EXHIBIT 10.1
PREFERRED STOCK PURCHASE AGREEMENT
by and among
JDA SOFTWARE GROUP, INC.
and
FUNDS AFFILIATED WITH
XXXXX XXXXXXX EQUITY PARTNERS INC.
Dated as of April 23, 2006
TABLE OF CONTENTS
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Section 1. Authorization and Closing................................... 1
1A. Authorization of the Preferred Stock........................ 1
1B. Purchase and Sale of the Preferred Stock.................... 1
1C. Initial Conversion Price of the Preferred Stock............. 1
1D. The Closing................................................. 2
Section 2. Conditions of Each Purchaser's Obligation at the Closing.... 2
2A. Representations and Warranties; Covenants................... 2
2B. Manugistics Acquisition..................................... 2
2C. Certificate of Designation.................................. 2
2D. Articles of Incorporation................................... 2
2E. Company's Bylaws............................................ 3
2F. Registration Agreement...................................... 3
2G. Shareholder Approvals....................................... 3
2H. Third Party Consents........................................ 3
2I. Governmental Consents and Approvals......................... 3
2J. Anti-Takeover Statutes and Measures......................... 3
2K. Material Adverse Change..................................... 4
2L. Securities Law Compliance................................... 4
2M. Listing of Shares........................................... 4
2N. Opinion of the Company's Counsel............................ 5
2O. Litigation.................................................. 5
2P. Expenses.................................................... 5
2Q. Compliance with Applicable Laws............................. 5
2R. Proceedings................................................. 5
2S. Closing Documents........................................... 5
2T. Waiver...................................................... 6
Section 3. Covenants Prior to Closing.................................. 6
3A. General..................................................... 6
3B. Third Party Notices and Consents............................ 6
3C. Governmental Notices and Consents........................... 6
3D. Operation of Business....................................... 6
3E. Manugistics Acquisition..................................... 7
3F. Full Access................................................. 7
3G. Notice of Material Developments............................. 8
3H. Exclusivity................................................. 8
3I. No Inconsistent Actions..................................... 8
Section 4. Covenants................................................... 9
4A. Financial Statements and Other Information.................. 9
4B. Inspection of Property...................................... 10
4C. Affirmative Covenants....................................... 10
4D. Compliance with Agreements.................................. 11
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4E. Use of Proceeds............................................. 11
4F. Certain Pre-emptive Rights.................................. 11
4G. Public Disclosures.......................................... 12
4H. SEC Reports................................................. 13
4I. Confidentiality............................................. 13
Section 5. Transfer of Restricted Securities........................... 14
5A. General Provisions.......................................... 14
5B. Rule 144A................................................... 14
5C. Restrictive Legends......................................... 14
5D. Legend Removal.............................................. 15
5E. Right of First Offer........................................ 15
Section 6. Representations and Warranties of the Company............... 16
6A. Organization; Ownership; Power; Qualification of the
Company..................................................... 16
6B. Subsidiaries................................................ 17
6C. Capital Stock and Related Matters........................... 17
6D. Authorization; No Breach.................................... 18
6E. SEC Reports and Financial Statements........................ 18
6F. No Material Adverse Effect.................................. 21
6G. Absence of Certain Developments............................. 21
6H. Tax Matters................................................. 22
6I. Contracts and Commitments................................... 23
6J. Intellectual Property Rights................................ 23
6K. Immigration................................................. 25
6L. Litigation, etc............................................. 25
6M. Brokerage, etc.............................................. 26
6N. Governmental Consent, etc................................... 26
6O. ERISA....................................................... 26
6P. Compliance with Laws........................................ 27
6Q. Environmental and Safety Matters............................ 27
6R. Application of Takeover Protections......................... 28
6S. Disclosure.................................................. 28
6T. Closing Date................................................ 28
Section 7. Definitions................................................. 28
Section 8. Miscellaneous............................................... 37
8A. Termination................................................. 37
8B. Fees and Expenses........................................... 38
8C. Remedies.................................................... 38
8D. Indemnification............................................. 39
8E. Purchaser's Investment Xxxxxxxxxxxxxxx...................... 00
0X. Consent to Amendments....................................... 42
8G. Survival of Representations and Warranties.................. 42
8H. Successors and Assigns...................................... 42
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8I. Generally Accepted Accounting Principles.................... 42
8J. Severability................................................ 43
8K. Counterparts................................................ 43
8L. Descriptive Headings; Interpretation........................ 43
8M. Governing Law............................................... 43
8N. Notices..................................................... 43
8O. Press Releases.............................................. 44
8P. No Strict Construction...................................... 44
8Q. Complete Agreement.......................................... 44
Schedules and Exhibits
Schedule of Purchasers
List of Exhibits
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JDA SOFTWARE GROUP, INC.
PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT is made as of April 23, 2006,
by and among JDA Software Group, Inc., a Delaware corporation (the "Company"),
and the Persons listed on the Schedule of Purchasers attached hereto
(collectively referred to herein as the "Purchasers" and individually as a
"Purchaser"). The Company and the Purchasers are sometimes collectively referred
to herein as the "Parties" and individually as a "Party." Except as otherwise
provided herein, capitalized terms used herein are defined in Section 7 hereof.
WHEREAS, the Company currently expects to entered into an Agreement
and Plan of Merger (the "Merger Agreement") relating to the proposed acquisition
(the "Acquisition") by merger of Manugistics Group, Inc. ("Manugistics").
WHEREAS, the Company desires to sell to the Purchasers, and the
Purchasers desire to purchase from the Company, certain shares of the Company's
newly-authorized Series B Convertible Preferred Stock in connection with the
Manugistics acquisition on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and understandings contained herein, and intending to be legally bound, the
Parties agree as follows:
Section 1. Authorization and Closing.
1A. Authorization of the Preferred Stock. The Company shall authorize
the issuance and sale to the Purchasers of 50,000 shares of its Series B
Preferred Stock, par value $.01 per share (the "Preferred Stock"), having the
rights and preferences set forth in the Certificate of Designations attached
hereto as Exhibit A. The Preferred Stock is convertible into shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock").
1B. Purchase and Sale of the Preferred Stock. At the Closing, the
Company shall sell to each Purchaser and, subject to the terms and conditions
set forth herein, each Purchaser shall purchase from the Company the number of
shares of Preferred Stock set forth opposite such Purchaser's name on the
Schedule of Purchasers attached hereto at a price of $1,000 per share of
Preferred Stock. The aggregate purchase price for the Preferred Stock (the
"Preferred Stock Purchase Price") purchased by the Purchasers shall be
$50,000,000.
1C. Initial Conversion Price of the Preferred Stock. The "Initial
Conversion Price" (as defined in the Certificate of Designations attached hereto
as Exhibit A) of the Preferred Stock shall be the average, over a period of the
three trading days consisting of the first full trading day beginning after the
announcement of the Manugistics acquisition and the two consecutive trading days
immediately following such day, of the bid price of the Common Stock as quoted
on The Nasdaq National Market as of 4:00 P.M., New York time on such day (the
"Initial Market Price"). The Initial Conversion Price will be subject to a
minimum price of $11.75 and a maximum price of $15.75. If the Initial Market
Price is at or below $11.75, the Initial Conversion price will be $11.75. If the
Initial Market Price is at or above $15.75, the Initial Conversion Price will be
$15.75.
1D. The Closing. The closing of the separate purchases and sales of
the Preferred Stock (the "Closing") shall take place at the offices of Xxxxxxxx
& Xxxxx, 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx simultaneously with the
closing of the Acquisition, subject to the satisfaction or waiver of the
conditions to Closing set forth in Section 2 below or at such other place or on
such other date as may be mutually agreeable to the Company and each Purchaser
(the date of the Closing, the "Closing Date"). At the Closing, the Company shall
deliver to each Purchaser stock certificates evidencing the Preferred Stock to
be purchased by such Purchaser, registered in such Purchaser's or its nominee's
name, upon payment of the purchase price thereof by wire transfer of immediately
available funds to an account designated by the Company at least two (2)
business days prior to the Closing, in the aggregate portion of the Preferred
Stock Purchase Price set forth opposite such Purchaser's name on the Schedule of
Purchasers. The stock certificates shall be made available for examination by
the Purchasers at least one (1) business day prior to the Closing Date.
Section 2. Conditions of Each Purchaser's Obligation at the Closing.
The obligation of each Purchaser to purchase and pay for the Preferred Stock at
the Closing is subject to the satisfaction as of the Closing of the following
conditions:
2A. Representations and Warranties; Covenants. The representations and
warranties contained in Section 6 hereof that are subject to materiality,
Material Adverse Effect or dollar threshold qualifications shall be true and
correct in all respects at and as of the Closing and the representations and
warranties contained in Section 6 that are not subject to materiality, Material
Adverse Effect or dollar threshold qualifications shall be true and correct in
all material respects at and as of the Closing, in each case as though then made
and as though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties, except to the extent of changes
caused by the transactions expressly contemplated herein, and the Company shall
have performed in all material respects all of the covenants required to be
performed by it hereunder prior to the Closing.
2B. Manugistics Acquisition. The Company shall have consummated, or
shall be contemporaneously consummating, the Acquisition on the terms set forth
in that the Merger Agreement and the Company shall not have waived any
conditions to the closing of the Acquisition other than as agreed in writing by
the Majority Holders. The Majority Holders may not waive the conditions to
closing set forth in this Section 2B without the prior written consent of the
Company.
2C. Certificate of Designation. The Company shall have duly adopted,
executed, acknowledged and filed with the Secretary of State of Delaware a
Certificate of Designation establishing the terms and relative rights of the
Preferred Stock in the form set forth in Exhibit A attached hereto (the
"Certificate of Designation"), and the Company shall not have adopted or filed
any other document designating terms, relative rights or preferences of its
preferred stock. The Certificate of Designation shall be in full force and
effect under the laws of the State of Delaware as of the Closing and shall not
have been amended or modified.
2D. Articles of Incorporation. The Company's Articles of
Incorporation, as amended (the "Articles of Incorporation"), shall be in form
and substance as previously delivered to each Purchaser, a copy of which is
attached hereto as Exhibit B, shall be in full force and
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effect under the laws of the State of Delaware as of the Closing and shall not
have been amended or modified except for the filing of the Certificate of
Designation.
2E. Company's Bylaws. The Company's bylaws, as amended, shall be in
form and substance as previously delivered to the Purchasers, a copy of which is
attached hereto as Exhibit C (the "Bylaws"), shall be in full force and effect
as of the Closing and shall not have been amended or modified.
2F. Registration Agreement. The Company and the Purchasers shall have
entered into a registration rights agreement in form and substance as set forth
in Exhibit D attached hereto (the "Registration Agreement"), and the
Registration Agreement shall be in full force and effect as of the Closing and
shall not have been amended or modified.
2G. Shareholder Approvals. The Company shall have obtained all
shareholder consents and approvals required, if any, to authorize, issue and
sell the Preferred Stock (whether such consents and approvals are required under
applicable law or the rules and regulations of the NASDAQ or otherwise).
2H. Third Party Consents. The Company shall have received or obtained
all third party consents and approvals, if any, that are necessary for the
consummation of the transactions contemplated hereby (including changes or
circumstances that may occur as a result of the terms of the Preferred Stock,
whether pursuant to Section 5C of the Certificate of Designation or otherwise
(but not including, for the avoidance of doubt, any purchase or other
acquisition by any such holder of additional securities of the Company other
than acquisitions that result from the terms of the Preferred Stock)) or that
are required in order to prevent a breach of or default under, a termination or
modification of, giving rise to the right of any change of control or similar
payments pursuant to, or acceleration of the terms of, any contract, agreement
or document to which the Company or any of its Subsidiaries is a party and which
is material to the Company, other than change of control agreements between the
Company and its officers now in existence and disclosed in the SEC Reports.
2I. Governmental Consents and Approvals. The Parties shall have
received or obtained all governmental and regulatory consents and approvals, if
any, that are necessary for the consummation of the transactions contemplated
hereby, in each case on terms and conditions satisfactory to each Purchaser
(collectively, the "Governmental Approvals").
2J. Anti-Takeover Statutes and Measures. No "fair price,"
"moratorium," "control share acquisition," "business combination" or other
anti-takeover statute or regulation enacted under federal or state laws
applicable to the Company or any Purchaser (including, but not limited to,
Section 203 of the Delaware General Corporation Law ("DGCL")) and no issuance of
rights or similar securities pursuant to any "poison pill" plan or similar
measure shall be applicable to the initial issuance and purchase of the
Preferred Stock by the Purchasers hereunder, the conversion thereof into Common
Stock or changes or circumstances that may occur as a result of the terms of the
Preferred Stock, whether pursuant to Section 5C of the Certificate of
Designation or otherwise (but not including, for the avoidance of doubt, any
purchase or other acquisition by any such holder of additional securities of the
Company other than acquisitions that result from the terms of the Preferred
Stock).
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2K. Material Adverse Change. There shall not have occurred any event,
violation, inaccuracy, circumstance or other matter that has had or could
reasonably be expected to have a material adverse effect on (a)(i) the business,
condition, capitalization, assets, liabilities, operations or financial
performance of Manugistics and its subsidiaries taken as a whole, (ii) the
ability of Manugistics to consummate the Acquisition or any of the other
transactions contemplated by the Merger Agreement or to perform any of its
obligations under the Merger Agreement, or (iii) the Company's ability to vote,
receive dividends with respect to or otherwise exercise ownership rights with
respect to the stock of the surviving corporation following the Acquisition;
provided, however, that in no event shall any of the following, alone or in
combination, be deemed to constitute a material adverse effect with respect to
Manugistics: any material adverse change, event, circumstance or development
with respect to, or effect resulting from, (A) changes after the date hereof in
the United States or global economy or capital markets in general that do not
have a materially disproportionate effect on Manugistics and its subsidiaries,
taken as a whole, (B) changes after the date hereof that affect generally the
software industry but that do not have a materially disproportionate effect on
Manugistics and its subsidiaries, taken as a whole, (C) changes after the date
hereof, in applicable law or in GAAP, (D) any decline in customer orders, or any
resignation of any employees, in each case to the extent attributable to the
public announcement or pendency of the Acquisition, (E) changes in the market
price or trading volume of the common stock of Manugistics (provided, however,
that the exception in this clause shall not in any way prevent or otherwise
affect a determination that any change, event, circumstance, development or
effect underlying such decrease has resulted in, or contributed to, a material
adverse effect), (F) failure(s) by Manugistics to meet internal operating
projections or forecasts, or published revenue or earnings predictions
(provided, however, that the exception in this clause shall not in any way
prevent or otherwise affect a determinations that any change, event,
circumstance, development or effect underlying such decrease has resulted in, or
contributed to. a material adverse effect), (G) any act or threat of terrorism
or war, any armed hostilities or terrorist activities, any threat or escalation
of armed hostilities or terrorist activities or any governmental or other
response or reaction to any of the foregoing, and (H) any effects resulting from
any legal proceeding against Manugistics by the stockholders of Manugistics
challenging or seeking to restrain or prohibit the consummation of the
Acquisition; or (b)(i) the business, condition, capitalization, assets,
liabilities, operations or financial performance of the Company and its
subsidiaries taken as a whole; provided, however, that a decline in the
Company's stock price shall not, in and of itself, be deemed to constitute such
a material adverse effect on the Company, or (ii) the ability of the Company to
consummate the Acquisition or any of the other transactions contemplated by the
Merger Agreement (including, but not limited to, the Facilities) or to perform
any of its obligations under the Merger Agreement.
2L. Securities Law Compliance. The Company shall have made all filings
under all applicable federal and state securities laws necessary to consummate
the issuance of the Preferred Stock pursuant to this Agreement in compliance
with such laws.
2M. Listing of Shares. The Company's Common Stock shall be listed for
trading on the Nasdaq National Market and shall not have been suspended by the
Securities and Exchange Commission or the National Association of Securities
Dealers (the "NASD") from trading on the Nasdaq National Market nor shall
suspension by the Securities and Exchange Commission or the NASD have been
threatened or be reasonably likely (whether with or without the passage of
time). The Common Stock issuable upon conversion of the Preferred Stock shall
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have been approved for listing on the Nasdaq National Market, subject only to
official notice of issuance.
2N. Opinion of the Company's Counsel. Each Purchaser shall have
received from DLA Xxxxx Xxxxxxx Xxxx Xxxx US LLP , counsel for the Company, an
opinion in each case in form and substance reasonably satisfactory to the
Majority Purchasers which shall be addressed to each Purchaser and dated the
date of the Closing.
2O. Litigation. No action, suit, investigation or other proceeding
shall be pending or threatened before any court or governmental or regulatory
official, body or authority in which it is sought to restrain or prohibit the
transactions contemplated hereby and no injunction, judgment, order, decree or
ruling with respect thereto shall be in effect.
2P. Expenses. At the Closing, the Company shall have reimbursed each
Purchaser for all fees and expenses as provided in Section 8B hereof.
2Q. Compliance with Applicable Laws. The purchase of the Preferred
Stock by each Purchaser hereunder shall not be prohibited by any applicable law
or governmental rule or regulation and shall not subject such Purchaser to any
penalty, liability or, in such Purchaser's reasonable judgment, other onerous
condition under or pursuant to any applicable law or governmental rule or
regulation.
2R. Proceedings. All corporate and other proceedings taken or required
to be taken by the Company in connection with the transactions contemplated
hereby to be consummated at or prior to the Closing.
2S. Closing Documents. The Company shall have delivered to each
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the Closing Date, stating
that the conditions specified in Section 1A and Section 2 inclusive, have
been satisfied in all material respects;
(ii) a certified copy of the resolutions duly adopted by the
Company's Board authorizing the execution, delivery and performance of the
Transaction Documents, the filing of the Certificate of Designation
referred to in Section 2B, the appointment to the Board of the Series B
Director designated by the Majority Holders pursuant to a written direction
delivered to the Company, the issuance and sale of the Preferred Stock,
changes or circumstances that may occur as a result of the terms of the
Preferred Stock, whether pursuant to Section 5C of the Certificate of
Designation or otherwise (but not including, for the avoidance of doubt,
any purchase or other acquisition by any such holder of additional
securities of the Company other than acquisitions that result from the
terms of the Preferred Stock), the reservation for issuance upon conversion
of the Preferred Stock of an aggregate of 4,255,320 shares of Common Stock
and the consummation of all other transactions contemplated by this
Agreement and of any resolutions duly adopted by the Company's shareholders
with respect to any of the foregoing;
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(iii) certified copies of the Articles of Incorporation, the
Certificate of Designation and the Bylaws, each as in effect at the
Closing;
(iv) copies of all Third Party and Governmental Approvals
required in connection with the consummation of the transactions hereunder
(including, without limitation, all blue sky law filings and waivers of all
preemptive rights and rights of first refusal); and
(v) such other documents relating to the transactions
contemplated by this Agreement as any Purchaser or its special counsel may
reasonably request.
2T. Waiver. Any condition specified in this Section 2 may be waived if
consented to by each Purchaser; provided that no such waiver shall be effective
against any Purchaser unless it is set forth in writing executed by such
Purchaser.
Section 3. Covenants Prior to Closing.
3A. General. Each of the Parties shall use reasonable efforts to take
all action and to do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the conditions set forth in Section
2 above). At the Closing, the applicable Parties shall execute and deliver all
of the agreements and instruments contemplated hereby to be executed and
delivered by the Parties at the Closing.
3B. Third Party Notices and Consents. The Company shall, and shall
cause each Subsidiary to, use reasonable efforts to give all required notices to
third parties and obtain all required third party consents and waivers in
connection with the transactions contemplated by this Agreement (including the
initial issuance and purchase of the Preferred Stock by the Purchasers
hereunder, the conversion thereof into Common Stock and changes or circumstances
that may occur as a result of the terms of the Preferred Stock, whether pursuant
to Section 5C of the Certificate of Designation or otherwise (but not including,
for the avoidance of doubt, any purchase or other acquisition by any such holder
of additional securities of the Company other than acquisitions that result from
the terms of the Preferred Stock)).
3C. Governmental Notices and Consents. Each of the Parties shall give
any notices to, make any filings with, and use reasonable efforts to obtain, any
authorizations, consents and approvals of governments and governmental agencies
in connection with the matters contemplated by this Agreement. Each Party shall
promptly inform the other Parties of any communications to or from the
Securities and Exchange Commission or any other Governmental Entity regarding
the transactions contemplated by this Agreement.
3D. Operation of Business. The Company shall, and shall cause each
Subsidiary to, operate its business only in the usual and ordinary course of
business consistent with past practice and use reasonable efforts to preserve
the goodwill and organization of its business and the relationships with its
clients, suppliers, employees and other Persons having business relations with
the Company or its Subsidiaries. Without limiting the generality of the
foregoing, prior to the Closing, the Company shall not (and shall not permit any
of its Subsidiaries to), without the prior written consent of the Majority
Purchasers: (i) redeem,
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purchase or otherwise acquire directly or indirectly any of its issued and
outstanding capital stock, or any outstanding rights or securities exercisable
or exchangeable for or convertible into its capital stock other than repurchases
of common stock made in the ordinary course of business consistent with past
practices pursuant to the Company's previously announced stock repurchase
program, or make any distribution or dividend to any of its shareholders or
other Persons; (ii) amend its articles of incorporation or bylaws, as the case
may be, or issue or agree to issue any capital stock or any rights to acquire,
or securities convertible into or exchangeable for, any of its capital stock,
except for the issuance of common stock upon the exercise of options issued
pursuant to the Permitted Stock Plans; (iii) directly or indirectly engage in
any transaction, arrangement or contract with any officer, director or Affiliate
or, with respect to or otherwise relating to such shareholder's shares, a
shareholder of the Company which is not in the ordinary course of business and
at arm's length; (iv) execute any guaranty, issue any debt, borrow any money or
otherwise incur any Funded Debt in excess of the amount permitted under the
Certificate of Designation (if it were filed and effective) to be outstanding at
any time without prior approval of the Majority Holders (as that term is defined
in the Certificate of Designation); (v) buy or sell any material assets out of
the ordinary course of business; (vi) amend or modify any stock option plan or
employee stock ownership or purchase plan as in existence as of the Closing,
adopt any new stock option plan or employee stock purchase plan or issue any
shares of capital stock to its employees other than pursuant to the Permitted
Stock Plans; or (vii) commit or agree to do any of the foregoing.
Notwithstanding the foregoing, (i) nothing in this Section 3D shall
prohibit the Company from taking any action or omitting to take any action as
required or as expressly contemplated by this Agreement and (ii) the Company may
take such actions as are reasonably necessary or advisable to consummate the
Acquisition or to exercise the Company's rights under the Merger Agreement,
subject, in the case of the actions contemplated by clauses (ii) and (iv) in the
immediately preceding paragraph, to the prior consultation with the Majority
Holders with respect to any such action.
3E. Manugistics Acquisition. The Company shall use its commercially
reasonable efforts to consummate the Acquisition on the terms set forth in the
Merger Agreement. The Company shall not waive any conditions to the closing of
the Acquisition other than as agreed in writing by the Majority Holders.
3F. Full Access. The Company shall (i) permit, and shall cause its
Representatives and Subsidiaries to permit, the Purchasers and their
Representatives full and complete access (during normal business hours and
subject to reasonable advance notice) to the Company's and its Subsidiaries'
books and records, facilities and personnel, (ii) use reasonable efforts to
cause its independent accountants to be available to the Purchasers and their
Representatives in the presence of a Representative of the Company (during
normal business hours and subject to reasonable advance notice), in connection
with their due diligence review of the Company and its affairs and operations or
otherwise in connection with the transactions contemplated hereby and (iii) use
reasonable efforts to provide Purchasers and their Representatives access to
Manugistics information, personnel and accountants to the extent permitted under
the Merger Agreement.
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3G. Notice of Material Developments. Each Party shall give prompt
written notice to the other Parties of (i) any material variances in any of its
representations or warranties contained in Section 6 or Section 8F below, as
applicable, (ii) any material breach of any covenant hereunder by such Party and
(iii) any other material development affecting the ability of such Party to
consummate the transactions contemplated by this Agreement, including the
Manugistics Acquisition.
3H. Exclusivity. In consideration of the time, effort, expense, and
other resources the Purchasers have expended and anticipate expending to
consummate the transactions contemplated hereby, the Purchasers and the Company
agree as follows:
(i) Until the earlier of the Closing Date or the termination of
this Agreement in accordance with its terms, neither the Company nor any of
its Subsidiaries shall, directly or indirectly, through any of their
respective officers, directors, employees, representatives, agents or
otherwise (including, without limitation, through any investment banker,
attorney or accountant retained by the Company or any of its Subsidiaries)
(collectively, the "Company Parties"), without the prior written consent of
the Majority Purchasers, (A) solicit, initiate or encourage the submission
of any other proposal or offer from, or otherwise enter into any other
agreements or arrangements (other than this Agreement) with, any other
Person (other than the Purchasers), relating to any Alternative Transaction
Proposal or (B) participate in any discussions or negotiations regarding,
or furnish to any other Person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage any effort or attempt by any other Person to do or
seek to do any of the foregoing.
(ii) As long as the agreements in this Section 3H are in effect,
the Company will notify the Purchasers as promptly as practicable after any
Company Party learns that any Person has made any Alternative Transaction
Proposal (including the identity of such Person and the terms of such
proposal). The Board shall promptly advise the Purchasers orally and in
writing of the status of any such Alternative Transaction Proposal as
developments arise or as requested by the Purchasers. The Company
represents and warrants to the Purchasers that no Company Party has entered
into any executory agreement which has not yet terminated or accepted any
commitment with respect to an Alternative Transaction Proposal and the
Company will keep the Purchasers fully informed of the status and details
(including amendments and proposed amendments) of any such request,
Alternative Transaction Proposal or inquiry. The Company further represents
and warrants that no Company Party has entered into any executory agreement
which has not yet terminated or accepted any commitment with respect to an
Alternative Transaction.
3I. No Inconsistent Actions. The Company covenants and agrees that it
will not and will not permit any Subsidiary to take any action which is
inconsistent in any material respect with their respective obligations under
this Agreement or that would hinder or delay in any material respect the
consummation of the transactions contemplated by this Agreement.
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Section 4. Covenants.
4A. Financial Statements and Other Information. The Company shall
deliver to each Purchasers and each other holder (subject to such holder's
agreement to comply with Section 4I hereof) of at least 50% of the Preferred
Stock:
(i) as soon as available, consolidated statements of income and
cash flows of the Company and its Subsidiaries for each fiscal quarter and
for the period from the beginning of the fiscal year to the end of such
fiscal quarter, and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal quarter, setting forth in each
case comparisons to the Company's annual budget and to the corresponding
period in the preceding fiscal year, in each case prepared in accordance
with GAAP;
(ii) as soon as available, consolidated statements of income,
cash flows and shareholders' equity of the Company and its Subsidiaries for
each fiscal year, and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth in each case
comparisons to the Company's annual budget and to the preceding fiscal
year, all prepared in accordance with GAAP, and accompanied by (a) with
respect to the consolidated portions of such statements, an opinion of
Deloitte & Touche LLP, any other Big Four accounting firm or any other
independent accounting firm of recognized national standing reasonably
acceptable to the Majority Holders and (b) a copy of such accounting firm's
annual management letter to the Board;
(iii) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant
aspects of the Company's operations or financial affairs given to the
Company by its independent accountants (and not otherwise contained in
other materials provided hereunder);
(iv) within the time frame determined by the board for the annual
budgeting process, an annual budget prepared on a monthly basis for the
Company and its Subsidiaries for such fiscal year, and promptly upon
preparation thereof any other significant budgets prepared by the Company
and any revisions of such annual or other budgets;
(v) promptly (but in any event within five business days) after
the discovery or receipt of notice of any Event of Noncompliance, an
Officer's Certificate specifying the nature and period of existence thereof
and what actions the Company and its Subsidiaries have taken and propose to
take with respect thereto;
(vi) copies of all financial statements, proxy statements,
reports and any other general written communications which the Company
sends to its shareholders and copies of all registration statements and all
regular, special or periodic reports which it files with the Securities and
Exchange Commission or with any securities exchange on which any of its
securities are then listed, and copies of all press releases and other
statements made available generally by the Company to the public concerning
material developments in the Company's and its Subsidiaries' businesses;
and
9
(vii) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any Person
entitled to receive information under this Section 4A may reasonably
request.
All financial statements included in the information to be provided pursuant to
paragraphs (i) and (ii) shall fairly report the financial condition and results
of operations of the Company and its Subsidiaries as of the dates and for the
periods stated therein, and, subject to the provisions of such paragraphs, shall
be prepared in accordance with GAAP, consistently applied, subject in the case
of monthly (but not quarterly) unaudited financial statements to changes
resulting from normal quarter-end adjustments and, in the case of all unaudited
financial statements, to the absence of footnote disclosures.
For purposes of this Agreement, all holdings of Preferred Stock by Persons who
are Affiliates of each other shall be aggregated for purposes of meeting any
threshold tests under this Agreement.
4B. Inspection of Property. The Company shall permit any
Representatives designated by each Purchaser or any other holder (subject to
such holder's agreement to comply with Section 4I hereof) of at least 50% of the
Preferred Stock, upon reasonable notice and during normal business hours and at
such other times as any such holder may reasonably request, to (i) visit and
inspect any of the properties of the Company and its Subsidiaries, (ii) examine
the corporate and financial records of the Company and its Subsidiaries and make
copies thereof or extracts therefrom and (iii) discuss the affairs, finances and
accounts of any such corporations with the directors, officers and key employees
of the Company and its Subsidiaries, and the Company shall use its reasonable
efforts to cause the independent accountants of the Company and its Subsidiaries
to be available, in the presence of a Company Representative, to such
Purchaser's or holder's Representatives.
4C. Affirmative Covenants. So long as any Preferred Stock remains
outstanding, the Company shall, and shall cause each Subsidiary to, unless it
has received the prior written waiver of the Majority Holders:
(i) at all times cause to be done all things necessary to
maintain, preserve and renew its corporate existence and, except where the
failure to do so would not reasonably be expected to result in a Material
Adverse Effect, maintain, preserve and renew all material licenses,
authorizations orders, permits and other governmental approvals necessary
to the conduct of its businesses and qualify and remain qualified to do
business as a corporation in all relevant jurisdictions;
(ii) maintain and keep its material properties in good repair,
working order and condition, and from time to time make all necessary or
desirable repairs, renewals and replacements, so that its businesses may be
properly and advantageously conducted in all material respects at all times
except where the failure to do so would not reasonably be expected to have
a Material Adverse Effect;
(iii) possess and maintain all material Intellectual Property
Rights necessary to the conduct of their respective businesses and own all
right, title and interest
10
in and to, or have a valid license for, all such Intellectual Property
Rights except where the failure to do so would not reasonably be expected
to have a Material Adverse Effect;
(iv) pay and discharge when payable all taxes, assessments and
governmental charges imposed upon its properties or upon the income or
profits therefrom except where the failure to do so would not reasonably be
expected to have a Material Adverse Effect;
(v) comply with all applicable laws, rules and regulations of all
relevant governmental authorities, except where the failure to do so would
not reasonably be expected to have a Material Adverse Effect;
(vi) apply for and continue in force with good and responsible
insurance companies adequate insurance covering risks of such types and in
such amounts that are customary for corporations of similar size engaged in
similar lines of business;
(vii) maintain officers and directors liability insurance
coverage in such amounts and subject to such terms as are customarily
maintained by public companies of similar market capitalization;
(viii) maintain materially accurate books of record and account
consistent with past practices and make provisions on its financial
statements for proper reserves in accordance with GAAP; and
(ix) at all times cause the Company's Common Stock or other
securities into which the Preferred Stock is convertible to be authorized
for quotation and listed on one or more of the Nasdaq National Market, the
American Stock Exchange or the New York Stock Exchange.
4D. Compliance with Agreements. So long as any Preferred Stock remains
outstanding, the Company shall perform and observe all of its obligations to
each holder of Preferred Stock set forth in the Articles of Incorporation, the
Certificate of Designation and the Company's Bylaws.
4E. Use of Proceeds. The Company shall not, without the prior written
consent of the Majority Holders, use the proceeds from the sale of the Preferred
Stock other than to complete the acquisition of Manugistics on the terms set
forth in the Merger Agreement, and to pay related costs, fees and expenses.
4F. Certain Pre-emptive Rights.
(i) Except for issuances of (A) Preferred Stock at the Closing,
(B) Common Stock or options to acquire Common Stock pursuant to the terms
of the Permitted Stock Plans (or Common Stock upon the exercise of such
options), (C) Common Stock issued or used from treasury shares as
consideration for the acquisition of another company or business as
approved (to the extent necessary) in accordance with the Articles of
Incorporation (including the Certificate of Designation)
11
and by the Board, (D) Common Stock pursuant to a Public Offering, or (E)
Common Stock upon conversion or exchange of any securities directly or
indirectly convertible into Common Stock, if so long as any Preferred Stock
remains outstanding the Company authorizes the issuance or sale of any
shares of Preferred Stock, Common Stock or any securities convertible into,
exchangeable or exercisable for or containing options or rights to acquire
any shares of Preferred Stock or Common Stock (collectively, "Equity
Securities"), the Company shall first offer to sell to each holder of
Preferred Stock a portion of such Equity Securities to be issued equal to
the number of Equity Securities to be issued multiplied by the quotient
obtained by dividing (1) the number of shares of Common Stock issued or
issuable upon conversion of the Preferred Stock held by such holder by (2)
the sum of the total number of shares of Common Stock then outstanding plus
the total number of shares of Common Stock issuable upon conversion of the
Preferred Stock plus the total number of shares of Common Stock issuable
upon conversion or exercise of outstanding options, rights or securities
convertible into or exercisable for Common Stock or for other securities
convertible into or exercisable into Common Stock at a price less than or
equal to the Market Price as of the date of the Company's offer (other than
the Preferred Stock). Each holder shall be entitled to purchase such stock
or securities at the most favorable price and on the most favorable terms
as such stock or securities are to be offered to any other Persons;
provided that if all Persons entitled to purchase or receive such stock or
securities are required to also purchase other securities of the Company,
the holders exercising their rights pursuant to this paragraph shall also
be required to purchase the same types of securities in the same ratios (on
the same terms and conditions) that such other Persons are required to
purchase. The purchase price for all stock and securities offered to such
holders hereunder shall be payable in cash.
(ii) In order to exercise its purchase rights hereunder, the
holder of Preferred Stock must within 10 business days after receipt of
written notice from the Company describing in reasonable detail the stock
or securities being offered, the purchase price thereof, the payment terms
and such holder's percentage allotment, deliver a written notice to the
Company describing such holder's election hereunder.
(iii) Upon the expiration of the offering period described above,
the Company shall be entitled to sell such stock or securities which the
holders of Preferred Stock have not elected to purchase during the 180 days
following such expiration at a price not less and on other terms and
conditions not more favorable to the purchasers thereof than that offered
to such holders. Any stock or securities offered or sold by the Company
after such 180-day period must be reoffered to the holders of Preferred
Stock pursuant to the terms of this Section 4F.
4G. Public Disclosures. After the date hereof, the Company shall not,
nor shall it permit any Subsidiary to, disclose any Purchaser's name or identity
as an investor in the Company in any press release or other public announcement
or in any document or material filed with any Governmental Entity without the
prior written consent of such Purchaser, unless such disclosure is required by
applicable law or governmental regulations or by order of a court of competent
jurisdiction, in which case, unless otherwise prohibited by applicable law,
prior to making such disclosure the Company shall give written notice to such
Purchaser describing in
12
reasonable detail the proposed content of such disclosure and shall permit the
Purchaser to review and comment upon the form and substance of such disclosure.
4H. SEC Reports. The Company shall file on a timely basis all SEC
Reports required to be filed by it with the Securities and Exchange Commission
under the Securities Exchange Act, the Securities Act and the rules and
regulations of the Securities and Exchange Commission under either of the
foregoing applicable to such SEC Reports, which SEC Reports shall comply in all
material respects with the requirements of the Securities Exchange Act, the
Securities Act and the published rules and regulations of the Securities and
Exchange Commission thereunder, each as applicable to all SEC Reports.
4I. Confidentiality.
(i) Each holder of Preferred Stock shall hold, and shall use its
reasonable efforts to cause its Representatives to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by
other requirements of law or national stock exchange, all confidential
documents and information concerning the Company or any of its Subsidiaries
furnished to the such holder of Preferred Stock, except to the extent that
such information can be shown to have been (a) previously known on a
non-confidential basis by the holder of Preferred Stock or such
Representatives, (b) in the public domain through no fault of such holder
of Preferred Stock or its Representatives (acting in their capacity as such
or with respect to information received in their capacity as such) or (c)
later acquired by such holder of Preferred Stock or its Representatives
from sources other than the Company or any of its Subsidiaries not known by
such holder of Preferred Stock or such Representatives, as applicable, to
be bound by any confidentiality obligation; provided that a holder of
Preferred Stock may disclose such information if required by applicable
law, subject to compliance with Section 4I(ii); provided further that a
holder of Preferred Stock may disclose such information to any of its
Representatives in connection with the transactions contemplated by this
Agreement or its ownership of the Preferred Stock and monitoring of its
investment therein so long as such Persons are informed by the holder of
Preferred Stock of the confidential nature of such information and are
directed by such holder of Preferred Stock to treat such information
confidentially; provided further that the holder of Preferred Stock may
disclose such information in connection with a sale or transfer (or
prospective sale or transfer) permitted by Section 5A of any Preferred
Stock if such holder of Preferred Stock's transferee (or prospective
transferee) agrees to be bound by the provisions of this section. Each
holder of Preferred Stock shall be responsible for any failure of it or any
of its Representatives to treat such information confidentially. Each
holder of Preferred Stock agrees that it shall not and it shall cause each
of its Representatives not to use any confidential documents or information
for any purpose other than monitoring and evaluating its investment in the
Company and in connection with the transactions contemplated by this
Agreement.
(ii) In the event any of the holders of Preferred Stock or anyone
to whom any of the holders of Preferred Stock transmit confidential
information is requested or required (by oral questions, interrogatories,
requests for information or documents, subpoenas, civil investigative
demand or similar process) to disclose any
13
such information, such holder of Preferred Stock shall provide the Company
with prompt notice so that the Company may seek a protective order or other
appropriate remedy and/or waive such holder's compliance with the
provisions of this section. In the event that such protective order or
other remedy is not obtained sufficiently promptly so as not to adversely
affect such holder of Preferred Stock or those of its officers, directors,
employees, accountants, counsel, consultants, advisors and agents as to
whom the information has been requested or required, or the Company waives
such holder's compliance with the provisions of this Agreement, such holder
will furnish only that portion of such information that such holder is
advised by counsel is legally required and shall, at the Company's expense
and direction, exercise its reasonable efforts to obtain reliable assurance
that confidential treatment will be accorded such information.
Section 5. Transfer of Restricted Securities.
5A. General Provisions. Restricted Securities are transferable only
pursuant to (i) a public offering registered under the Securities Act, (ii)
in-kind distributions by any holder that is an investment fund to its partners
or members in connection with a distribution of freely tradeable securities,
(iii) Rule 144 or Rule 144A of the Securities and Exchange Commission (or any
similar rule or rules then in force) if such rule is available and, as
applicable, if the holder thereof makes available to the Company in advance of
such transfer information demonstrating compliance with Rule 144 or Rule 144A of
the Securities and Exchange Commission, or (iv) after complying with Section 5E,
any other legally available means of transfer, provided that such transfer
pursuant to this clause (iv) is not to a direct competitor of the Company or any
Person controlled by such a competitor.
5B. Rule 144A. Upon the request of any holder of Restricted
Securities, the Company reasonably promptly shall supply to such holder or its
prospective transferees all information regarding the Company required to be
delivered in connection with a transfer pursuant to Rule 144A of the Securities
and Exchange Commission.
5C. Restrictive Legends. Each certificate or instrument representing
Restricted Securities shall be imprinted with a legend in substantially the
following form:
(i) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE
OR OTHERWISE DISTRIBUTED EXCEPT IN CONJUNCTION WITH AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR
IN COMPLIANCE WITH RULE 144 OR PURSUANT TO ANOTHER EXEMPTION. THE
SECURITIES ARE ALSO SUBJECT TO PROVISIONS OF A REGISTRATION RIGHTS
AGREEMENT."
(ii) "THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO
14
THE CONDITIONS SPECIFIED IN THE PREFERRED STOCK PURCHASE AGREEMENT,
DATED AS OF APRIL 24, 2003 (AS THE SAME MAY BE AMENDED FROM TIME TO
TIME), BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN OTHER PERSONS,
AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO
SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE."
In addition, the certificates representing Preferred Stock shall
bear the following legend:
"The Company will furnish the holder of this certificate information
concerning the designations, relative rights, preferences and
limitations applicable to each class of stock or series hereof,
including the liquidation and dividend preferences and voting and
conversion rights of the preferred stock, on request in writing and
without charge."
Whenever any particular securities cease to be Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense, new securities of the like tenor not bearing a Securities Act
legend of the character set forth in Section 5C(i).
5D. Legend Removal. If any Restricted Securities become eligible for
sale pursuant to Rule 144(k), the Company shall, upon the request of the holder
of such Restricted Securities, remove the legend set forth in Section 5C(i) from
the certificates for such Restricted Securities. In addition, if in connection
with any transfer the holder of the Restricted Securities delivers to the
Company an opinion of Xxxxxxxx & Xxxxx or such other counsel which (to the
Company's reasonable satisfaction) is knowledgeable in securities law matters to
the effect that no subsequent transfer of such Restricted Securities shall
require registration under the Securities Act, then the Company promptly upon
such contemplated shall transfer deliver new certificates for such Restricted
Securities which do not bear the Securities Act legend set forth in Section
5C(i). In addition, the Company shall, upon the request of the holder of such
Restricted Securities, remove the legend set forth in Section 5C(ii) from the
certificates for such Restricted Securities upon a conversion of Restricted
Securities constituting Preferred Stock into Common Stock.
5E. Right of First Offer. At least 15 business days prior to
transferring any shares of Preferred Stock pursuant to Section 5A(iv), the
transferring shareholder (the "Transferring Shareholder") shall deliver a
written notice (a "Sale Notice") to the Company. The Sale Notice shall disclose
in reasonable detail the proposed number of shares of Preferred Stock to be
transferred. The Company may offer to purchase all (but not less than all) of
the shares of Preferred Stock specified in the Sale Notice by delivering written
notice of such offer (a
15
"Company Offer") to the Transferring Shareholder, as soon as practicable but in
any event within 15 days after the delivery of the Sale Notice (the "Election
Period"), disclosing in reasonable detail the proposed terms and conditions
(including the offer price) of the Company's offer in a binding commitment (if
accepted by the Transferring Shareholder within 60 days) to purchase the
Transferring Shareholder's Preferred Stock specified in the Sale Notice. If
within the Election Period the Company has offered to purchase the shares of
Preferred Stock from the Transferring Shareholder in a Company Offer, the
Transferring Shareholder may, within 60 days after receipt of the Company Offer
(the "Offer Period"), either accept or decline the Company Offer. If the
Transferring Shareholder accepts the Company's Offer within such 60 day period,
then the Transferring Shareholder and the Company shall be bound, and the
transfer of such shares shall be consummated as soon as practical after the
delivery of the Transferring Shareholder's acceptance of the Company Offer, but
in any event within 30 days after the acceptance of the Company Offer. If the
Transferring Shareholder declines the Company Offer, then it may transfer such
shares of Preferred Stock (specified in the Sale Notice) at a price no less than
the price per share specified in the Company Offer within 120 days after the
expiration of the Election Period. If the Company has not made a Company Offer
(which must be with respect to all of the shares of Preferred Stock in the Sale
Notice), then the Transferring Shareholder may, within 180 days after the
expiration of the Election Period, transfer such shares of Preferred Stock
specified in the Sale Notice to one or more third parties. The Transferring
Shareholder shall deliver a new Sale Notice under this Section 5E with respect
to any shares of Preferred Stock not transferred within such 180-day period
after the expiration of the Election Period prior to any subsequent transfer.
The purchase price specified in any Company Offer shall be payable solely in
cash at the closing of the transaction. If the Company has failed to consummate
a Company Offer that one or more Transferring Shareholder(s) accepted, then this
Section 5E shall cease to apply with respect to such Transferring Shareholder(s)
and shall no longer require such Transferring Shareholder(s) to deliver a Sale
Notice to the Company prior to transferring any Preferred Stock.
Section 6. Representations and Warranties of the Company. As a
material inducement to the Purchasers to enter into this Agreement and purchase
the Preferred Stock hereunder, the Company hereby represents and warrants to
each Purchaser that:
6A. Organization; Ownership; Power; Qualification of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to be
so qualified as a foreign corporation or be in good standing would not have a
Material Adverse Effect. The Company possesses all requisite corporate power and
authority and all material licenses, permits and authorizations necessary to
own, lease and operate its properties and to conduct its business as now
conducted and presently proposed to be conducted except such as would not
reasonably be expected to have a Material Adverse Effect. The Company possesses
all requisite corporate power and authority and all material licenses, permits
and authorizations necessary to enter into this Agreement and the agreements
contemplated hereunder and to carry out the transactions contemplated hereunder.
16
6B. Subsidiaries. Each of the Company's Subsidiaries is duly
organized, validly existing as a corporation, general partnership, limited
partnership, limited liability company, closed joint stock company or similar
entity, and in good standing under the laws of the jurisdiction of its
organization and is duly qualified as a foreign corporation or other entity to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to be so qualified
as a foreign corporation or be in good standing would not have a Material
Adverse Effect. Each Subsidiary possesses all requisite organizational power and
authority and all material licenses, permits and authorizations necessary to
own, lease and operate its properties and to conduct its business as now
conducted and presently proposed to be conducted except such as would not
reasonably be expected to have a Material Adverse Effect. All of the issued and
outstanding shares of capital stock or other ownership interests of each such
Subsidiary are duly authorized and are validly issued, fully paid and
non-assessable (to the extent applicable) and owned by the Company, directly or
through Subsidiaries except such as would not reasonably be expected to have a
Material Adverse Effect.
6C. Capital Stock and Related Matters.
(i) As of March 31, 2006, the authorized capital stock of the
Company consists of (a) 2,000,000 shares of preferred stock, of which no
shares are designated, and (b) 50,000,000 shares of Common Stock, of which
30,222,983 shares are issued and outstanding and 6,254,418 shares are
reserved under the Permitted Stock Plans (of which options for 4,504,463
shares of Common Stock have been granted). As of the Closing and
immediately thereafter, the authorized capital stock of the Company shall
consist of (a) 2,000,000 shares of preferred stock, of which 50,000 shares
shall be designated as Series B Preferred Stock (all of which shall be
issued and outstanding) and of which no other shares shall be designated,
and (b) 50,000,000 shares of Common Stock, of which 30,222,983 shares (plus
any shares issued upon the exercise of options between the date of this
Agreement and the Closing Date) shall be issued and outstanding, 6,254,418
shares shall be reserved under the Permitted Stock Plans and 4,255,320
shares shall be reserved for issuance upon conversion of the Preferred
Stock. Except as set forth above or as disclosed in the Company SEC
Reports, neither the Company nor any Subsidiary has outstanding any stock
or securities convertible into or exchangeable for any shares of its
capital stock or containing any profit participation features, nor does it
have outstanding any rights or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable
for its capital stock or any stock appreciation rights or phantom stock
plans, except for the Preferred Stock. Neither the Company nor any
Subsidiary is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock
or any warrants, options or other rights to acquire its capital stock
except pursuant to the Certificate of Designation. All of the outstanding
shares of the Company's capital stock are validly issued, fully paid and
nonassessable.
(ii) There are no statutory or, to the Company's Knowledge,
contractual shareholders' preemptive rights or rights of refusal with
respect to the issuance or sale of the Preferred Stock hereunder or the
issuance of Common Stock upon conversion of the Preferred Stock. The
Company has complied with all applicable
17
federal or state securities laws in connection with the offer, sale and
issuance of the Preferred Stock hereunder, and such offer, issuance and
sale do not require registration under the Securities Act or any applicable
state securities laws. Except such as would not reasonably be expected to
have a Material Adverse Effect, the Company has complied with all
applicable federal or state securities laws in connection with the offer,
sale or issuance of any of its capital stock. Except as disclosed in the
Company SEC Reports, there are no agreements between the Company and any of
its shareholders or, to the Company's Knowledge, among any of the Company's
shareholders with respect to the voting or transfer of the Company's
capital stock or with respect to any other aspect of the Company's affairs.
6D. Authorization; No Breach. The execution, delivery and performance
of each of the Transaction Documents, the filing of the Certificate of
Designation and the offering, sale and issuance of the Preferred Stock to the
Purchasers have been duly authorized by all necessary corporate action on the
part of the Company. Each of the Transaction Documents constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms. The
Articles of Incorporation have been duly adopted and are in full force and
effect and enforceable in accordance with their terms and the Certificate of
Designation will have been duly adopted as of the Closing and will be in full
force and effect and enforceable in accordance with its terms. The offering,
sale and issuance of the Preferred Stock hereunder, the issuance of the Common
Stock upon conversion of the Preferred Stock, the filing of the Certificate of
Designation, changes or circumstances that may occur as a result of the terms of
the Preferred Stock, whether pursuant to Section 5C of the Certificate of
Designation or otherwise (but not including, for the avoidance of doubt, any
purchase or other acquisition by any such holder of additional securities of the
Company other than acquisitions that result from the terms of the Preferred
Stock)), the execution and delivery by the Company of each of the Transaction
Documents and the fulfillment of and compliance with the other respective terms
hereof and thereof by the Company, do not and will not (i) conflict with or
result in a breach of any of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in the creation of any lien, security
interest, charge or encumbrance upon the Company's or any Subsidiary's capital
stock or assets pursuant to, (iv) give any third party the right to modify,
terminate or accelerate any obligation under or claim any change of control or
similar payments pursuant to, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or governmental body
or agency pursuant to, the charter (including the Certificate of Designation) or
the Bylaws or the bylaws of any Subsidiary, or any law or statute or any rule,
regulation, order, writ, injunction or decree of any court or administrative
government body or agency to which the Company or any Subsidiary is subject, or
any material agreement, instrument, order, judgment or decree to which the
Company or any Subsidiary is subject. The Company is not a party to or bound by
any written or oral agreement or understanding with respect to any Alternative
Transaction, and has terminated all discussions with third parties regarding any
Alternative Transactions.
6E. SEC Reports and Financial Statements.
(i) The Company has filed with the SEC on a timely basis all
reports, schedules, forms, statements and other documents required to be
filed, as such documents may have been amended or supplemented with the SEC
since the time of filing (the
18
"Company SEC Documents"). No Subsidiary of the Company is required to file
with the SEC any report, schedule, form, statement or other document. Each
of the Company SEC Documents, (i) as of the filing date of such report,
complied with the requirements of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder (the "Securities Act")
and the Exchange Act, as the case may be, and, to the extent then
applicable, the Xxxxxxxx-Xxxxx Act of 2002 and the rules and regulations
promulgated thereunder (the "Xxxxxxxx-Xxxxx Act"), and (ii) as of its
filing date (or, if amended or superseded by a subsequent filing prior to
the date hereof, on the date of such filing) did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. As used in this Section 6E, the term "file" shall be broadly
construed to include any manner in which a document or information is
furnished, transmitted or otherwise made available to the SEC.
(ii) The certifications and statements required by Rules 13a-14
and 15d-14 under the Exchange Act and Sections 302 and 906 of the
Xxxxxxxx-Xxxxx Act with respect to the applicable Company SEC Documents
(collectively, the "Certifications"), were true and correct as of the date
of filing thereof. Nothing has come to the attention of the principal
executive officer or principal financial officer of the Company that would
preclude each of them from being able to make the Certifications in the
Company's next quarterly report on Form 10-Q when due.
(iii) The Company maintains disclosure controls and procedures
required by Rule 13a-15 or 15d-15 under the Exchange Act. Such disclosure
controls and procedures are effective to ensure that all material
information concerning the Company is made known on a timely basis to the
individuals responsible for the preparation of the Company's filings with
the SEC and other public disclosure documents. The Company has disclosed,
based on its most recent evaluation prior to the date of this Agreement, to
the Company's auditors and the Audit Committee of the Board of Directors of
the Company (A) any control deficiencies in the design or operation of
internal controls that could adversely affect in any material respect the
Company's ability to record, process, summarize and report financial data
and has identified for the Company's auditors any material weaknesses in
internal controls and (B) any fraud, whether or not material, that involves
management or other employees of the Company or its Subsidiaries. The
Company has delivered or made available to the Majority Purchasers a
summary of any such disclosure made by management to the Company's auditors
or the Audit Committee of the Company's Board of Directors. No significant
deficiency or material weakness was identified in management's assessment
of internal controls as of March 16, 2006 (nor has any such deficiency or
weakness since been identified). Neither the Company nor any of its
Subsidiaries nor, to the Knowledge of the Company, any director, officer,
employee, auditor, accountant or representative of the Company or any of
its Subsidiaries has received or otherwise had or obtained knowledge of any
complaint, allegation or claim, whether written or oral, alleging improper
accounting or auditing practices, procedures, methodologies or methods or
internal accounting control procedures of the Company or any of its
Subsidiaries, including any complaint, allegation or claim that the Company
or any of its Subsidiaries has engaged in
19
questionable accounting or auditing practices. No attorney representing the
Company or any of its Subsidiaries, whether or not employed by the Company
or any of its Subsidiaries, has reported evidence of a violation of
securities Laws, breach of fiduciary duty or similar violation by the
Company or any of its officers, directors, employees or agents to the Board
of Directors of the Company or any committee thereof or to any director or
officer of the Company. Since March 16, 2006, neither the chief executive
officer nor the chief financial officer of the Company has become aware of
any fact or circumstance that is reasonably likely to result in a
substantial change to the Company's internal controls over financial
reporting.
(iv) The Company is, and since enactment of the Xxxxxxxx-Xxxxx
Act has been, in compliance with the applicable provisions of the
Xxxxxxxx-Xxxxx Act and with the applicable listing and other rules and
regulations of The Nasdaq National Market, and has not received any notice
from The Nasdaq National Market asserting any non-compliance with such
rules and regulations. Except as permitted by the Exchange Act, including
Sections 13(k)(2) and (3), since the enactment of the Xxxxxxxx-Xxxxx Act,
neither the Company nor any of its affiliates has made, arranged, or
modified (in any material way) personal loans to any executive officer or
director of the Company. The audit committee of the Board of Directors of
the Company includes an Audit Committee Financial Expert, as defined by
Item 401(h)(2) of Regulation S-K.
(v) The Company has adopted a code of ethics, as defined by Item
406(b) of Regulation S-K, for senior financial officers, applicable to its
principal financial officer, comptroller or principal accounting officer,
or persons performing similar functions. The Company has promptly
disclosed, by filing a Form 8-K, any change in or waiver of the Company's
code of ethics, as required by Section 406(b) of Xxxxxxxx-Xxxxx Act. To the
Knowledge of the Company, there have been no violations of provisions of
the Company's code of ethics.
(vi) The financial statements of the Company for the fiscal year
ended December 31, 2005 (the "Company Financial Statements"), and all other
financial statements of the Company included in the Company SEC Documents,
including in each case the notes thereto (collectively with the Company
Financial Statements, the "SEC Financial Statements") complied, as of their
respective dates of filing with the SEC, or with respect to unaudited
financial statements, as of the date of this Agreement, in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, were prepared in
accordance with the United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods covered (except
as may be indicated therein or in the notes thereto or, in the case of
unaudited financial statements, as permitted by Form 10-Q of the SEC) and
fairly present in all material respects the consolidated financial position
of the Company and its Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
recurring year-end audit adjustments and other adjustments described
therein).
(vii) Except as set forth in the Company Financial Statements and
except as arising hereunder, the Company and its Subsidiaries have no
material liabilities
20
or obligations of any nature (whether absolute, accrued, asserted or
unasserted, contingent or otherwise) that would be required to be reflected
on or reserved against in any SEC Financial Statements that are not
disclosed, reflected or reserved against in such SEC Financial Statements,
except for such liabilities and obligations (A) that have been incurred
since March 16, 2006 in the Ordinary Course of Business, and (B) that could
not reasonably be expected to have a Material Adverse Effect on the
Company.
(viii) Neither the Company nor any of its Subsidiaries is a party
to, or has any commitment to become a party to, any joint venture,
partnership agreement or any similar contract (including any contract
relating to any transaction, arrangement or relationship between or among
the Company or any of its Subsidiaries, on the one hand, and any
unconsolidated Affiliate, including any structured finance, special purpose
or limited purpose entity or Person, on the other hand) where the purpose
or intended effect of such arrangement is to avoid disclosure of any
material transaction involving the Company or any of its Subsidiaries in
the Company's financial statements.
6F. No Material Adverse Effect. To the Company's Knowledge, since
December 31, 2005, there has occurred no event, circumstance or condition which
has had or which could reasonably be expected to have a Material Adverse Effect.
6G. Absence of Certain Developments.
(i) Except as expressly contemplated by this Agreement, the
Merger Agreement and the transactions contemplated hereunder or thereunder
or as disclosed in the SEC Reports, since December 31, 2005, neither the
Company nor any of its Subsidiaries has:
(a) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities convertible,
exchangeable or exercisable into any capital stock or other equity
securities except those issued pursuant to the Permitted Stock Plans;
(b) borrowed any amount (except for intercompany loans) or
incurred or become subject to any material liabilities, except current
liabilities incurred in the ordinary course of business and material
liabilities under contracts entered into in the ordinary course of
business;
(c) discharged or satisfied any material Lien or paid any
material obligation or liability, other than current liabilities paid in
the ordinary course of business;
(d) other than as has been publicly announced by the
Company, declared or made any payment or distribution of cash or other
property to its shareholders with respect to its capital stock or other
equity securities or purchased or redeemed any shares of its capital stock
or other equity securities (including, without limitation, any warrants,
options or other rights to acquire its capital stock or other equity
securities);
21
(e) except in the ordinary course of business, mortgaged or
pledged any of its properties or assets or subjected them to any Lien,
except Liens for current property taxes not yet due and payable;
(f) sold, assigned or transferred any of its tangible
assets, except in the ordinary course of business, or canceled any material
debts or claims;
(g) entered into any agreement to acquire the capital stock
or other equity interests of any Person;
(h) suffered any extraordinary losses or waived any rights
of material value, other than in the ordinary course of business or
consistent with past practice; or
(i) agreed, whether orally or in writing, to do any of the
foregoing.
(ii) Neither the Company nor any Subsidiary has at any time made
any bribes, kickback payments or other illegal payments.
6H. Tax Matters.
The Company and each Subsidiary have filed all Tax Returns which they
are required to file under applicable laws and regulations; all such Tax Returns
are complete and correct in all material respects and have been prepared in
compliance with all applicable laws and regulations in all material respects;
the Company and each Subsidiary have paid all Taxes due and owing by them
(whether or not such Taxes are required to be shown on a Tax Return) and have
withheld and paid over to the appropriate taxing authority all Taxes which they
are required to withhold from amounts paid or owing to any employee,
shareholder, creditor or other third party except for Taxes in dispute for which
appropriate reserves have been taken on the Company's financial statements and
except such as would not reasonably be expected to have a Material Adverse
Effect; the accrual for Taxes on the Latest Balance Sheet would be adequate to
pay all Tax liabilities of the Company and its Subsidiaries if their current tax
year were treated as ending on the date of the Latest Balance Sheet (excluding
any amount recorded which is attributable solely to timing differences between
book and Tax income); since the date of the Latest Balance Sheet, the Company
and its Subsidiaries have not incurred any liability for Taxes other than in the
ordinary course of business; and except as specifically disclosed to the
Majority Purchasers in writing on the date hereof, no foreign, federal, state or
local Tax audits or administrative or judicial proceedings are pending or being
conducted with respect to the Company or any Subsidiary, no information related
to Tax matters has been requested by any foreign, federal, state or local taxing
authority and no written notice indicating an intent to open an audit or other
review has been received by the Company or any Subsidiary from any foreign,
federal, state or local taxing authority. The charges, accruals and reserves on
the books of the Company and its Subsidiaries in respect of Taxes are, in the
reasonable judgment of the Company, adequate.
22
6I. Contracts and Commitments.
To the Company's Knowledge, all of the contracts, agreements and
instruments that would be required to be filed pursuant to Item 601 of
Regulation S-K (each a "Material Contract") have been filed, and all such
Material Contracts, whether or not so filed, are valid, binding and enforceable
in accordance with their respective terms. Except such as would not reasonably
be expected to have a Material Adverse Effect, the Company and each Subsidiary
have performed all obligations required to be performed by them and are not in
default under or in breach of nor, except as specifically disclosed to the
Majority Purchasers in writing on the date hereof, in receipt of any claim of
default or breach under any Material Contract; to the Company's Knowledge, no
event has occurred which with the passage of time or the giving of notice or
both would result in a material default, breach or event of noncompliance by the
Company or any Subsidiary under any Material Contract; and neither the Company
nor any Subsidiary has Knowledge of any breach or anticipated breach by the
other parties to any material contract, agreement, instrument or commitment to
which it is a party.
6J. Intellectual Property Rights.
(i) Except as contemplated by the Merger Agreement and the
transactions contemplated thereby, each of the Company and its Subsidiaries
owns, or is validly licensed or otherwise has the right to use all material
Intellectual Property used or necessary to carry on its business as
currently conducted or currently proposed to be conducted. Except as
contemplated by the Merger Agreement and the transactions contemplated
thereby, such Intellectual Property constitutes all the Intellectual
Property necessary to the conduct of the business of the Company and its
Subsidiaries as currently conducted or currently proposed to be conducted,
including the design, development, manufacture, use and sale of products
and technology and the performance of services.
(ii) To the Company's Knowledge, none of the Company or any of
its Subsidiaries has infringed upon or misappropriated any Intellectual
Property or other proprietary information of any other Person. Since
January 1, 2004, except as disclosed in the SEC Reports or as specifically
disclosed to the Majority Purchasers in writing on the date hereof, (1)
none of the Company or any of its Subsidiaries has received any material
charge, complaint, claim, demand or notice alleging any such infringement,
misappropriation or other conflict or challenging the ownership, use,
validity or enforceability of any Intellectual Property owned by, licensed
to or otherwise used by the Company or any of its Subsidiaries nor, to the
Knowledge of the Company, is there a reasonable basis for any such claim,
(2) none of the Company or any of its Subsidiaries is party to or the
subject of any pending or, to the Knowledge of the Company, threatened,
material suit, claim, action, investigation or proceeding with respect to
any such infringement, misappropriation or conflict, that has not been
settled or otherwise fully resolved, (3) to the Knowledge of the Company,
no other Person has infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property owned by, licensed to or otherwise
used by the Company or any of its Subsidiaries, and (4) none of the Company
or any of its Subsidiaries has received any opinion of counsel that a third
party patent applies to any product produced, marketed, licensed, sold or
distributed by the Company or any of its Subsidiaries. None of the Company
or any of its Subsidiaries
23
has brought any action, suit or proceeding for infringement of any
Intellectual Property of the Company or any of its Subsidiaries, or for
breach of any license or agreement involving any of such Intellectual
Property, except in the ordinary course of business, against any party, and
to the Knowledge of the Company there is no infringement or
misappropriation of any such Intellectual Property by any third party,
including any employee or former employee of the Company or any of its
Subsidiaries.
(iii) Since January 1, 2004, except as specifically disclosed to
the Majority Purchasers in writing on the date hereof, neither the Company
nor any of its Subsidiaries has transferred ownership of, or granted any
exclusive license with respect to, any material Intellectual Property that
is or was owned by the Company or any Subsidiary and is necessary for the
conduct of the business of the Company or any of its Subsidiaries as
currently conducted or currently proposed to be conducted, to any third
party other than in the ordinary course of business.
(iv) The Company does not believe it is or will be necessary to
use any inventions of any of its employees, consultants or independent
contractors made prior to their employment by, or performance of services
for, the Company and its Subsidiaries other than such inventions as have
been validly licensed by the Company.
(v) Each of the Company and its Subsidiaries has taken reasonable
and necessary steps (based on standard industry practices) to protect its
Intellectual Property and rights thereunder and, to the Knowledge of the
Company, no such rights to Intellectual Property have been lost or are in
jeopardy of being lost as a result of any failure by the Company or any of
its Subsidiaries to protect its Intellectual Property.
(vi) The Software owned or purported to be owned by the Company
or any of its Subsidiaries, was either (1) developed by employees of the
Company or its Subsidiaries within the scope of their employment, (2)
developed by independent contractors who have assigned their rights to the
Company or its Subsidiaries pursuant to written agreements or (3) otherwise
lawfully acquired by the Company or its Subsidiaries from a third party
pursuant to written agreements. To the Company's Knowledge, such Software
does not contain any programming code, documentation or other material or
development environments that embody Intellectual Property rights of any
Person other than the Company or its Subsidiaries, except for such
materials or development environments obtained by the Company or its
Subsidiaries from (A) third parties pursuant to valid licenses or other
agreements or (B) other Persons who make such materials or development
environments generally available to all interested purchasers or end-users
on standard commercial terms. The source code of any of the Company's
Software and the data associated therewith have been safeguarded and
protected as confidential and proprietary Company information.
(vii) The Company has adhered to its written policy on Open
Source Materials which has been made available to Purchaser or its
representatives, except where non-adherence could not reasonably be
expected to have a Material Adverse Effect on the Company. "Open Source
Materials" shall mean any software or other material that is made generally
available to the public, under license (including but not limited to the
24
GNU General Public License (GPL), GNU Lesser General Public License (LGPL),
Mozilla Public License (MPL), BSD licenses, and any other similar "free
software" or "open source" licenses) without requiring the payment of any
fees or royalties.
(viii) To the Company's Knowledge, the Company's software
products do not contain any computer code that is designed and has the
ability to disrupt, disable, harm, distort or otherwise impede the
legitimate operations of such software products by or for the Company or
its authorized users.
(ix) "Intellectual Property" means all intellectual property,
including but not limited to (1) inventions (whether patentable or
unpatentable and whether or not reduced to practice), ideas, research and
techniques, technical designs, discoveries and specifications,
improvements, modifications, adaptations, and derivations thereto, and
patents, patent applications, models, industrial designs, inventor's
certificates, and patent disclosures, together with reissuances,
continuations, continuations-in-part, revisions, extensions and
reexaminations thereof (the "Patents"), (2) trademarks, all service marks,
logos, trade dress, brand names and trade names, assumed names, corporate
names and other indications of origin (whether registered or unregistered),
(3) copyrights (whether registered or unregistered and any applications for
registration therefor, including any modifications, extensions or renewals
thereof), (4) trade secrets, know-how and confidential business information
and rights in any jurisdiction to limit the use or disclosure thereof by
any Person, (5) Software, (6) Internet domain names, and (7) moral rights,
publicity rights and customer lists. "Software" means any and all (A)
computer programs, including any and all software implementations of
algorithms, models and methodologies, whether in source code or object
code, (B) databases and compilations, including any and all data and
collections of data, whether machine readable or otherwise, (C)
descriptions, schematics, flow-charts and other work product used to
design, plan, organize and develop any of the foregoing and (D) all
documentation, including user manuals and training materials, relating to
any of the foregoing.
6K. Immigration. To the Company's Knowledge, the Company and its U.S.
Subsidiaries have complied with all relevant provisions of Section 274(A) of the
Immigration and Nationality Act, as amended (the "Immigration Act"). Without
limiting the foregoing, (a) each "employee" (as that term is defined in the
Immigration Act) of the Company or its Subsidiaries are permitted to be so
employed in the United States under the Immigration Act; (b) the Company and its
Subsidiaries have examined (and made copies of, if applicable) the documents
presented by such employee to establish appropriate employment eligibility under
the Immigration Act; (c) the Company and its Subsidiaries have completed and
required each employee hired on or since November 11, 1986 to complete a Form
I-9 verifying employment eligibility under the Immigration Act; (d) the Company
and its Subsidiaries have retained each such completed Form I-9 for the length
of time required under the Immigration Act; and (e) no monetary penalties have
been assessed against the Company or its Subsidiaries for violation of Section
274(A) of the Immigration Act.
6L. Litigation, etc. Except as disclosed in the SEC Reports or such as
are not required to be disclosed in the SEC Reports, there are no actions,
suits, proceedings, orders, investigations or claims pending or, to the
Knowledge of the Company, threatened against or
25
affecting the Company or any Subsidiary (or pending or, to the Knowledge of the
Company, threatened against or affecting any of the officers, directors or
employees of the Company and its Subsidiaries with respect to their businesses
or proposed business activities), or pending or threatened by the Company or any
Subsidiary against any third party, at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality
(including, without limitation, any actions, suit, proceedings or investigations
with respect to the transactions contemplated by this Agreement); neither the
Company nor any Subsidiary is subject to any arbitration proceedings under
collective bargaining agreements or otherwise or any governmental investigations
or inquiries (including, without limitation, inquiries as to the qualification
to hold or receive any license or permit); and, to the Company's Knowledge,
there is no basis for any of the foregoing. Neither the Company nor any
Subsidiary is subject to any material judgment, order or decree of any court or
other governmental agency, and neither the Company nor any Subsidiary has
received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed, from a legal standpoint, to any liability or
disadvantage which may be material to its business.
6M. Brokerage, etc. There are no (i) claims for brokerage commissions,
finders' fees or similar compensation in connection with the purchase of Series
B Preferred Stock by the Purchasers contemplated by this Agreement based on any
arrangement or agreement binding upon the Company or any Subsidiary or (ii)
special bonuses or other similar compensation payable to any employee of the
Company or any of its Subsidiaries or any "accelerated vesting" in connection
with the transactions contemplated hereby and the Company shall pay, and hold
each Purchaser harmless against, any liability, loss or expense (including,
without limitation, reasonable attorneys' fees and out-of-pocket expenses)
arising in connection with any such claim.
6N. Governmental Consent, etc. No permit, consent, approval or
authorization of, or declaration to or filing with, any Governmental Entity is
required in connection with the execution, delivery and performance by the
Company of this Agreement (including the issuance and sale of the Preferred
Stock to the Purchasers hereunder) or the other agreements contemplated hereby,
or the consummation by the Company of any other transactions contemplated hereby
or thereby.
6O. ERISA. In each case, except as disclosed in the SEC Reports or as
reflected or accrued for in the Latest Financial Statements:
(i) The Company has no material liability or potential liability
with respect to any "employee pension benefit plan" (as such term is
defined in Section 3(2) of ERISA) that is subject to Section 302 of Title I
of ERISA, Title IV of ERISA or Section 412 of the IRC or any "multiemployer
plan" (as such term is defined in Section 3(37) of ERISA). No Plan is a
"multiple employer plan" (as defined in Section 413 of the IRC).
(ii) Each Plan and any related trust, insurance contract or fund
has been maintained, funded and administered in compliance in all material
respects with its respective terms and with all applicable laws and
regulations, including, but not limited to, ERISA and the IRC. No asset of
the Company is subject to any lien under ERISA or the IRC, and the Company
has not incurred any liability under Title IV of ERISA or to
26
the PBGC. There are no pending or threatened actions, suits, investigations
or claims with respect to any Plan, other than routine claims for benefits.
(iii) With respect each Plan, all required payments, premiums,
contributions, reimbursements or accruals for all periods (or partial
periods) ending prior to or as of the Closing Date shall have been made or
properly accrued on the Latest Balance Sheet. None of the Plans has any
material unfunded liabilities which are not reflected on the Latest Balance
Sheet.
6P. Compliance with Laws. Except as disclosed in the SEC Reports, the
Company and each of its Subsidiaries has complied and is in material compliance
in all material respects with all applicable laws, ordinances, codes, rules,
requirements and regulations of foreign, federal, state and local governments
and all agencies thereof relating to the operation and ownership of its business
and the maintenance and operation of its properties and assets and no notices
have been received by and no claims have been filed against the Company or any
of its Subsidiaries alleging a material violation of any such laws, ordinances,
codes, rules, requirements or regulations. The Company and each of its
Subsidiaries holds and is in material compliance with all material permits,
licenses, bonds, approvals, certificates, registrations, accreditation and other
authorizations of all foreign, federal, state and local governmental agencies
required for the conduct of its business and the occupation and ownership of its
properties and facilities. No notices have been received by the Company or any
of its Subsidiaries alleging the failure to hold any of the foregoing.
6Q. Environmental and Safety Matters.
(i) The Company and its Subsidiaries have materially complied
with and are currently in material compliance with all Environmental and
Safety Requirements, and neither the Company nor its Subsidiaries have
received any oral or written notice, report or information regarding any
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) or any corrective, investigatory or remedial obligations arising
under Environmental and Safety Requirements which relate to the Company or
its Subsidiaries or any of their properties or facilities.
(ii) To the Company's Knowledge, none of the following exists at
any property or facility owned, occupied or operated by the Company or any
of its Subsidiaries: (A) underground storage tanks or surface impoundments;
(B) asbestos-containing materials in any form or condition; or (C)
materials or equipment containing polychlorinated biphenyls. To the
Company's Knowledge, neither the Company nor any of its Subsidiaries has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled or released any substance (including, without
limitation, any hazardous substance) or owned, occupied or operated any
facility or property, so as to give rise to liabilities of the Company or
its Subsidiaries for response costs, natural resource damages or attorneys
fees pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), as amended, or any other Environmental
and Safety Requirements.
27
6R. Application of Takeover Protections. Neither the Company nor any
Purchaser (with respect to its purchase of Preferred Stock pursuant to this
Agreement, the issuance of Common Stock upon conversion thereof and changes or
circumstances that may occur as a result of the terms of the Preferred Stock,
whether pursuant to Section 5C of the Certificate of Designation or otherwise
(but not including, for the avoidance of doubt, any purchase or other
acquisition by any such holder of additional securities of the Company other
than acquisitions that result from the terms of the Preferred Stock)) is subject
or party to (i) any "fair price," "moratorium," "control share acquisition,"
"business combination" or other anti-takeover statute or regulation or provision
enacted under federal or state laws (including, but not limited to, Section 203
of the DGCL) or under the Articles of Incorporation or Bylaws or other governing
documents, or (ii) any shareholder rights plan or poison pill plan or any
similar arrangement relating to accumulations of beneficial ownership of the
Company's capital stock or a change in control of the Company. The Company, its
shareholders and its Board have taken all necessary action, if any, in order to
render any such statutes and regulations, provisions and plans inapplicable to
the initial purchase by the Purchasers of Preferred Stock, the conversion
thereof to Common Stock and any changes or circumstances that may occur as a
result of the terms of the Preferred Stock, whether pursuant to Section 5C of
the Certificate of Designation or otherwise (but not including, for the
avoidance of doubt, any purchase or other acquisition by any such holder of
additional securities of the Company other than acquisitions that result from
the terms of the Preferred Stock)).
6S. Disclosure. Neither this Agreement, any of the Exhibits or
Schedules attached hereto or delivered in connection herewith nor any of the
written statements, documents, certificates or other items prepared and supplied
to the Purchasers by or on behalf of the Company with respect to the
transactions contemplated hereby contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein, in light of the circumstances in which they were made, not misleading.
6T. Closing Date. The representations and warranties of the Company
contained in this Section 6 and elsewhere in this Agreement and all information
contained in any exhibit, schedule or attachment hereto or in any certificate or
other writing delivered by, or on behalf of, the Company to any Purchaser at the
Closing shall be true and correct in all material respects on the date of the
Closing as though then made, except as affected by the transactions expressly
contemplated by this Agreement.
Section 7. Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"Affiliate" of any particular Person means (i) any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise and (ii) if such Person is a
partnership or limited liability company, any partner or member thereof.
"Affiliated Group" means any affiliated group as defined in IRC
Section 1504 that has filed a consolidated return for federal income tax
purposes (or any similar group under state,
28
local or foreign law) for a period during which any of the Company or any of its
Subsidiaries was a member.
"Alternative Transaction" means any (i) reorganization, dissolution,
liquidation or recapitalization of the Company or involving the Company, (ii)
sale of any capital stock or other equity interests in the Company (other than
the grant or exercise of employee stock options or restricted stock in
accordance with the Permitted Stock Plans ), (iii) direct or indirect
acquisition or purchase of any capital stock or other equity interests of the
Company or any tender offer or exchange offer that, if consummated, would result
in any Person beneficially owning 10% or more of any class of equity securities
of the Company or (v) any similar transaction involving the Company or its
capital stock.
"Alternative Transaction Proposal" means any proposal, offer, inquiry
or contact with respect to an Alternative Transaction.
"Articles of Incorpation" has the meaning given to such term in
Section 2C above.
"Bylaws" has the meaning given to such term in Section 2D above.
"Board" means the Company's board of directors.
"Certificate of Designation" has the meaning given to such term in
Section 2B above.
"Closing" has the meaning given to such term in Section 1C above.
"Closing Date" has the meaning given to such term in Section 1C above.
"COBRA" has the meaning given to such term in Section 6R(v) above.
"Common Stock" means the Company's common stock, par value $0.01 per
share.
"Company Offer" has the meaning given to such term in Section 5E
above.
"Company Sale" means (i) any consolidation or merger of the Company
with or into another entity or entities (whether or not the Company is the
surviving entity), (ii) any sale or transfer by the Company of all or
substantially all of its assets (determined either for the Company alone or with
its Subsidiaries on a consolidated basis), or (iii) any transaction or event
(including, without limitation, any sale, transfer or issuance or series of
sales, transfers and/or issuances of Common Stock by the Company or any holders
thereof) which results in any Person or group of Persons (as the term "group" is
used under the Securities Exchange Act of 1934), owning (including "beneficial
ownership," as that term is used under the Securities Exchange Act of 1934, as
amended) more than 25% of the Common Stock outstanding at the time of such
transaction or event, or of capital stock of the Company possessing the voting
power (under ordinary circumstances) to elect a majority of the Company's Board
of Directors.
"Company Parties" has the meaning given to such term in Section 3M(i)
above.
29
"Confidentiality Agreement" means any agreement respecting the
confidential treatment of information with respect to the Company entered into
between the Company and any Purchaser or its Affiliates prior to the date
hereof.
"Election Period" has the meaning given to such term in Section 5E
above.
"Environmental and Safety Requirements" means all federal, state,
local and foreign statutes, regulations, ordinances and other provisions having
the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including, without limitation, all those relating
to the presence, use, production, generation, handling, transport, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
Release, threatened Release, control or cleanup of any hazardous or otherwise
regulated materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation).
"Equity Securities" has the meaning given to such term in Section 4F
above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto.
"Event of Noncompliance" has the meaning given such term in the
Certificate of Designation.
"Funded Debt" means at a particular time, without duplication, (i) any
indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, guarantee or other debt security and (iii) any indebtedness described in
clauses (i) or (ii) guaranteed in any manner by a Person (including, without
limitation, guarantees in the form of an agreement to repurchase or reimburse);
provided that "Funded Debt" shall not include any loans between the Company
and/or its Wholly-Owned Subsidiaries.
"Future SEC Reports" has the meaning given to such term in Section
6E(i) above.
"GAAP" means generally accepted accounting principles, consistently
applied.
"Governmental Approvals" has the meaning given to such term in Section
2H above.
"Governmental Entity" means a domestic (federal, state, municipal or
local) or foreign government or governmental, regulatory or administrative
subdivision, department, authority, agency, commission, board, bureau, court of
instrumentality or arbitrator of any kind.
"Indebtedness" means at a particular time, without duplication, (i)
any indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness for the deferred
purchase price of property or services with
30
respect to which a Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business), (iv) any commitment by which a Person assures
a creditor against loss (including, without limitation, contingent reimbursement
obligations with respect to letters of credit), (v) any indebtedness guaranteed
in any manner by a Person (including, without limitation, guarantees in the form
of an agreement to repurchase or reimburse), (vi) any obligations under
capitalized leases with respect to which a Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or with respect to which
obligations a Person assures a creditor against loss, (vii) any indebtedness
secured by a Lien on a Person's assets and (viii) any unsatisfied obligation for
"withdrawal liability" to a "multiemployer plan" as such terms are defined under
ERISA; provided that "Indebtedness" shall not include any loans between the
Company and/or its Wholly-Owned Subsidiaries.
"Indemnified Liabilities" has the meaning given to such term in
Section 8E(i) below.
"Indemnitees" has the meaning given to such term in Section 8E(i)
below.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service marks,
trade dress, trade names, Internet domain names, logos and corporate names and
registrations and applications for registration thereof together with all of the
goodwill associated therewith, (iii) copyrights (registered or unregistered) and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and client and supplier lists and information),
(vii) other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
"Investment" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"IRS" means the United States Internal Revenue Service.
"Latest Balance Sheet" means the balance sheet included in the
consolidated annual financial statements of the Company and its Subsidiaries as
of December 31, 2005, for the 12 month period then ended, and included in the
Company's SEC Reports.
31
"Letter of Intent" means that certain letter agreement dated April 12,
2006, between Xxxxx Xxxxxxx Equity Partners Inc. and the Company.
"Liens" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any Subsidiary or any Affiliate,
any filing or agreement to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to the Company or any Subsidiaries under a
lease which is not in the nature of a conditional sale or title retention
agreement, or any subordination arrangement in favor of another Person (other
than any subordination arising in the ordinary course of business).
"Majority Holders" means the holders of a majority of the then
outstanding Preferred Stock, excluding any shares of Preferred Stock held by a
holder or group of affiliated holders of less than 10% of the then outstanding
Preferred Stock not deemed held by another Person pursuant to the following
proviso; provided that a Person shall be deemed to hold Preferred Stock for
purposes of this definition if such Person has the right to vote or otherwise
exercise decisions with respect to such shares of Preferred Stock (whether by
irrevocable proxy, voting agreement or otherwise) on matters relating to the
election and removal of the Series B Director pursuant to Section 4A of the
Certificate of Designation and the making of all decisions granted to the
Majority Holders pursuant to this Agreement and the Certificate of Designation
even if such Person is not the record holder or beneficial owner of such shares.
"Majority Purchasers" means, as of any date of determination, the
Purchasers set forth on the Schedule of Purchasers who would purchase a majority
of the Preferred Stock being offered at the Closing if the Closing were to occur
on such date of determination.
"Market Price" of any security means the average, over a period of 20
days consisting of the day as of which "Market Price" is being determined and
the 19 consecutive trading days prior to such day, of the closing prices of such
security's sales on the principal securities exchange on which such security may
at the time be listed, or, if there has been no sales on such exchange on any
day, the average of the highest bid and lowest asked prices on such exchange at
the end of such day, or, if on any day such security is not so listed, the
average of the representative bid and asked prices quoted on The Nasdaq National
Market as of 4:00 P.M., New York time, or, if on any day such security is not
quoted on The Nasdaq National Market, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization. If at any time such security is not listed on any securities
exchange or quoted in the Nasdaq National Market System or the over-the-counter
market, the "Market Price" shall be the fair value thereof determined jointly by
the Company and the Majority Holders. If such parties are unable to reach
agreement within a reasonable period of time, such fair value shall be
determined by an independent appraiser experienced in valuing securities jointly
selected by the Company and the Majority Holders. The determination of such
appraiser shall be final and binding upon the parties, and the Company shall pay
the fees and expenses of such appraiser.
32
"Material Adverse Effect." An event, violation, inaccuracy,
circumstance or other matter will be deemed to have a "Material Adverse Effect"
on the Company and its Subsidiaries if such event, violation, inaccuracy,
circumstance or other matter had or could reasonably be expected to have a
material adverse effect on (i) the business, condition, capitalization, assets,
liabilities, operations or financial performance of the Company and its
Subsidiaries taken as a whole, (ii) the ability of the Company to consummate the
Merger or any of the other transactions contemplated by this Agreement or to
perform any of its obligations under this Agreement, or (iii) the Company's
ability to vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving Corporation;
provided, however, that in no event shall any of the following, alone or in
combination, be deemed to constitute a Material Adverse Effect: any material
adverse change, event, circumstance or development with respect to, or effect
resulting from, (A) changes after the date of this Agreement in the United
States or global economy or capital markets in general that do not have a
materially disproportionate effect on the Company and its Subsidiaries, taken as
a whole, (B) changes after the date of this Agreement that affect generally the
software industry but that do not have a materially disproportionate effect on
the Company and its Subsidiaries, taken as a whole, (C) changes after the date
of this Agreement in applicable law or in GAAP, (D) any decline in customer
orders, or any resignation of any employees, in each case to the extent
attributable to the public announcement or pendency of the Merger, (E) changes
in the market price or trading volume of the Company Common Stock (provided,
however, that the exception in this clause shall not in any way prevent or
otherwise affect a determination that any change, event, circumstance,
development or effect underlying such decrease has resulted in, or contributed
to, a Company Material Adverse Effect), (F) failure(s) by the Company to meet
internal operating projections or forecasts, or published revenue or earnings
predictions (provided, however, that the exception in this clause shall not in
any way prevent or otherwise affect a determination that any change, event,
circumstance, development or effect underlying such decrease has resulted in, or
contributed to, a Company Material Adverse Effect), (G) any act or threat of
terrorism or war, any armed hostilities or terrorist activities, any threat or
escalation of armed hostilities or terrorist activities or any governmental or
other response or reaction to any of the foregoing, and (H) any effects
resulting from any legal proceeding against the Company by the stockholders of
the Company challenging or seeking to restrain or prohibit the consummation of
the Merger. An event, violation, inaccuracy, circumstance or other matter will
be deemed to have a "Material Adverse Effect" on the Company if such event,
violation, inaccuracy, circumstance or other matter had or would reasonably be
expected to have a material adverse effect on (i) the business, condition,
capitalization, assets, liabilities, operations or financial performance of the
Company and its Subsidiaries taken as a whole; provided, however, that a decline
in Parent's stock price shall not, in and of itself, be deemed to constitute a
Material Adverse Effect on Parent, or (ii) the ability of Parent to consummate
the Merger or any of the other transactions contemplated by the Agreement
(including, but not limited to, the Financing) or to perform any of its
obligations under the Agreement.
"Knowledge", as it pertains to the Company or its Subsidiaries, means
the actual, current knowledge of the Chief Executive Officer, the Chief
Financial Officer and the General Counsel of the Company.
"Officer's Certificate" means a certificate signed by the Company's
president or its chief financial officer (in his capacity as an officer of the
Company and not in his personal or any
33
other capacity), stating that (i) the officer signing such certificate has made
or has caused to be made such investigations as are reasonably necessary in
order to permit him to verify the accuracy of the information set forth in such
certificate and (ii) to the best of such officer's knowledge, such certificate
does not misstate any material fact and does not omit to state any fact
necessary to make the certificate not misleading.
"Party" or "Parties" has the meaning given to such term in the
Preamble above.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Permitted Liens" means:
(i) tax liens with respect to taxes not yet due and payable or
which are being contested in good faith by appropriate proceedings and for
which appropriate reserves have been established in accordance with GAAP;
(ii) deposits or pledges made in connection with, or to secure
payment of, utilities or similar services, workers' compensation,
unemployment insurance, old age pensions or other social security
obligations;
(iii) purchase money security interests in any property acquired
by the Company or any Subsidiary to the extent permitted by this Agreement;
(iv) interests or title of a lessor under any lease permitted by
this Agreement;
(v) mechanics', materialmen's or contractors' liens or
encumbrances or any similar lien or restriction for amounts not yet due and
payable;
(vi) easements, rights-of-way, restrictions and other similar
charges and encumbrances of record not interfering with the ordinary
conduct of the business of the Company and its Subsidiaries or detracting
from the value of the assets of the Company and its Subsidiaries; and
(vii) liens outstanding on the date hereof which secure
Indebtedness and which are described in the schedules to this Agreement.
"Permitted Stock Plans" means the following stock option plans of the
Company, each of which have been approved by the Company's stockholders in
accordance with the applicable rules of the Nasdaq National Market: 1995 Stock
Option Plan, 1996 Stock Option Plan, 1996 Outside Director Stock Option Plan,
1998 Non-statutory Stock Option Plan and 2005 Performance Incentive Plan.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a Governmental Entity.
34
"Plan" has the meaning given to such term in Section 6R(i) above.
"Preferred Stock" has the meaning given to such term in Section 1A
above and shall include any securities issued directly or indirectly with
respect thereto by way of a stock split, stock dividend or other division of
securities, or in connection with a combination of securities, recapitalization,
merger, consolidation or other reorganization, other than shares of Common Stock
issued upon conversion of the Preferred Stock.
"Preferred Stock Purchase Price" has the meaning given to such term in
Section 1B above.
"Public Offering" means any underwritten sale of the Company's common
stock pursuant to an effective registration statement under the Securities Act
filed with the Securities and Exchange Commission.
"Purchaser" or "Purchasers" has the meaning given to such term in the
Preamble above.
"Registration Agreement" has the meaning given to such term in Section
2E above.
"Representative" means, with respect to any Person, any of such
Person's officers, directors, employees, agents, attorneys, accountants,
consultants, equity financing partners or financial advisors or other Person
associated with, or acting for or on behalf of, such Person.
"Restricted Securities" means (i) the Preferred Stock issued
hereunder, (ii) the Common Stock issued upon conversion of the Preferred Stock
issued hereunder and (iii) any securities issued with respect to the securities
referred to in clauses (i) or (ii) above by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) been distributed
to the public through a broker, dealer or market maker pursuant to Rule 144 (or
any similar provision then in force) under the Securities Act or become eligible
for sale pursuant to Rule 144(k) (or any similar provision then in force) under
the Securities Act or (c) been otherwise transferred and new certificates for
them not bearing the Securities Act legend set forth in Section 5C(i) have been
delivered by the Company in accordance with Section 5D. Whenever any particular
securities cease to be Restricted Securities, the holder thereof shall be
entitled to receive from the Company, without expense, new securities of like
tenor not bearing a Securities Act legend of the character set forth in Section
5C(i). Any reference herein to a "majority of the Restricted Securities" or the
"number of Restricted Securities" or words of like effect for purposes of
comparison or calculation shall refer, with respect to any particular Restricted
Securities, to the number of shares of Common Stock (or equivalent common equity
securities of the Company) then represented by such Restricted Securities (on a
fully diluted, as-if-converted basis).
"Sale Notice" has the meaning given to such term in Section 5E above.
35
"SEC Reports" has the meaning given to such term in Section 6E(i)
above.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"Series B Director" means the directors that the holders of Preferred
Stock are entitled to elect pursuant to the Certificate of Designation.
"Shareholders Meeting" has the meaning given to such term in Section
3L(i) above.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. Notwithstanding the
foregoing, "Subsidiary" also shall include each "significant subsidiary" of the
Company, as such term is defined in Rule 1-02 of Regulation S-X. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity. For purposes of this Agreement, if the context does not otherwise
specify in respect of which Person the term "Subsidiary" is used, the term
"Subsidiary" shall refer to a Subsidiary of the Company.
"Tax" or "Taxes" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
36
"Transaction Documents" means this Agreement (including all exhibits
attached hereto), the Registration Agreement, and any other agreements entered
into between the Company and any Purchaser after the date hereof and on or prior
to the Closing Date and any certificate executed and delivered on or prior to
the Closing pursuant to Section 2.
"Transferring Shareholder" has the meaning given to such term in
Section 5E above.
"Treasury Regulations" means the United States Treasury Regulations
promulgated under the IRC, and any reference to any particular Treasury
Regulation section shall be interpreted to include any final or temporary
revision of or successor to that section regardless of how numbered or
classified.
"WARN Act" has the meaning given to such term in Section 6Q(iii).
"WARN Event" has the meaning given to such term in Section 6Q(iii).
"Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary of which all of the outstanding capital stock or other ownership
interests are owned by such Person or another Wholly-Owned Subsidiary of such
Person.
"Worksite Employees" means any employee of the Company or any of its
Subsidiaries that is also employed by one of the Company's or any of its
Subsidiary's clients.
Section 8. Miscellaneous.
8A. Termination.
(i) Conditions of Termination. This Agreement may be terminated
at any time prior to the Closing:
(a) by the mutual written consent of the Majority Purchasers
and the Company;
(b) by the Majority Purchasers if there has been a material
misrepresentation, material breach of warranty or material breach of a
covenant by the Company in the representations and warranties or covenants
set forth in this Agreement or the Schedules and Exhibits attached hereto
or delivered in connection herewith;
(c) by the Company if a Company Sale has occurred or the
Company obtains knowledge that a Company Sale is proposed; provided,
however, that immediately prior terminating this Agreement pursuant to this
Section 8A(i)(c), the Company must make the payment contemplated by Section
8A(i)(c) below; or
(d) by the Majority Purchasers or the Company if the
transactions contemplated hereby have not been consummated by the
"Termination Date" as such term is defined in the Merger Agreement;
provided, however, that neither the Majority Purchasers nor the Company
shall be entitled to terminate this Agreement
37
pursuant to this Section 8A(i)(d) if such party(ies) has breached any
representation, warranty, covenant or agreement in this Agreement.
(ii) Effect of Termination(a) . In the event of termination of
this Agreement by either the Majority Purchasers or the Company as provided
by Section 8A(i)(a), Section 8A(i)(b) or Section 8A(i)(d) above, this
Agreement shall forthwith become void and of no further force and effect,
except that (i) the covenants and agreements set forth in this Section 8A
shall survive such termination indefinitely, and (ii) nothing in this
Section 8A shall be deemed to release any Party from any liability for any
breach by such Party of the terms and provisions of this Agreement or to
impair the right of any Party to compel specific performance by another
Party of its obligations under this Agreement.
(b) In the event of termination of this Agreement by the
Company as provided by Section 8A(i)(c) above in connection with a Company
Sale, this Agreement shall forthwith become void and of no further force
and effect, except that (i) the covenants and agreements set forth in
Section 8A and Section 8B shall survive such termination indefinitely, and
(ii) the Company shall make a payment to each of the Purchasers in an
amount equal to:(1) (w) the aggregate liquidation value of the shares of
Series B Preferred set forth next to such Purchaser's name on the attached
Schedule of Purchasers.divided by (x) the Initial Conversion price
multiplied by (2) the amount by which the highest price per share of Common
Stock paid or to be paid in such Company Sale exceeds the Initial
Conversion Price.
8B. Fees and Expenses. Whether or not the Closing occurs, the Company
shall pay, and hold the Purchasers and all holders of Preferred Stock harmless
against liability for the payment of, their actual out-of-pocket costs and
expenses (including, without limitation, attorneys', accountants', consultants'
and other advisors' fees and expenses) arising in connection with: (a) the due
diligence review of the Company and its Subsidiaries, the preparation,
negotiation and execution of the Letter of Intent, Transaction Documents and the
consummation of the transactions contemplated hereby or thereby, (b) any
amendments or waivers (whether or not the same become effective) under or in
respect of this Agreement, the agreements contemplated hereby, the Certificate
of Designation or the Articles of Incorporation (including, without limitation,
in connection with any proposed merger, sale or recapitalization of the
Company), (c) stamp and other taxes which may be payable in respect of the
execution and delivery of this Agreement or the issuance, delivery or
acquisition of any shares of Preferred Stock or any shares of Common Stock
issuable upon conversion of the Preferred Stock, and (d) any filing with any
Governmental Entity with respect to its investment in the Company or any other
filing with any Governmental Entity with respect to the Company which mentions
such Person (unless otherwise provided in the Registration Agreement).
8C. Remedies. Each holder of Preferred Stock shall have all rights and
remedies set forth in this Agreement, the Articles of Incorporation and the
Certificate of Designation 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 having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason
38
of any breach of any provision of this Agreement and to exercise all other
rights available under applicable law. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter.
8D. Indemnification.
(i) Indemnification of Purchasers. In consideration of each
Purchaser's execution and delivery of this Agreement and acquiring the
Preferred Stock hereunder and in addition to all of the Company's other
obligations under this Agreement and the other agreements contemplated
hereby, the Company shall defend, protect, indemnify and hold harmless each
Purchaser, each other holder of Preferred Stock and each Person, if any,
who controls any Purchaser within the meaning of Section 15 of the
Securities Act of Section 20 of the Securities Exchange Act, and all of
their officers, directors, employees and agents (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, diminution of
value, costs, penalties, fees, liabilities and damages, and reasonable
actual expenses incurred 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 and expenses incurred in the investigation or defense of any
of the same or in asserting, preserving or enforcing any of their
respective rights hereunder (the "Indemnified Liabilities"), incurred by
the Indemnitees or any of them as a result of, or arising out of, or
relating to (a) the execution, delivery, performance or enforcement of this
Agreement and each of the other Transaction Documents and any other
instrument, certificate, document or agreement executed pursuant hereto by
any of the Indemnitees, (b) any breach of any covenant or agreement of the
Company under this Agreement or any other Transaction Document or (c) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Preferred Stock
(excluding the application of the Company's working capital), except in
each case to the extent such Indemnified Liabilities directly result from
the particular Indemnitee's gross negligence or willful misconduct or any
breach of the representations and warranties set forth in this Agreement by
such Indemnitee. 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.
(ii) Actions against Parties; Notification. Each Indemnitee shall
give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may
be sought hereunder, but failure to so notify an indemnifying party shall
not relieve such indemnifying party from any liability hereunder to the
extent it is not materially prejudiced as a result thereof, and in
39
any event shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of such action;
provided, however, that counsel to the indemnifying party shall not (except
with the consent of the Indemnitee) also be counsel to the Indemnitee. In
no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from
their own counsel for all Indemnitees in connection with any one action or
separate but similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances. No indemnifying party
shall, without the prior written consent of the Indemnitees (such consent
not to be unreasonably withheld; provided, however, that any Indemnitee may
withhold consent in its sole and absolute discretion to any settlement (A)
with respect to which the matter for indemnification relates to or arises
in connection with any criminal proceeding, action, indictment, allegation
or investigation brought against such Indemnitee, (B) if the Indemnitee
reasonably believes the settlement, compromise or consent to the entry of
any judgment would be detrimental to or injure the Indemnitee's reputation
or future business prospects or (C) which would result in an injunction or
equitable relief against the Indemnitee), settle or compromise or consent
to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any Governmental Entity, commenced or
threatened, or any claim whatsoever in respect to which indemnification or
contribution could be sought under this Section 8D (whether or not the
Indemnitees are actual or potential parties thereto), unless such
settlement, compromise or consent (a) includes an unconditional release of
each indemnified party from all liability arising out of such litigation
investigation, proceeding or claim and (b) does not include a statement as
to or an admission of fault, culpability or a failure to act by or on
behalf of any Indemnitee.
8E. Purchaser's Investment Representations. Each Purchaser hereby
represents and warrants for itself individually and ratably and not jointly and
severally, that:
(i) Organization, Good Standing, Power, Authority, Etc. Such
Purchaser is validly organized and existing and in good standing under the
laws of its jurisdiction of organization and has full power and authority
to execute and deliver each of the Transaction Documents to which such
Purchaser is a party, and to perform its obligations hereunder or
thereunder. Such Purchaser has taken all necessary corporate or other
organizational action in order to authorize the execution and delivery of
each of the Transaction Documents to which such Purchaser is a party and
the consummation of the transactions contemplated hereby or thereby, and
each such agreement is a valid and binding obligation of such Purchaser,
enforceable in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, similar laws
affecting creditors' rights generally or general principles of equity.
(ii) No Conflicts; No Consents. Neither the execution nor
delivery of any of the Transaction Documents to which such Purchaser is a
party nor the consummation by such Purchaser of the purchase of the
Preferred Stock contemplated hereby will conflict with, or result in any
violation of, or constitute any default under, any provision of such
Purchaser's organizational documents. Such Purchaser is not required to
submit any notice, report or other filing with any governmental authority
in connection
40
with the execution or delivery by it of this Agreement or the consummation
of the transactions contemplated hereby. No consent, approval or
authorization of any governmental or regulatory authority or any other
party or person is required to be obtained by such Purchaser (but in no
event including any consent, approval or authorization of any governmental
or regulatory authority necessitated by the status of the Company or its
business) in order to execute, deliver and perform its obligations under
this Agreement. Such Purchaser is not aware of any reason why the
provisions of Section 2P will not be satisfied as to such Purchaser.
(iii) Ownership of Securities. As of immediately prior to the
date hereof, such Purchaser does not own any debt or equity securities
issued by the Company.
(iv) Investor Suitability. Such Purchaser is an "accredited
investor" as such term is defined in Rule 501 promulgated under the
Securities Act.
(v) Disclosure of Information. Such Purchaser acknowledges that
it or its representatives have been furnished with all information
regarding the Company and its business, assets, results of operations and
financial condition that the Purchaser has requested. Such Purchaser has
had an opportunity to ask questions of and receive answers from the Company
regarding the Company and its business, assets, results of operations, and
financial condition and the terms and conditions of the issuance of the
Securities; however, no representations or warranties have been made by the
Company to the Purchasers in their capacity as Purchasers except as are set
forth in this Agreement. NOTHING CONTAINED IN THIS SECTION 8E(v) AND NO
INVESTIGATION, OR NEGLIGENCE OF THE PURCHASER IN CONNECTION THEREWITH, BY
PURCHASERS SHALL IN ANY WAY AFFECT THE PURCHASERS' RIGHT TO RELY UPON THE
COMPANY'S REPRESENTATIONS AND COVENANTS CONTAINED IN THIS AGREEMENT.
(vi) Investment Experience. Such Purchaser represents that it has
such knowledge, experience and skill in evaluating and investing in common
and preferred stocks and other securities, based on actual participation in
financial, investment and business matters, so that each is capable of
evaluating the merits and risks of an investment in the Preferred Stock and
has such knowledge, experience and skill in financial and business maters
that each is capable of evaluating the merits and risks of the investment
in the Company and the suitability of the Preferred Stock as an investment
and can bear the economic risk of an investment in the Preferred Stock.
(vii) Brokerage. No broker, finder or other party is entitled to
receive from such Purchaser, any brokerage or finder's fee or any other
fee, commission or payment as a result of the transactions contemplated by
this Agreement for which the Company could have any liability or
responsibility.
(viii) Purchase for Own Account. Such Purchaser is acquiring the
Restricted Securities purchased hereunder or acquired pursuant hereto for
its own account with the present intention of holding such securities for
purposes of investment, and that
41
it has no intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws; provided that nothing contained herein shall prevent any Purchaser or
subsequent holders of Restricted Securities from transferring such
securities in compliance with the provisions of Section 4 hereof.
8F. Consent to Amendments. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the prior written consent of
the Majority Holders outstanding at the time the amendment or waiver becomes
effective or, in the case of any amendment or waiver prior to the Closing, only
if the Company has obtained the consent of the Majority Purchasers; provided
that if any such amendment, modification or waiver would adversely affect any
holder of Preferred Stock, as the case may be, relative to the holders of
Preferred Stock voting in favor of such amendment, modification, or waiver, such
amendment, modification or waiver shall also require the written consent of the
holders of a majority of the Preferred stock, as the case may be, held by all
holders so adversely affected; provided further that if any such amendment,
modification or waiver is to a provision in this Agreement that requires a
specific vote to take an action thereunder or to take an action with respect to
the matters described therein, such amendment, modification or waiver shall not
be effective unless such vote is obtained with respect to such amendment,
modification or waiver. No other course of dealing between the Company and the
holder of any Preferred Stock or any delay in exercising any rights hereunder or
under the Articles of Incorporation, Certificate of Designation or Registration
Agreement shall operate as a waiver of any rights of any such holders. For
purposes of this Agreement, Preferred Stock held by the Company or any
Subsidiary shall not be deemed to be outstanding.
8G. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
Closing of the transactions contemplated hereby, regardless of any investigation
made by any Purchaser or on its behalf.
8H. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the Parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the Parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Purchaser's benefit as a
purchaser or holder of Preferred Stock are also for the benefit of, and
enforceable by, any subsequent holder of such Preferred Stock.
8I. Generally Accepted Accounting Principles. Where any accounting
determination or calculation is required to be made under this Agreement or the
exhibits hereto, such determination or calculation (unless otherwise provided)
shall be made in accordance with GAAP, except that if because of a change in
GAAP the Company would have to alter a previously utilized accounting method or
policy in order to remain in compliance with GAAP, such determination or
calculation shall continue to be made in accordance with the Company's previous
accounting methods and policies.
42
8J. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
8K. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts (including by means of telecopied signature pages), any one
of which need not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same Agreement.
8L. Descriptive Headings; Interpretation. The descriptive headings and
captions used in this Agreement and the table of contents to this Agreement are
for convenience and reference purposes only and shall not constitute a
substantive part of, or affect in any way the meaning or interpretation of, this
Agreement. Any capitalized terms used in any Schedule or Exhibit attached hereto
or delivered in connection herewith and not otherwise defined therein shall have
the meanings set forth in this Agreement. The use of the word "including" herein
shall mean "including without limitation." The Parties intend that each
representation, warranty and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty or covenant.
8M. Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights and obligations
of the Company and its shareholders. All other issues and questions concerning
the construction, validity, enforcement and interpretation of this Agreement and
the Exhibits and Schedules hereto shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
8N. Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Certificate of
Designation shall be in writing and shall be deemed to have been given when
delivered personally to the recipient, telecopied to the recipient (with hard
copy sent by overnight courier in the manner provided hereunder) if sent prior
to 4:00 p.m. Chicago time on a business day (and otherwise, on the immediately
succeeding business day), one business day after being sent to the recipient by
reputable overnight courier service (charges prepaid) or three business days
after being mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Company at the address indicated below and
to the Purchasers at the addresses indicated on the Schedule of Purchasers
attached hereto:
JDA Software Group, Inc.
43
00000 X. 00xx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
DLA Xxxxx Xxxxxxx Xxxx Xxxx US LLP
0000 Xxxxx Xxxxx Xxxxx., Xxx. 000
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
or to such other address or to the attention of such other Person as the
recipient Party has specified by prior written notice to the sending Party.
8O. Press Releases. None of the Parties will issue any press release
or public statement with respect to the transactions contemplated hereby without
the prior consent of the Company and the Majority Purchasers, except as may be
required by applicable law or obligations pursuant to any listing agreement with
any national securities exchange (with it being understood, however, that the
Parties will consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any such press release or public
announcement). The Parties agree that the initial press release or releases to
be issued with respect to the transactions contemplated by this Agreement shall
be agreed upon by the Company and the Purchasers prior to the issuance thereof
(but the content thereof shall be subject to the requirements of applicable law
and any obligations pursuant to any listing agreement with any national
securities exchange).
8P. No Strict Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement.
8Q. Complete Agreement. Except as otherwise expressly set forth
herein, this Agreement and the other agreements, certificates and instruments
expressly required to be delivered hereby embody the complete agreement and
understanding of the parties hereto and supersede and preempt any prior
understandings, agreements or representations by or among the parties, whether
written or oral, which may have related to the subject matter hereof in any way,
including the Letter of Intent and the Confidentiality Agreement. The parties
hereto acknowledge and agree there are no oral understandings or agreements
between them with respect to the subject matter hereof.
* * * * *
44
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
JDA SOFTWARE GROUP, INC.
By: /s/ Hamish X. Xxxxxx
------------------------------------
Its: President and Chief Executive Officer
-----------------------------------
XXXXX XXXXXXX FUND VII, L.P.
By: TC Partners VII, L.P.
Its: General Partner
By: Xxxxx Xxxxxxx Equity Partners Inc.
Its: General Partner
By: /s/ Xxxxxxx Xxxxx
------------------------------------
Its: Managing Director
XXXXX XXXXXXX FRIENDS FUND VII, L.P.
By: TC Partners VII, L.P.
Its: General Partner
By: Xxxxx Xxxxxxx Equity Partners Inc.
Its: General Partner
By: /s/ Xxxxxxx Xxxxx
------------------------------------
Its: Managing Director
LIST OF EXHIBITS
Exhibit A - Certificate of Designation
Exhibit B - Articles of Incorporation
Exhibit C - Bylaws
Exhibit D - Registration Agreement
