EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of
June 29, 2000, by and among Intraware, Inc., a Delaware corporation, with
headquarters located at 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx
00000 (the "COMPANY"), and the investors listed on the Schedule of Buyers
attached hereto (individually, a "Buyer" and collectively, the "BUYERS").
WHEREAS:
A. The Company and each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D ("REGULATION D") as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 ACT");
B. The Company has authorized the following new series of its
preferred stock, par value $0.0001 per share: the Company's Series A
Preferred Stock (the "SERIES A PREFERRED STOCK"), the Company's Series B
Preferred Stock (the "SERIES B PREFERRED STOCK") and the Company's Series C
Preferred Stock (the "SERIES C PREFERRED STOCK") (collectively, the
"PREFERRED STOCK"), which shall be convertible into shares of the Company's
Common Stock, par value $0.0001 per share (the "COMMON STOCK") (as converted,
the "CONVERSION SHARES"), in accordance with the terms of the Company's
Certificates of Designations, Preferences and Rights of the Preferred Stock,
substantially in the forms attached hereto as EXHIBIT A, EXHIBIT B and
EXHIBIT C (collectively, the "CERTIFICATE OF DESIGNATIONS");
C. Each Buyer wishes to purchase, upon the terms and conditions
stated in this Agreement, shares of the Series A Preferred Stock, shares of
the Series B Preferred Stock and shares of the Series C Preferred Stock
(collectively, the "PREFERRED SHARES") in the respective amounts set forth
opposite such Buyer's name on the Schedule of Buyers (which amounts in the
aggregate for all Buyers shall be: 834 shares of the Series A Preferred
Stock, 833 shares of the Series B Preferred Stock and 833 shares of the
Series C Preferred Stock) and warrants, in substantially the form attached
hereto as EXHIBIT I (the "WARRANTS"), to acquire up to a number of shares of
Common Stock determined pursuant to the terms of such Warrant (as exercised,
collectively, the "WARRANT SHARES"); and
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form attached hereto as EXHIBIT D (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights with respect to the Conversion Shares and
the Warrant Shares under the 1933 Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and each Buyer hereby agree as
follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
(a) PURCHASE OF PREFERRED SHARES. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7
below, the Company shall issue and sell to each Buyer and each Buyer
severally agrees to purchase from the Company the respective number of
Preferred Shares set forth opposite such Buyer's name on the Schedule of
Buyers, along with a Warrant to acquire up to the number of Warrant Shares
determined pursuant to the terms of the Warrants issued in connection with
such Preferred Shares (the "Closing"). The purchase price (the "PURCHASE
PRICE") of each Preferred Share and the related Warrant at the Closing shall
be $10,000.
(b) CLOSING DATE. The date and time of the Closing (the
"CLOSING DATE") shall be 10:00 a.m. Central Time, within one (1) business day
following the date hereof, subject to notification of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6 and 7 below
(or such later date as is mutually agreed to by the Company and each Buyer).
The Closing shall occur on the Closing Date at the offices of Xxxxxx Xxxxxx
Zavis, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000.
(c) FORM OF PAYMENT. On the Closing Date, (i) each Buyer
shall pay the aggregate Purchase Price to the Company for the Preferred
Shares and Warrants to be issued and sold to such Buyer at the Closing, by
wire transfer of immediately available funds in accordance with the Company's
written wire instructions, and (ii) the Company shall deliver to each Buyer,
stock certificates (in the denominations as such Buyer shall request) (the
"PREFERRED STOCK CERTIFICATES") representing such number of the Preferred
Shares of the respective series of the Preferred Shares which such Buyer is
then purchasing (as indicated opposite such Buyer's name on the Schedule of
Buyers) along with the Warrant such Buyer is purchasing hereunder, duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee.
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2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only
itself that:
(a) INVESTMENT PURPOSE. Such Buyer (i) is acquiring the
Preferred Shares and the Warrants, (ii) upon conversion of the Preferred
Shares, will acquire the Conversion Shares then issuable and (iii) upon
exercise of the Warrants, will acquire the Warrant Shares issuable upon
exercise thereof (the Preferred Shares, the Conversion Shares, the Warrants,
and the Warrant Shares and the Dividend Shares (as defined in the Certificate
of Designations) collectively are referred to herein as the "SECURITIES"),
for its own account for investment only and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by making the representations herein, such Buyer does not agree
to hold any of the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933
Act.
(b) ACCREDITED INVESTOR STATUS. Such Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and
state securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and
the eligibility of such Buyer to acquire the Securities.
(d) INFORMATION. Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Buyer. Such Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer's right to rely on the Company's
representations and warranties contained herein. Such Buyer understands that
its investment in the Securities involves a high degree of risk. Such Buyer
has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Securities.
(e) NO GOVERNMENTAL REVIEW. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of the investment in the Securities
nor have such authorities passed upon or endorsed the merits of the offering
of the Securities.
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(f) TRANSFER OR RESALE. Such Buyer understands that except
as provided in the Registration Rights Agreement: (i) the Securities have not
been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless
(A) subsequently registered thereunder, (B) such Buyer shall have delivered
to the Company an opinion of counsel reasonably acceptable to the Company, in
a reasonably acceptable form, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such Buyer provides the Company with
reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the 1933 Act, as amended,
(or a successor rule thereto) ("RULE 144"); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 0000 Xxx) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other person is under any obligation to
register the Securities for resale under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any resale exemption
thereunder.
(g) LEGENDS. Such Buyer understands that the certificates
or other instruments representing the Preferred Shares and the Warrants and,
until such time as the sale of the Conversion Shares and the Warrant Shares
have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the stock certificates representing the Conversion Shares
and the Warrant Shares, except as set forth below, shall bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR (B) AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY, IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II)
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act,
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(ii) in connection with a sale, assignment or other transfer, such holder
provides the Company with an opinion of counsel reasonably acceptable to the
Company, in a reasonably acceptable form, to the effect that such sale,
assignment or transfer of the Securities may be made without registration
under the 1933 Act, or (iii) such holder provides the Company with reasonable
assurance that the Securities can be sold, assigned or transferred pursuant
to Rule 144. Each Buyer acknowledges, covenants and agrees to sell the
Securities represented by a certificate(s) from which the legend has been
removed, only pursuant to (i) a registration statement effective under the
1933 Act, or (ii) advice of counsel that such sale is exempt from the
registration requirements of Section 5 of the 1933 Act.
(h) VALIDITY; ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
(i) RESIDENCY. Such Buyer is a resident of that country
specified in its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
(a) ORGANIZATION AND QUALIFICATION. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in
which the Company, directly or indirectly, owns a majority of the capital
stock or holds a majority of the equity or similar interest) are corporations
duly organized and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite corporate
power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good
standing would not have a Material Adverse Effect. As used in this Agreement,
"MATERIAL ADVERSE Effect" means any material adverse effect on the business,
properties, assets, operations, results of operations or financial condition
of the Company and its Subsidiaries, if any, taken as a whole, or on the
transactions contemplated hereby or by the agreements and instruments to be
entered into in connection herewith, or on the authority or ability of the
Company to perform its obligations under the Transaction Documents (as
defined below) or the Certificate of Designations. The Company does not,
directly or indirectly, own capital stock or hold an equity or similar
interest in any entity, except as set forth on SCHEDULE 3(A).
(b) AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the
requisite corporate power and authority to enter into and perform this
Agreement, the Registration
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Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in
Section 5), the Warrants and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "TRANSACTION DOCUMENTS") and to file, and
perform its obligations under, the Certificate of Designations, and to issue
the Securities in accordance with the terms hereof and thereof. The execution
and delivery of the Transaction Documents by the Company and the filing of
the Certificate of Designations by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby, including
without limitation the issuance of the Preferred Shares and the Warrants and
the reservation for issuance and the issuance of the Conversion Shares and
the Warrant Shares issuable upon conversion or exercise thereof, have been
duly authorized by the Company's Board of Directors by unanimous written
consent and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders (except to the extent that
stockholder approval may be required pursuant to the rules of The Nasdaq
Stock Market, Inc. for the issuance of a number of Conversion Shares greater
than 19.99% of the number of shares of Common Stock outstanding immediately
prior to the Closing Date). This Agreement and the other Transaction
Documents of even date herewith have been duly executed and delivered by the
Company, and constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as
such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of
creditors' rights and remedies. As of the Closing, the Transaction Documents
dated after the date hereof shall have been duly executed and delivered by
the Company, and shall constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity
or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally, the enforcement of
creditors' rights and remedies. Upon its filing with the Secretary of State
of the State of Delaware, the Certificate of Designations will be in full
force and effect, enforceable against the Company in accordance with its
terms.
(c) ISSUANCE OF SECURITIES. The Preferred Shares are duly
authorized and, upon issuance at the Closing, shall be (i) validly issued,
fully paid and non-assessable, (ii) free from all taxes, liens and charges
with respect to the issue thereof and (iii) entitled to the rights and
preferences set forth in the Certificate of Designations. At least 1,750,000
2,000,000 shares of Common Stock have been duly authorized and reserved for
issuance upon conversion of the Preferred Shares and upon exercise of the
Warrants. Upon conversion or exercise in accordance with the Certificate of
Designations or the Warrants, as the case may be, the Conversion Shares and
the Warrant Shares will be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue thereof,
with the holders being entitled to all rights accorded to a holder of Common
Stock. The issuance by the Company of the Securities is exempt from
registration under the 1933 Act.
(d) NO CONFLICTS. Except as disclosed in SCHEDULE 3(D), the
execution, delivery and performance of the Transaction Documents by the
Company, the performance by the Company of its obligations under the
Certificate of Designations and the consummation by
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the Company of the transactions contemplated hereby and thereby (including,
without limitation, the reservation for issuance and issuance of the
Conversion Shares and the Warrant Shares) will not (i) result in a violation
of the Certificate of Incorporation (as defined below), any Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or the Bylaws (as defined below) or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of The Nasdaq Stock
Market, Inc.) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is
bound or affected.
(e) CONSENTS. Except as disclosed in SCHEDULE 3(E) and
except for the filing of the Registration Statement (as defined in the
Registration Rights Agreement) with the SEC, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of
its obligations under or contemplated by the Transaction Documents or to
perform its obligations under the Certificate of Designations, in each case
in accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain or
make pursuant to the preceding sentence have been obtained or effected on or
prior to the date hereof or will be so obtained or effected in a timely
manner. The Company and its Subsidiaries are unaware of any facts or
circumstances which might prevent the Company from obtaining or effecting any
of the foregoing.
(f) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF
SECURITIES. The Company acknowledges and agrees that each Buyer is acting
solely in the capacity of arm's length purchaser with respect to the
Transaction Documents and the Certificate of Designations and the
transactions contemplated hereby and thereby, and that no Buyer is (i) an
officer or director of the Company, (ii) an "affiliate" of the Company (as
defined in Rule 144) or (iii) a "beneficial owner" of more than 10% of the
Common Stock (as defined for purposes of Rule 13d-3 of the 1934 Act (as
defined below)). The Company further acknowledges that no Buyer is acting as
a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the Certificate of Designations
and the transactions contemplated hereby and thereby, and any advice given by
a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the Certificate of Designations and the
transactions contemplated hereby and thereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each
Buyer that the Company's decision to enter into the Transaction Documents and
the Certificate of Designations has been based solely on the independent
evaluation by the Company and its representatives.
(g) NO GENERAL SOLICITATION; PLACEMENT AGENT. Neither the
Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the 1933
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Act) in connection with the offer or sale of the Securities. The Company
acknowledges that it has not engaged a placement agent in connection with the
sale of the Preferred Shares and the related Warrants.
(h) NO INTEGRATED OFFERING. None of the Company, its
Subsidiaries, any of their affiliates, and any person acting on their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would
require registration of any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of
the Company are listed or designated. None of the Company, its Subsidiaries,
their affiliates and any person acting on their behalf will take any action
or steps referred to in the preceding sentence that would require
registration of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.
(i) APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT.
The Company and its board of directors have taken all necessary action, if
any, in order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Certificate of
Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Buyers as a result of the transactions contemplated
by this Agreement, including, without limitation, the Company's issuance of
the Securities and the Buyer's ownership of the Securities. The Company has
not adopted a shareholder rights plan or similar arrangement relating to
accumulations of beneficial ownership of Common Stock or a change in control
of the Company.
(j) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since February 28,
1999, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). The Company has delivered to the Buyers or their respective
representatives true and complete copies of the SEC Documents, or portions
thereof, which have not been filed electronically with the SEC through the XXXXX
system. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder 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 their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted
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accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). No other information
provided by or on behalf of the Company to the Buyers which is not included
in the SEC Documents, including, without limitation, information referred to
in Section 2(d) of this Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are
or were made, not misleading.
(k) ABSENCE OF CERTAIN CHANGES. Except as disclosed in
SCHEDULE 3(K), since February 29, 2000, there has been no material adverse
change and no material adverse development in the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its Subsidiaries. The Company has not taken any steps, and does
not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings. Except as disclosed in SCHEDULE 3(K),
since February 29, 2000, the Company has not (i) declared or paid any
dividends, (ii) sold any assets, individually or in the aggregate, in excess
of $100,000 outside of the ordinary course of business or (iii) had capital
expenditures, individually or in the aggregate, in excess of $100,000.
(l) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has occurred
or exists, or is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, prospects, operations
or financial condition, that would be required to be disclosed by the Company
under applicable securities laws on a registration statement on Form S-1
filed with the SEC relating to an issuance and sale by the Company of its
Common Stock and which has not been publicly announced.
(m) CONDUCT OF BUSINESS; REGULATORY PERMITS. Neither the
Company nor its Subsidiaries is in violation of any term of or in default under
its Certificate of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of the Company or Bylaws
or their organizational charter or bylaws, respectively. Except as disclosed in
SCHEDULE 3(M), neither the Company nor any of its Subsidiaries is in violation
of any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or its Subsidiaries, and neither the Company nor any
of its Subsidiaries will conduct its business in violation of any of the
foregoing, except for possible violations which would not, individually or in
the aggregate, have a Material Adverse Effect. Without limiting the generality
of the foregoing, the Company is not in violation of any of the rules,
regulations or requirements of The Nasdaq Stock Market, Inc. (the "PRINCIPAL
MARKET"), including, without limitation, the listing requirements set forth in
Rule 4310(c)(25)(H)(i)(d) of The Nasdaq Stock Market, Inc. and has no knowledge
of any facts or circumstances which would reasonably lead
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to delisting or suspension of the Common Stock by the Nasdaq National Market
(the "PRINCIPAL MARKET") in the foreseeable future. Except as disclosed in
SCHEDULE 3(M), since February 28, 1999, (i) the Company's Common Stock has
been designated for quotation or listed on the Principal Market, (ii) trading
in the Common Stock has not been suspended by the SEC or the Principal Market
and (iii) the Company has received no communication, written or oral, from
the SEC or the Principal Market regarding the suspension or delisting of the
Common Stock from the Principal Market. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in
the aggregate, a Material Adverse Effect, and neither the Company nor any
such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit.
(n) FOREIGN CORRUPT PRACTICES. Neither the Company, nor any
of its Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any of its Subsidiaries has, in the
course of its actions for, or on behalf of, the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee.
(o) TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 3(O) and in the SEC Documents filed at least ten days prior to the
date hereof and other than the grant of stock options disclosed on SCHEDULE
3(P), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
officer, director or employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
(p) EQUITY CAPITALIZATION. As of the date hereof, the
authorized capital stock of the Company consists of (x) 250,000,000 shares of
Common Stock, of which as of the date hereof, 26,218,175 shares are issued
and outstanding, 1,353,090 shares are reserved for issuance pursuant to the
Company's stock option and purchase plans and no shares are reserved for
issuance pursuant to securities (other than the Preferred Shares and the
Warrants) exercisable or exchangeable for, or convertible into, shares of
Common Stock, and (y) 10,000,000 shares of preferred stock, of which as of
the date hereof, none are issued and outstanding, and none are reserved for
issuance (other than the Preferred Stock). All of such outstanding shares
have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in SCHEDULE 3(P): (i) no shares of the
Company's capital
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stock are subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries; (iii) there are no
agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933
Act (except the Registration Rights Agreement); (iv) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of
its Subsidiaries is or may become bound to redeem a security of the Company
or any of its Subsidiaries; (v) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities; and (vi) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar
plan or agreement. The Company has furnished to the Buyer true and correct
copies of the Company's Certificate of Incorporation, as amended and as in
effect on the date hereof (the "CERTIFICATE OF INCORPORATION"), and the
Company's Bylaws, as amended and as in effect on the date hereof (the
"BYLAWS"), and the terms of all securities convertible into or exercisable or
exchangeable for Common Stock and the material rights of the holders thereof
in respect thereto.
(q) INDEBTEDNESS AND OTHER CONTRACTS. Except as disclosed
in SCHEDULE 3(Q), neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness (as defined below), (ii) is a party to any contract,
agreement or instrument, the violation of which, or default under which, by
the other party(ies) to such contract, agreement or instrument would result
in a Material Adverse Effect, (iii) is in violation of any term of or in
default under any contract, agreement, instrument or Indebtedness, except
where such violations and defaults would not result, either individually or
in the aggregate, in a Material Adverse Effect, or (iv) is a party to any
contract, agreement or instrument, the performance of which, in the judgement
of the Company's officers, has or is expected to have a Material Adverse
Effect. For purposes of this Agreement, (x) "Indebtedness" of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments, (D)
all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the
acquisition of property, assets or businesses, (E) all indebtedness created
or arising under any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to any property or assets
acquired with the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of default
are limited to repossession or sale of such property), (F) all
11
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease,
(G) all indebtedness referred to in clauses (A) through (F) above secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge,
charge, security interest or other encumbrance upon or in any property or
assets (including accounts and contracts rights) owned by any Person, even
though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above, (y) "CONTINGENT OBLIGATION"
means, as to any Person, any direct or indirect liability, contingent or
otherwise, of that Person with respect to any indebtedness, lease, dividend
or other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid
or discharged, or that any agreements relating thereto will be complied with,
or that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto, and (z) "PERSON" means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.
(r) ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by the Principal Market, any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Common Stock or any of the
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, except as set forth in the
SEC Documents filed with the SEC at least five (5) days prior to the date
hereof or SCHEDULE 3(R).
(s) INSURANCE. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company believes to
be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged.
(t) EMPLOYEE RELATIONS. Neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their
relations with their employees are good. No executive officer (as defined in
Rule 501(f) of the 0000 Xxx) has notified the Company that such officer
intends to leave the Company or otherwise terminate such officer's employment
with the Company. No executive officer, to the best knowledge of the Company
and its Subsidiaries, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the foregoing
matters.
12
(u) TITLE. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of
all liens, encumbrances and defects except such as are described in SCHEDULE
3(U). Any real property and facilities held under lease by the Company and
any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
(v) INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights (collectively, "INTELLECTUAL PROPERTY RIGHTS") necessary to conduct
their respective businesses as now conducted. Except as set forth on SCHEDULE
3(V), none of the Company's Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate within two years from the
date of this Agreement. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of the
Intellectual Property Rights of others, or of any such development of similar
or identical trade secrets or technical information by others. Except as set
forth on SCHEDULE 3(V), there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its Subsidiaries regarding Intellectual Property Rights or other
infringement. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing infringements or
claims, actions or proceedings. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and
value of all of their Intellectual Property Rights.
(w) ENVIRONMENTAL LAWS. The Company and its Subsidiaries
(i) are in compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval where, in each of the three foregoing cases, the failure to so
comply would have, individually or in the aggregate, a Material Adverse
Effect.
(x) TAX STATUS. The Company and each of its Subsidiaries
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
and has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and has
set aside on its books provision reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of
the Company know of no basis for any such claim.
13
(y) KEY EMPLOYEES. Except as described in SCHEDULE 3(Y), no
director or executive officer has borrowed money pursuant to a currently
outstanding loan that is secured by the Common Stock or any right or option
to receive Common Stock.
4. COVENANTS.
(a) BEST EFFORTS. Each party shall use its best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
(b) FORM D AND BLUE SKY. The Company agrees to file a Form
D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing. The Company
shall timely take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for or to qualify the Securities
for sale to the Buyers pursuant to this Agreement under applicable securities
or "Blue Sky" laws of the states of the United States, and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date. The Company shall make all filings and reports relating to the offer
and sale of the Securities required under applicable securities or "Blue Sky"
laws of the states of the United States following the Closing Date.
(c) REPORTING STATUS. Until the date on which the Investors
(as that term is defined in the Registration Rights Agreement) shall have
sold all the Conversion Shares and the Warrant Shares and none of the
Preferred Shares or Warrants is outstanding (the "REPORTING PERIOD"), the
Company shall file all reports required to be filed with the SEC pursuant to
the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would otherwise permit such termination.
(d) USE OF PROCEEDS. The Company will use the proceeds from
the sale of the Securities for substantially the same purposes and in
substantially the same amounts as indicated in SCHEDULE 4(D).
(e) FINANCIAL INFORMATION. The Company agrees to send the
following to each Investor during the Reporting Period (i) unless the
following are filed with the SEC through XXXXX and are available to the
public through XXXXX, within one business day after the filing thereof with
the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on
Form 10-Q, any Current Reports on Form 8-K and any registration statements
(other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii)
on the same day as the release thereof, facsimile copies of all press
releases issued by the Company or any of its Subsidiaries, and (iii) copies
of any notices and other information made available or given to the
stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.
(f) [INTENTIONALLY OMITTED.]
14
(g) LISTING. The Company shall promptly secure the listing
of all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents and the Certificate of Designations. The Company shall maintain the
Common Stock's authorization for quotation on the Nasdaq National Market, The
New York Stock Exchange, Inc. or The American Stock Exchange, Inc. Neither
the Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the delisting or suspension of the Common
Stock on the Principal Market. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(g).
(h) EXPENSES; FEES. Subject to Section 8 below, at the
Closing, the Company shall pay a nonaccountable expense allowance of $44,200
to Xxxxxx Capital Ltd. (a Buyer) or its designee(s) and $20,800 to Xxxxxxx
Capital Ltd. (a Buyer) or its designee(s), which amounts shall be withheld by
each such Buyer from its Purchase Price at the Closing. The Company shall be
responsible for the payment of any placement agent's fees or broker's
commissions relating to or arising out of the transactions contemplated
hereby.
(i) CAPITAL AND SURPLUS; SPECIAL RESERVES. The Company
agrees that the capital of the Company (as such term is used in Section 154
of the General Corporation Law of Delaware) in respect of the Preferred
Shares shall be at least equal to the aggregate stated value of such
Preferred Shares and that it shall not increase the capital of the Company
with respect to any shares of the Company's capital stock outstanding as of
the date hereof at anytime on or after the date of this Agreement, nor shall
it increase the capital of the Company with respect to any shares of the
Company's capital stock issued after the date hereof after the date of
issuance of such shares (other than the Preferred Shares). The Company also
agrees that it shall not create any special reserves under Section 171 of the
General Corporation Law of Delaware without the prior written consent of each
holder of Preferred Shares. So long as any Preferred Shares remain
outstanding, the Company shall not account for as surplus or transfer to or
otherwise allocate to the Company's surplus account for purposes of the
Delaware General Corporation Law any of the capital represented by the
Preferred Shares, including, without limitation, for the purpose of reducing
any of its capital stock as contemplated by Section 244 of the Delaware
General Corporation Law. The amount to be represented in the capital account
for the Preferred Stock at all times for each outstanding Preferred Share
shall be an amount equal to the product of (i) the Stated Value (as defined
in the Certificate of Designations) and (ii) 120%.
(j) PLEDGE OF SECURITIES. The Company acknowledges and
agrees that the Securities may be pledged by an Investor (as defined in the
Registration Rights Agreement) in connection with a bona fide margin
agreement or other loan secured by the Securities. The pledge of Securities
shall not be deemed to be a transfer, sale or assignment of the Securities
hereunder, and no Investor effecting a pledge of Securities shall be required
to provide the Company with any notice thereof or otherwise make any delivery
to the Company pursuant to
15
this Agreement, any other Transaction Document or the Certificate of
Designations, including without limitation, Section 2(f) of this Agreement;
provided that an Investor and its pledgee shall be required to comply with
the provisions of Section 2(f) hereof in order to effect a sale, transfer or
assignment of Securities to such pledgee. The Company hereby agrees to
execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such
pledgee by an Investor.
(k) DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL
INFORMATION. On or before the first business day following the Closing Date,
the Company shall file a Form 8-K describing the terms of the transactions
contemplated by the Transaction Documents and the Certificate of Designations
in the form required by the 1934 Act, and attaching the material Transaction
Documents (including, without limitation, this Agreement, the form of Warrant
and the Registration Rights Agreement) and the Certificate of Designations as
exhibits to such filing (including all attachments, exhibits and schedules to
such documents, the "8-K FILING"). From and after the filing of the 8-K
Filing with the SEC, no Buyer shall be in possession of any material
nonpublic information received from the Company, any of its subsidiaries or
any of its respective officers, directors, employees or agents, that is not
disclosed in the 8-K Filing. The Company shall not, and shall cause each of
its Subsidiaries and its and each of their respective officers, directors,
employees and agents, not to, provide any Buyer with any material nonpublic
information regarding the Company or any of its Subsidiaries from and after
the filing of the 8-K Filing with the SEC without the express written consent
of such Buyer. In the event of a breach of the foregoing covenant by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, in addition to any other remedy provided
herein, in the Transaction Documents or in the Certificate of Designations, a
Buyer shall have the right to make a public disclosure, in the form of a
press release, public advertisement or otherwise, of such material nonpublic
information without the prior approval by the Company, its Subsidiaries, or
any of its or their respective officers, directors, employees or agents. No
Buyer shall have any liability to the Company, its Subsidiaries, or any of
its or their respective officers, directors, employees, shareholders or
agents for any such disclosure. Subject to the foregoing, neither the Company
nor any Buyer shall issue any press releases or any other public statements
with respect to the transactions contemplated hereby or disclosing the name
of any Buyer; provided, however, that the Company shall be entitled, without
the prior approval of any Buyer, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity
with the 8-K Filing and contemporaneously therewith and (ii) as is required
by applicable law and regulations (provided that in the case of clause (i)
each Buyer shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release).
(l) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. So long
as any Preferred Shares are outstanding, the Company shall not, directly or
indirectly, redeem, or declare or pay any cash dividend or distribution on,
the Common Stock without the prior express written consent of the holders of
not less than two-thirds of the then outstanding Preferred Shares.
16
(m) LIMITATION ON NET SALES OF COMMON STOCK. So long as a
Buyer holds any Preferred Shares, such Buyer agrees that it will not enter
into, directly or indirectly, (A) any net sales of Common Stock on any single
day in excess of that number of shares of Common Stock equal to the product
of (I) the quotient of (x) the number of Preferred Shares purchased by such
Buyer on the Closing Date, divided by (y) the aggregate number of Preferred
Shares purchased by all the Buyers on the Closing Date, multiplied by (II)
10% of the daily trading volume for the Common Stock (as reported by
Bloomberg Financial Markets "BLOOMBERG") for that trading day and (B) any net
sales of Common Stock on any day during a Pricing Period Suspension (as
defined in the Certificate of Designations); provided, however, that the
restrictions on net sales set forth above shall not apply (i) on and after
the first date on which there has been any Change of Control (as defined in
Section 5(a) of the Certificate of Designations) or an announcement of any
pending, proposed or intended Change of Control, (ii) on and after the first
date on which there has occurred a Triggering Event (as defined in Section
4(a) of the Certificate of Designations) or an event that with the passage of
time and without being cured would constitute a Triggering Event, (iii) if
the Company is in default under the Certificate of Designations for failing
to effect any requested conversion or redemption of any Preferred Shares
pursuant to the Certificate of Designations, (iv) on and after any date on
which the Company issues or sells or is deemed to have issued or sold any
Variable Securities (as defined in the Certificate of Designations), (v) on
and after the Stockholder Meeting Deadline (as defined in Section 4(n)), if
the Company fails to receive the Stockholder Approval (as defined in Section
4(n)) on or before the Stockholder Meeting Deadline, (vi) on and after the
20th trading day prior to the date which is two (2) years after the Closing
Date, or (vii) on and after the date on which the Company first delivers a
Notice of Merger Conversion (as defined in Section 8 of the Certificate of
Designations) to such Buyer. Notwithstanding the foregoing, an Affiliate of
Xxxxxxxx Capital Management, Inc. (a Buyer) shall not be subject to the
restrictions set forth in this Section 4(m) only to the extent that such
Affiliate is not acting in concert with, or at the direction of, Xxxxxxxx
Capital Management, Inc. "Affiliate" for purposes of this Section 4(m) means,
with respect to any person or entity, another person or entity that, directly
or indirectly, (X) controls that person or entity, (Y) is controlled by that
person or entity, or (Z) shares common control with that person or entity.
"Control" or "controls" for purposes of this Section 4(m) means that a person
or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
(n) PROXY STATEMENT. In connection with the next meeting of
stockholders of the Company, which meeting shall not be later than September
30, 2000 (the "STOCKHOLDER MEETING DEADLINE"), the Company shall provide each
stockholder entitled to vote at such meeting with a proxy statement, which
has been previously reviewed by the Buyers and a counsel of their choice,
soliciting each such stockholder's affirmative vote at such stockholder
meeting for approval of the Company's issuance of all of the Securities as
described in this Agreement (such affirmative vote is referred to in this
Agreement as the "STOCKHOLDER APPROVAL"), and the Company shall use its best
efforts to solicit its stockholders' approval of such issuance of the
Securities and cause the Board of Directors of the Company to recommend to
the stockholders that they approve such proposal. If the Company fails to
hold a meeting of its stockholders by the Stockholder Meeting Deadline
seeking the Stockholder Approval, then, as partial relief (which remedy shall
not be exclusive of any other remedies available at law or
17
in equity), the Company shall pay to each holder of Preferred Shares an
amount in cash per Preferred Share equal to the product of (i) $10,000
multiplied by (ii) .025 multiplied by (iii) the quotient of (x) the number of
days after the Stockholder Meeting Deadline and prior to the date that a
meeting of the Company's stockholders seeking the Stockholder Approval is
held, divided by (y) 30. The Company shall make the payments referred to in
the immediately preceding sentence within five days of the earlier of (I) the
holding of the meeting of the Company's stockholders, the failure of which
resulted in the requirement to make such payments, and (II) the last day of
each 30-day period beginning on the Stockholder Meeting Deadline, as the case
may be. In the event the Company fails to make such payments in a timely
manner, such payments shall bear interest at the rate of 2.0% per month (pro
rated for partial months) until paid in full.
(o) FINANCIAL COVENANTS OF THE COMPANY.
(i) DEFINITIONS. For purposes of this
Agreement:
"CASH BURN" means the lesser of (A) earnings
before taxes, depreciation, amortization, amortization of unearned
compensation, provisions for doubtful accounts and Other Items (all
as determined in accordance with generally accepted accounting
principles ("GAAP"), less net change in investing activities, not
including net investments in Cash Equivalents; and (B) the change in
cash and Cash Equivalents, plus the change in Adjusted Working
Capital; provided, however, that if the lesser of the immediately
preceding clauses (A) and (B) is greater than zero, then Cash Burn
shall be deemed to be equal to zero.
"CASH EQUIVALENTS" means: (a) securities issued or
fully guaranteed or insured by the United States Government or any
agency thereof having maturities of not more than one (1) year from
the date of acquisition; (b) certificates of deposit, time deposits,
repurchase agreements, reverse repurchase agreements, or bankers'
acceptances, having in each case a tenor of not more than one (1)
year, issued by any U.S. commercial bank or any branch or agency of
a non-U.S. bank licensed to conduct business in the U.S. having
combined capital and surplus of not less than $250,000,000; (c)
commercial paper of an issuer rated at least A-1 by Standard &
Poor's Corporation or P-1 by Xxxxx'x Investors Service Inc. and in
either case having a tenor of not more than three (3) months,; (d)
reputable and nationally recognized money market funds with a
minimum of $100,000,000 in assets, and pursuant to which the Company
may withdraw its investment at any time without penalty; and (e)
securities purchased or investments made by the Company pursuant to
and in compliance with the Intraware, Inc. Investment Policy
Statement Effective March 1999 (without giving effect to any
amendments or modifications after March 1999), which is attached
hereto as EXHIBIT K, to the extent that such securities or
investments are not covered by the immediately preceding clauses
(a), (b), (c) or (d).
"ADJUSTED WORKING CAPITAL" means the current
assets minus current liabilities, as determined in accordance with
GAAP; provided, however, that for purposes of this definition of
Adjusted Working Capital, current assets shall not include cash and
Cash Equivalents.
"OTHER ITEMS" means, to the extent agreed to by
the Buyers and the Company, other non-cash items that are included
in the net cash used in operating activities section of the cash
flow statement.
18
(ii) COVENANTS. The Company covenants that so long
as any Preferred Shares remain outstanding (the "FINANCIAL COVENANT
COMPLIANCE PERIOD"):
(A) CASH BALANCE. The Company shall
not permit the aggregate amount of cash and Cash Equivalents of the
Company to fall below $7,000,000. In determining the amount of the
Company's cash and Cash Equivalents, the Company shall not include
in its calculation any cash or Cash Equivalents which are restricted
or encumbered (other than cash and Cash Equivalents which are
restricted by the terms of this Agreement).
(B) CASH BURN. The Company shall not
permit the absolute value of Cash Burn for any quarterly period set
forth below to exceed the amount set forth in the table below with
respect to such quarterly period (provided, however, that this
Section 4(o)(ii)(B) shall not apply in any quarterly period in which
the aggregate amount of cash and Cash Equivalents of the Company
exceeds $25,000,000 at the end of such quarterly period):
QUARTERLY PERIOD ENDED CASH BURN
----------------------------------------------
August 31, 2000 $12,000,000
November 30, 2000 $10,000,000
February 28, 2001 $10,000,000
May 31, 2001 $8,000,000
August 31, 2001 $8,000,000
November 30, 2001 $6,000,000
February 28, 2002 $6,000,000
May 31, 2002 $6,000,000
(iii) COMPLIANCE. During the Financial Covenant Compliance
Period, the Company shall deliver to the Buyers a duly executed and completed
copy of a certificate in the form of EXHIBIT J (a "COMPLIANCE CERTIFICATE")
on the same day as the Company files a Quarterly Report on Form 10-Q or
Annual Report on Form 10-K with respect to any period ended on a date set
forth in Section 4(o)(ii)(B) (each, an "SEC FILING") with the SEC, which
Compliance Certificate and SEC Filing each shall include sufficient detail to
permit each Buyer to independently ascertain, based on such detailed
information, whether the Company is in compliance with the financial
covenants set forth in this Section 4(o) during the most recent quarterly
period covered by such SEC Filing. In addition, each Compliance Certificate
shall (A) contain a statement that the officer executing such Compliance
Certificate has reviewed the relevant terms of this Agreement and has made,
or caused to be made, under his or her supervision, a review of the
transactions and conditions of the Company and its Subsidiaries from the
beginning of the quarterly or annual period covered by the SEC Filing to the
date of the Compliance Certificate and that such review shall not have
disclosed the existence during such period of any condition or event that
constitutes a violation of this Section 4(o) or, if any such condition or
event existed or exists, specifying the nature and period of existence
thereof, and (B) shall not contain any material, nonpublic information.
Furthermore, during the
19
Financial Covenant Compliance Period, each press release by the Company which
includes quarterly or annual financial information about the Company shall
include sufficient detail, including a cash flow statement, to permit each
Buyer to independently ascertain, based on such detailed information, whether
the Company is in compliance with the financial covenants set forth in this
Section 4(o) during the most recent quarterly period covered by such press
release. It shall be a breach of this Section 4(o) if (I) the Buyers do not
receive the Compliance Certificate from the Company on or before the day
which is 45 days after the end of any quarterly period for which the Company
would ordinarily be required to file a Quarterly Report on Form 10-Q or 90
days after the end of any quarterly period for which the Company would
ordinarily be required to file an Annual Report on Form 10-K (or if such 45th
or 90th day falls on a Saturday, Sunday or holiday, the first business day
following such 45th or 90th day, as the case may be), (II) the Company issues
a press release or files an SEC Filing containing information which
demonstrates that the Company is not in compliance with the financial
covenants set forth in this Section 4(o), or (III) the Company is not in
compliance with the financial covenants set forth in this Section 4(o) on any
date or for any quarterly period in the Financial Covenant Compliance Period.
(p) SUCCESS FEE. If the Company delivers a Notice of Merger
Conversion (as defined in the Certificate of Designations), then within five
(5) business days of such delivery, the Company shall pay as a success fee an
amount in cash to each Buyer equal to such Buyer's pro rata portion (based on
the number of Preferred Shares issued to such Buyer on the Closing Date
relative to the aggregate number of Preferred Shares issued to all the Buyers
on the Closing Date) of the product of 0.03, multiplied by the Net Investment
(the "SUCCESS FEE"); provided, however, that the provisions of this Section
4(p) shall no longer apply after the Company has paid a Success Fee to the
Buyers in accordance with this Section 4(p). "NET INVESTMENT" means the (i)
aggregate Purchase Price for the Preferred Shares and the related Warrants
purchased by all of the Buyers at the Closing, minus (ii) the Purchase Price
paid by the Buyers at the Closing with respect to the aggregate number of
Preferred Shares for which the Company paid the Pricing Period Redemption
Price to the Buyers pursuant to Section 10 of the Certificate of
Designations. The Company shall pay the respective Success Fee to each Buyer
by wire transfer of immediately available funds in accordance with each
Buyer's written wire instructions.
(q) INVESTMENT POLICY. The Company agrees that it shall
comply with the Intraware, Inc. Investment Policy Statement Effective March
1999, which is attached as EXHIBIT K, at all times during the Financial
Covenant Compliance Period, without giving effect to any amendments or
modifications after March 1999.
20
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares in such amounts as specified from
time to time by each Buyer to the Company upon conversion of the Preferred
Shares or exercise of the Warrants in the form of EXHIBIT F attached hereto
(the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred
to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof will be given by the Company to its transfer agent, and
that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and
the Registration Rights Agreement. If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(f), the Company shall
permit the transfer, and shall promptly instruct its transfer agent to issue
one or more certificates in such name and in such denominations as specified
by such Buyer to effect such sale, transfer or assignment. In the event that
such sale, assignment or transfer involves Conversion Shares or Warrant
Shares sold, assigned or transferred pursuant to an effective registration
statement or pursuant to Rule 144 or any other exemption under the 1933 Act,
the transfer agent shall issue such Securities to the buyer, assignee or
transferee, as the case may be, without any restrictive legend. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to a Buyer. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that a Buyer shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell
the Preferred Shares and related Warrants to a Buyer at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
(a) Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
(b) The Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware.
(c) Such Buyer shall have delivered to the Company the
Purchase Price for the Preferred Shares and the related Warrants being
purchased by such Buyer at the Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company
(less any funds withheld pursuant to Section 4(h)).
21
(d) The representations and warranties of such Buyer shall
be true and correct in all material respects as of the date when made and as
of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Buyer at or prior to the
Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the
Preferred Shares and related Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit
and may be waived by such Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:
(a) The Company shall have executed and delivered to such
Buyer (i) each of the Transaction Documents and (ii) the Preferred Stock
Certificates (in such denominations as such Buyer shall request) and the
Warrants being purchased by such Buyer pursuant to this Agreement at the
Closing.
(b) The Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware, and a copy thereof
certified by such Secretary of State shall have been delivered to such Buyer.
(c) Such Buyer shall have received the opinion of the
Company's counsel dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of
EXHIBIT E attached hereto.
(d) The Company shall have delivered to such Buyer a copy
of the Irrevocable Transfer Agent Instructions, in the form of EXHIBIT F
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(e) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each domestic Subsidiary in such corporation's state of incorporation issued
by the Secretary of State of such state of incorporation as of a date within
10 days of the Closing Date.
(f) The Company shall have delivered to such Buyer a
certified copy of the Certificate of Incorporation as certified by the
Secretary of State of the State of Delaware within 10 days of the Closing
Date.
(g) The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company dated as of the Closing
Date, as to (i) the resolutions
22
described in Section 3 as adopted by the Company's Board of Directors in a
form reasonably acceptable to such Buyer, (ii) the Certificate of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in the
form attached hereto as EXHIBIT G.
(h) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied
and complied in all respects with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer in the form
attached here to as EXHIBIT H.
(i) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Closing Date.
(j) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by this Agreement
as such Buyer or its counsel may reasonably request.
(k) (i) The Common Stock shall be designated for quotation
or listing on the Principal Market, and (ii) trading in the Common Stock on
the Principal Market shall not have been suspended by the SEC or the
Principal Market nor shall suspension by the SEC or the Principal Market have
been threatened.
(l) Each other Buyer shall have tendered to the Company the
Purchase Price for the number of Preferred Shares set forth opposite such
Buyer's name on the Schedule of Buyers and the related Warrants.
(m) The Company shall have made a press release regarding
its earnings for the first quarter of the fiscal year ending February 28,
2001 (including, without limitation, all the information in the quarterly
update of the Company's financial position attached as Exhibit A to the
Company's disclosure schedules attached to this Agreement), which includes
the Company's statement of cash flow information for that quarter, and
regarding any other material, nonpublic information provided to any Buyer
prior to or on the Closing Date.
8. TERMINATION. In the event that the Closing shall not have
occurred with respect to a Buyer on or before five business days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party; provided, however, that if this Agreement is terminated
pursuant to this Section 8, the Company shall
23
remain obligated to reimburse the nonbreaching Buyers for the expenses
described in Section 4(h) above.
9. MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of Illinois,
without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of Illinois or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of Illinois. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago,
for the adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address for such notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereby irrevocably waives any right it may have,
and agrees not to request, a jury trial for the adjudication of any dispute
hereunder or in connection with or arising out of this agreement or any
transaction contemplated hereby.
(b) COUNTERPARTS. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party; provided that a facsimile
signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature.
(c) HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes
all other prior oral or written agreements between the Buyers, the Company,
their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any
representation, warranty, covenant or
24
undertaking with respect to such matters. No provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and
the holders of at least a majority of the Preferred Shares then outstanding
(or if prior to the Closing, the Buyers listed on the Schedule of Buyers as
purchasing at least a majority of the Preferred Shares to be purchased at the
Closing), and no provision hereof may be waived other than by an instrument
in writing signed by the party against whom enforcement is sought. No such
amendment shall be effective to the extent that it applies to less than all
of the holders of the Preferred Shares then outstanding. The Company has not,
directly or indirectly, made any agreements with any Buyers relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents and the
Certificate of Designations.
(f) NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i)
upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
business day after deposit with an overnight courier service, in each case
properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Intraware, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: President
With a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
Xxxx X. Xxxxxxx, Esq.
25
If to the Transfer Agent:
Xxxxxx Trust Company of California
000 Xxxxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxx X. Xxxxx
If to a Buyer, to its address and facsimile number set forth on the Schedule
of Buyers, with copies to such Buyer's representatives as set forth on the
Schedule of Buyers, or to such other address and/or facsimile number and/or
to the attention of such other person as the recipient party has specified by
written notice given to each other party five days prior to the effectiveness
of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from
an overnight courier service in accordance with clause (i), (ii) or (iii)
above, respectively.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns, including any purchasers of the Preferred Shares. The Company
shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the holders of at least a majority of
the Preferred Shares then outstanding, including by merger or consolidation,
except pursuant to a Change of Control (as defined in Section 5 of the
Certificate of Designations) with respect to which the Company is in
compliance with Section 5 of the Certificate of Designations and Section 9 of
the Warrants. A Buyer may assign some or all of its rights hereunder without
the consent of the Company, provided, however, that any such assignment shall
not release such Buyer from its obligations hereunder unless such obligations
are assumed by such assignee and the Company has consented to such assignment
and assumption, which consent shall not be unreasonably withheld.
(h) NO THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
(i) SURVIVAL. Unless this Agreement is terminated under
Section 8, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9 shall survive the Closing. Each Buyer shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
(j) FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such
26
other agreements, certificates, instruments and documents, as the other party
may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
(k) INDEMNIFICATION. In consideration of each Buyer's
execution and delivery of the Transaction Documents to which it is a party
and acquiring the Securities thereunder and in addition to all of the
Company's other obligations under the Transaction Documents and the
Certificate of Designations, the Company shall defend, protect, indemnify and
hold harmless each Buyer and each other holder of the Securities and all of
their stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses
in connection therewith (irrespective of whether any such Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "INDEMNIFIED
LIABILITIES"), incurred by any Indemnitee as a result of, or arising out of,
or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in
the Transaction Documents or the Certificate of Designations or any other
certificate, instrument or document contemplated hereby or thereby or (c) any
cause of action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of the Transaction Documents
or the Certificate of Designations or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities, (iii) any disclosure made by such Buyer
pursuant to Section 4(k), or (iv) solely the status of such Buyer or holder
of the Securities as an investor in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. Except as otherwise set forth herein, the mechanics and procedures with
respect to the rights and obligations under this Section 9(k) shall be the
same as those set forth in Section 6 of the Registration Rights Agreement.
(l) NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.
(m) REMEDIES. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
the Certificate of Designations and all rights and remedies which such holders
have been granted at any time under any other agreement or contract and all of
the rights which such holders have under any law. Any Person (as defined in
Section 3(q)) having any rights under any provision of this Agreement
27
shall be entitled to enforce such rights specifically (without posting a bond
or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
(n) PAYMENT SET ASIDE. To the extent that the Company makes
a payment or payments to the Buyers hereunder or pursuant to any of the other
Transaction Documents or the Certificate of Designations or the Buyers
enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
* * * * * *
28
IN WITNESS WHEREOF, each Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first
written above.
COMPANY: BUYERS:
INTRAWARE, INC. XXXXXX CAPITAL LTD.
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
------------------------------- ----------------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxxxx X. Xxxxxxx
-----------------------------
Title: Chief Executive Officer Title: Authorized Signatory
XXXXXXX CAPITAL LTD.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Authorized Signatory
HFTP INVESTMENT L.L.C.
By: /s/ Xxxxxx Xxxxx
-------------------------------
Name: Xxxxxx Xxxxx
Title: Authorized Signatory
XXXXXXXX CAPITAL MANAGEMENT, INC.
By: /s/ Xx Xxxxx
-------------------------------
Name: Xx Xxxxx
Title: President
SCHEDULE OF BUYERS
INVESTOR'S NAME INVESTOR ADDRESS NUMBER OF NUMBER OF NUMBER OF INVESTOR'S LEGAL REPRESENTATIVES'
AND FACSIMILE NUMBER SHARES OF SHARES OF SHARES OF ADDRESS AND FACSIMILE NUMBER
SERIES A SERIES B SERIES C
PREFERRED PREFERRED PREFERRED
STOCK STOCK STOCK
----------------------------------------------------------------------------------------------- -----------------------------------
Xxxxxx Capital Ltd. Citadel Investment Group, L.L.C. 284 283 283 Xxxxxx Xxxxxx Zavis
000 Xxxx Xxxxxxxxxx Xxxxxx 000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx Attention: Xxxxxx X. Xxxxxxxx,
Xxxxxx X. Xxxxxx Esq.
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Residence: Cayman Islands
Xxxxxxx Capital Ltd. Citadel Investment Group, L.L.C. 133 134 133 Xxxxxx Xxxxxx Zavis
000 Xxxx Xxxxxxxxxx Xxxxxx 000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx Attention: Xxxxxx X. Xxxxxxxx,
Xxxxxx X. Xxxxxx Esq.
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Residence: Cayman Islands
HFTP Investment L.L.C. Promethean Asset Management, 167 166 167 Xxxxxx Xxxxxx & Xxxxx
L.L.C. 000 X. Xxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx Xxxxxxx, Xxxxxxxx 00000-0000
Xxx Xxxx, XX 00000 Attention: Xxxxxx X. Xxxxxxxx,
Attention: Xxxx Xxxxxxx Esq.
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Residence: New York
Xxxxxxxx Capital Xxxxxxxx Capital Management, Inc. 250 250 250 Solomon, Zauderer, Ellenhorn,
Management, Inc. Credit Suisse First Boston Xxxxxxxx & Xxxxx
11 Madison Ave., 7th Floor 00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx Attention: Xxxxxx Xxxxxx
Xxxxxxx Xxxxxxxxxxxx Telephone: (000) 000-0000
Telephone: (000) 000-0000 Facsimile: (000) 000-0000
(000) 000-0000
Facsimile: (000) 000-0000
(000) 000-0000
Residence: New York
SCHEDULES
Schedule 3(a) Subsidiaries
Schedule 3(d) Conflicts
Schedule 3(e) Consents
Schedule 3(k) Material Changes
Schedule 3(m) Conduct of Business; Regulatory Permits
Schedule 3(o) Transactions with Affiliates
Schedule 3(p) Capitalization
Schedule 3(q) Indebtedness and Other Contracts
Schedule 3(r) Litigation
Schedule 3(u) Title
Schedule 3(v) Intellectual Property
Schedule 3(y) Key Employees
Schedule 4(d) Use of Proceeds
EXHIBITS
Exhibit A Form of Certificate of Designations, Preferences
and Rights of the Series A Preferred Stock
Exhibit B Form of Certificate of Designations, Preferences
and Rights of the Series B Preferred Stock
Exhibit C Form of Certificate of Designations, Preferences
and Rights of the Series C Preferred Stock
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Company Counsel Opinion
Exhibit F Form of Irrevocable Transfer Agent Instructions
Exhibit G Form of Secretary's Certificate
Exhibit H Form of Officer's Certificate
Exhibit I Form of Warrant
Exhibit J Compliance Certificate
Exhibit K Investment Policy
EXHIBIT J
COMPLIANCE CERTIFICATE
INTRAWARE, INC.
Date: ___________, _____
This certificate is given by INTRAWARE, INC., a Delaware
corporation ("COMPANY"), pursuant to Section 4(o) of that certain Securities
Purchase Agreement dated as of _____ __, 2000 among the Company and the
Buyers referred to therein, as such agreement may have been amended,
restated, supplemented or otherwise modified from time to time (the
"SECURITIES PURCHASE AGREEMENT"). Capitalized terms used herein without
definition shall have the meanings set forth in the Securities Purchase
Agreement.
The officer executing this certificate is the Chief
Financial Officer of the Company and as such is duly authorized to execute
and deliver this certificate on behalf of the Company. By executing this
certificate such officer hereby certifies to each of the Buyers that:
(a) the financial statements contained in the SEC
Filing made on the date hereof are correct and complete and fairly present in
accordance with GAAP the financial position and the results of operations of
the Company and its Subsidiaries on a consolidated basis as of the dates of
such financial statements (subject in the case of interim financial
statements to normal year-end adjustments and the absence of footnote
disclosure);
(b) he has reviewed the relevant terms of the
Securities Purchase Agreement and have made, or caused to be made, under my
supervision, a review of the transaction and conditions of the Company and
its Subsidiaries from the beginning of the quarterly or annual period covered
by the SEC Filing to the date hereof, and, to the best of his knowledge, the
Company, during the period covered by such financial statements contained in
the SEC Filing, has observed and performed all of its covenants and other
agreements, and satisfied every condition in the Securities Purchase
Agreement to be observed, performed or satisfied by it, and he has no
knowledge of any condition or event that constitutes a violation of Section
4(o) of the Securities Purchase Agreement;
(c) ANNEX A is a correct calculation of the
applicable financial covenants contained in Section 4(o) of the Securities
Purchase Agreement; and
(d) Neither this Certificate nor any of the
attachments or annexes hereto contain or constitute any material, nonpublic
information.
IN WITNESS WHEREOF, the Company has executed this Compliance
Certificate on _______________, _____.
INTRAWARE, INC.
By:
-----
Name:
----
Chief Financial Officer
