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TEMPLATE SOFTWARE, INC.
CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
NOVEMBER 27, 1996
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TABLE OF CONTENTS
SECTION PAGE
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1. Purchase and Sale of Convertible Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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1.1 Sale and Issuance of Convertible Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . 1
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2. Representations and Warranties of TSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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2.1 Organization, Good Standing and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . 2
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2.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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2.3 Authority; Execution and Delivery; Requisite Consents, Nonviolation . . . . . . . . . . . . . . 3
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2.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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2.5 TSI Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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2.6 Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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2.7 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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2.8 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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2.9 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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2.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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2.11 Labor Union Activities; Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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2.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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2.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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2.14 Compliance with Laws; Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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2.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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2.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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2.17 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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2.18 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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2.19 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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2.20 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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2.21 Employee Confidentiality Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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2.22 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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3. Representations and Warranties of Alcatel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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3.3 No Intended Resale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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3.4 Disclosure of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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3.5 Investment Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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3.6 Accredited Investor Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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3.7 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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3.8 Further Limitations on Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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3.9 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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4. Additional Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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TABLE OF CONTENTS (CONT'D)
SECTION PAGE
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5. Certain Post-Closing Covenants of TSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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5.1 Observer Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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5.2 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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5.3 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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5.4 Exemption from Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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5.5 Accounting and Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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5.6 Assistance in Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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5.7 Additional Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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6. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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6.1 Standstill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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6.2 Tax Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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6.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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6.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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6.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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6.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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6.7 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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6.8 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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6.9 JUDICIAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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6.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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6.11 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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6.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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6.13 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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6.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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EXHIBIT LIST
Exhibit A - Amended and Restated Articles
Exhibit B - Shareholders Agreement
Exhibit C - Registration Rights Agreement
Exhibit D - By-Laws
Exhibit E - Financial Statements
Exhibit F - Employee Confidentiality Agreements
SCHEDULE LIST
Schedule 1 - Schedule of Exceptions
Schedule 2 - Names of Shareholders and holders of Options and/or
Warrants, etc.
Schedule 3 - Subsidiaries
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CONVERTIBLE PREFERRED PURCHASE AGREEMENT
This Purchase Agreement ("AGREEMENT") is made as of this 27 day of
November, 1996 by and between Template Software, Inc. ("TSI"), a Virginia
corporation and the successor by merger to Template Software, Inc. ("TSI
MARYLAND"), a Maryland corporation, and Alcatel N.V. ("ALCATEL"), a company
limited by shares with ordinary structure organized under the laws of the
Netherlands.
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Convertible Preferred Stock.
1.1 Sale and Issuance of Convertible Preferred Stock.
Subject to the terms and conditions of this Agreement, Alcatel is hereby
purchasing and TSI is hereby selling and issuing to Alcatel, 500,000 shares of
Series A Convertible Preferred Stock, par value $0.01 (the "SERIES A STOCK"),
of TSI containing the terms set forth in the Articles of Amendment and
Restatement being filed simultaneously with the execution and delivery of this
Agreement in the form attached as Exhibit A hereto (the "AMENDED AND RESTATED
ARTICLES"), at a price of $16 per share of Series A Stock, for an aggregate
purchase price of $8,000,000. The shares of common stock, par value $0.01 per
share, of TSI (the "COMMON STOCK") issuable upon conversion of the Series A
Stock are sometimes hereinafter referred to as the "CONVERSION COMMON STOCK."
Simultaneously with the execution and delivery of this Agreement, TSI is
delivering to Alcatel, at the offices of Proskauer Xxxx Xxxxx & Xxxxxxxxxx LLP,
0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx a certificate representing the Series A Stock
issued in the name of Alcatel or such Affiliate (as hereinafter defined) of
Alcatel as Alcatel may specify, against delivery to TSI by Alcatel of a wire
transfer in the amount of the aggregate purchase price therefor.
2. Representations and Warranties of TSI. Except as set forth on
the Schedule of Exceptions furnished to Alcatel and attached hereto as Schedule
1, which specifically identifies the relevant subsections hereof, which
exceptions shall be deemed to be representations and warranties as if made
hereunder, TSI hereby represents and warrants to, and agrees with, Alcatel as
follows. For purposes of this Section 2: (i) references to TSI (including
indirectly by reference to the Companies) shall be deemed, except where the
context otherwise requires, to include TSI Maryland with respect to any
representation or warranty relating to any events or period of time occurring,
in whole or in part, prior to the effective time of the Merger (as hereinafter
defined), (ii) matters disclosed on any subsection of Schedule 1 shall be
deemed disclosed for purposes of any other subsection, (iii) specific matters
disclosed in the Draft Registration Statement (as hereinafter defined) shall be
deemed disclosed on the relevant subsections of Schedule 1, and (iv) the phrase
"to the best knowledge of TSI" or other similar formulations shall be deemed to
refer to the current actual knowledge of the officers and directors of TSI and
any facts or circumstances of which, after due inquiry, such officers and
directors would reasonably be expected to have actual knowledge.
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2.1 Organization, Good Standing and Qualification. Each
of TSI, Template Software UK Limited ("TSUKL"), a corporation organized under
the laws of England and a wholly-owned subsidiary of TSI, and Template Software
Limited ("TSL"), a corporation organized under the laws of England and a
wholly-owned subsidiary of TSI and, together with TSUKL, the "SUBSIDIARIES"
(TSI and the Subsidiaries are sometimes hereinafter collectively referred to as
the "COMPANIES"), is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of the
Companies has all requisite power and authority to carry on its business as now
conducted and as proposed to be conducted. TSI has all requisite power and
authority to enter into and perform this Agreement and the transactions
contemplated hereby. Each of the Companies is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so
to qualify could have a material adverse effect on its business.
2.2 Capitalization.
(a) The capital stock of TSI consists of: (i)
17,000,000 shares of Common Stock, of which 2,247,008 shares are issued and
outstanding, 500,000 shares are reserved for issuance upon conversion of the
Series A Stock, 2,180,915 shares are reserved for issuance to key employees,
officers and directors under TSI's 1986 Incentive Stock Option Plan, its 1992
Incentive Stock Option Plan, its 1992 Incentive Stock Option Plan, Class B or
its 1992 Nonqualified Stock Option Plan (collectively, the "PRIOR STOCK OPTION
PLANS"), of which 2,100,915 shares are subject to outstanding incentive stock
option grants and 80,000 shares are subject to outstanding non-qualified stock
option grants under the Prior Stock Option Plans, and 1,000,000 shares are
reserved for issuance pursuant to TSI's 1996 Equity Incentive Plan (the "1996
EQUITY PLAN"), of which no shares are subject to outstanding grants or awards;
and (ii) 3,000,000 shares of Preferred Stock, par value $0.01, of TSI, of which
500,000 shares are designated as Series A Stock, all of which Series A shares
are issued and outstanding. The Prior Stock Option Plans have terminated and
no additional options may be granted thereunder. The rights, privileges and
preferences of the Common Stock and Series A Stock are as stated in the Amended
and Restated Articles, which has been duly filed with the Virginia State
Corporation Commission and is in full force and effect.
(b) Except for the outstanding shares of capital
stock and outstanding stock options specified in Subsection 2.2(a) and the
shares of Common Stock reserved for issuance upon exercise of such outstanding
options, pursuant to the 1996 Equity Plan or pursuant to the conversion rights
of the issued and outstanding shares of Series A Stock, TSI: (i) does not have
outstanding any capital stock or other securities convertible into or
exchangeable for any shares of its capital stock, and no Person (as hereinafter
defined) has any right to subscribe for or to purchase (including conversion or
preemptive rights), or any options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or other claims of any character relating to, any capital stock or
any stock or other securities convertible into or exchangeable for any capital
stock of TSI; (ii) does not have any capital stock, equity interests or other
securities reserved for issuance for any purpose; and (iii) is not subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire
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or retire any shares of its capital stock or any convertible securities, rights
or options of the type described in the preceding clause (i). All of the
issued and outstanding shares of Common Stock were duly authorized and have
been validly issued and are fully paid and nonassessable. All of the shares of
Series A Stock and, when issued as contemplated hereby, Conversion Common Stock
will be validly issued, fully paid and nonassessable. Except as set forth in
Part 2.2 of Schedule 1, TSI is not a party to and, to the best knowledge of
TSI, no shareholder of TSI is a party to, any agreement with respect to the
voting or transfer of any of TSI's capital stock, other than the agreements
regarding transfer contained herein, in the proposed Shareholders Agreement in
the form of Exhibit B attached hereto (the "SHAREHOLDERS AGREEMENT"), and in
the proposed Registration Rights Agreement in the form of Exhibit C attached
hereto (the "REGISTRATION RIGHTS AGREEMENT"). Schedule 2 includes a complete
and correct list of the name of each of TSI's shareholders and the number of
shares of Common Stock owned by such shareholder, and the name of each holder
of an outstanding stock option, the number of options to purchase Common Stock
owned by such holder and the exercise prices at which such options may be
exercised. No shares of capital stock of TSI Maryland were issued in violation
of any preemptive or other similar rights.
2.3 Authority; Execution and Delivery; Requisite
Consents, Nonviolation. TSI has all requisite power and authority to execute,
deliver, file (as applicable) and perform this Agreement, the Amended and
Restated Articles, the Shareholders Agreement, the Registration Rights
Agreement and each other document or instrument executed by it, or any of its
officers, in connection herewith or therewith or pursuant hereto or thereto
(this Agreement, together with all of the foregoing documents and instruments,
are sometimes collectively referred to herein as the "COMPANY DOCUMENTS"), and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery, filing and performance of this Agreement and the other Company
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of TSI and its shareholders. This Agreement and each of the other
Company Documents has been duly executed and delivered by TSI and constitute
the legal, valid and binding obligation of TSI, enforceable against TSI in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency or other similar laws affecting the enforceability of
creditors' rights in general or by general principles of equity. The
execution, delivery, filing and performance of this Agreement and the other
Company Documents (including, without limitation, the Amended and Restated
Articles, the Shareholders Agreement and the Registration Rights Agreement),
and the consummation by TSI of the transactions contemplated hereby and thereby
(including, without limitation, the offer, sale and delivery by TSI of the
Series A Stock and the Conversion Common Stock) does not and will not: (a)
require the consent, license, permit, waiver, approval, authorization or other
action of, by or with respect to, or the registration, declaration or filing
(except for the filing of the Amended and Restated Articles with the Virginia
State Corporation Commission) with, any court or governmental authority,
department, commission, board, bureau, agency or instrumentality, domestic or
foreign (each, a "GOVERNMENTAL AUTHORITY"), or any other individual,
partnership, corporation, unincorporated organization or association, limited
liability company, trust or other entity (collectively, a "PERSON"); (b)
violate or conflict with any provision of the Amended and Restated Articles,
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TSI's by-laws (a complete and correct copy of which is attached hereto as
Exhibit D); or (c) constitute a default (with or without notice or lapse of
time or both) under, violate or conflict with, or give rise to a right of
termination, cancellation or acceleration or to a loss of a material benefit
under, any Law, Contract, right relating to Intellectual Property, Permit or
Order (as each such capitalized term is hereinafter defined) to which TSI is or
hereafter may be a party or by which TSI or any of its properties are or
hereafter may be bound. The Merger was duly authorized and validly consummated
in accordance with all applicable requirements of Maryland and Xxxxxxxx Xxxx.
2.4 Subsidiaries. Schedule 3 correctly sets forth all of
the subsidiaries of TSI, the jurisdiction of incorporation of each such
subsidiary and its authorized capitalization, its outstanding shares of capital
stock outstanding, and the record and beneficial owner of those shares. Except
for the Subsidiaries, TSI does not own or control, directly or indirectly, any
partnership interests, stock or other equity interests in any partnership,
corporation or other entity or any voting rights or right to control the
policies and direction of any partnership, corporation or other entity. There
are not outstanding (and neither TSI nor any Subsidiary has any plan to issue,
grant or enter into) any options, warrants, rights (including conversion or
preemptive rights), subscriptions or agreements for the purchase or acquisition
from or by TSI or any Subsidiary of any shares of capital stock of any
Subsidiary. There are no voting agreements, voting trust agreements,
shareholder agreements or other agreements relating to the capital stock of any
of the Subsidiaries.
2.5 TSI Financial Information. TSI previously has
provided to Alcatel its consolidated balance sheets as of November 30, 1994 and
1995 and August 31, 1996, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the three-year period ended November 30, 1995 and the nine-month period ended
August 31, 1996 (the "FINANCIAL STATEMENTS"), as audited by Coopers & Xxxxxxx,
LLP, who issued their report thereon dated October 25, 1996. Attached hereto
as Exhibit E is a true and complete copy of the Financial Statements. The
Financial Statements are complete and correct in all material respects, are in
accordance with the books of account, ledgers and records of the Companies;
have been prepared in conformity with generally accepted accounting principles,
and present fairly the consolidated financial position, results of operations
and cash flows of the Companies as of the respective dates and periods thereof.
Except as reflected in the notes to the Financial Statements, none of the
Companies has any obligation or liability, contingent or otherwise, other than:
(i) liabilities incurred in the ordinary course of business and consistent with
past practice since the date of the Financial Statements, which liabilities are
not, individually or in the aggregate, material to the business (as presently
conducted or proposed to be conducted), properties, earnings, assets,
liabilities, conditions (financial or otherwise) or prospects (collectively
"CONDITIONS") of the Companies taken as a whole, and (ii) obligations (not
arising as a result of any breach or default by any Company) under Scheduled
Contracts or Contracts of a type not required to be listed as Scheduled
Contracts. Each of the Companies maintains and will continue to maintain a
standard system of accounting established and administered in accordance with
generally accepted accounting principles.
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2.6 Certain Changes or Events. Except as set forth in
Part 2.6 of Schedule 1 and for the merger (the "MERGER") of TSI Maryland with
and into TSI on October 31, 1996 pursuant to the Agreement and Plan of
Reorganization of TSI Maryland and TSI dated as of October 16, 1996 and the
Articles of Merger dated October 18, 1996, complete and correct copies of which
have been delivered by TSI to Alcatel, since August 31, 1996 the business of
each of the Companies has been operated only in the ordinary course and
consistent with past practice, and, in addition to and not in limitation of the
foregoing: (i) there has been no change in the Condition of any of the
Companies, except for changes in the ordinary course of business consistent
with past practice which have not been, individually or in the aggregate,
materially adverse to the Companies taken as a whole; (ii) there has been no
change of Laws, no revocation or change in any Contract or Permit or right to
do business, and no other event or occurrence of any character, whether or not
insured against, which has resulted in, or to the best knowledge of TSI could
reasonably be expected to result in, a material adverse change in the Condition
of the Companies taken as a whole; (iii) TSI has not authorized or made any
distributions, or declared or paid any dividends, upon or with respect to any
of its capital stock or other equity interests, nor has TSI redeemed, purchased
or otherwise acquired, or issued or sold, any of its capital stock or other
equity interests; (iv) none of the Companies has entered into any material
transaction other than in the ordinary course of business and consistent with
past practice; (v) none of the Companies has incurred any indebtedness for
borrowed money or made any loans or advances to any Person; (vi) there has been
no waiver by any of the Companies of a valuable right or of a material debt
owed to it; (vii) none of the Companies has failed to satisfy or discharge any
Lien, except in the ordinary course of business and consistent with past
practice as to Liens that are not, individually or in the aggregate, material
to the Condition of the Companies taken as a whole; (viii) there has been no
material change in any compensation, arrangement or agreement with any
employee, director, shareholder or Affiliate (as defined below) of any Company;
and (ix) there has been no agreement or commitment by any of the Companies to
do or perform any of the acts described in this Section 2.6. For purposes of
this Agreement, an "AFFILIATE" of a specified Person shall mean a Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
2.7 Title to Assets. Except as set forth in Part 2.7 of
Schedule 1, each of the Companies has good and marketable title to all of its
assets and properties, free and clear of any liens, pledges, security
interests, claims, encumbrances or other restrictions of any kind
(collectively, "LIENS"). With respect to any assets or properties it leases,
each Company holds a valid and subsisting leasehold interest therein, free and
clear of any Liens, is in compliance, in all material respects, with the terms
of the applicable lease, and enjoys peaceful and undisturbed possession under
such lease. To the best knowledge of TSI, all of the assets and properties of
each of the Companies that are material to the conduct of business as presently
conducted or as proposed to be conducted by each such Company are in good
operating condition and repair, subject to ordinary wear and tear.
2.8 Contracts. None of the Companies is a party to, nor
are any of the Companies or any of their respective assets or properties bound
by or subject to, any oral or
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written contracts, agreements, notes, instruments, franchises, leases,
licenses, sublicenses, commitments, arrangements or understandings, written or
oral (collectively, "CONTRACTS") of the following types, except for those (the
"SCHEDULED CONTRACTS") listed in Part 2.8 of Schedule 1 hereto:
(a) any Contracts pursuant to which any of the
Companies or any other party thereto is obligated to pay in excess of
fifty thousand dollars ($50,000);
(b) any Contracts pursuant to which any of the
Companies acquired the right to use any Intellectual Property or
information that is material to the business of such Company, or
pursuant to which any of the Companies has granted to others the right
to use, or which otherwise relates to, its Intellectual Property;
(c) any Contracts (other than advances of
expenses to employees in the ordinary course of business) involving
loans, loan agreements, debt securities, mortgages, deeds of trust,
security agreements, suretyships or guarantees;
(d) any Contracts between any of the Companies,
on the one hand, and any of their respective officers, directors,
employees or Persons that beneficially own in excess of 5.0%
(calculated in accordance with Rule 13d-3 promulgated under the
Securities Exchange Act of 1934) of the outstanding equity interests
in TSI (each a "PRINCIPAL SHAREHOLDER"), or any Affiliate or relative,
or Affiliate of a relative, of any of the foregoing, on the other;
(e) any deferred compensation agreements, bonus,
pension, profit sharing, stock option and incentive plans or
arrangements, hospitalization, medical and insurance plans, agreements
and policies, retirement and severance plans and other employee
compensation policies and agreements affecting employees of any of the
Companies;
(f) any Contracts with any labor union affecting
employees of any of the Companies;
(g) any Contracts which restrict in any material
respect any of the Companies from freely engaging in its business or
competing anywhere; and
(h) any Contracts which otherwise are material to
the Condition of any of the Companies.
Complete and correct copies of all Scheduled Contracts have
been made available to Alcatel. All of the Scheduled Contracts are in full
force and effect and constitute legal, valid and binding obligations of each of
the parties thereto; the Companies and, to the best knowledge of TSI, each
other party thereto, has performed in all material respects all obligations
required to be performed by it under the Scheduled Contracts, and no violation
exists in respect thereof
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on the part of any of the Companies or, to the best knowledge of TSI, any other
party thereto; none of the Scheduled Contracts is currently being renegotiated;
and the validity, effectiveness and continuation of all Scheduled Contracts was
not affected by the Merger and will not be materially adversely affected by the
transactions contemplated by this Agreement or the execution, delivery, filing
and performance by the Company of any of its obligations under any of the
Company Documents. All of the Scheduled Contracts were entered into in the
ordinary course of business and none of the Scheduled Contracts is materially
adverse to the Companies.
2.9 Intellectual Property.
(a) (i) Set forth on Part 2.9 of Schedule 1
hereto is a true, correct and complete list of all patents, trademarks, service
marks, trade names, computer software and copyrights material to the conduct of
the Companies' business, and any registrations or applications for any of the
foregoing (collectively, the "INTELLECTUAL PROPERTY"), of any kind in which any
of the Companies has an ownership interest. Except for standard third-party
license agreements for off-the-shelf software, Part 2.9 of Schedule 1 hereto
contains a true, correct and complete list of all licenses, sublicenses or
other agreements that in any way relate to or affect the rights of the
Companies to any of the Intellectual Property or any trade secrets of the
Companies or pursuant to which any of the Companies has a right to use any
Intellectual Property (the "INTELLECTUAL PROPERTY LICENSES"). All such
licenses, sublicenses and other agreements are in all material respects in the
respective forms of such agreements reviewed by Alcatel's intellectual property
counsel on November 7, 1996.
(ii) The Companies are the sole and
exclusive owners, free and clear of all Liens, and have all right, title and
interest in all of the Intellectual Property described in Part 2.9 of Schedule
1 hereto. With respect to any Intellectual Property or trade secret necessary
to conduct its business, each Company owns or has the exclusive (except with
respect to standard third-party license agreements for off-the-shelf software)
right to use such Intellectual Property or trade secret in its business. To
the best of TSI's knowledge, each Company owns or possesses sufficient licenses
or other rights to use all intellectual property covered by its patents or
patent applications that are necessary to conduct the business of such Company
as now being conducted and as proposed to be conducted by such Company.
(iii) Each of the Intellectual Property
Licenses is in full force and effect and constitutes a legal, valid, binding
and enforceable obligation in accordance (in all material respects) with its
terms against each party thereto. Each Company has performed all obligations
imposed upon it under each of the Intellectual Property Licenses to which it is
a party. None of the Companies nor, to the best knowledge of TSI, any other
party thereto is in material default thereunder, nor, to the best knowledge of
TSI, is there any event that with notice or lapse of time, or both, would
constitute a material default thereunder. The execution, delivery and filing
of this Agreement and the other Company Documents by TSI and the performance by
TSI of its obligations hereunder or thereunder will not, with notice or lapse
of time, or both, constitute a default under any of the Intellectual Property
Licenses. None of the Companies has received any notice that any other party
to any of the Intellectual Property
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Licenses intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder. No
director, officer, shareholder, employee or other Affiliate of TSI owns,
directly or indirectly, in whole or in part, any of the Intellectual Property
or any material trade secret of any Company. None of the officers, employees,
consultants, distributors, agents, representatives or advisors of any Company
have entered into any agreement relating to such Company's business regarding
know-how, trade secrets, assignment of rights in inventions, or prohibition or
restriction of competition or solicitation of customers, or any other similar
restrictive agreement or covenant, whether written or oral, with any Person
other than a Company.
(iv) Except for disclosures made in the
ordinary course of business that are not materially adverse to the Condition of
the Companies taken as a whole, none of the Companies has disclosed, other than
pursuant to, and in accordance with, the Intellectual Property Licenses, any
proprietary information (including, without limitation, any source code)
relating to the Intellectual Property or any of the Intellectual Property
Licenses to any person other than Alcatel. Each Company has at all times used
its reasonable best efforts to protect and enforce their rights in or to all
such proprietary information and other trade secrets of such Company. None of
the Companies is under any contractual or other obligation to disclose any
proprietary information relating to the Intellectual Property, any material
trade secret of any Company or any of the Intellectual Property Licenses, nor,
to the best knowledge of TSI, is any other party to the Intellectual Property
Licenses under any obligation to disclose proprietary information included in
or relating to the Intellectual Property, any material trade secret of any
Company or any of the Intellectual Property Licenses to any Person except to a
person having a legally binding obligation of confidentiality with respect
thereto, and no event has taken place, including the execution and delivery of
this Agreement and the transactions contemplated hereby or any related change
in the business activities of any Company, that would give rise to any such
obligation or to an unrestricted disclosure thereof.
(v) The consummation of the transactions
contemplated hereby or by any of the other Company Documents will not alter or
impair in any material respect the rights of any Company to any of the
Intellectual Property, to any material trade secret of any Company, or under
any of the Intellectual Property Licenses.
(b) No claim with respect to the Intellectual
Property, any material trade secret of any Company, or any Intellectual
Property License that, if adversely determined, would materially and adversely
affect the ability of any Company to conduct its business as presently
conducted and as proposed to be conducted, is currently pending or, to the best
knowledge of TSI, has been asserted, or overtly threatened by any Person, nor
does TSI know of any grounds for any claim against any Company: (A) to the
effect that any other Person infringes on any of the Intellectual Property or
Intellectual Property Licenses or misappropriates any trade secret or know-how
or other proprietary rights material to any Company; (B) challenging the
ownership, validity or effectiveness of any of the Intellectual Property, any
of the Intellectual Property Licenses or material trade secrets of such
Company; or (C) challenging any license, sublicense or other legally
enforceable right of any Company under any
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Intellectual Property or any of the Intellectual Property Licenses.
(c) To the best of TSI's knowledge, none of the
Companies has violated or infringed, and is not currently violating or
infringing, and none of the Companies has received any communications alleging
that any of the Companies (or any of its employees or consultants) has violated
or infringed or, by conducting its business as proposed would violate or
infringe, any patents (whether utility or design), patent applications,
trademarks, service marks, trade names, copyrights (including rights to mask
works), trade secrets, confidential and proprietary information, protected
designs, know-how and processes (collectively, the "PROPRIETARY ASSETS") of any
other person or entity.
(d) TSI is not aware that any employee or
consultant of any of the Companies is obligated under any agreement (including
licenses, covenants or commitments of any nature) or subject to any judgment,
decree or order of any court or administrative agency, or any other restriction
that would interfere with the use of his or her best efforts to carry out his
or her duties for any of the Companies or to promote the interests of any of
the Companies or that could conflict with any of the Companies' businesses as
proposed to be conducted. The carrying on of each of the Companies' businesses
by the employees and contractors of each such Company and the conduct of each
of the Companies' businesses as presently proposed, will not, to the best of
TSI's knowledge, conflict with or result in a breach of the terms, conditions
or provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees or contractors or any of the
Companies is now obligated. TSI does not believe it is or will be necessary to
utilize any inventions of any employees of any of the Companies (or persons any
of the Companies currently intends to hire) made prior to their employment by
(or not assigned to) any such Company. At no time during the conception of or
reduction of any of the Companies' Proprietary Assets to practice was any
developer, inventor or other contributor to such patents operating under any
grants from any governmental entity or agency or private source, performing
research sponsored by any governmental entity or agency or private source or
subject to any employment agreement or invention assignment or nondisclosure
agreement or other obligation with any third party that could adversely affect
any of the Companies' rights in such Proprietary Assets.
2.10 Insurance. Each of the Companies has in full force
and effect (i) fire and casualty insurance policies, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed, and (ii) other
insurance in such amounts, and against such risks, as is customary for
companies similar to the Companies, in each case with reputable insurance
companies.
2.11 Labor Union Activities; Employee Relations. No
employee of any of the Companies is represented by any labor union or covered
by any collective bargaining agreement; nor, to the best knowledge of TSI, has
any labor union sought to represent any employee of any of the Companies.
There is no strike or other labor dispute involving any of the Companies
pending, or to the best knowledge of TSI, threatened. To the best knowledge of
TSI, no officer or key employee intends to terminate his employment with any of
the Companies. To the best
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knowledge of TSI, no officer or key employee of any of the Companies is a party
to or bound by any Contract, or subject to any restrictions (including, without
limitation, any non-competition restriction), which would restrict the right of
such person to participate in the affairs of any of the Companies. Except as
disclosed in the Draft Registration Statement, the employment of each officer
and key employee of each of the Companies is terminable at will.
2.12 ERISA. Part 2.12 of Schedule 1 hereto includes (and
separately identifies) a true and complete list of all "employee benefit
plans," within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, ("ERISA"), any arrangement described in
Section 2.8(e), or any other plan, agreement, policy, or arrangement (whether
written or unwritten, domestic or foreign, insured or self-insured), currently
or previously established, maintained, sponsored, or contributed to (or with
respect to which any obligation to contribute has been undertaken) by any
Company (each a "PLAN" and, collectively, the "PLANS"). No entity would be, or
has ever been, deemed a single employer with any Company under Sections 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the "CODE"),
or Section 4001 of ERISA. No Plan is or has ever been subject to Title IV of
ERISA, Section 302 of ERISA or Section 412 of the Code. Each Plan intended to
qualify under Section 401(a) of the Code has been qualified since its inception
and has received a determination letter from the Internal Revenue Service
("IRS") that the Plan is so qualified and nothing has occurred that caused or
could cause the loss of such qualification or the imposition of any penalty or
tax liability. The Companies have complied in all material respects with all
obligations relating to the Plans and each Plan complies and has been
maintained and operated in all material respects in accordance with its terms
and applicable law, including without limitation, ERISA and the Code. The
Companies have no liability, actual or contingent, with respect to any Plan
other than to make payments to or under the terms of any Plan or applicable
law.
2.13 Litigation. There is no action, suit, proceeding,
audit or investigation by or before any court or other Governmental Authority
(collectively, "ACTIONS") pending or, to the best knowledge of TSI, threatened
against any of the Companies, or affecting any of the properties or assets of
any of the Companies (including, without limitation, any of its Permits) which,
individually or in the aggregate, could have a material adverse effect on the
Condition of the Companies taken as a whole, nor, to the best knowledge of TSI,
is there any reasonable basis for any such Action. To the best knowledge of
TSI, there is no Action against any director, officer or employee of any of the
Companies in connection with the business of any of the Companies that, in the
event of an adverse judgment against any such Person, could have a material
adverse effect on the Condition of the Companies taken as a whole, nor, to the
best knowledge of TSI, is there any reasonable basis for any such Action. The
foregoing includes, without limitation, any Action pending or, to TSI's best
knowledge, threatened (or any reasonable basis therefor known to TSI) involving
the prior employment of any employees of any of the Companies, their use in
connection with the business of any of the Companies of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. None of the Companies
or any of their respective assets or properties, nor, to the best knowledge of
TSI, any shareholder, director,
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officer or employee of any of the Companies, in connection with such Companies'
respective businesses, is subject to any order, judgment, writ, injunction,
decree, ruling or decision (collectively, an "ORDER") of any Governmental
Authority which is material to the Condition of any such Company. There is no
Action by any of the Companies currently pending or which any of the Companies
intends to initiate which is material to the Condition of any such Company.
2.14 Compliance with Laws; Permits. To the best knowledge
of TSI, none of the Companies has violated or failed to comply with, in any
material respect, any statute, law, ordinance, rule, regulation or policy of
any Governmental Authority (collectively, "LAWS") to which it or any of its
properties or assets is subject. To the best knowledge of TSI, each of the
Companies has all permits, licenses, orders, certificates, authorizations and
approvals of any Governmental Authority, including without limitation, all
facility and other security clearances required by the U. S. Department of
Defense (collectively, the "PERMITS"), that are material to the conduct of its
business as presently conducted or as described in the Draft Registration
Statement; all such Permits are in full force and effect; no violations or
notices of failure to comply have been issued or recorded in respect of any
such Permits; and, to the best knowledge of TSI, no reasonable basis for
revoking or suspending any of the Permits exists. All applications, reports,
notices and other documents required to be filed by the Companies with all
Governmental Authorities have been timely filed and are complete and correct in
all material respects as filed or as amended prior to the date hereof. None of
the Companies nor, to the best knowledge of TSI, any of their respective
officers or agents has made any illegal or improper payments to, or provided
any illegal or improper inducement for, any governmental official or other
Person in an attempt to influence any such Person to take or to refrain from
taking any action relating to any of the Companies.
2.15 Taxes. All federal, state, city, county, local and
foreign income, franchise, sales, use and value added tax returns and reports,
and all other material tax returns and reports required to be filed by any
Company in any jurisdiction (collectively, "RETURNS") have been timely filed.
All such Returns are true, correct and complete in all material respects. All
taxes, assessments, fees, interest, penalties and other charges with respect
thereto (collectively, "TAXES") due or claimed to be due from any of the
Companies have been paid, except to the extent reserved against on the
Financial Statements. No income tax return of any of the Companies has been
audited by the applicable Governmental Authority, and there are in effect no
waivers of the applicable statute of limitations for Taxes in any jurisdiction
for any of the Companies for any period.
2.16 Environmental Matters. The business, assets and
properties of each of the Companies are and have been operated and maintained
in all material respects in compliance with all applicable federal, state,
city, county and local environmental protection laws and regulations
(collectively, the "ENVIRONMENTAL LAWS"). No event has occurred that, with or
without the passage of time or the giving of notice, or both, would constitute
a non-compliance by any of the Companies in any material respect with, or a
material violation by any of the Companies of, the Environmental Laws. None of
the Companies nor any of their respective
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predecessors has caused or permitted to exist, as a result of an intentional or
unintentional act or omission, a disposal, discharge or release of solid
wastes, pollutants or hazardous substances, on or from any site which currently
is or formerly was owned, leased, occupied or used by any of the Companies or
any predecessor company, except where such disposal, discharge or release was
in compliance with the Environmental Laws. There is no site: (i) which is
listed, or proposed for listing on a registry or inventory of inactive
hazardous waste sites maintained by any Governmental Authority and which
currently is or formerly was owned, leased, occupied or used by any of the
Companies or any predecessor company, or (ii) with respect to which any of the
Companies or any predecessor company has received notice that such Company is
considered to be a potentially responsible person for cleanup or other
liability in respect of Environmental Laws.
2.17 Transactions with Affiliates. Except for employment
and compensation arrangements described in the Draft Registration Statement (as
hereinafter defined) and as provided in the notes to the Financial Statements,
none of the Companies has directly or indirectly engaged in any material
transaction (as defined for purposes of clause 3(iii)(m) of Article 9 of the
Amended and Restated Articles) with any past or present Principal Shareholder
of TSI or with any of his Affiliates, associates or relatives, and none of the
Companies has any obligation to or claim against any past or present Principal
Shareholder of TSI or any of his Affiliates, associates or relatives, and no
such Person has any obligation to or claim against any of the Companies.
Except for employment and compensation arrangements described in the Draft
Registration Statement and as provided in the Notes to the Financial
Statements, all products, services or benefits provided to any Company by any
such Person, or provided by any Company to any such Person, are set forth on
Part 2.18 of Schedule 1 hereto. No past or present Principal Shareholder of
any of the Companies, nor any of his Affiliates, associates or relatives, has
any direct or indirect interest of any kind in any business or entity which is
competitive with the Companies, except for the ownership as a passive investor
of less than 5% of any class of securities that is traded on any national
securities exchange or the Nasdaq National Market.
2.18 Registration Rights. Except as provided in the
Registration Rights Agreement, no Person has, and as of the Closing no Person
will have, demand, "piggy-back," or other rights to cause any of the Companies
to file any registration statement under the Securities Act of 1933 (the
"SECURITIES ACT") relating to any securities of any of the Companies or to
participate in any such registration statement.
2.19 No Brokers or Finders. None of the Companies nor any
of their respective Affiliates has entered or will enter into any agreement
pursuant to which any of the Companies or Alcatel will be liable, as a result
of the transactions contemplated by this Agreement or any of the other Company
Documents, for any claim of any person for any commission, fee or other
compensation as finder or broker.
2.20 Investment Company Act. Neither TSI nor any of its
Subsidiaries is an "investment company", nor is TSI or any of its Subsidiaries
directly or indirectly controlled by
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or acting on behalf of any Person which is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
2.21 Employee Confidentiality Agreements. Each employee
and officer of each of the Companies has executed a Confidentiality Agreement
in substantially the form attached hereto as Exhibit F. TSI is not aware,
after reasonable investigation, that any such employee or officer is in
violation thereof, and TSI and each of the Subsidiaries will make reasonable
efforts to prevent any such violation.
2.22 Disclosure. The representations and warranties made
by TSI in this Section 2 (including on the Schedules hereto) do not fail to
state any material fact necessary in order to make the statements contained
herein or in any other Company Documents not misleading. In addition to and
not in limitation of the foregoing, the draft dated November 27, 1996 of a
Registration Statement on Form S-1 with respect to the shares of Common Stock
(the "DRAFT REGISTRATION STATEMENT") contains all statements which are required
to be stated therein in accordance with the Securities Act and the regulations
promulgated thereunder (except for information that is permitted under
Securities Act Rule 430A to be omitted from a registration statement at the
time it becomes effective), and does not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. TSI covenants that
any initial public offering and sale of Common Stock (whether or not as
contemplated by the Draft Registration Statement) that is made pursuant to a
registration statement that is declared effective under the Securities Act
within six months of the date hereof will be made in accordance with the
Securities Act and all other applicable securities and blue sky laws.
3. Representations and Warranties of Alcatel. Alcatel hereby
represents and warrants to, and agrees with, TSI as follows:
3.1 Organization. Alcatel is duly organized, validly
existing and in good standing under the laws of the Netherlands.
3.2 Authorization. Alcatel has all requisite power and
authority to execute, deliver and perform this Agreement and the other Company
Documents to which it is a party and to consummate the transactions
contemplated hereby or thereby. The execution, delivery and performance of
this Agreement and the other Company Documents to which it is a party, and the
consummation of the transactions contemplated hereby or thereby, have been duly
and validly authorized by all necessary action on the part of Alcatel. This
Agreement and each other Company Document to which Alcatel is a party has been
duly executed and delivered by Alcatel and constitutes its legal, valid and
binding obligation, enforceable against Alcatel in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency
or other similar laws affecting the enforceability of creditors' rights in
general or by general principles of equity.
3.3 No Intended Resale. The Series A Stock is being
acquired by Alcatel for
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investment for its own account and not with a view to the resale or
distribution thereof in violation of applicable security laws.
3.4 Disclosure of Information. Alcatel has had full
access to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the Series A Stock, and has had an
opportunity to ask questions and receive answers from TSI regarding the terms
and conditions of the offering of the Series A Stock and to obtain additional
information (to the extent TSI possessed such information or could acquire it
without unreasonable effort or expense) necessary to verify any information
furnished to Alcatel or to which Alcatel had access. Neither the foregoing nor
any other provision of this Section 3, however, in any way limits or modifies
the representations and warranties made by TSI in Section 2 or Alcatel's
ability to rely thereon.
3.5 Investment Experience. Alcatel understands that the
purchase of the Series A Stock involves substantial risk. Alcatel acknowledges
that it is able to bear the economic risk of its investment in the Series A
Stock and has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of this investment in the
Series A Stock.
3.6 Accredited Investor Status. Alcatel is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act and within the meaning of the definition of such term set forth
in any applicable state securities laws.
3.7 Restricted Securities. Alcatel understands that the
Series A Stock is characterized as "restricted securities" under the Securities
Act inasmuch as it is being acquired from TSI in a transaction not involving a
public offering and that under the Securities Act and applicable regulations
thereunder such securities may be resold without registration under the
Securities Act only in certain limited circumstances. In this connection,
Alcatel represents that it is familiar with Rule 144 promulgated under the
Securities Act as presently in effect, and understands such resale limitations
imposed thereby and by the Securities Act. Alcatel understands that TSI is
under no obligation to register any of the securities sold hereunder except as
provided in the Registration Rights Agreement. Alcatel understands that no
public market now exists for the Series A Stock or the Conversion Common Stock
(collectively, the "RESTRICTED SECURITIES"), and no assurance can be given that
a public market will ever exist for any Restricted Securities.
3.8 Further Limitations on Disposition. Without in any
way limiting the representations set forth above, and subject to any
restrictions in the Company Documents, Alcatel further agrees not to make any
disposition of all or any portion of the Restricted Securities unless and
until:
(a) there is then in effect a registration
statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with
such registration statement; or
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(b) Alcatel shall have notified TSI of the
proposed disposition and shall have furnished TSI, at the
expense of Alcatel or its transferee, with an opinion of
counsel, reasonably satisfactory to TSI, that such disposition
will not require registration of such securities under the
Securities Act.
Notwithstanding the provisions of paragraphs (a) and (b) above, no such
registration statement or opinion of counsel shall be required by TSI: (i) for
any transfer of any Restricted Securities in compliance with SEC Rule 144 or
Rule 144A; or (ii) for any transfer of any Restricted Securities by Alcatel to
an Affiliate of Alcatel; provided that in each of the foregoing cases the
transferee agrees in writing to be subject to the terms of this Section 3.8 to
the same extent as if the transferee were an original party hereto.
3.9 Legends. It is understood that the instruments and
certificates evidencing the Restricted Securities will bear the legends set
forth below:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
(b) For any Series A Stock a legend in the form
of the following:
THE SHARES EVIDENCED BY THIS CERTIFICATE: (1) ARE
CONVERTIBLE INTO SHARES OF COMMON STOCK OF TEMPLATE SOFTWARE,
INC. AT THE OPTION OF THE REGISTERED HOLDER AT ANY TIME PRIOR
TO AUTOMATIC CONVERSION THEREOF; AND (2) AUTOMATICALLY CONVERT
INTO COMMON STOCK OF TEMPLATE SOFTWARE, INC. IN THE EVENT OF A
PUBLIC OFFERING MEETING CERTAIN REQUIREMENTS, ALL PURSUANT TO
AND UPON THE TERMS AND CONDITIONS SPECIFIED IN TEMPLATE
SOFTWARE, INC.'s AMENDED AND RESTATED ARTICLES OF
INCORPORATION. A COPY OF SUCH AMENDED AND RESTATED ARTICLES
OF INCORPORATION MAY BE OBTAINED, WITHOUT CHARGE, AT TEMPLATE
SOFTWARE, INC.'S PRINCIPAL OFFICE.
The legend set forth in (a) above shall be removed by TSI from any certificate
or instrument
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evidencing Restricted Securities upon delivery to TSI of an opinion by counsel,
reasonably satisfactory to TSI, that a registration statement under the
Securities Act is at that time in effect with respect to the legended security
or that such security can be freely transferred in a public sale without such a
registration statement being in effect.
4. Additional Deliveries. Simultaneously with the execution and
delivery of this Agreement, TSI has delivered or caused to be delivered to
Alcatel: (i) the opinion of Hunton & Xxxxxxxx dated as of the date hereof and
(b) a copy of the Financial Statements accompanied by the opinion of Coopers &
Xxxxxxx, LLP.
5. Certain Post-Closing Covenants of TSI. TSI covenants and
agrees as follows:
5.1 Observer Rights. TSI shall give to Alcatel notice of
each meeting of the Board of Directors of TSI and of each executive or other
similar committee thereof at the same time and in the same manner as notice is
given to the directors of TSI or such Subsidiary. At any time that a designee
of the holders of a majority of the Series A Stock or the Conversion Common
Stock is not serving as a member of the Board of Directors of TSI, one (1)
designee of Alcatel shall be entitled to attend in person, as an observer, all
meetings held in person and to listen to telephone meetings of the Board of
Directors of TSI and of each such committee thereof solely for the purpose of
allowing Alcatel to have current information with respect to the affairs of
such Company; provided that such observer agrees in writing not to disclose any
confidential information obtained at such meetings or contained in any
materials provided to the directors or the members of such committees to any
person other than the holders of the Series A Stock or the Conversion Common
Stock. TSI shall provide to Alcatel in connection with each meeting its
respective observer designee is entitled to attend, whether or not present at
such meeting, copies of all notices, minutes, consents, and all other materials
or information that it provides to the directors or committee members with
respect to such meeting, at the same time such materials and information are
given to the directors (except that materials and information provided to
directors of TSI or such Subsidiary at meetings at which a designee of Alcatel
is not present shall be provided to Alcatel promptly after the meeting). If
the Board of Directors of any of TSI or any such committee thereof proposes to
take any action by written consent in lieu of a meeting, TSI shall, to the
extent reasonably practicable, give written notice thereof to Alcatel prior to
the effective date of such consent describing in reasonable detail the nature
and substance of such action, and in any case shall send to such observer a
copy of the instrument pursuant to which such proposed written consent is to be
effected no later than its first circulation to the members of the Board of
Directors or such committee generally. TSI shall bear all travel and related
expenses incurred by the observer designees of Alcatel associated with
attending such meetings. The provision of this Section 5.1 shall survive the
Closing, the issuance of the Series A Stock and the Conversion Common Stock and
any public offering of any capital stock or other securities of TSI, and shall
continue as long as Alcatel, its Affiliates and their respective assignees
shall, directly or indirectly, beneficially own in the aggregate at least 3% of
the then fully diluted shares of Common Stock. For purposes hereof, "FULLY
DILUTED COMMON SHARES" shall mean, as of any date: the sum of (i) the
outstanding shares of Common Stock as of that date and (ii) the additional
shares of Common Stock that would be
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taken into account for purposes of calculating fully diluted earnings per share
for the period from the end of TSI's last fiscal year through such date under
the treasury-stock method in accordance with generally accepted accounting
principles.
5.2 Information.
(a) Alcatel and its assignees shall be entitled
to receive, and TSI agrees to provide to Alcatel and its assignees,
the following; provided, however, that TSI's obligations under this
Section 5.2(a) shall be suspended at any time that TSI is subject to
the reporting obligations of Sections 13 or 15(d) of the Securities
Exchange Act of 1934 (the "EXCHANGE ACT"):
(i) As soon as available, but in any
event not later than forty-five (45) days after the
end of each month, the unaudited consolidated balance
sheet as at the end of such month of TSI and its
subsidiaries and the related unaudited consolidated
statements of operations, shareholders' equity and
cash flows for such month and for the elapsed period
in such fiscal year, all in reasonable detail and
stating in comparative form the figures as of the end
of and for the comparable period of the preceding
fiscal year and budgeted figures for the period. All
such financial statements shall be complete and
correct in all material respects and shall be
accompanied by a certificate of the Chief Executive
Officer, President or Chief Financial Officer of TSI
to such effect.
(ii) As soon as available, but in any
event not later than 45 days after the end of each
fiscal quarter, the unaudited consolidated balance
sheet of TSI and its subsidiaries as at the end of
such fiscal quarter and the related unaudited
consolidated statements of operations, shareholders'
equity and cash flows of TSI and its subsidiaries for
such fiscal quarter and for the elapsed period in
such fiscal year, all in reasonable detail and
stating in comparative form the figures as of the end
of and for the comparable periods of the preceding
fiscal year and budgeted figures for the period. All
such financial statements shall be complete and
correct in all material respects, shall be prepared
in accordance with generally accepted accounting
principles applied on a consistent basis throughout
the periods reflected therein (except that such
financial statements may omit notes and would be
subject to normal year-end adjustments which are not,
in the aggregate, material) and shall be accompanied
by a certificate of the Chief Executive Officer,
President or Chief Financial Officer of TSI to such
effect.
(iii) As soon as available, but in any
event within 90 days after the end of each fiscal
year of TSI, the audited consolidated and unaudited
consolidating balance sheet of TSI and its
subsidiaries as at the end of
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such fiscal year and the related audited consolidated
statements and unaudited consolidating statements of
operations, shareholders' equity and cash flows of
TSI and its subsidiaries for such fiscal year, all in
reasonable detail and stating in comparative form the
figures as at the end of and for the previous fiscal
year and budgeted figures for the fiscal year
accompanied by an opinion of an accounting firm of
nationally recognized standing selected by TSI with
respect to the consolidated statements, which opinion
shall state that such accounting firm's audit was
conducted in accordance with generally accepted
auditing standards and, accordingly, included such
tests of accounting records and such other auditing
procedures as were considered necessary under the
circumstances and which opinion shall not be subject
to any qualification resulting from a limit on the
scope of the examination of the financial statements
or the underlying data or which could be eliminated
by changes in the financial statements or the notes
thereto or by the creation of or increase in a
reserve or a decreased carrying value of assets. All
such financial statements shall be complete and
correct in all material respects and prepared in
reasonable detail and in accordance with generally
accepted accounting principles applied, except as
stated therein, on a consistent basis throughout the
periods reflected therein.
(iv) Promptly after receipt, copies of
all management letters from accountants and all
certificates prepared by or for TSI or its
subsidiaries as to compliance, defaults, material
adverse changes, material litigation or similar
matters, but only to the extent that the delivery
thereof would not result in the loss of any generally
recognizable privilege otherwise applicable thereto.
(v) Within 30 days after TSI obtains
knowledge of the commencement or written threat of
commencement of any material litigation (including,
without limitation, any litigation relating to any
Intellectual Property or any of the Intellectual
Property Licenses) or proceeding against any of the
Companies or their respective assets, written notice
by TSI of the nature and extent of such litigation or
proceeding.
(vi) Promptly, but in any event within
fifteen (15) days, after any distribution to its
shareholders generally or to specific shareholders by
agreement, to its directors, to prospective investors
or to the financial community of an annual report,
proxy statement, registration statement or other
similar report or communication, a copy of each such
report, proxy statement, registration statement or
other similar report or communication; and promptly,
but in any event within two (2) business days, after
released, copies of all press releases and other
statements made available generally by any of the
Companies to the public concerning material
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developments.
(vii) Within 60 days after the end of each
fiscal year, a list of shareholders and other
security holders, showing the authorized and
outstanding shares by class (including the Common
Stock equivalents of any convertible security), the
holdings of each shareholder (both before giving
effect to dilution and on a fully-diluted basis) and
the holdings of each Person that holds options,
warrants or convertible securities (both before
giving effect to dilution and on a fully diluted
basis).
(viii) Promptly, but in any event not later
than ten (10) days after execution, copies of any
agreement entered into by TSI or any of its
subsidiaries, with any shareholder, director, officer
or employee of TSI or any of its subsidiaries or any
past or present Principal Shareholder or Affiliate.
(ix) At any time that the holders of the
Series A Stock have not elected a director or
designated an observer pursuant to Sections 3(ii) or
3(iv) of the Amended and Restated Articles, all
materials or documents that such observer would be
entitled to receive, which shall be delivered at the
same time that such materials or documents are
delivered to the members of the board of directors or
any applicable committee.
(x) From time to time, and promptly,
such additional information and financial data
regarding results of operations, financial condition,
business, affairs or prospects of TSI and its
subsidiaries, including without limitation cash flow
analyses and projections, as is available to TSI that
Alcatel shall reasonably request.
(b) Filings and Shareholder Reports. TSI shall
deliver to Alcatel, simultaneously with its filing with the Securities
and Exchange Commission, any national securities exchange, the Nasdaq
National Market or the National Association of Securities Dealers,
Inc., a copy of each publicly available annual, periodic or special
report or proxy statement or registration statement of TSI. To the
extent not covered by the preceding sentence, TSI shall also deliver,
simultaneously with its mailing or transmission, any annual or other
report or communication provided to any class or group of shareholders
of TSI, and any press release and other public statements.
(c) Other Information. TSI shall provide, from
time to time, such additional information regarding TSI or its
subsidiaries as Alcatel may reasonably request, including without
limitation, any information or reports required by reason of reporting
or regulatory requirements to which Alcatel, or any Person controlling
Alcatel is subject. At any time that the Holders of the Series A
Stock have not elected a director or designated an observer, pursuant
to the provisions of the Amended and Restated
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Articles referred to above, or if such director or observer is not a
member or observer of any committee of the Board effecting such
grants, TSI shall give Alcatel reasonable prior notice of the grant of
any options or other rights or awards to any officer, employee,
director or consultant under any employee incentive plan.
5.3 Annual Meetings. At any time that it is not subject
to the reporting requirements of Sections 13 or 15(d) of the Exchange Act, TSI
will hold an annual meeting of all shareholders to elect directors in
accordance with the Amended and Restated Articles and at which information with
respect to its business will be furnished and discussed.
5.4 Exemption from Investment Company Act. TSI shall
conduct its business so that neither TSI nor any of its subsidiaries shall
become an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
5.5 Accounting and Reserves. TSI shall, and TSI shall
cause each of its subsidiaries to, maintain a standard and uniform system of
accounting and shall keep proper books and records and accounts in which full,
true and correct entries shall be made of its transactions, all in accordance
with generally accepted accounting principles applied on a consistent basis
through all periods, and shall set aside on such books for each fiscal year all
such proper reserves for depreciation, obsolescence, amortization, bad debts
and other purposes in connection with its operations as are required by such
principles so applied.
5.6 Assistance in Sales. Anything in this Agreement or
the Shareholders Agreement to the contrary notwithstanding, in the event that
it becomes unlawful for Alcatel or any of its Affiliates to continue to hold
all or any of the Series A Stock or the Conversion Common Stock or any other
securities received as a distribution on or in respect of or exchange for any
of such stock, or restrictions are imposed on Alcatel or any Affiliate of
Alcatel by any Law that, in the reasonable judgement of Alcatel, make it unduly
burdensome to continue to hold all or any of such securities, then Alcatel may
sell or otherwise dispose of all or any of such securities, TSI shall use
reasonable efforts to assist Alcatel and/or any such Affiliate in disposing of
such securities in a prompt and orderly manner, and, at the request of Alcatel
and/or any such Affiliate, TSI shall provide (and authorize Alcatel and/or any
such Affiliate to provide) financial and other information concerning TSI and
its subsidiaries to any prospective purchaser of such interest.
5.7 Additional Covenants.
(a) When applicable, TSI shall file the reports
required to permit sales under Rule 144 of the Securities Act.
(b) During any period in which TSI is not subject
to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, TSI shall make available information required to be provided by
Rule 144A(d)(4), upon request.
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(c) TSI shall use the proceeds from the sale of
the Series A Stock pursuant hereto for working capital and general
corporate purposes, including acquisitions of or investments in
products, technologies or businesses that broaden or enhance the
Companies' current product or service offerings; provided, however,
that TSI may use up to one-third of said proceeds to repurchase shares
of its outstanding Common Stock at prices per share not to exceed $16.
(d) TSI shall provide to Alcatel for its review
copies of each registration statement or prospectus prepared in
connection with any initial public offering of equity securities of
TSI, and each pre-effective or post-effective amendment or supplement
thereto, prior to filing with the Securities and Exchange Act, and no
reference in any such registration statement or prospectus to Alcatel
or any Affiliate of Alcatel, the transactions contemplated by this
Agreement or any of the Company Documents, or any other transaction or
agreement between Alcatel or any of its Affiliates and TSI or any of
its Affiliates, without the prior written consent of Alcatel, which
consent shall not be unreasonably withheld. Nothing in this Section
5.7(d) shall be deemed to prohibit TSI from making any disclosure in
any such registration statement or prospectus that, based on advice of
its counsel, it believes is required under applicable Laws.
6. Miscellaneous.
6.1 Standstill. Alcatel and any of its Affiliates
controlled by it shall not purchase or otherwise acquire beneficial ownership
of any shares of Common Stock or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock if beneficial ownership
of such shares of Common Stock or other securities, together with all other
shares of Common Stock and securities convertible into, or exchangeable or
exercisable for, Common Stock beneficially owned by Alcatel or any of its
Affiliates and assuming the conversion, exchange or exercise of all such
securities that are convertible into, or exchangeable or exercisable for,
Common Stock, would in the aggregate exceed 19.9% of the then outstanding
shares of Common Stock. Notwithstanding anything in the foregoing to the
contrary, the restrictions set forth in this Section 6.1 shall (i) terminate
upon any sale, directly or indirectly, in a single transaction or a series of
related transactions, including (without limitation) by means of merger,
consolidation or reorganization, in which any Person or group of Persons
acquires beneficial ownership of, or the right to acquire beneficial ownership
of, an aggregate of 50% or more of the outstanding shares of Common Stock, and
(ii) shall not be deemed to have been breached as a result of any change in the
outstanding shares of Common Stock not effected by Alcatel or any of its
Affiliates or as a result of the operation of the Series A Stock's conversion
rights.
6.2 Tax Expenses. TSI shall pay all stamp, documentary
and other taxes which may be payable in connection with the execution, delivery
and performance of this Agreement, and the purchase and sale of the Series A
Common Stock and the Conversion Common Stock.
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6.3 Publicity. Except as may be required by Law, TSI and
Alcatel shall use the name of, or make reference to, the other party or any of
such other party's Affiliates or any of the transactions contemplated hereby in
any press release or in any public manner only in accordance with the mutual
agreement of TSI and Alcatel, it being understood that the parties agree to
promote publicly Alcatel's investment in TSI and such other relationships that
may arise between the parties in a mutually advantageous manner consistent with
applicable law.
6.4 Indemnification. TSI agrees to indemnify Alcatel and
each officer, director, employee, agent, shareholder and Affiliate of Alcatel
(collectively, the "INDEMNIFIED PARTIES") for, and hold each Indemnified Party
harmless from and against: (i) any and all damages, losses, claims and other
liabilities of any and every kind, including, without limitation, judgments and
costs of settlement, and (ii) any and all out-of-pocket costs and expenses of
any and every kind, including, without limitation, reasonable fees and
disbursements of counsel for such Indemnified Parties (all of which expenses
periodically shall be reimbursed as incurred), in each case, arising out of or
suffered or incurred in connection with any of the following: (a) any
misrepresentation or any breach of any warranty made by TSI herein or in any of
the other Company Documents, or (b) any breach or non-fulfillment of any
covenant or agreement made by TSI herein or in any of the other Company
Documents.
6.5 Survival. All representations, warranties, covenants
and agreements contained in or made pursuant to this Agreement or contained in
any certificate delivered pursuant to this Agreement, shall remain operative
and in full force and effect, regardless of any investigation made by or on
behalf of any party hereto, and shall survive the transfer and payment for the
Securities and the consummation of the transactions contemplated hereby;
provided, however, that (except as follows) the representations and warranties
of TSI made herein shall terminate on the second anniversary of the date
hereof; and provided, further, that (i) the representations and warranties
contained in Sections 2.12, 2.15 and 2.18 shall survive until the sixtieth day
after the expiration of the applicable statutes of limitations relating to the
subject matter of such representations and warranties, and (ii) no such
expiration shall affect any claim asserted prior thereto.
6.6 Assignment. This Agreement and all the provisions
hereof shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns, except that neither this
Agreement nor any rights or obligations hereunder shall be assigned or
delegated by TSI without the prior written consent of Alcatel. Prior to the
Closing, Alcatel may assign this Agreement and its rights hereunder to any of
its Affiliates. After the Closing, Alcatel may assign this Agreement and its
rights hereunder, in whole or in part, to (i) any Affiliate of Alcatel or (ii)
any other transferee of shares of Series A Stock or Conversion Common Stock
constituting or convertible into, as the case may be, at least 25% of the
aggregate shares of Convertible Common Stock issued or issuable upon conversion
of the Series A Stock.
6.7 Amendment; Waiver. Any term, covenant, agreement or
condition of this Agreement may be amended, and compliance therewith may be
waived (either generally or in
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a particular circumstance and either retroactively or prospectively), by one or
more substantially concurrent written instruments signed by TSI and by Alcatel.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon TSI and Alcatel.
6.8 APPLICABLE LAW. THE INTERNAL LAWS OF THE STATE OF
NEW YORK SHALL GOVERN THE INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS
OF THIS AGREEMENT, REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES
OF CONFLICTS OF LAW.
6.9 JUDICIAL PROCEEDINGS. ANY JUDICIAL PROCEEDING
INVOLVING ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE RIGHTS OR INTERESTS OF TSI OR ALCATEL OR THE BREACH OR ALLEGED
BREACH OF THIS AGREEMENT, WHETHER ARISING DURING OR AT OR AFTER THE TERMINATION
OF THIS AGREEMENT (EACH OF THE FOREGOING DISPUTES, CONTROVERSIES AND CLAIMS
HEREINAFTER REFERRED TO AS AN "AGREEMENT DISPUTE"), SHALL BE BROUGHT ONLY IN A
FEDERAL OR STATE COURT LOCATED IN THE COUNTY, CITY AND STATE OF NEW YORK, AND
EACH OF THE PARTIES HERETO (i) UNCONDITIONALLY ACCEPTS THE EXCLUSIVE
JURISDICTION OF SUCH COURTS AND ANY RELATED APPELLATE COURT AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY AND (ii) IRREVOCABLY WAIVES
ANY OBJECTION SUCH PARTY MAY NOW HAVE OR HEREAFTER HAS AS TO THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT
FORUM. EACH OF THE PARTIES HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING AN AGREEMENT DISPUTE.
6.10 Notices. All notices and other communications
provided for herein shall be dated and in writing and shall be deemed to have
been duly given (x) on the date of delivery, if delivered personally or by
telecopier, receipt confirmed, or (y) on the second following business day, if
delivered by a recognized overnight courier service offering overnight delivery
or on the third following business day if such courier offers second-day
delivery, in each case, to the party to whom it is directed at the following
address (or at such other address as any party hereto shall hereafter specify
by notice in writing to the other parties hereto):
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(i) If to TSI, to it at the following address:
00000 Xxxxxxx Xxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Hunton & Xxxxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxx 0000
XxXxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
(ii) If to Alcatel, to it at the following address:
00 xxx Xxxxxxx
00000 Xxxxx Xxxxx 00,
Xxxxxx
Telecopy: 011-331-4058-5920
Attention: X. Xxxxxx Xxxxxx Xxxxxxx
with a copy to:
Proskauer Xxxx Xxxxx & Xxxxxxxxxx LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
6.11 Integration. This Agreement and the documents
referred to herein or delivered pursuant hereto or pursuant to such documents,
including all exhibits and schedules, contain the entire understanding of the
parties with respect to their subject matter and supersede all prior agreements
and understandings between the parties with respect to their subject matter.
6.12 Severability. Each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
6.13 Descriptive Headings. The section and other headings
contained in this
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Agreement are for convenience of reference only and shall not affect the
meaning or interpretation of this Agreement.
6.14 Counterparts. This Agreement may be executed in two
or more counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which together shall be deemed to be one
and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
TEMPLATE SOFTWARE, INC.
By: /s/ Xxxxxx X. Xxx
---------------------------------------
Name: Xxxxxx X. Xxx
Title: Chairman
ALCATEL N.V.
By: Compagnie Financiere Alcatel
By: /s/ M. Xxxxx Xxxxx
---------------------------------------
Name: M. Xxxxx Xxxxx
Title:
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