EXHIBIT 4.3
TANGRAM ENTERPRISE SOLUTIONS, INC.
SECURITIES CONVERSION AGREEMENT
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THIS SECURITIES CONVERSION AGREEMENT (the "Agreement") is entered into as of
February 20, 2001 by and between Tangram Enterprise Solutions, Inc., a
Pennsylvania corporation (the "Company") and Safeguard Scientifics, Inc., a
Pennsylvania corporation ("Safeguard").
RECITALS
WHEREAS, Safeguard agreed on September 11, 1997 to lend to the Company on a
revolving basis up to $6,000,000 (the "Debt Financing"). The Debt Financing was
evidenced by a Second Amended Revolving Note with a principal amount of
$6,000,000 dated September 11, 1997, which is attached hereto as Exhibit A (the
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"Existing Note"). As of the date hereof and prior to the Conversion (as defined
below), the outstanding principal and interest under the Note is $3,581,867.38.
WHEREAS, the Company and Safeguard desire to exchange $3,000,000 of the
aggregate amount of principal outstanding under the Existing Note for shares of
Series F Convertible Preferred Stock of the Company ("Series F Preferred Stock")
on the terms set forth herein (the "Conversion").
WHEREAS, in connection with the Conversion, the Company desires to amend
the Existing Note to reduce the amount which may be borrowed thereunder to
$3,000,000, of which $500,000 of principal and $81,867.38 of accrued but unpaid
interest will be outstanding immediately after the Conversion.
WHEREAS, the Company and Safeguard desire to enter into an Investors'
Rights Agreement (the "Investor Rights Agreement").
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
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1. CONVERSION / NEW NOTE
2. Conversion. Safeguard hereby converts $3,000,000 of the aggregate
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amount of principal outstanding under the Exising Note as of the date hereof
into 3,000 shares of Series F Preferred Stock (the "Shares"), the receipt of
certificates representing the Shares which is hereby acknowledged by Safeguard.
The stated value of each share of Series F Preferred Stock shall be equal to
$1,000 per share. The shares of Series F Preferred Stock shall have the rights,
preferences, privileges and restrictions set forth in the Statement of
Designations, Preferences and Rights of the Company's Series F Convertible
Preferred Stock, in the form attached hereto as Exhibit B (the "Designations").
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3. Amendment of Exising Note. Contemporaneously with the execution
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hereof, Safeguard and the Company shall enter into the First Amendment to the
Second Amended Revolving Note, in the form attached hereto as Exhibit C (the
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"Note Amendment").
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on the disclosure schedules hereby delivered by
the Company to Safeguard (the "Schedules"), the Company represents and warrants
to Safeguard as of the date hereof as follows:
5. Organization, Good Standing and Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania. The Company has all requisite corporate
power and authority to own and operate its properties and assets, to execute and
deliver this Agreement, the Investor Rights Agreement, the Note Amendment and
any other agreements to be delivered by the Company that are contemplated herein
or delivered pursuant hereto (collectively, the "Related Agreements"), and, to
the extent applicable, to issue the Shares and to carry out the provisions of
this Agreement, the Related Agreements and the Designations and to carry on its
business as currently conducted and as currently proposed to be conducted. The
Company is duly qualified, is authorized to do business and is in good standing
as a foreign corporation in each jurisdiction in which the nature of its
activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so would not have a material adverse effect on the Company or the Company's
business.
6. Capitalization; Voting Rights. The authorized capital stock of the
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Company consists of 50,000,000 shares, such shares being designated as follows:
(i) 48,000,000 shares of common stock, par value $.01 per share (the "Common
Stock") of which (a) 16,405,548 are issued and outstanding and (b) (1) 3,323,700
shares are reserved for future issuance to employees pursuant to the Company's
1997 Equity Compensation Plan adopted by the Company on May 21, 1997, the
Company's 1988 Stock Option Plan and the Company's Stock Option Plan for
Directors (the "Stock Option Plans") and (2) 3,000,000 shares are reserved for
issuance pursuant to the Asset Purchase Agreement, dated February 13, 2001 by
and among the Company, Axial Technology Holding AG and Wyzdom Solutions, Inc.
(the "Asset Purchase Agreement"); (ii) 2,000,000 shares of preferred stock, par
value $.01 per share, consisting of 500,000 shares of Series A Convertible
Preferred Stock, par value $.10 per share, of which no shares are issued and
outstanding, 200,000 shares of Series B Convertible Preferred Stock, par value
$.01 per share, of which no shares are issued and outstanding, 250,000 shares of
Series C Convertible Preferred Stock, par value $.01 per share, of which no
shares are issued and outstanding, 9,500 shares of Series D Convertible
Preferred Stock, par value $.01 per share, of which no shares are issued and
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outstanding, 1,800 shares of Series E Redeemable Preferred Stock, par value $.01
per share, of which no shares are issued and outstanding, and 3,000 shares of
Series F Convertible Preferred Stock, par value $.01 per share (the "Series F
Preferred Stock"), of which 3,000 shares will be upon consummation of the
transactions contemplated hereby issued and outstanding. The Shares have been
duly authorized, and upon consummation of the Conversion, will be fully paid and
non-assessable and issued in compliance with all applicable state and federal
laws concerning the issuance of securities. All issued and outstanding shares of
the Common Stock and the Shares (i) have been duly authorized and validly
issued, (ii) are fully paid and nonassessable and (iii) were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities. The rights, preferences, privileges and restrictions of the Shares
are as stated in the Designations, which was accepted for filing by the
Pennsylvania Department of State prior to the date hereof. The shares of Common
Stock issuable upon conversion of the Shares pursuant to the terms of the
Designations (the "Conversion Shares") have been duly and validly reserved for
issuance. Other than the 3,323,700 shares reserved for issuance under the Stock
Option Plans and 3,000,000 shares of Common Stock to be issued pursuant to the
Asset Purchase Agreement, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal), proxy
or shareholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its securities. The Shares are free of
any liens or encumbrances; provided, however, that the Shares may be subject to
restrictions on transfer under state and/or federal securities laws. When issued
in compliance with the provisions of the Designations, the Conversion Shares
will be validly issued, fully paid and nonassessable, and will be free of any
liens or encumbrances other than liens and encumbrances; provided, however, that
the Conversion Shares may be subject to restrictions on transfer under state
and/or federal securities laws.
7. Authorization; Binding Obligations. All action (corporate or
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otherwise) on the part of the Company, and its officers, directors and
shareholders, necessary for the authorization of this Agreement and the Related
Agreements, the performance of all obligations of the Company hereunder and
thereunder and the authorization, issuance and delivery of the Shares pursuant
hereto and the Conversion Shares pursuant to the Designations have been taken.
Upon their execution and delivery, this Agreement and the Related Agreements
will be valid and binding obligations of the Company enforceable in accordance
with their terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; (b) general principles of equity that restrict
the availability of equitable remedies; and (c) to the extent that the
enforceability of the indemnification provisions in Sections 2.9 or 3.5 of the
Investor Rights Agreement may be limited by applicable laws. The issuance of the
Shares and the subsequent conversion of the Shares into Conversion Shares are
not and will not be subject to any preemptive rights or rights of first refusal
that have not been properly waived or complied with. Neither the execution and
delivery of this Agreement or the Related Agreements, nor the performance of any
of the transactions contemplated hereby or thereby will, directly or indirectly,
with or without notice or lapse of time, contravene, conflict with or result in
a material violation or breach of, or give any person or entity the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate or modify any applicable contract
legally binding on the Company.
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8. SEC Documents. The Company has filed all reports, schedules, forms,
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statements and other documents required to be filed by it with the United States
Securities and Exchange Commission (the "SEC") pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended, and any rules
or regulations promulgated thereunder (the "Exchange Act"), on a timely basis
(all of the foregoing, together with all reports, schedules, forms, statements
and other documents filed by Company's subsidiaries with the SEC, and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits) incorporated by reference therein, being
hereinafter referred to herein as the "SEC Documents"). As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of the date
hereof, the information contained in the SEC Documents, when viewed in the
context of the total mix of information publicly available concerning the
Company, does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
9. REPRESENTATIONS AND WARRANTIES OF SAFEGUARD.
Safeguard hereby represents and warrants to the Company as follows (such
representations and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement):
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10. Requisite Power and Authority. Safeguard has all necessary power and
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authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. Upon
their execution and delivery, this Agreement and the Related Agreements will be
valid and binding obligations of Safeguard, enforceable in accordance with their
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (b) general principles of equity that restrict
the availability of equitable remedies, and (c) to the extent that the
enforceability of the indemnification provisions of Sections 2.9 or 3.5 of the
Investor Rights Agreement may be limited by applicable laws.
11. Investment Representations. Safeguard understands that neither the
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Shares nor the Conversion Shares have been registered under the Securities Act.
Safeguard also understands that the Shares (and the Conversion Shares) are being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon Safeguard's representations contained in this
Agreement. Safeguard hereby represents and warrants as follows:
12. Safeguard Bears Economic Risk. Safeguard has substantial experience in
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evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. Safeguard must bear the economic risk of this investment
indefinitely unless the Shares (or the Conversion Shares) are registered
pursuant to the Securities Act, or an exemption from registration is available.
Safeguard also represents it has not been organized for the purpose of acquiring
the Shares (or the Conversion Shares).
13. Acquisition for Own Account. Safeguard is acquiring the Shares and the
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Conversion Shares for Safeguard's own account, not as nominee or agent, for
investment only, and not with a view towards their resale or distribution or any
part thereof, and Safeguard has no present intention of selling, granting any
participation in or otherwise distributing the same. By executing this
Agreement, Safeguard further represents that Safeguard does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares or the Conversion Shares.
14. Safeguard Can Protect Its Interest. Safeguard represents that by
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reason of its, or of its management's, business or financial experience,
Safeguard has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Safeguard is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
15. Accredited Safeguard. Safeguard represents that it is an "accredited
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investor" within the meaning of Regulation D under the Securities Act.
16. Company Information. Safeguard has received and read all information
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of the Company requested by Safeguard and has had an opportunity to discuss the
Company's business, management and financial affairs with directors, officers
and management of the Company and has had the opportunity to review the
Company's operations and facilities. Safeguard has also had the opportunity to
ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
17. MISCELLANEOUS.
18. Further Assurances. After the date hereof, consistent with the terms
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and conditions hereof, each party hereto will execute and deliver such other
documents and take such other
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actions as reasonably requested by the other party to in order to carry out this
Agreement, the Related Agreements and the transactions contemplated hereby and
thereby.
19. Governing Law. This Agreement shall be governed in all respects by the
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laws of the Commonwealth of Pennsylvania without regard to the conflicts of laws
principals of any jurisdiction.
20. Survival. The representations, warranties, covenants and agreements
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made herein shall survive the execution of this Agreement. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
21. Successors and Assigns. Except as otherwise expressly provided herein,
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the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Shares and the Conversion Shares from time to time.
22. Entire Agreement. This Agreement, the Exhibits and Schedules hereto,
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the Related Agreements, the Designations and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.
23. Severability. In case any provision of the Agreement shall be invalid,
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illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
24. Amendment and Waiver.
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25. This Agreement may be amended or modified only upon the written
consent of the Company and the holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted).
26. The obligations of the Company and the rights of the holders of the
Shares and the Conversion Shares under the Agreement may be waived only with the
written consent of the holders of at least a majority of the Shares (treated as
if converted and including any Conversion Shares into which the Shares have been
converted).
27. Delays or Omissions. No delay or omission to exercise any right, power
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or remedy accruing to any party, upon any breach, default or noncompliance by
another party under this Agreement, the Related Agreements or the Designations,
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of or in any similar breach, default or noncompliance thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
Safeguard's part of any breach, default or noncompliance under this Agreement,
the Related Agreements or under the Designations or any waiver on such party's
part of any provisions or conditions of the Agreement, the Related Agreements,
or the Designations must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Related Agreements, the Designations, by law, or otherwise
afforded to any party, shall be cumulative and not alternative.
28. Notices. All notices required or permitted hereunder shall be in
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writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by
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confirmed telex or facsimile if sent during normal business hours of the
recipient, and if not, then on the next business day; (c) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (d) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the Company at the address as set
forth on the signature page hereof and to Safeguard at the address set forth on
the signature page hereof attached hereto or at such other address as the
Company or Safeguard may designate by ten (10) days advance written notice to
the other parties hereto.
29. Expenses. Each party shall pay all costs and expenses that it incurs
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with respect to the negotiation, execution, delivery and performance of the
Agreement; provided, however, that the Company shall reimburse Safeguard
Scientifics, Inc. or its designees for its reasonable legal fees and expenses,
not to exceed $10,000, incurred in connection with the negotiation, execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
30. Titles and Subtitles. The titles of the sections and subsections of
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the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.
31. Counterparts. This Agreement and any amendment or supplement hereto
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may be executed by the parties in separate counterparts, whether originally or
by facsimile, each of which when so executed and delivered, shall be an
original, but all such counterparts shall together constitute one and the same
agreement.
32. Broker's Fees. Each party hereto represents and warrants that no
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agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other fee or commission directly or indirectly in connection
with the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 4.13 being untrue.
33. Pronouns. All pronouns contained herein, and any variations thereof,
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shall be deemed to refer to the masculine, feminine or neutral, singular or
plural, as to the identity of the parties hereto may require.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Securities
Conversion Agreement as of the date set forth in the first paragraph hereof.
COMPANY: SAFEGUARD:
TANGRAM ENTERPRISE
SOLUTIONS, INC. SAFEGUARD SCIENTIFICS, INC.
By: /s/ Xxxx X. Xxxxx By: /s/ N. Xxxxxxx Xxxxxxx
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Title: Senior Vice President and Title: Executive Vice President
Chief Financial Officer and General Counsel
Address: 00000 Xxxxxxx Xxxxxxx Address: 000 Xxxxxxxxx Xxxx.
Xxxxx 000 000 Xxxxx Xxxx Xxxxx
Xxxx, Xxxxx Xxxxxxxx 00000-0000 Xxxxx, XX 00000-0000
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