Exhibit 10.30
BLUESTONE SOFTWARE, INC.
SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
April 22, 1998
TABLE OF CONTENTS
Page
1. Purchase and Sale of Stock........................................................................1
1.1 Sale and Issuance of Series B Preferred Stock..............................................1
1.2 Closing....................................................................................1
2. Representations and Warranties of the Company.....................................................2
2.1 Organization, Good Standing and Qualification..............................................2
2.2 Capitalization and Voting Rights...........................................................2
2.3 Subsidiaries...............................................................................3
2.4 Authorization..............................................................................3
2.5 Valid Issuance of Preferred and Common Stock...............................................3
2.6 Governmental Consents......................................................................4
2.7 Offering...................................................................................4
2.8 Litigation.................................................................................4
2.9 Patents and Trademarks.....................................................................4
2.10 Compliance with Other Instruments..........................................................5
2.11 Agreements; Action.........................................................................5
2.12 Related-Party Transactions.................................................................6
2.13 Financial Plan.............................................................................7
2.14 Permits....................................................................................7
2.15 Environmental and Safety Laws..............................................................7
2.16 Manufacturing and Marketing Rights.........................................................7
2.17 Disclosure.................................................................................7
2.18 Registration Rights........................................................................7
2.19 Title to Property and Assets...............................................................8
2.20 Financial Statements.......................................................................8
2.21 Changes....................................................................................8
2.22 Employee Benefit Plans.....................................................................9
2.23 Tax Matters................................................................................10
2.24 Insurance..................................................................................12
2.25 Books and Records..........................................................................12
2.26 Use of Proceeds............................................................................12
2.27 Labor Matters..............................................................................12
3. Representations and Warranties of the Investors...................................................12
3.1 Authorization..............................................................................13
3.2 Purchase Entirely for Own Account..........................................................13
3.3 Disclosure of Information..................................................................13
3.4 Investment Experience......................................................................13
3.5 Accredited Investor........................................................................13
3.6 Restricted Securities......................................................................13
3.7 Further Limitations on Disposition.........................................................14
3.8 Legends....................................................................................14
4. Conditions of Investor's Obligations at Closing...................................................14
4.1 Representations and Warranties.............................................................15
4.2 Performance................................................................................15
4.3 Compliance Certificate.....................................................................15
4.4 Qualifications.............................................................................15
4.5 Proceedings and Documents..................................................................15
4.6 Opinion of Company Counsel.................................................................15
4.7 Investors' Rights Agreement................................................................15
4.8 Right of First Refusal and Co-Sale Agreement...............................................15
4.9 Voting Agreement...........................................................................15
4.10 Due Diligence..............................................................................16
4.11 Restated Certificate of Incorporation......................................................16
4.12 Related Agreements.........................................................................16
4.13 Waiver of Default..........................................................................16
5. Conditions of the Company's Obligations at Closing................................................16
5.1 Representations and Warranties.............................................................16
5.2 Payment of Purchase Price..................................................................16
5.3 Qualifications.............................................................................16
5.4 Right of First Refusal and Co-Sale Agreement...............................................16
5.5 Voting Agreement...........................................................................17
6. Indemnification...................................................................................17
7. Miscellaneous.....................................................................................18
7.1 Survival of Warranties.....................................................................18
7.2 Successors and Assigns.....................................................................18
7.3 Governing Law..............................................................................18
7.4 Counterparts...............................................................................19
7.5 Titles and Subtitles.......................................................................19
7.6 Notices....................................................................................19
7.7 Finder's Fee...............................................................................19
7.8 Expenses...................................................................................19
7.9 Amendments and Waivers.....................................................................19
7.10 Severability...............................................................................20
7.11 Aggregation of Stock.......................................................................20
7.12 Entire Agreement...........................................................................20
SCHEDULE A Schedule of Investors.....................................................................24
SCHEDULE B Disclosure Letter.........................................................................25
EXHIBIT A Second Amended Restated Certificate of Incorporation.......................................26
EXHIBIT B Opinion of Company Counsel.................................................................27
EXHIBIT C Restated Investors- Rights Agreement.......................................................28
EXHIBIT D Restated Right of First Refusal and Co-Sale Agreement......................................29
EXHIBIT E Restated Voting Agreement..................................................................30
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BLUESTONE SOFTWARE, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 22nd day of April 1998,
by and between Bluestone Software, Inc., a Delaware corporation (the
"Company"), and the investors listed on Schedule A hereto, each of which is
herein referred to as an "Investor."
INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual
agreements stated below, the parties agree as follows:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES B PREFERRED STOCK.
(a) The Company shall adopt and file with the Secretary of
State of Delaware on or before the Closing (as defined below) the Second
Amended and Restated Certificate of Incorporation in the form attached hereto
as EXHIBIT A (the "Restated Certificate").
(b) Subject to the terms and conditions of this Agreement,
each Investor agrees, severally, to purchase at the Closing (as hereafter
defined), and the Company agrees to sell and issue to each Investor at such
Closing, that number of shares of the Company's Series B Convertible
Preferred Stock, $.001 par value per share ("Series B Preferred Stock"), set
forth opposite each Investor's name on SCHEDULE A hereto, at a price of
$1.296 per share.
1.2 CLOSING.
The purchase by the Investors and sale by the Company of
the shares of Series B Preferred Stock hereunder (the "Shares") shall take
place at the offices of Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 12:00 P.M., on April 22, 1998, or at such
other time and place as the Company and the Investors, mutually agree upon
orally or in writing (which time and place are designated as the "Closing");
provided, however, that if acceptable to the Company and the Investors, the
Closing may be effected by facsimile transmission of executed copies of the
documents delivered at the Closing and payment of the purchase price
specified in Section 1.1 and by sending original copies of the documents
delivered at the Closing by reputable overnight delivery service, postage or
delivery charges prepaid, for delivery to the parties at their addresses
stated on the signature page of this Agreement by the third business day
following the Closing. At the Closing the Company shall deliver to each
Investor a certificate representing the Shares that such Investor is
purchasing against payment of the purchase price therefor by check, wire
transfer, or, in the case of the Investors other than General Electric
Capital Corporation, by delivery of 10% Convertible Subordinated Secured
Notes in an aggregate principal amount and accrued interest thereon equal to
the stated value of the Shares purchased therewith, dated March 2, 1998, or
any combination thereof in an amount equal to the purchase price referred to
on SCHEDULE A attached hereto. Any Investor purchasing Shares pursuant to
this Agreement shall become a party to this Agreement, the Restated
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Investors' Rights Agreement, the Restated First Refusal and Co-Sale
Agreement, and the Restated Voting Agreement (each as defined below and
collectively with this Agreement, the "New Transaction Agreements"), all
dated as of the date hereof.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Knowing that each
Investor is relying thereon, the Company hereby represents and warrants to
each Investor that, except as set forth in the Disclosure Letter attached
hereto as SCHEDULE B (the "Disclosure Letter") furnished to each Investor and
special counsel for the Investors, specifically identifying the relevant
subparagraph hereof:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on its business or properties.
2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized capital
of the Company will consist immediately after the Closing, of:
(i) PREFERRED STOCK. (a) 5,526,316 shares of Series A
Convertible Preferred Stock, $.001 par value per share ("Series A Preferred
Stock"), all of which are outstanding; and (b) 8,782,695 shares of Series B
Preferred Stock, which will be sold pursuant to this Agreement. The rights,
privileges and preferences of the Series B Preferred Stock will be as stated
in the Company's Restated Certificate. The Series A Preferred Stock and
Series B Preferred Stock are collectively herein referred to as "Preferred
Stock".
(ii) COMMON STOCK. 36,135,327 shares of common stock,
$.001 par value per share ("Common Stock"), of which (a) 18,382,695 shares
have been reserved for issuance upon conversion of the shares of Series B
Preferred Stock and 5,526,316 shares have been reserved for issuance upon
conversion of the shares of Series A Preferred Stock (together, the
"Conversion Shares"), (b) 700,000 shares have been reserved for issuance upon
conversion of the convertible term note held by ▇▇▇▇ ▇▇▇▇▇▇ in the principal
amount of $500,000 (the "▇▇▇▇ ▇▇▇▇▇▇ Conversion Shares"), (c) 813,250 shares
have been reserved for issuance upon the exercise of outstanding options (the
"1996 Plan Options") granted to certain employees of the Company pursuant to
the Company's Amended and Restated 1996 Incentive and Non-Qualified Stock
Option Plan (the "1996 Plan"), (d) 300,000 shares have been reserved for
issuance upon the exercise of outstanding options granted to ▇▇▇ ▇▇▇▇▇▇ (the
"▇▇▇▇▇▇ Options"), (e) 1,386,750 shares have been reserved for issuance upon
the exercise of options to be granted in the future to certain employees of
the Company under the 1996 Plan, (f) 26,316 shares have been reserved for
issuance upon the exercise of warrants granted to Silicon Valley Bank (the
"Silicon Valley Bank Warrants") and (g) 9,000,000 shares are currently issued
and outstanding.
(iii) The outstanding shares of Common Stock are all duly and
validly authorized and issued, fully paid and nonassessable, and were issued
in accordance with the registration or qualification provisions of the
Securities Act of 1933, as amended (the "Act"), and any relevant state
securities laws or pursuant to valid exemptions therefrom.
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(iv) Except for (a) the conversion privileges of the
Preferred Stock, (b) the rights provided in the registration rights
provisions of the Restated Investors' Rights Agreement, (c) any other rights
created under the New Transaction Agreements, and (d) as of the Closing (I)
700,000 shares of Common Stock reserved for issuance upon conversion of the
convertible term note held by ▇▇▇▇ ▇▇▇▇▇▇ in the principal amount of
$500,000, (II) 300,000 shares of Common Stock reserved for issuance upon
exercise of the ▇▇▇▇▇▇ Options, (III) 813,250 shares of Common Stock reserved
for issuance upon exercise of the 1996 Plan Options, and (IV) 25,000 shares
reserved for issuance upon exercise of the Silicon Valley Bank Warrants,
there are not outstanding any options, warrants, rights (including conversion
or preemptive rights) or agreements for the purchase or acquisition from the
Company of any shares of its capital stock. The Company has reserved an
additional 1,386,750 shares of its Common Stock for purchase upon exercise of
options to be granted in the future to certain employees under the 1996 Plan.
Except for the New Transaction Agreements, the Company is not a party or
subject to any agreement or understanding, and, to the best of the Company's
knowledge, there is no agreement or understanding between any persons and/or
entities, which affects or relates to the voting or giving of written
consents by a director of the Company or the voting or giving of written
consents by a director or stockholder with respect to any security.
2.3 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association,
or other business entity. The Company is not a participant in any joint
venture, partnership, or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of the New Transaction Agreements, the
performance of all obligations of the Company hereunder and thereunder, and
the authorization, issuance (or reservation for issuance), sale and delivery
of the Shares being sold hereunder and the Conversion Shares, has been taken
or will be taken prior to the Closing. The New Transaction Agreements
constitute valid and legally binding obligations of the Company, enforceable
in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws
of general application affecting enforcement of creditors' rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Restated Investors' Rights
Agreement, as amended, may be limited by applicable federal or state
securities laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK. The Shares, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully
paid, and nonassessable, and will be free of restrictions on transfer other
than restrictions on transfer under the New Transaction Agreements and under
applicable state and federal securities laws. The Conversion Shares have been
duly and validly reserved for issuance and, upon issuance in accordance with
the terms of the Restated Certificate, will be duly and validly issued, fully
paid, and nonassessable and will be free of restrictions on transfer other
than restrictions on transfer under the New Transaction Agreements and under
applicable state and federal securities laws.
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2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part
of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement (except such additional steps as
may be necessary to qualify the offer and sale of the Shares under applicable
state securities laws, which such steps have been taken or shall be timely
taken by the Company).
2.7 OFFERING. Subject in part to the truth and accuracy of each
Investor's representations set forth in Section 3 of this Agreement, the
offer, sale and issuance of the Shares as contemplated by this Agreement are
exempt from the registration requirements of the Act, and neither the Company
nor any authorized agent acting on its behalf will take any action hereafter
that would cause the loss of such exemption.
2.8 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that
questions the validity of the New Transaction Agreements or the right of the
Company to enter into such agreements, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or
in the aggregate, in any material adverse change in the assets, condition,
affairs or prospects of the Company, financially or otherwise, or any change
in the current equity ownership of the Company, nor is the Company aware that
there is any basis for the foregoing. The foregoing includes, without
limitation, actions, suits, proceedings or investigations pending or
threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary
to any of their former employers, or their obligations under any agreements
with prior employers. The Company is not a party or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or that the Company intends to
initiate.
2.9 PATENTS AND TRADEMARKS. The Company owns or possesses
sufficient legal rights to all patents, trademarks, service marks, trade
names, copyrights, trade secrets, information, proprietary rights and
processes ("Intellectual Property") necessary for its business as now
conducted and as proposed to be conducted without any conflict with or
infringement of the rights of others. The Disclosure Letter contains a
complete list of all patents and patent applications of the Company. There
are no outstanding options, licenses, or agreements of any kind relating to
any of the Company's Intellectual Property, nor is the Company bound by or a
party to any options, licenses or agreements of any kind with respect to the
Intellectual Property of any other person or entity. The Company has not
received any communications alleging that the Company has violated or, by
conducting its business as proposed to be conducted, would violate any of the
Intellectual Property of any other person or entity. The Company is not aware
that any of the Company's employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of his or her best
efforts to promote the interests of the Company or that would conflict with
the Company's business as proposed to be conducted. Neither the execution nor
delivery of the New Transaction Agreements nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed to be conducted, will, to the best of the
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Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.
The Company does not believe that it is or will be necessary to utilize any
inventions of any of the Company's employees (or people it currently intends
to hire) made prior to their employment by the Company.
2.10 COMPLIANCE WITH OTHER INSTRUMENTS.
(a) The Company is not in violation or default of any
provision of its Restated Certificate or Bylaws, or of any instrument,
judgment, order, writ, decree or contract to which it is a party or by which
it is bound, or, to the best of its knowledge, of any provision of any
federal or state statute, rule or regulation applicable to the Company.
Except as set forth in the Disclosure Letter, the execution, delivery and
performance of the New Transaction Agreements, and the consummation of the
transactions contemplated hereby and thereby, will not result in any such
violation or be in conflict with or constitute, with or without the passage
of time and/or giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event that
results in the creation of any lien, charge or encumbrance upon any assets of
the Company or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations or any of its assets or
properties.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss
of any material right granted under any license, distribution or other
agreement.
2.11 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and
by the New Transaction Agreements, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors
or affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to
which the Company is a party or by which it is bound that may involve (i)
obligations (contingent or otherwise) of, or payments to the Company in
excess of, $25,000, or (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company, or (iii) provisions
restricting or affecting the development, manufacture or distribution of the
Company's products or services, or (iv) indemnification by the Company with
respect to infringements of proprietary rights.
(c) Since the date of the Latest Balance Sheet (as defined
below), the Company (i) has not declared or paid any dividends or authorized
or made any distribution upon or with respect to any class or series of its
capital stock, (ii) except for (A) the convertible term note in the principal
amount of $500,000 payable to ▇▇▇▇ ▇▇▇▇▇▇ (the "▇▇▇▇ ▇▇▇▇▇▇ Term Note"), (B)
the term loan in the original principal amount of $235,000 payable to Silicon
Valley Bank (the "Silicon Valley Bank Term Loan"), (C) the $1,000,000
revolving line of credit with Silicon Valley Bank (the "Silicon Valley Bank
Credit Line"), and (D) the $150,000 convertible line of credit note with
Silicon Valley Bank (the "Silicon Valley Bank Convertible Line of Credit
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Note"), does not currently have outstanding any indebtedness for money
borrowed or any other liabilities individually in excess of $25,000 or, in
the case of indebtedness and/or liabilities individually less than $25,000,
in excess of $75,000 in the aggregate, and (iii) has not made any loans or
advances to any person, other than ordinary advances for travel expenses, has
not sold, exchanged or otherwise disposed of any of its assets or rights,
other than the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including
persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Certificate or Bylaws that materially adversely affects its business
as now conducted or as proposed to be conducted, its properties or its
financial condition.
(f) The Company has not engaged in the past three (3)
months in any discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Company with or
into any such corporation or corporations, (ii) with any corporation,
partnership, association or other business entity or any individual regarding
the sale, conveyance or disposition of all or substantially all of the assets
of the Company or a transaction or series of related transactions in which
more than fifty percent (50%) of the voting power of the Company is disposed
of, or (iii) regarding any other form of acquisition, liquidation,
dissolution or winding up of the Company.
(g) Any agreements, understandings, instruments or
contracts with the parties to contracts listed in Schedule 2.11 of the
Disclosure Letter which were entered into prior to the date of such contracts
listed in Schedule 2.11 of the Disclosure Letter are no longer in force or
effect.
2.12 RELATED-PARTY TRANSACTIONS. No employee, officer, or director
of the Company or member of his or her immediate family or affiliate of any
of the foregoing is indebted to the Company, nor is the Company, except for
its obligations under the ▇▇▇▇ ▇▇▇▇▇▇ Term Notes, indebted (or committed to
make loans or extend or guarantee credit) to any of them. To the best of the
Company's knowledge, none of such persons has any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm
or corporation that competes with the Company, except that employees,
officers, or directors of the Company and members of their immediate families
may own stock in publicly traded companies that may compete with the Company.
No member of the immediate family of any officer or director of the Company
is directly or indirectly interested in any material contract with the
Company.
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2.13 FINANCIAL PLAN. The financial plan attached to the Disclosure
Letter (the "Financial Plan") has been prepared in good faith by the Company
and does not contain any untrue statement of a material fact nor does it omit
to state a material fact necessary to make the statements made therein not
misleading, except that with respect to projections contained in the
Financial Plan, the Company represents only that such projections were
prepared in good faith by the Company and that the Company reasonably
believes there is a reasonable basis for such projections.
2.14 PERMITS. The Company has all franchises, permits, licenses,
and any similar authority necessary for the conduct of its business as now
being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects, or financial condition of the
Company, and the Company believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as planned to
be conducted in the Financial Plan. The Company is not in default in any
material respect under any of such franchises, permits, licenses, or other
similar authority.
2.15 ENVIRONMENTAL AND SAFETY LAWS. To the best of the Company's
knowledge, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and
to the best of its knowledge, no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
2.16 MANUFACTURING AND MARKETING RIGHTS. The Company has not
granted rights to manufacture, produce, assemble, license, market, or sell
its products to any other person and is not bound by any agreement that
affects the Company's exclusive right to develop, manufacture, assemble,
distribute, market or sell its products.
2.17 DISCLOSURE. The Company has fully provided each Investor with
all the information that such Investor has requested for deciding whether to
purchase the Series B Preferred Stock and all information that the Company
believes is reasonably necessary to enable such Investor to make such
decision. Neither the New Transaction Agreements nor any other written
statements or certificates made or delivered in connection herewith or
therewith contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements herein or therein not
misleading. There is no fact within the knowledge of the Company, or any of
the Company's officers which has not been disclosed herein or in writing by
them to the Investors and which materially adversely affects, or in the
future in their opinion may, insofar as they can now foresee, materially
adversely affect the business, properties, assets or condition, financial or
otherwise, of the Company. Other than as stated in the Disclosure Letter,
without limiting the foregoing, the Company has no knowledge or belief that
there exists, or there is, pending or planned, any patent, invention, device,
application or principle or any statute, rule, law, regulation, standard or
condition which would materially adversely affect the condition, financial or
otherwise, or the operations of the Company.
2.18 REGISTRATION RIGHTS. Except as provided in the Restated
Investors' Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
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2.19 TITLE TO PROPERTY AND ASSETS. The Company owns its property
and assets free and clear of all mortgages, liens, loans and encumbrances,
except (i) as reflected in the Financial Statements (as defined below), (ii)
for liens for current taxes not yet delinquent, (iii) for liens imposed by
law and incurred in the ordinary course of business for obligations not past
due to carriers, warehousemen, laborers, materialmen and the like, (iv) for
liens in respect of pledges or deposits under workers' compensation laws or
similar legislation, (v) for minor defects in title, none of which,
individually or in the aggregate, materially interferes with the use of such
property, or (vi) for such encumbrances and liens that arise in the ordinary
course of business and do not materially impair the Company's ownership or
use of such property or assets. With respect to the property and assets it
leases, the Company is in compliance with such leases and, to the best of its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.
2.20 FINANCIAL STATEMENTS. The Company has delivered to each
Investor consolidated audited financial statements (balance sheet, operating
statement and statement of cash flows) of the Company as of and for the
fiscal year ended December 31, 1997 and those of Bluestone Consulting, Inc.,
a New Jersey corporation (the "Predecessor Corporation") as of and for each
of the fiscal years ended December 31, 1996 and 1995 (the "Audited Financial
Statements"), and consolidated unaudited financial statements (balance sheet,
operating statement and statement of cash flows) of the Company as of
February 28, 1998 and for the two months then ended (the "Unaudited Financial
Statements" together with the Audited Financial Statements, the "Financial
Statements"). The Financial Statements fairly present the financial condition
and operating results of the Company and the Predecessor Corporation as of
the dates, and for the periods, indicated therein, subject to normal year-end
adjustments. The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and with each other, except that the
Unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. Except as set forth in the
Financial Statements, the Company has no material liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to December 31, 1997, and (ii) obligations under
contracts and commitments incurred in the ordinary course of business, which,
individually or in the aggregate, are not material to the financial condition
or operating results of the Company. Except as disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness
of any other person, firm or corporation.
2.21 CHANGES. Except as disclosed in the Disclosure Letter, since
December 31, 1997, the date of the latest audited balance sheet included in
the Financial Statements (the "Latest Balance Sheet"), there has not been:
(a) any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the Company
(as such business is presently conducted and as it is proposed to be
conducted);
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(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and that is not material to the assets,
properties, financial condition, operating results, prospects or business of
the Company (as such business is presently conducted and as it is proposed to
be conducted);
(e) any material change or amendment to a material contract
or arrangement by which the Company or any of its assets or properties is
bound or subject;
(f) any resignation or termination of employment of any key
officer of the Company, and the Company, to the best of its knowledge, does
not know of the impending resignation or termination of employment of any
such officer;
(g) any mortgage, pledge, transfer of a security interest
in, or lien, created by the Company, with respect to any of its material
properties or assets, except liens for taxes not yet due or payable;
(h) any loans or guarantees made by the Company to or for
the benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business; or
(i) to the best of the Company's knowledge, any other event
or condition of any character that might materially and adversely affect the
assets, properties, financial condition, operating results, prospects or
business of the Company (as such business is presently conducted and as it is
proposed to be conducted).
2.22 EMPLOYEE BENEFIT PLANS. Except as set forth in the Disclosure
Letter, the Company has not established, maintained, contributed or been
required to contribute to any Employee Benefit Plans as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
the Company has not proposed any Employee Benefit Plans which the Company
will establish, maintain, or to which the Company will contribute or be
required to contribute, and the Company has not proposed any changes to any
Employee Benefit Plans now in effect (all of the preceding referred to
collectively hereinafter as the "Company's Employee Benefit Plans"). True and
correct copies and descriptions, to the extent that they exist, of all of the
Company's Employee Benefit Plans have been previously provided to the
Investors. Each of the Company's Employee Benefit Plans, which is intended to
be qualified under Section 401(a) of the Code is so qualified. Favorable
letters of determination of such tax-qualified status from the IRS have been
previously provided to the Investors. With respect to the Company's Employee
Benefit Plans, the Company will have made, on or prior to the Closing, all
payments required to be made by it on or prior to the Closing and will have
accrued (in accordance with generally accepted accounting principles
consistently applied and the requirements of ERISA) as of the Closing all
payments due but not yet payable as of the Closing. The Company has
previously provided to the Investors a true and correct copy of the most
current Form 5500 and any other form or filing required to be submitted to
any governmental agency with regard to any of
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the Company's Employee Benefit Plans. All of the Company's Employee Benefit
Plans are, and have been, operated in full compliance with their provisions
and with all applicable Laws including, without limitation, ERISA and the
Code and the regulations and rulings thereunder. The Company and all
fiduciaries of the Company's Employee Benefit Plans have complied with the
provisions of the Company's Employee Benefit Plans and with all applicable
Laws including, without limitation, ERISA and the Code and the regulations
and rulings thereunder. There has been no termination or partial termination
(including any termination or partial termination attributable to this sale)
of any of the Company's Employee Benefit Plans. The Company has never
established, maintained or had the obligation to contribute to a defined
benefit plan (as defined in the Code or ERISA), an Employee Benefit Plan that
is subject to the minimum funding standards of the Code or ERISA, or a
multiemployer (as defined in the Code or ERISA). Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due from the Company under any of the Company's Employee
Benefit Plans, (ii) increase any benefits otherwise payable under any of the
Company's Employee Benefit Plans, or (iii) result in the acceleration of the
time of payment or vesting of any such benefits to any extent. None of the
Company's Employee Benefit Plans provides benefits after retirement or
termination of employment, except to the extent required under applicable
law. There are no pending actions, claims or lawsuits which have been
asserted or instituted against any of the Company's Employee Benefit Plans,
the assets of any of the trusts under such plans, the plan sponsor, the plan
administrator or against any fiduciary of any of the Company's Employee
Benefit Plans (other than routine benefit claims) nor does the Company have
knowledge of facts which could form the basis for any such action, claim or
lawsuit. There are no investigations or audits of any of the Company's
Employee Benefit Plans, any trusts under such plans, the plan sponsor, the
plan administrator or any fiduciary of any of the Company's Employee Benefit
Plans which have been threatened or instituted nor does the Company have
knowledge of facts which could form the basis for any such investigation or
audit. No event has occurred or will occur which will result in liability to
the Company in connection with any Employee Benefit Plan established,
maintained, or contributed to (currently or previously) by the Company or by
any other entity which, together with the Company, constitute elements of
either (i) a controlled group of corporations (within the meaning of Section
414(b) of the Code), (ii) a group of trades or businesses under common
control (within the meaning of Sections 414(c) of the Code or 4001 of ERISA),
(iii) an affiliated service group (within the meaning of Section 414(m) of
the Code), or (iv) another arrangement covered by Section 414(o) of the Code.
For purposes of this Agreement, "Employee Benefit Plan" means (i) any
employee benefit plan, as defined in Section 3(3) of ERISA, and (ii) any
other plan, trust agreement or arrangement for any bonus, severance,
hospitalization, vacation, incentive or deferred compensation, pension or
profit-sharing, retirement, payroll savings, stock option, equity
compensation, group insurance, death benefit, fringe benefit, welfare or any
other employee benefit plan or fringe benefit arrangement of any nature
whatsoever, including those benefiting retirees or former employees.
2.23 TAX MATTERS.
(a) The Company has filed all Tax Returns (as defined below)
which it was required to file under applicable laws and regulations; all such
Tax Returns are complete and correct in all respects and have been prepared
in compliance with all applicable laws and
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regulations; the Company has paid all Taxes (as defined below) due and owing
by it with respect to any period ending on or before the Closing (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 it is
required to withhold from amounts paid or owing to any employee, stockholder,
creditor or other third party with respect to any period ending on or before
the Closing; the Company has not waived any statute of limitations with
respect to any Taxes or agreed to any extension of time with respect to any
Tax Return; the accrual for Taxes on the Latest Balance Sheet would be
adequate to pay all Tax liabilities of the Company if its current tax year
were treated as ending on the date of the Latest Balance Sheet; since the
date of the Latest Balance Sheet, the Company has not incurred any liability
for Taxes other than in the ordinary course of business; the assessment of
any additional Taxes for periods for which Tax Returns have been filed by the
Company shall not exceed the recorded liability therefor on the Latest
Balance Sheet; the federal income Tax Returns of the Company have been
audited or closed for all tax years through 1992; no foreign, federal, state
or local tax audits or administrative or judicial proceedings are pending or
being conducted with respect to the Company, 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 from any foreign, federal,
state or local taxing authority; and there are no material unresolved
questions or claims concerning the Company's Tax liability;
(b) The Company has not made an election under Section 341(f)
of the Internal Revenue Code of 1986, as amended (the "Code"). The Company is
not liable for the Taxes of another person under (i) Treas. Reg. Section
1.1502-6 (or comparable provisions of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or indemnity, or (iv) otherwise.
The Company is not a party to any tax sharing agreement. The Company has
disclosed on their federal income Tax Returns any position taken for which
substantial authority (within the meaning of Section 6662(d)(2)(B)(i) of the
Code) did not exist at the time the return was filed. The Company has not
made any payments, is obligated to make payments or is a third party to an
agreement that could obligate it to make any payments that would not be
deductible under Section 280G of the Code;
(c) As of the Closing, the Company is a qualified small
business within the meaning of Section 1202(c) of the Code. During the
period beginning one year prior to the Closing Date through the Closing,
the Company has not made a significant redemption of its stock within the
meaning of Section 1202(c)(3)(B) of the Code;
(d) The Company has made a valid election under Section
1362(a) of the Code to be treated as an "S corporation" within the meaning of
Section 1361 of the Code, which election has been effective for all tax
periods from the date of the Company's formation to the date of the issuance
of the Series A Preferred Stock;
(e) The formation of Bluestone Consulting, Inc., a Delaware
corporation ("BCI") by the Company and the distribution of its stock to the
stockholders (the "Spin-off") did not and will not result in any Tax to the
Company, and for purposes of subsection 2.23(a) above, such formation and
distribution shall not be considered a transaction occurring in the ordinary
course of business; and
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(f) For purposes of this Agreement, the term "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. The term "Tax Return" means
any return, information report or filing with respect to Taxes, including any
schedules attached thereto and including any amendment thereof.
2.24 INSURANCE. The Company has in full force and effect fire
and casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed, and key man insurance covering ▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ as specified in the
Disclosure Letter.
2.25 BOOKS AND RECORDS. The minute books and stock record books of
the Company provided to the Investors contain (i) minutes of all meetings of
the stockholders, board of directors and any committee of the board of
directors, (ii) written statements of all actions taken by the stockholders,
board of directors and any committee of the board of directors without a
meeting, and (iii) records of the issuance, transfer and cancellation of all
shares of capital stock and other securities, in each case since the time of
incorporation. Such minute books and stock record books reflect all
transactions referred to there in accurately and completely.
2.26 USE OF PROCEEDS. The Company will use the proceeds of the
sale of the Series B Preferred Stock for the purpose of sales and marketing
expenditures and other operating expenses.
2.27 LABOR MATTERS. The Company is not a party to any collective
bargaining agreement covering employees of the Company's business, nor does
any labor union or collective bargaining agent represent any of the employees
of the Company's business. Except as set forth in the Disclosure Letter,
there is no labor strike, slow-down or stoppage pending or, to the Company's
knowledge, threatened by the employees of the Company's business.
2.28 "YEAR 2000". The Company's computer system and software
(including all software and applications developed for or sold to any
customer or client) are able to accurately process date data, including but
not limited to, calculating, comparing and sequencing from, into and between
the twentieth century (through year 1999), the year 2000 and the twenty-first
century, including leap year calculations. To the best knowledge of the
Company, it is not aware of any inability on the part of any service provider
to timely remedy such service provider's own deficiencies in respect of the
year 2000 problem.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
hereby severally represents and warrants that:
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3.1 AUTHORIZATION. Such Investor has full power and authority to
enter into the Transaction Agreements, and each such agreement constitutes
its valid and legally binding obligation, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Investors' Rights Agreement may be limited by applicable
federal or state securities laws.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with such Investor in reliance upon such Investor's representation to the
Company, which by such Investor's execution of this Agreement such Investor
hereby confirms, that the Shares to be received by such Investor and the
Conversion Shares (collectively, the "Securities") will be acquired for
investment for such Investor's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof except in
accordance with the Act, and that such Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same.
By executing this Agreement, such Investor further represents that such
Investor does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or
to any third person, with respect to any of the Securities.
3.3 DISCLOSURE OF INFORMATION. Such Investor believes it has
received all the information it considers necessary or appropriate for
deciding whether to purchase the Shares. Such Investor further represents
that it has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Shares and
the business, properties, prospects and financial condition of the Company.
The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.
3.4 INVESTMENT EXPERIENCE. Such Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and
has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Shares.
Investor also represents it has not been organized for the purpose of
acquiring the Shares.
3.5 ACCREDITED INVESTOR. Such Investor is an "accredited
investor" within the meaning of Securities and Exchange Commission ("SEC")
Rule 501 of Regulation D, as presently in effect.
3.6 RESTRICTED SECURITIES. Such Investor understands that the
Shares and Conversion Shares are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and therefore
may not be sold, transferred or otherwise disposed of without registration
under the Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Shares or the Conversion Shares
or an available exemption from registration under the Act, the Shares or the
Conversion Shares must be held indefinitely. In this connection, such
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Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, such Investor further agrees
not to make any disposition of all or any portion of the Securities unless
and until the transferee has agreed in writing for the benefit of the Company
to be bound by this Section 3 and the Investors' Rights Agreement provided
and to the extent this Section and such agreement are then applicable, and:
(a) There is then in effect a Registration Statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b)(i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
if reasonably requested by the Company, such Investor shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such shares
under the Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and
(b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor that is a partnership to a partner of
such partnership or a retired partner of such partnership who retires after
the date hereof, or to the estate of any such partner or retired partner or
the transfer by gift, will or intestate succession of any partner to his or
her spouse or to the siblings, lineal descendants or ancestors of such
partner or his or her spouse, if the transferee agrees in writing to be
subject to the terms hereof to the same extent as if he or she were an
original Investor hereunder.
3.8 LEGENDS. It is understood that the certificates evidencing
the Securities may bear one or all of the following legends:
"These securities have not been registered under the Securities
Act of 1933, as amended, or any state securities laws. They may
not be sold, offered for sale, pledged or hypothecated in the
absence of a registration statement in effect with respect to
the securities under such Act and such state securities laws or
an opinion of counsel satisfactory to the Company that such
registration is not required or unless sold pursuant to
Rule 144 of such Act."
4. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not
consent in writing thereto:
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4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
4.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing.
4.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the Closing a certificate stating that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since
the date of the Financial Statements.
4.4 QUALIFICATIONS. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state (except for certain post-Closing Blue Sky filings required under
applicable state securities laws) that are required in connection with the
lawful issuance and sale of the Shares pursuant to this Agreement shall be
duly obtained and effective as of the Closing.
4.5 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
and all documents incident thereto shall be reasonably satisfactory in form
and substance to Investors' special counsel, and they shall have received all
such counterpart original and certified or other copies of such documents as
they may reasonably request.
4.6 OPINION OF COMPANY COUNSEL. Each Investor shall have received
from counsel for the Company, an opinion, dated as of the Closing, in the
form and content satisfactory to the Investors and attached hereto as EXHIBIT
B.
4.7 RESTATED INVESTORS' RIGHTS AGREEMENT. The Company and each
Investor shall have entered into an investors' rights agreement in the form
attached hereto as EXHIBIT C (the "Restated Investors' Rights Agreement").
4.8 RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT AND
SERIES B PREFERRED STOCK. The Company and certain key members of the
Company's management and those individuals who hold more than two percent
(2.0%) of the outstanding Common Stock of the Company as of the Closing (on a
fully as-converted basis, as if all shares of Series A Preferred Stock and
Series B Preferred Stock and all convertible securities had been fully
converted into shares of Common Stock) shall have entered into a restated
right of first refusal and co-sale agreement in the form satisfactory to the
Investors and attached hereto as EXHIBIT D (the "Restated Right of First
Refusal and Co-Sale Agreement").
4.9 RESTATED VOTING AGREEMENT. The Company and each of Baiada and
▇▇▇▇ ▇▇▇▇▇▇, shall have entered into a restated voting agreement in the form
attached hereto as EXHIBIT E (the "Restated Voting Agreement").
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4.10 DUE DILIGENCE. All matters investigated by the Investors in
the course of their due diligence shall be satisfactory to each of the
Investors, special counsels for Investors and the respective accountants for
the Investors.
4.11 RESTATED CERTIFICATE OF INCORPORATION. The Restated
Certificate in the form satisfactory to the Investors and attached hereto as
EXHIBIT A shall ave been adopted by the Company and filed with the Secretary
of State of Delaware.
4.12 RELATED AGREEMENTS. Each Investor shall have received from
the Company, the following agreements in form and content satisfactory to
each of the Investors:
(i) BANK LENDING AGREEMENTS. Any and all lending agreements
by and between the Company and its primary lender for working capital,
capital equipment leases and software leases;
(ii) SHAREHOLDER LENDING AGREEMENTS. Any and all lending
agreements by and between the Company and the shareholders of BCI; and
(iii) SERVICES AGREEMENT. Any and all agreements by and
between the Company and BCI regarding the provision of consulting services by
BCI to the Company.
4.13 WAIVER OF DEFAULT. The Company shall have obtained a written
waiver, in form and content satisfactory to each of the Investors, from
Silicon Valley Bank of any defaults under any loan agreement between the
Company and Silicon Valley Bank.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by
that Investor:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investors contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
5.2 PAYMENT OF PURCHASE PRICE. The Investors shall have delivered
the purchase price specified in Section 1.1 and the notes specified in
Section 1.2 shall have been delivered and canceled.
5.3 QUALIFICATIONS. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or
of any state (except for certain post-Closing Blue Sky filings required under
applicable state securities laws) that are required in connection with the
lawful issuance and sale of the Shares pursuant to this Agreement shall be
duly obtained and effective as of the Closing.
5.4 RESTATED RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT. The
Investors shall have entered into the Restated Right of First Refusal and
Co-Sale Agreement dated the date hereof.
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5.5 RESTATED VOTING AGREEMENT. The Investors shall have entered
into the Restated Voting Agreement dated the date hereof.
6. INDEMNIFICATION.
(a) In addition to all rights and remedies available to the
Investors at law or in equity, the Company shall indemnify, defend and hold
harmless each of the Investors and any parent, subsidiary, associate,
affiliate, partner, shareholder, director, officer, shareholder or agent of
each such Investor, and each subsequent holder of Series B Preferred Stock
and their respective affiliates, stockholders, officers, directors,
employees, agents, representatives, successors and permitted assigns (all of
the foregoing are collectively referred to as the "Indemnified Parties") from
and against and pay on behalf of or reimburse such party as and when incurred
all losses (including, without limitation, diminutions in value),
liabilities, demands, claims, actions or causes of action, costs, damages,
judgments, debts, settlements, assessments, deficiencies, taxes, penalties,
fines or expenses, whether or not arising out of any claims by or on behalf
of any third party, including interest, penalties, reasonable attorneys' fees
and expenses and all reasonable amounts paid in investigation, defense or
settlement of any of the foregoing (collectively, "Losses") which any such
party may suffer, sustain or become subject to, as a result of, in connection
with, or relating to or by virtue of:
(i) any material misrepresentations or material breach of
warranty on the part of the Company under Section 2;
(ii) without duplication of subsection 6(a)(i), any material
misrepresentation in or material omission from any of the representations or
warranties contained in any certificate, document or instrument or the
Disclosure Letter delivered to the Investors by or on behalf of the Company
in connection herewith;
(iii) any material nonfulfillment or breach of any covenant or
agreement on the part of the Company under this Agreement or under any
certificate, document or instrument delivered in connection therewith; or
(iv) any action, demand, proceeding, investigation or claim by
any third party (including, without limitation, governmental agencies)
against or affecting the Company and/or its affiliates or subsidiaries which,
if successful, would give rise to or evidence the existence of or relate to a
material breach of (A) any of the representations or warranties at the time
made or (B) covenants of the Company.
(b) Notwithstanding the foregoing, and subject to the following
sentence, upon judicial determination, which is final and no longer
appealable, that the act or omission giving rise to the indemnification
hereinabove provided resulted primarily out of or was based primarily upon
the Indemnified Party's gross negligence, fraud or willful misconduct (unless
such action was based upon the Indemnified Party's reliance in good faith
upon any of the representations, warranties, covenants or promises made by
the Company herein), the Company shall not be responsible for any Losses
sought to be indemnified in connection therewith, and the Company shall be
entitled to recover from the Indemnified Party all amounts previously paid in
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full or partial satisfaction of such indemnity, together with all costs and
expenses of the Company reasonably incurred in effecting such recovery, if
any.
(c) All indemnification rights hereunder shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereunder indefinitely, regardless of any
investigation, inquiry or examination made for or on behalf of, or any
knowledge of any of the Investors and/or any of the other Indemnified Parties
or the acceptance by either Investor of any certificate or opinion.
(d) If for any reason the indemnity provided for in this Section 6
is unavailable to any Indemnified Party or is insufficient to hold each such
Indemnified Party harmless from all such Losses arising with respect to the
transactions contemplated hereunder, then the Company and the Indemnified
Party shall each contribute to the amount paid or payable by such Loss in
such proportion as is appropriate to reflect not only the relative benefits
received by the Company on the one hand, and such Indemnified Party on the
other, but also the relative fault of the Company on the one hand, and the
Indemnified Party on the other, as well as any relevant equitable
considerations. In addition, the Company agrees to reimburse any Indemnified
Party upon demand for all reasonable expenses (including legal counsel fees)
incurred by such Indemnified Party or any such other person in connection
with investigating, preparing or defending any such action or claim. The
indemnity, contribution and expense reimbursement obligations that the
Company has under this Section 6 shall be in addition to any liability that
the Company may otherwise have. The Company further agrees that the
indemnification and reimbursement commitments set forth in this Agreement
shall apply whether or not the Indemnified Party is a formal party to any
such lawsuits, claims or other proceedings.
(e) Any indemnification of either Investor or any other Indemnified
Party by the Company pursuant to this Section 6 shall be effected by wire
transfer of immediately available funds from the Company to an account
designated by such Investor or such other Indemnified Party within 15 days
after the determination thereof.
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution, delivery and performance of this
Agreement and the Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the
Investors or the Company.
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties
(including transferees of any Securities). Nothing in this Agreement express
or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Delaware without giving effect to
conflict of law principles.
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EACH OF THE PARTIES HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OF
THE NEW TRANSACTION AGREEMENTS.
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more
than one counterpart hereof.
7.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 NOTICES. Unless otherwise provided, all notices, consents or
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given (i) when
delivered personally, (ii) three business days after being mailed by first
class mail, postage prepaid, or (iii) one business day after being sent by a
reputable overnight delivery service, postage or delivery charges prepaid, to
the parties at their respective addresses stated on the signature page of
this Agreement. Notices may also be given by prepaid telegram or facsimile
and shall be effective on the date transmitted if confirmed within 24 hours
thereafter by a signed original sent in the manner provided in the preceding
sentence. Any party may change its address for notice and the address to
which copies must be sent by giving notice of the new addresses to the other
parties in accordance with this Section 7.6, except that any such change of
address notice shall not be effective unless and until received.
7.7 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature
of a finders' fee (and the costs and expenses of defending against such
liability or asserted liability) for which such Investor or any of its
officers, partners, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless each Investor from any liability for
any commission or compensation in the nature of a finders' fee (and the costs
and expenses of defending against such liability or asserted liability) for
which the Company or any of its officers, employees or representatives is
responsible.
7.8 EXPENSES. Subject to the provisions of Section 6, whether or
not the Closing is effected, the Company shall pay all costs and expenses
that it incurs with respect to the negotiation, execution, delivery and
performance of this Agreement. If the Closing is effected, the Company shall,
at the Closing, reimburse the reasonable fees and out-of-pocket expenses of
special counsel for General Electric Capital Corporation not to exceed
$35,000 and of special counsel for Patricof Ventures and ▇▇▇▇▇ Capital not to
exceed $6,000. If any action at law or in equity is necessary to enforce or
interpret the terms of the New Transaction Agreements, the prevailing party
shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
7.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a
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particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of 75% of the Common Stock
issued or issuable upon conversion of the Shares. Any amendment or waiver
effected in accordance with this Section 7.9 shall be binding upon each
holder of any such securities purchased under this Agreement at the time
outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
7.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
7.11 AGGREGATION OF STOCK. All Shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose
of determining the availability of any rights under this Agreement.
7.12 ENTIRE AGREEMENT. This Agreement and the other New Transaction
Agreements referred to herein constitute the entire agreement with respect to
the subject matter hereof among the parties, and no party shall be liable or
bound to any other party in any manner by any warranties, representations, or
covenants except as specifically set forth herein or therein.
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first above written.
BLUESTONE SOFTWARE, INC.
By:/s/ ▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇
Title: President
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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INVESTORS:
GENERAL ELECTRIC CAPITAL CORPORATION
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Vice President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
THE P/A FUND, L.P.
By: APA PENNSYLVANIA PARTNERS II, L.P.,
its General Partner
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: General Partner
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
PATRICOF PRIVATE INVESTMENT CLUB, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By:/s/ ▇▇▇▇▇▇▇ ▇. Case
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Case
Title: Vice President
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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APA EXCELSIOR IV, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By:/s/ ▇▇▇▇▇▇▇ ▇. Case
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Case
Title: Vice President
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇ & CO. (CAYMAN) LTD., CUST. FOR
APA EXCELSIOR IV/OFFSHORE, L.P.
By: PATRICOF & CO. VENTURES, INC.,
its Investment Advisor
By:/s/ ▇▇▇▇▇▇▇ ▇. Case
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Case
Title: Managing Director
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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/s/ ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇
Address: ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇. ▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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