered pursuant to any registration statement and the
registration was for the Company's account, then the Company may
offer all of the securities it proposes to register for its own
account and such limitation on any remaining securities that may, in
the opinion of the underwriter, be sold will be imposed as follows:
(i) first shares of the Non-Investor Shareholders who requested
inclusion of Registrable Securities in such registration pursuant to
Section 4 hereof shall be excluded until such time as the Investors
shall have received aggregate proceeds from prior sales of their
Registrable Securities and any sales pursuant to Section 2(a) equal
to $30,000,000, pro rata on the basis of the shares requested to be
included by each; and (ii) next shares of the Investors who
requested inclusion of Registrable Securities in such registration
shall be excluded, pro rata on the basis of the shares requested to
be included by each; provided, however, that in the event such
-4-
underwriter reasonably advises the Holders who have requested
inclusion of their Registrable Securities in such registration that
marketing considerations require a limitation on the number of
shares offered by specific Holders, such limitation shall be imposed
in accordance with the underwriter's advice. If the registration is
for the account of another security holder under Section 2, then the
cutback shall be in accordance with the provisions of Section 2.
(b) The Company shall select the underwriter for an offering made
pursuant to this Section 3; provided that such underwriter must be reasonably
acceptable to the Holders of a majority of the Registrable Securities being
registered in such offering.
4. Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 2, 3, or 5 shall be paid by the Company. All Selling Expenses incurred
in connection with any such registration, qualification or compliance shall be
borne by the holders of the securities registered, pro rata on the basis of the
number of their shares so registered.
5. Registration on Form S-3. The Company shall use its best efforts to
qualify for registration on Form S-3 or any comparable or successor form; and to
that end the Company shall register (whether or not required by law to do so)
the Common Stock under the Exchange Act in accordance with the provisions of the
Exchange Act following the effective date of the first registration of any
securities of the Company on Form S-1 or any comparable or successor form. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Agreement, the Investors shall
each have unlimited rights to request registrations on Form S-3 (such requests
shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended methods of disposition of such
shares by such Holder or Holders).
6. Registration Procedures. In the case of each registration effected
by the Company pursuant to this Agreement, the Company will keep each Holder of
Registrable Securities included in such registration advised in writing as to
the initiation of each registration and as to the completion thereof. At its
sole expense, the Company will do the following for the benefit of such Holders:
(a) Keep such registration effective for a period of 120 days or
until the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs, and amend or
supplement such registration statement and the prospectus contained therein from
time to time to the extent necessary to comply with the Act and applicable state
securities laws provided, however, that (A) such 120 day period shall be
extended for a period of time equal to the period during which the Holders
refrain from selling any securities included in such registration in accordance
with provisions in Section 2(a) hereof; and (B) in the case of any registration
of Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120 day period shall be extended until all
such Registrable Securities are sold, provided that Rule 415 promulgated by the
Commission pursuant to the Act, or any successor rule under the Act, permits an
offering on a continuous or
-5-
delayed basis, and provided further that applicable rules under the Act
governing the obligation to file a post-effective amendment permit, in lieu of
filing a post-effective amendment which (x) includes any prospectus required by
Section 10(a) of the Act or (y) reflects facts or events representing a material
or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (x) and (y) above to be contained in periodic reports filed pursuant to
Section 12 or 15(d) of the Exchange Act in the registration statement;
(b) Use its best efforts to register or qualify the Registrable
Securities covered by such registration under the applicable securities or "blue
sky" laws of such jurisdictions as the selling shareholders may reasonably
request; provided, that the Company shall not be obligated to qualify to do
business in any jurisdiction where it is not then so qualified or otherwise
required to be so qualified or to take any action which would subject it to the
service of process in suits other than those arising out of such registration;
(c) Furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request;
(d) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 2 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and is entered into by the Holder and provided
further that, if the underwriter so requests, the underwriting agreement will
contain customary contribution provisions on the part of the Company;
(e) To the extent then permitted under applicable professional
guidelines and standards, use its best efforts to obtain a comfort letter from
the Company's independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters and an opinion from
the Company's counsel in customary form and covering such matters of the type
customarily covered in a public issuance of securities, in each case addressed
to the Holders, and provide copies thereof to the Holders; and
(f) Permit the counsel to the selling Holders whose expenses are
being paid pursuant to Section 4 hereof to inspect and copy such corporate
documents as it may reasonably request.
7. Indemnification.
(a) The Company will, and hereby does, indemnify each Holder, each
of its officers, directors and partners, and each person controlling such Holder
within the meaning of the Act, with respect to which registration, qualification
or compliance has been effected pursuant to this Agreement, and each
underwriter, if any, and each person who controls such underwriter within the
meaning of the Act, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such
-6-
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Act or the Exchange Act or securities act of any state or any
rule or regulation thereunder applicable to the Company and relating to action
or inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such Holder, each of its
officers, directors and partners, and each person controlling such Holder, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
whether or not resulting in any liability, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement (or
alleged untrue statement) or omission (or alleged omission) based upon written
information furnished to the Company by such Holder or underwriter and stated to
be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by him, her
or it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of the Act and the rules and
regulations thereunder, each other such Holder and each of their officers,
directors and partners, and each person controlling such Holder, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, each person
controlling the Company, each underwriter and each person who controls any such
underwriter, each Holder and each person controlling such Holder, and their
respective directors, officers, partners, persons, underwriters and control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, whether or not resulting in liability, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein; provided, however, that the
obligations of each Holder hereunder shall be limited to an amount equal to the
net proceeds received by such Holder upon sale of his, her or its securities.
(c) Each party entitled to indemnification under this Section 7
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations under this Section 7 (except and to the
extent the Indemnifying Party has been prejudiced as a consequence thereof). The
Indemnifying Party will be entitled to participate in, and to the extent that it
may elect by written
-7-
notice delivered to the Indemnified Party promptly after receiving the aforesaid
notice from such Indemnified Party, at its expense to assume, the defense of any
such claim or any litigation resulting therefrom, with counsel reasonably
satisfactory to such Indemnified Party, provided that the Indemnified Party may
participate in such defense at its expense, notwithstanding the assumption of
such defense by the Indemnifying Party, and provided, further, that if the
defendants in any such action shall include both the Indemnified Party and the
Indemnifying Party and the Indemnified Party shall have reasonably concluded
that there may be legal defenses available to it and/or other Indemnified
Parties which are different from or additional to those available to the
Indemnifying Party, the Indemnified Party or Parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party or
Parties and the fees and expenses of such counsel shall be paid by the
Indemnifying Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall (i) furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom and (ii) shall reasonably assist
the Indemnifying Party in any such defense, provided that the Indemnified Party
shall not be required to expend its funds in connection with such assistance.
(d) No Holder shall be required to participate in a registration
pursuant to which it would be required to execute an underwriting agreement in
connection with a registration effected under Section 2 or 3 which imposes
indemnification or contribution obligations on such Holder more onerous than
those imposed hereunder; provided, however, that the Company shall not be deemed
to breach the provisions of Section 2 or 3 if a Holder is not permitted to
participate in a registration on account of his, her or its refusal to execute
an underwriting agreement on the basis of this subsection (d).
8. Lock-up Agreement. If requested by the Underwriter in any registered
public offering by the Company, the Shareholders agree not to sell or otherwise
transfer any Registration Securities for such period of time after the date of
such offering as may be requested by the underwriter, but in no event to exceed
180 days from the close of the initial registered public offering and ninety
(90) days from the close of any subsequent registered public offering, provided
that all executive officers, directors and two percent (2%) shareholders of the
Company enter into similar agreements, and each Shareholder is released from
such lock up agreement on a pro rata basis with any other Shareholder, officer,
director or two percent (2%) shareholder released from its lock up agreement.
9. Information by Holder. Each Holder of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement or otherwise required by applicable state or federal securities
laws.
-8-
10. Limitations on Registration Rights. From and after the date of this
Agreement, the Company shall not, without the prior written consent of the
Investors, enter into any agreement with any holder or prospective holder of any
securities of the Company which would give any such holder or prospective holder
(a) the right to require the Company, upon any registration of any of its
securities, to include, among the securities which the Company is then
registering, securities owned by such holder, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of its securities will
not limit the number of Registrable Securities sought to be included by the
Holders of Registrable Securities or reduce the offering price thereof; or (b)
the right to require the Company to initiate any registration of any securities
of the Company.
11. Exception to Registration. The Company shall not be required to
effect a registration under this Agreement if such Holders may sell without
registration under the Act all Registrable Securities for which they requested
registration under the provisions of the Act and in the manner and in the
quantity in which the Registrable Securities were proposed to be sold; provided
that this Section 11 shall not apply to sales made under Rule 144(k) or any
successor rule promulgated by the Commission until after the effective date of
the Company's initial registration of shares under the Act. Notwithstanding the
foregoing, in no event shall the provisions of this Section 11 be construed to
preclude a Holder of Registrable Securities from exercising rights under Section
3 for a period of three years after the effective date of the Company's initial
registration of shares under the Act.
12. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of
restricted securities (as that term is used in Rule 144 under the Act) to the
public without registration, the Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Act, at all times from and after
ninety (90) days following the effective date of the first registration under
the Act filed by the Company for an offering of its securities to the general
public;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as an Investor owns any restricted securities, furnish
to the Investor forthwith upon request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 (at any time from and
after ninety days following the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Act and Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
by the Company as an
-9-
Investor may reasonably request in availing itself of any rule or regulation of
the Commission allowing an Investor to sell any such securities without
registration.
13. Listing Application. If shares of any class of stock of the Company
shall be listed on a national securities exchange, the Company shall, at its
expense, include in its listing application all of the shares of the listed
class then owned by any Investor and any Non-Investor Shareholder.
14. Damages. The Company recognizes and agrees that the Holder of
Registrable Securities shall not have an adequate remedy if the Company fails to
comply with the provisions of this Agreement, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure any Holder of Registrable Securities shall be entitled to seek
specific performance of the Company's obligations hereunder and that the Company
will not oppose an application seeking such specific performance.
15. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including without
limitation transferees of any Registrable Securities), whether so expressed or
not.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be (i) mailed by certified or registered
mail, return receipt requested, postage prepaid (ii) sent by hand delivery,
(iii) sent by facsimile, or (iv) sent by overnight courier addressed as follows:
If to the Company, any Non-Investor Shareholder or any Investor, at
the address of such party set forth on Schedule I hereto or the most
recent address as is shown on the stock records of the Company; and
If to any subsequent Holder of Registrable Securities, to it at such
address as may have been furnished to the Company in writing by such
Holder; or, in any case, at such other address or addresses as shall have
been furnished in writing to the Company (in the case of a Holder of
Registrable Securities) or to the Holders of Registrable Securities (in
the case of the Company) in accordance with the provisions of this
paragraph.
(c) This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
(d) This Agreement may not be amended or modified, and no
provision hereof may be waived, without the written consent of the Company, the
Investors holding at least fifty-one percent (51%) of the outstanding
Registrable Securities held by the Investors and the Non-Investor Shareholders
holding at least fifty-one percent (51%) of the outstanding Registrable
Securities held by the Non-Investor Shareholders.
-10-
(e) This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
* * * * * * * * * *
-11-
SYBARI SOFTWARE, INC.
REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been executed as an instrument
under SEAL as of the date and year first above written.
COMPANY:
SYBARI SOFTWARE, INC.
By: ________________________________
Name:
Title:
INVESTORS:
Summit Ventures V, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By: _________________________
Member
Summit V Companion Fund, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By: _________________________
Member
S-1
SYBARI SOFTWARE, INC.
REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
Summit V Advisors Fund, L.P.
By: Summit Partners, LLC
Its General Partner
By: ______________________________
Member
Summit V Advisors Fund (QP), L.P.
By: Summit Partners, LLC
Its General Partner
By: ______________________________
Member
Summit Subordinated Debt Fund II, L.P.
By: Summit Partners SD II, LLC
Its General Partner
By: ______________________________
Member
Summit Investors III, L.P.
By: __________________________________
General Partner
S-2
SYBARI SOFTWARE, INC.
REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been executed as an instrument
under SEAL as of the date and year first above written.
NON-INVESTOR SHAREHOLDERS:
__________________________
Xxxxxx X. Xxxxxxx
__________________________
Xxxxxx Xxxxxx
__________________________
Xxxxxxx X. Xxxxxxxx
__________________________
Xxxxxxx X. XxxxXxxxxxx
__________________________
Xxxxxxx Xxxxx
__________________________
Xxxxxx X. Xxxx
__________________________
Xxxxxxxxx X. Xxxxxx
__________________________
Xxx X. Xxxxxx
__________________________
Xxxxxx Xxxxxxxxx
__________________________
Xxxxx Xxxxxxx
S-3
SCHEDULE 1
Name and Address
COMPANY
Sybari Software, Inc.
000 Xxxxxxxxx Xxxx
Xxxx Xxxxxxxxx,XX 00000
Attn: President
Facsimile: (000)000-0000
INVESTORS
Summit Ventures V, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Companion Fund, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Advisors Fund, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Advisors Fund (QP), L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit Subordinated Debt Fund II, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit Investors III, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
NON-INVESTORS SHAREHOLDERS
Xxxxxx X. Xxxxxxx
________________________
________________________
________________________
Xxxxxx Xxxxxx
________________________
________________________
________________________
Xxxxxxx X. Xxxxxxxx
________________________
________________________
________________________
Xxxxxxx X. XxxxXxxxxxx
________________________
________________________
________________________
Xxxxxxx Xxxxx
________________________
________________________
________________________
Xxxxxx X. Xxxx
________________________
________________________
________________________
Xxxxxxxxx X. Xxxxxx
________________________
________________________
________________________
Xxx X. Xxxxxx
________________________
________________________
________________________
Xxxxxx Xxxxxxxxx
________________________
________________________
________________________
Xxxxx Xxxxxxx
________________________
________________________
________________________
EXHIBIT F
SHAREHOLDERS' AGREEMENT
AGREEMENT, made as of the_____day of March, 2001, by and among Sybari
Software, Inc., a New York corporation (the "Company"), those persons identified
on the signature page hereof as Founders (the "Founders") and those persons
identified on the signature page hereof as current employees of the Company and
those persons who are employees of the Company who hereafter acquires shares of
Common Stock and become parties to this Agreement (the "Employee Shareholders"
collectively with the Founders, the "Non-Investor Shareholders"), and the
Investors listed on the signature pages hereto as an investor shareholder, (each
individually an "Investor" and collectively, the "Investors" and, together with
the Non-Investor Shareholders, the "Shareholders").
WHEREAS, the Investors are acquiring an aggregate of 1,000,000 shares of
Series A Redeemable Preferred Stock, par value $.01 per share, of the Company
(the "Series A Preferred Stock") and 50 shares of Series B Convertible
Redeemable Preferred Stock, par value $.01 per share of the Company (the "Series
B Preferred Stock" and at times together with the Series A Preferred Stock, the
"Preferred Stock"), pursuant to the terms of a Securities Purchase and
Redemption Agreement, dated as of the date hereof, by and among the Company, the
Investors and the Founders (the "Purchase Agreement");
WHEREAS, the Non-Investor Shareholders own an aggregate of 150 shares of
Common Stock, par value $.01 per share, of the Company (the "Common Stock");
and
WHEREAS, it is a condition to the obligations of the parties under the
Purchase Agreement that this Agreement be executed by the parties hereto, and
the parties are willing to execute this Agreement and to be bound by the
provisions hereof.
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and the parties' desire to provide for continuity of ownership of
the Company to further the interests of the Company and its present and future
shareholders, the parties hereby agree with each other as follows:
1. Definition of Shares. As used in this Agreement, "Shares" shall mean
and include all shares of the Common Stock, Preferred Stock and other equity
securities of the Company now owned or hereafter acquired by a Shareholder
including, without limitation, shares of Common Stock issued upon (i) exercise
of options now owned or hereafter acquired or (ii) conversion of the Series B
Preferred Stock.
2. Prohibited Transfers and Other Matters. No Non-Investor Shareholder
shall sell, assign, transfer, pledge, hypothecate, mortgage, encumber or dispose
of all or any of his, her or its Shares except in compliance with the terms of
this Agreement. Notwithstanding anything to the contrary contained in this
Agreement, (a) a Non-Investor Shareholder may transfer without the necessity of
prior approval all or any of his or her Shares by way of gift to his or her
spouse, to any of his or her lineal descendants or ancestors, to any trust for
the benefit of any one or more
of such Non-Investor Shareholders, or to his or her spouse or his or her lineal
descendants or ancestors or charity, provided that with respect to any transfer
to a charity or charities the aggregate number of Shares that may be transferred
by a Non-Investor Shareholder may not exceed five percent (5%) of the aggregate
number of Shares held by such Non-Investor Shareholder as of the date of this
Agreement, and (b) a Non-Investor Shareholder may transfer all or any of his or
her Shares by will or the laws of descent and distribution; provided that any
such transferee under clause (a) and (b) of this Section 2 (referred to herein
as "Permitted Transferees") shall agree in writing with the Company and the
other Shareholders, as a condition to such transfer, to be bound by all of the
provisions of this Agreement to the same extent as if such transferee were the
Shareholder transferring such Shares.
3. Right of First Refusal on Dispositions.
(a) If at any time a Non-Investor Shareholder (a "Selling
Non-Investor Shareholder") desires to sell or otherwise transfer all or any part
of his or her Shares pursuant to a bona fide offer from a third party (the
"Proposed Transferee"), the Selling Non-Investor Shareholder shall submit a
written offer (the "Offer") by delivering the Offer to the Investors to sell
such Shares (the "Offered Shares") on the terms and conditions, including price,
that the Selling Non-Investor Shareholder proposes to sell such Offered Shares
to the Proposed Transferee. The Offer shall disclose the identity of the
Proposed Transferee, the number of Offered Shares proposed to be sold, the total
number of Shares owned by the Selling Non-Investor Shareholder, the terms and
conditions, including price, of the proposed sale, and any other material facts
relating to the proposed sale. The Offer shall further state (i) that the
Investors may acquire in accordance with the provisions of this Agreement, any
of the Offered Shares for the price and upon the other terms and conditions set
forth therein and (ii) if all such Offered Shares are not purchased by the
Investors, the Investors who have not purchased any such Offered Shares pursuant
to this Section 3 may exercise their rights provided pursuant to Section 4
hereof.
(b) Each Investor shall have the right to purchase that number of
Offered Shares as shall be equal to the number of Offered Shares multiplied by a
fraction, the numerator of which shall be the number of Shares which any such
Investor owns and the denominator of which shall be the aggregate number of
Shares owned by the Investors who elect to purchase the Offered Shares. The
amount of such Offered Shares that each Investor is entitled to purchase under
this Section 3 shall be referred to as its "Pro Rata Fraction."
(c) The Investors shall have a right of oversubscription such that
if any party fails to accept the Offer as to his or its full Pro Rata Fraction,
the remaining Investors shall, among them, have the right to purchase up to the
balance of the remaining Offered Shares not so purchased. The Investors may
exercise such right of oversubscription by accepting the Offer for the remaining
Offered Shares as to more than their Pro Rata Fraction. If, as a result thereof,
such oversubscriptions exceed the total number of the Offered Shares available
in respect of such oversubscription privilege, the oversubscribing Investors
shall be cut back with respect to over-subscriptions on a pro rata basis in
accordance with their respective Pro Rata Fraction or as they may otherwise
agree among themselves.
-2-
(d) Those Investors who desire to purchase all or any part of the
Offered Shares shall communicate in writing their election to purchase to the
Selling Non-Investor Shareholder, which communication shall state the number of
remaining Offered Shares such parties desire to purchase and shall be provided
to the Selling Non-Investor Shareholder within, thirty (30) days of the date the
Offer was made. Such communication, together with the communication of the
Company specified above, shall, when taken in conjunction with the Offer, be
deemed to constitute a valid, legally binding and enforceable agreement for the
sale and purchase of such Offered Shares (subject to the aforesaid limitations
as to the right of the Investors to purchase more than their Pro Rata Fraction).
Sales of such Offered Shares to be sold, to the Investors pursuant to this
Section 3 shall be made at the offices of the Company within sixty (60) days
following the date the Offer was made.
(e) If the Investors do not offer to purchase all of the Offered
Shares, all, but not fewer than all, of the Offered Shares may be sold by the
Selling Non-Investor Shareholder at any time within 120 days after the date the
Offer was made, subject to the provisions of Section 4. Any such sale shall be
to the Proposed Transferee, at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those
specified in the Offer. If the Offered Shares are not sold within such 120-day
period, they shall continue to be subject to the requirements of a prior offer
pursuant to this Section 3, and may not be transferred except in compliance with
the provisions of this Section 3. If Offered Shares are sold pursuant to this
Section 3 to any purchaser who is not a party to this Agreement, the purchaser
of such Offered Shares shall execute a counterpart of this Agreement as a
precondition of the purchase of such Offered Shares and any Offered Shares sold
to such purchaser shall continue to be subject to the provisions of this
Agreement.
(f) If Offered Shares are sold pursuant to this Section 3 to any
purchaser who is not a party to this Agreement, the purchaser of such Offered
Shares shall execute a counterpart of this Agreement as a precondition of the
purchase of such Offered Shares and any Offered Shares sold to such purchaser
shall continue to be subject to the provisions of this Agreement.
4. Right of Participation in Sales.
(a) If at any time any Non-Investor Shareholder desires to sell
all or any part of the Shares owned by him, her or it to any third party (the
"Selling Shareholder'") and those Shares to be transferred have not been
purchased by the Investors under Section 3, each Investor shall have the right
to sell to the third party, as a condition to such sale by the Selling
Shareholder, at the same price per share and on the same terms and conditions as
involved in such sale by the Selling Shareholder, a pro rata portion of the
amount of Shares proposed to be sold to the third party. The "pro rata portion"
of Shares which the Investor shall be entitled to sell to the third party shall
be that number of Shares as shall equal the number of Shares proposed to be sold
to the third party multiplied by a fraction, the numerator of which is the
aggregate of all Shares which the Investor wishing to participate in the sale
then holds or has the right to acquire upon exercise of options or warrants
which are then exercisable, and the denominator of which is the aggregate of all
Shares which are held by all investors wishing to participate in any sale under
this Section 4, including the Selling Shareholder, or which such Persons have
the right to acquire upon exercise of options or warrants which are then
exercisable.
-3-
(b) If the Selling Shareholder wishes to make a sale to a third
party which is subject to this Section 4, the Selling Shareholder shall, after
complying with the provisions of Section 3, give to each Investor notice of such
proposed sale, and stating that all Shares were not purchased pursuant to the
Offer as discussed in Section 3. Such notice shall be given at least twenty (20)
days prior to the date of the proposed sale to the third party. Each Investor
wishing to so participate in any sale under this Section 4 shall notify the
Selling Shareholder in writing of such intention within fifteen (15) days after
such Non-Investor Shareholder's receipt of the notice described in the preceding
sentence.
(c) The Selling Shareholder and each participating Investor shall
sell to the third party all, or at the option of the third party, any part of
the Shares proposed to be sold by them at not less than the price and upon other
terms and conditions, if any, not more favorable to the third party than those
in the notice provided by the Selling Shareholder under subparagraph (b) above;
provided, however, that any purchase of less than all of such Shares by the
third party shall be made from the Selling Shareholder and each participating
Investor pro rata based upon the relative number of the Shares that the Selling
Shareholder and each participating Shareholder is otherwise entitled to sell
pursuant to Section 4(a).
(d) If any Shares are sold pursuant to this Section 4 to any
purchaser who is not a party to this Agreement, the purchaser of such Shares
shall execute a counterpart of this Agreement as a precondition to the purchase
of such Shares and such Shares shall continue to be subject to the provisions of
this Agreement.
5. Right of Purchase.
(a) The Company hereby grants to the Non-Investor Shareholders and
the Investors (each a "Participating Shareholder") so long as such Participating
Shareholder shall own any Shares, of record or beneficially, the right to
purchase all or part of such Participating Shareholder's pro rata share of New
Securities (as defined below) which the Company, from time to time, proposes to
sell and issue. Such Participating Shareholder's pro rata share, for purposes of
this purchase right, is the ratio of the number of Shares which such
Participating Shareholder owns or has the right to acquire from the Company upon
exercise of options (to the extent then vested) to the total number of Shares
then owned by all Shareholders and all Shares issuable upon the exercise of
options and warrants. Each Participating Shareholder shall have a right of
over-allotment pursuant to this Section 5 such that to the extent any
Participating Shareholder does not exercise his or its purchase right in full
hereunder, such additional shares of New Securities which such Shareholder did
not purchase may be purchased by the other Participating Shareholders.
(b) For purposes of this Agreement, "New Securities" shall mean
any capital stock of the Company whether now authorized or not, and rights,
options or warrants to purchase capital stock, and securities of any type
whatsoever that are, or may become convertible into or exchangeable for capital
stock, issued on or after the date hereof; provided that the term "New
Securities" does not include (i) Common Stock issued as a stock dividend to
holders of Common Stock or upon any stock split, subdivision or combination of
shares of Common Stock, (ii) Series A Preferred Stock or Series B Preferred
Stock issued as a dividend to holders of Series A Preferred Stock or Series B
Preferred Stock, respectively, or upon any stock split, subdivision or
-4-
combination of Series A Preferred Stock or Series B Preferred Stock, (iii)
options or warrants (or shares of Common Stock issuable upon exercise thereof)
issued pursuant to a Company stock option plan approved by the Compensation
Committee of the Company's Board of Directors in accordance with the terms of
the Purchase Agreement, (iv) shares of capital stock, options or warrants to
purchase shares of capital stock issued in connection with any acquisition
approved by the Board of Directors of the Company, (v) any options, warrants or
shares of capital stock approved by the Board of Directors for issuance in
connection with senior financing extended to the Company and (vi) capital stock
issued pursuant to a registration statement filed under the Securities Act of
1933, as amended.
(c) In the event the Company proposes to undertake an issuance of
New Securities, it shall give the Participating Shareholders written notice of
its intention, describing the type of New Securities and the price and the terms
upon which the Company proposes to issue the same. The Participating
Shareholders shall have twenty (20) business days from the date of receipt of
any such notice to agree to purchase up to each Participating Shareholder's pro
rata share of such New Securities (and any over-allotment amount pursuant to the
operation of Section 5(a) hereof) for the price and upon the terms specified in
the notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased.
(d) In the event any Participating Shareholder fails to exercise
in full his or its purchase right under this Section 5 (after giving effect to
the over-allotment provision of Section 5(a) hereof), the Company shall have 120
days thereafter to sell the New Securities with respect to which such purchase
right was not exercised, at a price and upon terms no more favorable to the
purchasers thereof than specified in the Company's notice. To the extent the
Company does not sell all the New Securities offered within said 120 day period,
the Company shall not thereafter issue or sell such New Securities without first
again offering such securities to the Participating Shareholders in the manner
provided above.
(e) The rights granted to the Participating Shareholders under
this Section 5 shall expire immediately prior to, and shall not apply in
connection with, the consummation of the first Qualified Public Offering (as
defined in Section 9 hereof).
6. Election of Directors.
(a) At each annual meeting of the shareholders of the Company, and
at each special meeting of the shareholders of the Company called for the
purpose of electing directors of the Company, and at any time at which
shareholders of the Company shall have the right to, or shall, vote for
directors of the Company, then, and in each event, the Shareholders shall vote
all Shares owned by them for the election of a Board of Directors consisting of
seven (7) directors, designated in the manner designated below (subject to
adjustment in accordance with the provisions of this Section 6):
(i) two (2) directors shall be designated by the Investors
holding a majority of the Shares held by all Investors (which designees shall
initially be Xxxxxx X. Xxxxxxx and Xxxx X. Xxxxxxx) (individually an "Investor
Director" and collectively the "Investor Directors");
-5-
(ii) four (4) directors shall be designated by the
Shareholders holding a majority of then outstanding Common Stock (which shall be
calculated to include the Series B Preferred Stock on an as converted basis)
acting as a group (which designees shall initially be Xxxxxx X. Xxxxxxx, Xxxxxxx
X. Xxxxxxxx, Xxxxxx Xxxxxx, and Xxxxxxx X. XxxxXxxxxxx (each a "Non-Investor
Director, and collectively the Non-Investor Directors");
(iii) the remaining director, who shall not be an employee or
affiliate of the Company, shall be designated by the Shareholders holding a
majority of then outstanding Common Stock (which shall be calculated to include
the Series B Preferred Stock on an as converted basis), acting as a group (the
"Independent Director"); and
(iv) any director designated pursuant to Sections 6(a)(i),
(ii) and (iii) shall not be subject to removal without the consent of the party
or parties appointing such director(s) and upon any removal of such director
(including due to the death or disability of such director), the director shall
be replaced by the party or parties electing the removed director.
(b) if at any time the Company shall (i) default in the payment of
any principal of or interest on its Debentures due March 30, 2006 (the
"Debentures"), when the same becomes due and payable (whether at maturity or at
the date fixed for mandatory or optional redemption or prepayment or by
acceleration or otherwise); or (ii) default for any reason in its obligation to
repurchase the Shares held by the Investors pursuant to the terms of the
Redemption Agreement, or (iii) default under any of the covenants contained in
Articles III and IV of the Purchase Agreement (each of such defaults described
in clauses (i), (ii) and (iii) being hereinafter referred to as a "Default") and
such Default shall not have been remedied within thirty (30) days after written
notice thereof shall have been received by the Company from the Investors, then
the number of directors constituting the Board of Directors shall be increased
to either eleven (11) or to a lesser number selected by the Investors and the
Investors shall be entitled to designate four (4) additional directors in the
event that the number of directors constituting the Board of Directors shall be
increased to eleven (11) or, if the Investors designate a smaller Board, such
lesser number of additional directors as would allow the Investors to hold a
majority of the directorships on the Board of Directors (which directors shall
be designated by the Investors owning at least a majority of the Shares held by
all Investors), and such right may be exercised at any annual meeting or at any
special meeting called for such purpose or at any adjournment thereof, or by
written consent of the Company's shareholders. The Shareholders agree to
promptly take such action as shall be required to fix the number of directors at
eleven (11) and for the election of the four (4) additional directors as shall
be designated by the Investors.
(c) The Company shall reimburse all reasonable direct costs and
expenses incurred by directors in attending meetings of the Board of Directors
of the Company.
7. Board Committees. The Shareholders shall take all actions, including
without limitation, the voting of all their Shares, to cause the provisions of
this Section 7 to be satisfied.
(a) Compensation Committee. There shall be established at all
times during the term of this Agreement a Compensation Committee of the Board of
Directors (the "Compensation Committee") which shall be comprised of three (3)
directors as follows: one (1)
-6-
of whom shall be an Investor Director; one (1) of whom shall be a Non-Investor
Director and one (1) of whom shall be the Independent Director. The Compensation
Committee will determine the compensation of all senior employees and
consultants of the Company (including salary, bonus, equity participation and
benefits); provided that no member of the Compensation Committee may vote on his
own compensation. The compensation of senior employees and consultants shall be
reviewed by the Compensation Committee on an annual basis, and the decision by a
unanimous vote of all members of the Compensation Committee will control the
Committee's actions.
(b) Audit Committee. There shall be established at all times
during the term of this Agreement an Audit Committee of the Board of Directors
(the "Audit Committee") which shall be comprised of three (3) directors as
follows: one (1) of whom shall be an Investor Director, one (1) of whom shall be
a Non-Investor Director and one (1) of whom shall be the Independent Director.
The Audit Committee shall, among other things, select, from time to time, the
Company's auditors and monitor review of the audit process.
8. Insurance. The Company shall at all times uses its commercially
reasonable efforts to maintain for the benefit of its officers and directors
liability insurance in scope and amount, and from an insurer, reasonably
acceptable to the Investors.
9. Term. This Agreement shall terminate on the earlier to occur of (a)
other than Section 4 hereof, immediately prior to consummation of a Qualified
Public Offering (as defined below), (b) such date as all Shares owned by the
Investors and their transferees have been repurchased or redeemed by the
Company, or (c) the tenth anniversary of the date of this Agreement. A
"Qualified Public Offering" means an underwritten public offering by the Company
of its Common Stock pursuant to a registration statement filed and declared
effective under the Securities Act of 1933, as amended (the "Act"), in which (i)
the aggregate proceeds to the Company equal at least $50,000,000, (ii) the price
per share of Common Stock equals or exceeds three (3) times the original
purchase price of the Series B Preferred Stock and (iii) in which all of the
Series A Preferred Stock has been redeemed and all amounts due and owing under
the Debentures have been paid in full.
10. Failure to Deliver Shares. If any Shareholder becomes obligated to
sell any Shares to another Shareholder under this Agreement and fails to deliver
such Shares in accordance with the terms of this Agreement, such other
Shareholder may, at its option, in addition to all other remedies it may have,
send to the defaulting Shareholder the purchase price for such Shares as is
herein specified. Thereupon, the Company, upon written notice to the defaulting
Shareholder, (a) shall cancel on its books the certificate or certificates
representing the Shares to be sold and (b) shall issue, in lieu thereof, in the
name of such other Shareholder, a new certificate or certificates representing
such Shares, and thereupon all of the defaulting Shareholder's rights in and to
such Shares shall terminate.
11. Specific Enforcement. Each Shareholder expressly agrees that the
other Shareholders and the Company may be irreparably damaged if this Agreement
is not specifically enforced. Upon a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by any Shareholder, the other
Shareholders and the Company shall, in addition to all
-7-
other remedies, each be entitled to apply for a temporary or permanent
injunction, and/or a decree for specific performance, in accordance with the
provisions hereof.
12. Legend. Each certificate evidencing any of the Shares now owned or
hereafter acquired by the Shareholders shall bear in addition to any other
legends required by other agreements or by law a legend substantially as
follows:
"Any sale, assignment, transfer or other disposition of the shares
represented by this certificate is restricted by, and subject to, the
terms and provisions of a certain Shareholders' Agreement dated as of
March 30, 2001. A copy of said Agreement is on file with the Secretary of
the Corporation."
13. Notices. Notices given hereunder shall be deemed to have been duly
given (i) on the date of personal delivery, (ii) one day after deposit with
Federal Express or other overnight courier, or (iii) on the date of postmark if
mailed by certified or registered mail, return receipt requested, to the party
being notified at his or its address specified on Schedule I hereto or such
other address as the addressee may subsequently notify the other parties of in
writing.
14. Entire Agreement and Amendments. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a written agreement signed by the parties hereto;
provided, however, that Investors owning at least a majority of the Shares owned
by all Investors may effect any such waiver, modification, amendment or
termination on behalf of all of the Investors, and Non-Investor Shareholders
owning at least a majority of the Shares owned by all Non-Investor Shareholders
may effect any such waiver, modification, amendment or termination on behalf of
all of the Non-Investor Shareholders. Each of the Shareholders represents that
he, she or it is not a party to any other agreement which would prevent him, her
or it from performing his. her or its obligations hereunder. No waiver of any
breach or default hereunder shall be considered valid unless in writing, and no
such waiver shall be deemed a waiver of any subsequent breach or default of the
same or similar nature.
15. Governing Law; Successors and Assigns. This Agreement shall be
governed by the internal laws of The Commonwealth of Massachusetts without
giving effect to the conflicts of laws principles thereof and, except as
otherwise provided herein, shall be binding upon the heirs, personal
representatives, executors, administrators, successors and assigns of the
parties, provided that no Non-Investor Shareholder shall be permitted to assign
its rights to designate a director under Section 7 hereof.
16. Severability. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
17. Captions. Captions are for convenience only and are not deemed to be
part of this Agreement.
-8-
18. Counterparts. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
* * *
-9-
SHAREHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been executed as an instrument
under SEAL as of the date and year first above written.
COMPANY:
SYBARI SOFTWARE, INC.
By:______________________________________
Name:
Title:
NON-INVESTOR SHAREHOLDERS:
____________________________________
Xxxxxx X. Xxxxxxx
____________________________________
Xxxxxxx X. Xxxxxxxx
____________________________________
Xxxxxx Xxxxxx
____________________________________
Xxxxxxx X. XxxxXxxxxxx
____________________________________
Xxxxxxx Xxxxx
____________________________________
Xxxxxx X. Xxxx
____________________________________
Xxxxxxxxx X. Xxxxxx
____________________________________
Xxx X. Xxxxxx
S-1
SHAREHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
____________________________________
Xxxxxx Xxxxxxxxx
____________________________________
Xxxxx Xxxxxxx
INVESTORS:
Summit Ventures V, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By: ___________________________
Member
Summit V Companion Fund, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By: ___________________________
Member
S-2
SHAREHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
Summit V Advisors Fund, L.P.
By: Summit Partners, LLC
Its General Partner
By: __________________________________
Member
Summit V Advisors Fund (QP), L.P.
By: Summit Partners, LLC
Its General Partner
By: __________________________________
Member
Summit Subordinated Debt Fund II, L.P.
By: Summit Partners SD II, LLC
Its General Partner
By: __________________________________
Member
Summit Investors III, L.P.
By: ______________________________________
General Partner
S-3
SCHEDULE 1
COMPANY
Sybari Software, Inc.
000 Xxxxxxxxx Xxxx
Xxxx Xxxxxxxxx, XX 00000
Attn: President
Facsimile: (000) 000-0000
NON-INVESTOR SHAREHOLDERS
Xxxxxx X. Xxxxxxx
_________________________
_________________________
_________________________
Xxxxxx Xxxxxx
_________________________
_________________________
_________________________
Xxxxxxx X. Xxxxxxxx
_________________________
_________________________
_________________________
Xxxxxxx X. XxxxXxxxxxx
_________________________
_________________________
_________________________
Xxxxxxx Xxxxx
_________________________
_________________________
_________________________
Xxxxxx X. Xxxx
_________________________
_________________________
_________________________
Xxxxxxxxx X. Xxxxxx
_________________________
_________________________
_________________________
Xxx X. Xxxxxx
_________________________
_________________________
_________________________
Xxxxxx Xxxxxxxxx
_________________________
_________________________
_________________________
Xxxxx Xxxxxxx
_________________________
_________________________
_________________________
INVESTORS
Summit Ventures V, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Companion Fund, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Advisors Fund, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Advisors Fund (QP), L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit Subordinated Debt Fund II, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit Investors III, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
EXHIBIT G
AGREEMENT
AGREEMENT made as of this ____________ day of _______________________ ; by
and between Sybari Software, Inc., a Corporation organized and existing under
the laws of the State of New York, its successors and assigns, having its
principal place of business at 000 Xxxxxxxxx Xxxx, X. Xxxxxxxxx, XX 00000
("SYBARI"), and __________________________________ his heirs and assigns, with
an address at _______________________, _____________________________(
hereinafter "Individual").
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. PREAMBLE. Sybari engages Individual's services and Individual desires to be
engaged by Sybari in connection with certain aspects of the creation,
development, testing, marketing and/or manufacture of a variety of products and
processes for Sybari and for Sybari clients (the "Products"); and, Individual
will prepare, write, create, or develop certain materials or works pursuant to
Sybari's specifications and transfers all of his right title and interest to
such materials or works including all know-how, ideas, techniques, designs,
formula, algorithms, source code, object code, computer programs, inventions,
improvements, discoveries, ideas, documents, files, data, and concepts in
connection with the Products (the "Work"); and,
In connection with such services, Individual may be given access to, generate,
or otherwise come into contact with certain proprietary and/or confidential
information of Sybari and Sybari clients; and, Individual and Sybari desire to
prevent the dissemination or misuse of such information; and, This Agreement in
no way changes, modifies or alters any Sybari employee manual or similar
document.
2. SERVICES. Sybari hereby engages Individual's services and Individual hereby
accepts, upon the terms and conditions contained herein at the compensation set
from time to time by Sybari, which may be modified from time to time by notice
to Individual by Sybari. While providing services to Sybari, Individual shall:
faithfully and diligently serve Sybari's interests; and, use his best efforts to
perform those services specified by Sybari. Individual acknowledges that the
services to be performed herein are personal in nature and that Individual shall
perform all services. Any waiver of compensation by Individual, shall not negate
Individual's obligations set forth herein.
3. WARRANTIES. Individual hereby represents and warrants: he is the creator of
the Works; the Works are his sole, exclusive and original work; he has full
rights and power to enter into this Agreement; there exists no adverse claim to
or in the Works; that the Works have not been previously assigned, pledged or
otherwise encumbered; that the Works have not been previously published in any
form; that the Works are not in the public domain; that the Works do not and
will not infringe any statutory or common law rights, copyrights, trademarks,
patents or other personal or property right whatsoever; that the Works do not
contain any libelous, scandalous or obscene matter or matter otherwise contrary
to law; and, that the Works do not contain any recipes, formulas or instructions
that would be injurious to the health of a user. These warranties are continuing
and shall survive termination and/or expiration of this agreement.
4. INDEMNIFICATION. In the event of any claim, action or proceeding based upon
an alleged violation of any of the foregoing warranties: i) Sybari shall have
the right to defend same through counsel of its own choosing; ii) Individual
shall have the right (at its own expense) to participate in the defense with
counsel of his own choosing; and iii) Individual shall hold harmless Sybari,
Sybari's clients, any seller or licensee of the Work, against any damages and
expenses (including reasonable counsel fees and the cost of any settlement).
Sybari shall promptly notify Individual of any such claim, action or proceeding;
Individual shall fully cooperate in the defense thereof; and Sybari may withhold
payment of reasonable amounts due Individual under this or any other agreement
between Sybari and Individual. This indemnification is continuing and shall
survive termination and/or expiration of this agreement.
5. DUTY TO DISCLOSE TO SYBARI. The term "Work" shall include: all inventions,
improvements, discoveries and ideas (whether or not patentable), copyrights,
trademarks and trade secrets which are made, conceived or first reduced to
practice by Individual whether done solely or jointly with Sybari or other
persons associated with, employed by, contracted by Sybari or clients of Sybari
or result from suggestions or observations made during the term of this
Agreement that relate to Sybari or a client of Sybari businesses, research and
investigations. Individual further agrees to promptly disclose to Sybari, or its
Sybari Software, Inc. Employee Confidentiality Agreement
Page 1
designee, any Works as soon as Individual becomes aware of the existence of such
Work.
6. CONFIDENTIALITY. Individual recognizes and acknowledges that the Products
which Sybari owns, plans or develops, whether for its own use or for use by
others, are confidential and are the property of Sybari. Individual further
recognizes and acknowledges that in order to enable Sybari to perform services
for its clients and to develop new Products, Sybari may be furnished
confidential information concerning business affairs, plans, property, methods
of operation, data, trade secrets, actual or anticipated business, suppliers,
consultants, clients, licensees, affiliates, know-how, designs, formulae,
research, strategies and information of third parties all of which are not
generally known by the public. Individual recognizes that such information must
be kept confidential (hereinafter collectively "Confidential Information"). The
term Confidential Information shall include all Work as defined herein.
7. NON-DISCLOSURE. Individual agrees that, except as directed by Sybari.
Individual will not at any time, whether during or after his services with
Sybari, disclose to any person or use any Confidential Information, or permit
any person to examine and/or make copies of any documents which contain or are
derived from Confidential Information, whether prepared by Individual or
otherwise coming into Individual's possession or control without the prior
written permission of Sybari.
8. POSSESSION. Individual agrees that upon request by Sybari, and in any event
upon termination and/or expiration of this agreement, Individual shall turn over
to Sybari all documents, papers or other material in his possession or under his
control which may contain or be derived from Confidential Information, together
with all documents, notes, Works or other work product which is connected with
or derived from Individual's services to Sybari whether or not such material is
at the date hereof in Individual's possession. Individual agrees that Individual
shall have no proprietary interest in any Work or work product developed or used
by Individual and arising out of his services rendered to Sybari. Individual
shall, from time to time as may be requested by Sybari, do all things which may
be necessary to establish or document Sybari's ownership of any such Work or
work product, including, but not limited to execution of appropriate copyright,
patent or trademark applications or assignments. Individual hereby appoints
Sybari, and Sybari's designee, as my attorneys-in-fact and authorized agent to
execute document on my behalf for this purpose.
9. COPYRIGHT OWNERSHIP. Individual expressly agrees that the Works are to be
considered "works made for hire" within the meaning of the Copyright laws of the
United States in effect on or after the Work's date of creation, and that
Sybari is to be considered the author of the Works and the material contained
therein and entitled to copyright and all other rights therein throughout the
world, including but not limited to the right to make such changes therein and
such uses thereof, including use in any derivative works, as Sybari may
determine; and that any and all rights of Individual therein capable of transfer
are expressly transferred hereby to Sybari.
10. COPYRIGHT ASSIGNMENT. If, however, the Works are deemed not to be a "works
made for hire" under applicable laws, Individual, in exchange for good and
valuable consideration, the receipt of which is hereby acknowledged, hereby
grants and assigns to Sybari, its successors and assigns, as of the Works' date
of creation, all his right, title and interest in and to the Works, and the
material contained therein, including but not limited to the copyrights therein
throughout the world; the right to secure all applications, renewals,
extensions and revisions of such intellectual property rights, pursuant to the
laws now and hereafter pertaining thereto; and all other rights in the Works of
any nature whatsoever, whether now known or hereafter devised, including but not
limited to the right to make such changes therein and such uses thereof,
including use in any derivative works, as Sybari may determine.
11. INTELLECTUAL PROPERTY ASSIGNMENT. Individual hereby agrees to assign any and
all rights, title and interest in any invention, improvement, discovery, ideas,
improvement of an invention, or any Works whether patentable or not, copyright,
trademark, trade dress, trade secret, or know-how regarding the subject matter
of this Agreement, any services performed by Individual under this Agreement,
any Works, work product, Products or Confidential Information.
12. RIGHTS OF PATERNITY OR INTEGRITY. Individual, for good and valuable
consideration, specifically waives his Moral Rights, to the extent that they may
exist, pursuant to the laws now and hereafter pertaining thereto in and to the
Works. Should Individual object to any use of the Works, his sole and exclusive
remedy is to notify Sybari of his objection, and Sybari shall immediately delete
all references to Individual's name in connection with the Works. For purposes
Sybari Software, Inc. Employee Confidentiality Agreement
Page 2
of this Agreement, Moral Rights means any rights of paternity or integrity, any
right to claim authorship of the Works, whether or not such would be prejudicial
to Individual's honor or reputation, and any similar right, existing under
judicial or statutory law or in any country in the world, or under any treaty,
regardless whether or not such right is denominated or generally referred to as
a "moral" right.
13. NON-COMPETITION. Individual agrees and covenants that because of the
confidential and sensitive nature of the Confidential Information and because
the use of, or even the appearance of the use of, the Confidential Information
in certain circumstances may cause irreparable damage to Sybari and its
reputation, or to clients of Sybari, or to prospective clients of Sybari,
Individual shall not, until the expiration of two years after the termination or
expiration of this agreement, engage, directly or indirectly, or through any
corporations or associates in any business, enterprise or employment which is
similar in nature to and directly competitive with Sybari or any Sybari Product
developed under this agreement.
14. INDIVIDUAL'S PROHIBITION OF RENDERING SERVICES. If this agreement expires
and/or terminates for any reason, Individual shall not, for a period of two
years from the date of termination and/or expiration, have any business dealings
whatsoever, either directly or indirectly or through corporate entities or
associates with any customer, client, vendor, employee, consultant, independent
contractor or other assignors of Sybari or its subsidiaries, assigns or related
companies or any person or firm which has contacted or been contacted by Sybari
as a potential customer, client, vendor, assignor, employee, writer, researcher,
or independent contractor used, hired, employed, contracted or otherwise engaged
by Sybari; and Individual shall keep in strictest confidence, both during the
term of this agreement and subsequent to termination and/or expiration, and
shall not during the period of the term of this agreement or thereafter disclose
or divulge to any person, firm or corporation, or use directly or indirectly,
for Individual's own benefit or the benefit of others, any information which in
good faith and good conscience ought to be treated as Confidential Information
including, without limitation, information relating to Products developed by
Sybari, information as to sources of, and arrangements for information,
databases, software, development products, employees, or contractors used,
hired, employed, contracted or otherwise engaged by Sybari, or supplied to
customers or clients of Sybari, submission and proposal procedures of Sybari,
customer or contact lists or any other Confidential Information.
15. SAVING PROVISION. Sybari and Individual agree and stipulate that the
agreements and covenants not to compete and prohibitions for rendering services
contained in the preceding paragraphs are fair and reasonable in light of all of
the facts and circumstances of the relationship between Individual and Sybari.
However, Individual and Sybari are aware and acknowledge that in certain
circumstances courts have refused to enforce certain agreements not to compete.
Therefore, in furtherance of and not in derogation of the provisions of the
preceding paragraphs, Sybari and Individual agree that in the event a court
should decline to enforce the provisions of the preceding paragraphs, those
paragraphs shall be deemed to be modified to restrict Individual's competition
with Sybari and prohibitions of rendering services to the maximum extent, in
time, scope and geography, which the court shall find enforceable; however, in
no event shall the provisions of the preceding paragraph be deemed to be more
restrictive to Individual than those contained therein.
16. INJUNCTIVE RELIEF. Individual acknowledges that disclosure of any
Confidential Information or breach of any of the non-competitive covenants or
agreements contained herein may give rise to irreparable injury to Sybari or
clients of Sybari, which may be inadequately compensable in damages.
Accordingly, Sybari or, where appropriate a client of Sybari, may seek and
obtain injunctive relief against the breach or threatened breach of the
foregoing undertakings, in addition to any other legal remedies which may be
available. Individual further acknowledges and agrees that in the event of the
termination and/or expiration of this agreement, Individual's experience and
capabilities are such that Individual can obtain employment in business
activities which are of a different or non-competing nature with his or her
activities as Individual of Sybari; and that the enforcement of a remedy
hereunder by way of injunction shall not prevent Individual from earning a
reasonable livelihood. Individual further acknowledges and agrees that the
covenants contained herein are necessary for the protection of Sybari's
legitimate business interests and are reasonable in scope and content.
17. ENFORCEABLE. The provisions of this Agreement shall be enforceable
notwithstanding the existence of any claim or cause of action of Individual
against Sybari whether predicated on this Agreement or otherwise.
Sybari Software, Inc. Employee Confidentiality Agreement
Page 3
18. GOVERNING LAW. The Agreement shall be construed in accordance with the
laws of the State of New York. The parties consent to venue and jurisdiction in
a court of competent jurisdiction in the county where Sybari's principal place
of business is at the time of commencement of the lawsuit.
19. ASSIGNMENT. This agreement, and the performance obligations herein, can not
be assigned by Individual.
20. EMPLOYMENT AT WILL. Unless Individual has a written contract for employment,
for a definite term, signed by the President of Sybari, such Individual is
employed by Sybari as an employee at will. Individual's employment by Sybari can
be terminated by either Individual or by Sybari at any time, for any reason, or
for no reason at all, except as may be otherwise proscribed by law. No
representative of Sybari, with the exception of the President, regardless of
his/her position with Sybari, has the authority to enter into any verbal or
written employment agreement with Individual for a specific period of time.
21. GENERAL. This Agreement contains the entire agreement of the parties
relating to the subject matter hereof. This Agreement may be modified only by an
instrument in writing signed by both parties hereto. Any notice to be given
under this Agreement shall be sufficient if it is in writing and is either
personally given (or served) or sent by mail to Individual at his address as the
same appears on the books and records of Sybari or to Sybari at its principal
office, or otherwise as directed by Sybari, from time to time. The provisions of
this Agreement relating to representations, warranties, indemnification,
confidentiality, prohibitions of rendering services and non-competition shall
survive expiration and/or termination, however caused. The paragraph headings
contained herein are for convenience only and are not to be considered part of
this Agreement where they may be in conflict with a specific term or condition
contained herein.
IN WITNESS WHEREOF, the parties have executed the foregoing agreement as
of the date first above written.
Individual Sybari Software, Inc..
___________________ By: ____________________
Name:
Title:
Date: Date:
Sybari Software, Inc. Employee Confidentiality Agreement
Page 4
EXHIBIT H
REDEMPTION AGREEMENT
This Redemption Agreement (this "Agreement") is dated as of
the ___________________ day of March, 2001, by and among Sybari Software, Inc.,
a New York corporation (the "Company"), and the persons set forth on Schedule
1.1 as Investors (each an "Investor" and collectively the "Investors").
As of the date of this Agreement, the Investors have purchased (i) an
aggregate of 1,000,000 shares of Series A Redeemable Preferred Stock of the
Company, par value $.01 per share, (the "Series A Preferred Stock") (ii) an
aggregate of 50 shares of the Series B Convertible and Redeemable Preferred
Stock, par value $.01 per share, of the Company (the "Series B Preferred
Stock"), which are convertible into shares of Common Stock, par value $.01 per
share, of the Company (the "Common Stock") and (iii) an aggregate of $15,000,000
of Subordinated Debentures of the Company (the "Debentures"), pursuant to a
certain Securities Purchase and Redemption Agreement, dated the date hereof, by
and among the Company, certain shareholders of the Company and the Investors
(the "Purchase Agreement"). The shares of Series A Preferred Stock, the shares
of Series B Preferred Stock, the Common Stock issuable upon conversion of the
Series B Preferred Stock and any other Common Stock now owned or hereafter
acquired by the Investors (together with any shares issued with respect thereto
pursuant to any stock split, stock dividend or the like) are referred to herein
as the "Shares." Capitalized terms used herein and not otherwise defined in this
Agreement shall have the meanings assigned to them in the Purchase Agreement.
In consideration of the execution and delivery of the Purchase Agreement
and the agreements set forth below, the parties agree with each other as
follows:
1. Option to Sell Shares to Company. In the event the Company has not
consummated a Liquidity Event on or prior to March 30, 2006, the Investors may,
at their election, from and after March 30, 2006, require the Company to redeem
pro rata from all Investors (i) on or after March 30, 2006 an amount equal to
50% of the aggregate number of the Shares outstanding as of such date and (ii)
on or after March 30, 2007, an amount equal to the aggregate number of the
Shares remaining outstanding as of such date. If any Investor elects to require
the Company to redeem its Shares hereunder, such Investor shall notify the
Company that it intends to offer to the Company any or all of the Shares then
held by it for purchase by the Company. The Company shall promptly give notice
of such intention to all other Investors who own Shares, and any Investor may,
within ten (10) days of such notice, give the Company notice that it intends to
offer to the Company any or all of the Shares then held by it. The Company shall
repurchase all Shares so offered under this Agreement as set forth below. The
option to sell Shares pursuant to this Section 1(a) shall be referred to as the
"Option." For the purposes of this Redemption Agreement, the term "Liquidity
Event" means any one (1) or more of the following: (i) the liquidation,
dissolution, or winding up of the Company, whether voluntary or involuntary;
(ii) a sale, merger, or similar transaction involving the Company, as the result
of which those persons who held 100% of the voting stock of the Company
immediately prior to such transaction do not hold more than 50% of the voting
stock of the Company (or the surviving
or resulting entity) after giving effect to such transaction; (iii) the sale of
all or substantially all of the assets of the Company; or (iv) the consummation
of the first public offering of securities of the Company pursuant to a
registration statement filed under the Securities Act of 1933, as amended,
pursuant to which the aggregate public offering price of the shares sold by the
Company equals or exceeds $50,000,000, the price per share of Common Stock
equals or exceeds three (3) times the original purchase price of the Series B
Preferred Stock and in which all of the Series A Preferred Stock has been
redeemed and all amounts due and owing under the Debentures have been paid in
full.
2. Price.
(a) The price to be paid by the Company for each Share to be sold
under the Option shall be the greater of (i) the sum of (X) the purchase price
for such Share and (Y) any and all accrued but unpaid dividends on such Share,
or (ii) the fair market value thereof, as of the date of such proposed
repurchase, as agreed upon in good faith by the Company and the Representative
(who shall be a person selected by the Investors owning a majority of the Shares
to be redeemed hereunder and who shall be hereinafter referred to as the
"Representative"), taking into account, in valuing such Shares, all relevant
facts and circumstances; provided, however, that there shall be no discount to
reflect the fact that the Shares are illiquid or represent a minority interest
in the Company. If no such agreement is reached within thirty (30) days after
notice is given to the Company of the exercise of the Option, the fair market
value shall be determined by appraisal as set forth below.
(b) All appraisals shall be undertaken by two (2) appraisers, one
(1) selected by the Board of Directors of the Company and one (1) selected by
the Representative. No Director whose Shares are being appraised or who is
affiliated with a person whose Shares are being appraised shall vote on the
selection of the appraiser chosen by the Company. The fair market value shall be
the fair market value arrived at by those appraisers within thirty (30) days
following the appointment of the last appraiser to be appointed. In the event
that the (2) two appraisers agree in good faith on such fair market value within
such a period of time, such agreed value shall be used for these purposes. If
the appraisers cannot agree but their valuations are within ten percent (10%) of
each other, the fair market value shall be the mean of the two (2) valuations.
If the appraisers cannot agree and the differences in the valuations are greater
than ten percent (10%), the appraisers shall select a third appraiser who will
calculate fair market value independently, and, except as provided in the next
sentence, the fair market value of the Shares shall be the average of the two
(2) fair market values arrived at by the appraisers who are closest in amount.
If one (1) appraiser's valuation is the mean of the other two (2)valuations,
such mean valuation shall be the fair market value. In the event that the two
original appraisers cannot agree upon a third appraiser within ten (10) days
following the end of the thirty (30) day period referred to above, then the
third appraiser shall be appointed by the American Arbitration Association in
Boston, Massachusetts. If, following the final determination of the purchase
price for the Shares, any Investor previously offering its Shares for repurchase
shall choose not to sell any or all of its Shares, then such Investor shall so
notify the Company within ten (10) days following receipt of the results of the
appraisal. The expenses of the appraiser chosen by the Company will be borne by
it, the expenses of the appraiser chosen by the Representative will be
-2-
borne by those Investors exercising the Option, pro rata based on the number of
Shares being redeemed, and the expenses of the third appraiser will be borne
fifty percent (50%) by the Company and fifty percent (50%) by those shareholders
exercising the Option pro rata based on the number of Shares being redeemed.
3. Payment.
(a) Within twenty (20) days following either the agreement as
provided above of the Company and the Representative concerning the fair market
value of the Shares or the receipt of the results of the last of the appraisals
referred to above, the Company shall purchase the Shares tendered to it at the
price established by this Agreement (the "Redemption Price"), and the Investors
exercising the Option shall deliver to the Company, upon receipt of payment
therefor, the certificates for the Shares duly endorsed by them for transfer.
(b) Notwithstanding the other provisions of this Agreement, the
Company shall not be obligated to repurchase any Shares to the extent such
repurchase would violate applicable law; provided, however, that the Company
shall use its best efforts to comply with such restriction. In the event a
repurchase is delayed on account of the preceding sentence, it shall be made at
the first time it would not violate such law and the Redemption Price shall bear
interest at the rate of ten percent (10%) per annum, compounded annually, until
such time as the redemption is completed. If on account of the first sentence of
this subparagraph (b) the Company may purchase fewer than all of the Shares
offered for redemption, the Company shall repurchase all Shares when permitted,
allocated pro rata among those who requested that their Shares be redeemed, in
proportion to the amount which would have been paid to such holder had all
Shares as to which it requested redemption been redeemed. If on account of the
first sentence of this subparagraph (b) the Company may purchase fewer than all
of the Shares offered for redemption, the holders of the Shares not redeemed
shall continue to receive the benefit of the rights and privileges afforded the
Shares under the Purchase Agreement and the Related Agreements.
(c) If pursuant to Section 3(b) the Company fails to repurchase
all Shares as to which the Option has been exercised, the Company shall initiate
a rights offering to its shareholders (the "Rights Offering"). The Rights
Offering shall be comprised of Common Stock which shall be offered to the
shareholders of the Company at a price per share equal to the fair market value
thereof, as determined pursuant to Section 2, with a gross offering price equal
to the amount remaining payable to the Investors for the Shares with respect to
which the Option was exercised. All shareholders shall have the right to
participate in the Rights Offering in proportion to the Shares owned by each,
with a right of over-subscription. The Rights Offering shall be commenced within
thirty (30) days after the date on which the Company is obligated to purchase
Shares as to which the Option has been exercised, and shall remain open for a
maximum of sixty (60) days. All proceeds of the Rights Offering shall be used to
fund the purchase of Shares as to which the Option has been exercised.
(d) Payment shall be made by check or wire transfer of funds to
such bank account as each Investor shall direct.
-3-
4. Notices. All notices or other communications required or permitted
to be delivered hereunder shall be in writing signed by the party giving the
notice and sent by telecopier, express delivery service, or regular or certified
mail to the address specified in the Purchase Agreement.
5. Entire Agreement. This Agreement and the agreements referred to
herein constitute the entire agreement of the parties with respect to the
matters contemplated herein. This Agreement and such other agreements supersede
any and all prior understandings as to the subject matter of this Agreement.
6. Amendments, Waivers and Consents. Any provision in this Agreement to
the contrary notwithstanding, changes in or additions to this Agreement may be
made, and compliance with any covenant or provision herein set forth may be
omitted or waived, if the Company shall obtain consent thereto in writing from
Persons holding an aggregate of at least a majority of the Shares owned by the
Investors.
7. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the respective parties
hereto.
8. General; Definitions. The headings contained in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. In this Agreement the singular includes the
plural, the plural the singular, the masculine gender includes the neuter,
masculine and feminine genders. This Agreement shall be governed by and
construed under the laws of The Commonwealth of Massachusetts.
9. Severability. If any provision of this Agreement shall be found by
any court of competent jurisdiction to be invalid or unenforceable, the parties
hereby waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable, and, as modified, shall
be enforced as any other provision hereof, with all the other provisions hereof
continuing in full force and effect.
10. Counterparts. This Agreement may be executed in counterparts, all of
which together shall constitute one and the same instrument.
* * * * * *
-4-
SYBARI SOFTWARE, INC.
REDEMPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as an instrument under seal as of the date for first above written.
SYBARI SOFTWARE, INC.
By:______________________________________
Name:
Title:
INVESTORS:
Summit Ventures V, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By:
____________________________________
Member
Summit V Companion Fund, L.P.
By: Summit Partners, V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By:
____________________________________
Member
S-1
SYBARI SOFTWARE, INC.
REDEMPTION AGREEMENT
COUNTERPART SIGNATURE PAGE
Summit V Advisors Fund, L.P.
By: Summit Partners, LLC
Its General Partner
By:
____________________________________
Member
Summit V Advisors Fund (QP), L.P.
By: Summit Partners, LLC
Its General Partner
By:
____________________________________
Member
Summit Subordinated Debt Fund II, L.P.
By: Summit Partners SD II, LLC
Its General Partner
By:
____________________________________
Member
Summit Investors III, L.P.
By: ____________________________________
General Partner
S-2
SCHEDULE 1.1
INVESTORS
Name and Address
Summit Ventures V, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Companion Fund, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Advisors Fund, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Advisors Fund (QP), L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit Subordinated Debt Fund II, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit Investors III, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
EXHIBIT I
SYBARI SOFTWARE, INC.
March_____,2001
Summit Ventures V, L.P.
Summit V Companion Fund, L.P.
Summit V Advisors Fund, L.P.
Summit V Advisors Fund (QP), L.P.
Summit Subordinated Debt Fund II, L.P.
Summit Investors III, L.P.
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Re: Management Rights
Ladies and Gentlemen:
This letter will confirm our agreement that effective upon your purchase
of Senior Subordinated Debentures (the "Debentures"), in the aggregate principal
amount of $15,000,000; 100,000 shares of the Series A Redeemable Preferred Stock
(the "Series A Stock") and 50 shares of the Series B Convertible Redeemable
Preferred Stock ("the Series B Stock") of Sybari Software, Inc. (the "Company")
for so long as you hold any shares of the Series A Stock or any shares of the
Series B Stock purchased by you on the date hereof, you shall be entitled to the
following contractual management rights, in addition to the rights that you may
be entitled to pursuant to the Securities Purchase and Redemption Agreement and
the Related Agreements:
(1) You shall be permitted to consult with and advise management of the
Company on significant business issues, including management's proposed annual
operating plans, and management will make itself available to meet with you at
the Company's facilities at mutually agreeable times for such consultation and
advice and to review progress in achieving said plans.
(2) You may examine the books and records of the Company and inspect its
facilities and may request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations, provided that access to highly confidential proprietary information
and facilities need not be provided.
(3) If and for so long as you do not have a representative on the
Company's Board of Directors, the Company shall invite you to send your
representative to attend in a nonvoting observer capacity all meetings of its
Board of Directors and, in this respect, shall give your representative copies
of all notices, minutes, consents, and other material that it provides to its
Directors; provided, however, that the Company reserves the right to exclude
your representative from access to any material or meeting or portion thereof if
the Company believes upon advice of counsel that such exclusion is reasonably
necessary to preserve the attorney-client privilege, to protect highly
confidential proprietary information or for other similar reasons.
The rights described herein shall terminate and be of no further force or
effect upon the consummation of the sale of the Company's securities pursuant to
a registration statement filed by the Company under the Securities Act of 1933
in connection with the firm commitment underwritten offering of its securities
to the general public.
Very truly yours.
SYBARI SOFTWARE, INC.
By:______________________________________
Title:___________________________________
EXHIBIT J
FIRPTA Certificate
Section 1445 of the Internal Revenue Code provides that a transferee of a U.S.
real property interest must withhold tax if the transferor is a foreign person
and the transferee is acquiring a U.S. real property interest. To inform the
Company that withholding of tax is not required from the cash redemption payment
to be made to me, I hereby certify the following:
1. I am not a nonresident alien for purposes of U.S. income taxation;
2. My U.S. taxpayer identifying number (Social Security Number or Employer
Identification Number) is____________________________________; and
3. My home address is: ___________________
___________________
I understand that this certification may be disclosed to the Internal Revenue
Service by the Company and that any false statement I have made here could be
punished by fine, imprisonment or both.
Under penalties of perjury I declare that I have examined this certification
and, to the best of my knowledge and belief, it is true, correct and complete.
(NOTE: The Company must retain this certification until the end of the
fifth taxable year following the taxable year in which the transfer takes
place. This certificate is furnished for the information of the
transferee: the transferee should seek legal advice as to the effect of
same.)
Other Requirements
I am enclosing executed copies of the following:
(1) Stock Certificate representing tendered shares, duly endorsed for
transfer
(2) Stock Redemption Agreement
(3) IRS Form W-9
(4) Consent to Election under IRC Section 1362(e)(3)
Date:____________ ,2001
___________________________________________
(Please sign your name exactly as it appears below)
___________________________________________
Print Name
[Printed name per stock certificate]
SYBARI SOFTWARE, INC.
SCHEDULE 1.1
Purchase Price and Purchase Price and
Principal Amount Number of Shares Number of Shares
of Debentures to of Series A of Series B Total Purchase
Name and Address be Purchased Preferred Stock Preferred Stock Price
---------------- ------------ --------------- --------------- -----
Summit Ventures V, L.P. --- $ 3,946,395 $ 6,698,100 $ 10,644,495.00
c/o Summit Partners 789,279.00 33,4905
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Companion Fund, L.P. --- $ 659,910 $ 1,120,040 $ 1,779,950.00
c/o Summit Partners 131,982.00 5,6002
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Advisors Fund, L.P. --- $ 80,665 $ 136,900 $ 217,565.00
c/o Summit Partners 16,133.00 0.6845
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit V Advisors Fund (QP), --- $ 263,960 $ 448,000 $ 711,960.00
L.P. 52,792.00 2.2400
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit Subordinated Debt Fund II, $ 14,863,656.00 --- $ 1,535.000 $ 16,398,656.00
L.P. 7,6750
c/o Summit Partners
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Summit Investors III, L.P. $ 136,344.00 $ 49,070 $ 61,960 $ 247,374.00
c/o Summit Partners 9,814.00 0.3098
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx
Total Shares 1,000,000 50
Cost Per Share $ 5.00 $ 200,000
SCHEDULE 1.4 - REDEMPTION OF SHARE AND COMMON STOCK POST-CLOSING
#SHARES #SHARES
# SHARES SHARE PRE- POST-
CASH REDEEMED PERCENTAGE CLOSING CLOSING
---- -------- ---------- ------- -------
Xxxxxx Xxxxxxx $ 6,500,000.00 13 26% 43 30
Xxxxxx Xxxxxx $ 9,000,000.00 18 36% 56 38
Xxxxxxx Xxxxxxxx $ 6,500,000,00 13 26% 52 39
Xxxxxxx XxxxXxxxxxx $ 3,000,000.00 6 12% 20 14
--------------- -- --- --- ---
Total: $ 25,000,000.00 50 100% 171 121
2
SCHEDULE 1.6 - CONTRIBUTION PERCENTAGES FOR NON-FOUNDER OPTION SALES
Principal Shareholders Contribution Percentage
---------------------- -----------------------
1. Xxxxxx Xxxxxx 50%
2. Xxxxxx Xxxxxxx 25%
3. Xxxxxxx Xxxxxxxx 25%
3
SCHEDULE 1.7 - OUTSTANDING SHAREHOLDER LOANS
As of the Closing Date, the following is a listing of loans from the Company to
shareholders which shall be paid off in accordance with Section 1.7 of the
Agreement.
Shareholder Amount of Outstanding Loan
----------- --------------------------
Xxxxxx Xxxxxxx $ 834,402.00
Xxxxxx Xxxxxx 71,938.00
------------
Total: 906,340.00
4
