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EXHIBIT 10.16
SEQUOIA SOFTWARE CORPORATION
CONVERTIBLE PREFERRED STOCK AND WARRANTS
PURCHASE AGREEMENT
NOVEMBER 23, 1999
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PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made as of this 23rd day of
November, 1999 by and among SEQUOIA SOFTWARE CORPORATION, a Maryland
corporation (the "Company"), and the investors listed on Schedule 1 hereto
(individually an "Investor" and collectively the "Investors").
In consideration of the premises, mutual promises and covenants
contained in this Agreement, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, THE PARTIES HERETO HEREBY AGREE AS
FOLLOWS:
1. Purchase and Sale of Convertible Preferred Stock and
Warrants.
1.1 Sale and Issuance of Convertible Preferred Stock and
Warrants. (a) Subject to the terms and conditions of this Agreement, each
Investor, severally and not jointly, agrees to purchase at the Closing (as
hereinafter defined), and the Company agrees to sell and issue to each
Investor, severally and not jointly, the following:
(i) as to ▇▇▇▇▇ Communications Fund, L.P., a Delaware
limited partnership ("▇▇▇▇▇"), (x) 14,585,197 shares of Series
C Convertible Preferred Stock, par value $0.001 per share, of
the Company (the "Series C Stock"), containing the terms set
forth in the certificate of incorporation of the Company as
amended and restated in the form of Exhibit A hereto (the
"Certificate"), at a price of $1.02844 per share and (y) a
warrant, substantially in the form attached hereto as Exhibit
B (a "Warrant"), entitling the holder thereof to purchase
5,112,929 shares of Series D Convertible Preferred Stock, par
value $0.001 per share, of the Company (the "Series D Stock"),
containing the terms set forth in the Certificate at an
initial exercise price of $1.1246 per share, at a price of
$5,750.00 for the Warrant, for an aggregate purchase price for
such Series C Stock and the Warrant of $15,005,750.00; and
(ii) as to divine interVentures, inc., a Delaware
corporation, (x) 4,861,732 shares of Series C Stock, at a
price of $1.02844 per share and (y) a Warrant to purchase
1,704,310 shares of Series D Stock, at a price of $1,916.67
for the Warrant, for an aggregate purchase price for such
Series C Stock and the Warrant of $5,001,916.67; and
(iii) as to the other Investors listed on Schedule 1
hereto, the number of shares of Series C Stock set forth
opposite each such other Investor's name on Schedule 1 for the
aggregate purchase price and form of consideration (which
shall include all outstanding convertible notes issued to each
such Investor by the Company, all accrued interest thereon and
all warrants issued in connection therewith) set forth
opposite each such other Investor's name on Schedule 1.
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(b) After the Certificate has been amended and
restated as contemplated hereby, the Common Stock, $0.001 par value
per share, of the Company (the "Common Stock"), containing the
terms set forth in the Certificate, issuable upon conversion of
each of the Series C Stock and the Series D Stock issuable upon
exercise of the Warrants, and the Series D Stock issuable upon
exercise of the Warrants, is sometimes hereinafter referred to as
the "Conversion Stock." The Series C Stock and the Warrants are
sometimes hereinafter collectively referred to as the "Securities."
1.2 Closing. The purchase and sale of the Securities shall
take place at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, at 10:00 a.m., on November 23, 1999, or
at such other time and place as the Company and the Investors purchasing a
majority of the Securities mutually agree upon orally or in writing (which time
and place are designated as the "Closing"). At the Closing, the Company shall
deliver to each Investor certificates representing the Series C Stock and, in
the case of ▇▇▇▇▇ and divine interVentures, inc., a Warrant representing the
Warrants to be purchased by each of ▇▇▇▇▇ and divine interVentures, inc.,
against delivery to the Company by such Investor of a wire transfer (or other
consideration indicated on Schedule 1 hereto) in the amount of the aggregate
purchase price therefor. Such certificates and Warrants shall be issued in the
names and the amounts set forth on Schedule 1 hereto.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to, and agrees with, each of the Investors, except as
set forth on the Schedule of Exceptions furnished to each of the Investors and
attached hereto as Schedule 2, specifically identifying the relevant subsection
hereof, as follows:
2.1 Organization, Good Standing and Qualification. Each of the
Company, Radian Systems, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("Radian") and Redwood Software Europe Limited d/b/a
Sequoia Software Europe, an Ireland corporation and a wholly-owned subsidiary of
the Company ("Ireland" and, together with Radian, the "Subsidiaries"; the
Company and the Subsidiaries are sometimes hereinafter collectively referred to
as the "Companies"), is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of formation. Each of the
Companies has all requisite power and authority to carry on its business as now
conducted and as proposed to be conducted. The Company has all requisite power
and authority to enter into and perform this Agreement and the transactions
contemplated hereby. Each of the Companies is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so to
qualify could have a material adverse effect on its business, properties,
operations, earnings, assets, liabilities, condition (financial or otherwise) or
prospects (collectively, "Condition").
2.2 Capitalization. After giving effect to the transactions
contemplated by this Agreement, and immediately after the Closing, the capital
stock of the Company, as authorized by the Certificate, will consist of: (i)
75,714,665 shares of Common Stock, of which 15,845,864
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shares will be issued and outstanding, 43,805,567 will be reserved for issuance
upon conversion of issued and outstanding shares of Series A Convertible
Preferred Stock, par value $0.001 per share, of the Company (the "Series A
Stock"), containing the terms set forth in the Certificate, Series B Convertible
Preferred Stock, par value $0.001 per share, of the Company (the "Series B
Stock"), containing the terms set forth in the Certificate and Series C Stock,
6,817,239 will be reserved for issuance upon conversion of the Series D Stock
issuable upon exercise of the Warrants, and 8,156,789 shares are reserved for
issuance to key employees, officers and directors under all of the Company's
various stock option grants (the "Stock Option Grants"), of which no such shares
are subject to currently outstanding incentive stock option grants, and all of
such shares are subject to currently outstanding non-qualified stock option
grants, and (ii) 50,622,929 shares of Preferred Stock, par value $0.001 per
share, of the Company the (collectively, the "Preferred Stock"), of which
8,065,000 shares shall have been designated as Series A Stock, 8,064,877 shares
of which will be issued and outstanding, 9,647,770 shares shall have been
designated as Series B Stock, all of which will be issued and outstanding,
26,092,659 shares shall have been designated as Series C Stock, all of which
will be issued and outstanding and 6,817,239 shares shall have been designated
Series D Stock, none of which will be issued and outstanding. The rights,
privileges and preferences of the Common Stock, Series A Stock, Series B Stock,
Series C Stock and Series D Stock are as stated in the Certificate, a true and
complete copy of which is attached hereto as Exhibit A. Except for the Warrants
and the stock options specified above under the Stock Option Grants, and except
for conversion rights of shares of Preferred Stock, as of the Closing, (i) the
Company will not have outstanding any capital stock or other securities
convertible into or exchangeable for any shares of its capital stock and, except
for the preemptive rights contained in the Investor Rights Agreement in the form
attached hereto as Exhibit C (the "Investor Rights Agreement"), (ii) except as
contemplated herein, on the schedules hereto and in the Investment Documents, no
person will have any right to subscribe for or to purchase (including conversion
or preemptive rights), or any options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, any calls, commitments
or other claims of any character relating to, any capital stock or any stock or
securities convertible into or exchangeable for any capital stock of the
Company; (iii) except as contemplated herein, on the schedules hereto and in the
Investment Documents, the Company will not have any capital stock, equity
interests or other securities reserved for issuance for any purpose; or (iv)
except as contemplated herein, on the schedules hereto and in the Investment
Documents, the Company will not be subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any convertible securities, rights or options of the type
described in the preceding clause (i) (other than the mandatory redemption
requirements in respect of the Preferred Stock as stated in the Certificate).
All of the issued and outstanding shares of Common Stock, Series A Stock and
Series B Stock have been duly and validly issued and are fully paid and
nonassessable and all of the shares of Series C Stock and Conversion Stock, when
issued as contemplated hereby, will be validly issued, fully paid and
nonassessable. To the best knowledge of the Company after due inquiry, there are
no agreements among the Company's stockholders with respect to the voting or
transfer of the Company's capital stock, other than the agreements regarding
voting contained in the Third Amended and Restated Stockholders Agreement in the
form attached hereto as Exhibit D (the "Stockholders Agreement") and the
agreements regarding transfer contained herein, in the Stockholders
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Agreement, the Investor Rights Agreement and in the Amended and Restated
Registration Rights Agreement in the form of Exhibit E attached hereto (the
"Registration Rights Agreement"). Schedule 3 hereto includes a complete and
correct list both as of immediately prior, and after giving effect, to the
Closing, of the name of each of the Company's stockholders and the number of
shares of each class of stock owned by such stockholder, and the name of each
holder of an outstanding stock option, warrant and/or convertible security and
the number of options, warrants and/or convertible securities to purchase or
otherwise acquire stock owned by such holder and the exercise or conversion
price, as applicable, at which such option, warrant or convertible security may
be exercised or converted, as the case may be. All of the issued and outstanding
shares of Common Stock, Preferred Stock and all other securities of the Company
have been, and the Securities and Conversion Stock will be, offered, issued and
sold by the Company in compliance with applicable Federal and state securities
laws.
2.3 Authority; Execution and Delivery; Requisite Consents,
Nonviolation. The Company has all requisite power and authority to execute,
deliver and perform this Agreement, the Warrants, the Investor Rights
Agreement, the Stockholders Agreement, the Registration Rights Agreement and
each other document or instrument executed by it, or any of its officers, in
connection herewith or therewith or pursuant hereto or thereto (this Agreement,
together with all of the foregoing documents and instruments, are sometimes
collectively referred to herein as the "Investment Documents"), and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the other Investment Documents
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary action on the part of the
Company. This Agreement and each of the other Investment Documents that have
been executed as of the date hereof is duly executed and delivered by the
Company and the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting the enforceability of creditors' rights in general or by general
principles of equity. Except as set forth in Part 2.3 of Schedule 2 hereto, the
execution, delivery and performance of this Agreement and the other Investment
Documents (including, without limitation, the Warrants, the Investor Rights
Agreement, the Stockholders Agreement and the Registration Rights Agreement),
the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the offer, sale and delivery by the
Company of the Securities) will not (a) require the consent, license, permit,
waiver, approval, authorization or other action of, by or with respect to, or
registration, declaration or filing with, any court or governmental authority,
department, commission, board, bureau, agency or instrumentality, domestic or
foreign ("Governmental Authority") or any other individual, partnership,
corporation, unincorporated organization or association, limited liability
company, trust or other entity (collectively, a "Person") (other than the other
parties to the Investment Documents whose consent has been obtained on or prior
to the Closing); (b) violate or conflict with any provision of the Certificate,
the By-Laws, as amended, of the Company as currently in effect, (the "By-Laws"),
a true and complete copy of which are attached hereto as Exhibit F; or (c)
constitute a default (with or without notice or lapse of time or both) under,
violate or conflict with, or give rise to a right of termination, cancellation
or acceleration or to a loss of a material
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benefit under any Law (as defined in Section 2.14 below), Contract (as defined
in Section 2.8 below), rights relating to Intellectual Property (as defined in
Section 2.9 below), Permit (as defined in Section 2.14 below) or Order (as
defined in Section 2.13 below) to which the Company is or hereafter may be a
party or by which the Company or its properties are or hereafter may be bound.
2.4 Subsidiaries. Schedule 4 hereto correctly sets forth all
of the subsidiaries of the Company, the place of incorporation of each such
subsidiary and its authorized capitalization, its shares of capital stock
outstanding, and the record and beneficial owner of those shares. Except for
the Subsidiaries and as set forth in Part 2.4 of Schedule 2 hereto, the Company
does not own or control, directly or indirectly, any partnership interests,
stock or other equity interests in any partnership, corporation or other entity
or any voting rights or right to control the policies and direction of any
partnership, corporation or other entity. There are not outstanding (and
neither the Company nor any Subsidiary has any plan to issue, grant or enter
into) any options, warrants, rights (including conversion or preemptive
rights), subscriptions or agreements for the purchase or acquisition from or by
the Company or any Subsidiary of any shares of capital stock of any Subsidiary.
There are no voting agreements, voting trust agreements, stockholder agreements
or other similar agreements relating to the capital stock of any of the
Subsidiaries.
2.5 The Company Financial Information. The Company has
provided to each Investor its consolidated balance sheet as of December 31,
1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for the year then ended (the "Audited Financials"), as
audited by Ernst & Young LLP. Attached hereto as Exhibit G is an unaudited
consolidated balance sheet of the Company as of September 30, 1999, and the
related unaudited consolidated statements of operations, stockholders' equity
and cash flows for the nine-month period then ended (the "Unaudited Financials"
and, together with the Audited Financials except that the unaudited Financials
do not contain footnotes, the "Financial Statements"). The Financial Statements
are complete and correct in all material respects; are in accordance with the
books of account, ledgers and records of the Companies; have been prepared in
conformity with generally accepted accounting principles applied, in the case
of the Unaudited Financials, on a basis consistent with that of the Audited
Financials, subject to normal year-end adjustments which are not, in the
aggregate, material; and present fairly the consolidated financial position,
results of operations and cash flows of the Companies as of the respective dates
thereof. Except as reflected in the Audited Financials (including the footnotes
thereto), none of the Companies has on the date hereof any obligation or
liability, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business and consistent with past practice since
December 31, 1998, which liabilities are not, individually or in the aggregate,
material to the Condition of the Companies, taken as a whole, (ii) obligations
under Scheduled Contracts (as defined in Schedule 2.8 below) or Contracts of a
type not required to be listed as Scheduled Contracts, and (iii) obligations
and liabilities which, individually or in the aggregate, are not material to
the Condition of the Companies, taken as a whole. Each of the Companies
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
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2.6 Certain Changes or Events. Except as set forth in Part
2.6 of Schedule 2 hereto, since June 30, 1999, the business of each of the
Companies has been operated only in the ordinary course, consistent with past
practice, and in addition to, and not in limitation of the foregoing: (i) there
has been no change in the Condition of any of the Companies, except for changes
in the ordinary course of business consistent with past practice which have not
been, in the aggregate, materially adverse to any such Company; (ii) there has
been no change of Laws, no revocation or change in any Contract or Permit or
right to do business, and no other event or occurrence of any character,
whether or not insured against, which has resulted, or could reasonably be
expected to result, in a material adverse change in the Condition of the
Companies, taken as a whole; (iii) the Company has not authorized or made any
distributions, or declared or paid any dividends, upon or with respect to any
of its capital stock, or other equity interests, nor has the Company redeemed,
purchased or otherwise acquired, or issued or sold, any of its capital stock or
other equity interests; (iv) none of the Companies has entered into any
material transaction, other than in the ordinary course of business and
consistent with past practice; (v) none of the Companies has incurred any
indebtedness for borrowed money or made any loans or advances to any Person;
(vi) there has been no waiver by any of the Companies of a material right or of
a material debt owed to it; (vii) none of the Companies has failed to satisfy
or discharge any Lien (as defined in Section 2.7 below), except in the ordinary
course of business and which is not material to the Condition of any such
Company (as such business is presently conducted and as it is proposed to be
conducted consistent with the Business Plan (as such term is defined in Section
2.23 below)); (viii) there has been no material change in any compensation,
arrangement or agreement with any employee, director, stockholder or Affiliate
thereof (as defined below); and (ix) there has been no agreement or commitment
by any of the Companies to do or perform any of the acts described in this
Section 2.6. "Affiliate" of a specified Person shall mean a Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
2.7 Title to Assets. Except as set forth in Part 2.7 of
Schedule 2 hereto, each of the Companies has good and marketable title to all
of its assets and properties, free and clear of any liens, pledges, security
interests, claims, encumbrances or other restrictions of any kind (collectively,
"Liens"), except for Liens which individually and in the aggregate are not
material in amount, do not materially detract from the value of such assets and
properties and do not impair the use of such assets and properties. With
respect to any assets or properties it leases, each of the Companies holds a
valid and subsisting leasehold interest therein, free and clear of any Liens,
except for Liens which individually and in the aggregate are not material in
amount, do not materially detract from the value of such assets and properties
and do not impair the use of such assets and properties, is in compliance, in
all material respects, with the terms of the applicable lease, and enjoys
peaceful and undisturbed possession under such lease. All of the assets and
properties of each of the Companies that are material to the conduct of
business as presently conducted or as proposed to be conducted by each of such
Companies are in good operating condition and repair, subject to ordinary wear
and tear.
2.8 Contracts. None of the Companies is a party to, nor are
any of the Companies or any of their respective assets or properties bound by,
or subject to, any contracts,
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agreements, notes, instruments, franchises, leases, licenses, commitments,
arrangements or understandings, written or oral (collectively, "Contracts") of
the following types, except for those (the "Scheduled Contracts") listed in Part
2.8 of Schedule 2 hereto:
(a) any Contracts pursuant to which any of the
Companies, or another party thereto, is obligated to pay in excess of
fifty thousand dollars ($50,000);
(b) any Contracts pursuant to which any of the
Companies acquired the right to use any Intellectual Property or
information that is material to or necessary in the business of such
Company other than software that is generally commercially available,
or pursuant to which any of the Companies has granted to others the
right to use, or which otherwise relates to, its Intellectual Property;
(c) any Contracts (other than advances of expenses
to employees in the ordinary course of business) involving loans,
loan agreements, debt securities, mortgages, deeds of trust,
security agreements, suretyships or guarantees;
(d) any Contracts between any of the Companies, on
the one hand, and (i) any of their respective officers, directors,
employees or (ii) Persons that beneficially own in excess of 1.0% of
the outstanding equity interest of the Company (each a "Principal
Owner"), or any Affiliate or relative, or Affiliate of a relative, of
any of the foregoing, or any other Related Person (as defined in
Section 7.15), on the other;
(e) other than the Stock Option Grants, any deferred
compensation agreements, bonus, pension, profit sharing, other stock
option and incentive plans or arrangements, hospitalization, medical
and insurance plans, agreements and policies, retirement and
severance plans and other employee compensation policies and
agreements affecting employees of any of the Companies;
(f) any Contracts with any labor union affecting
employees of any of the Companies;
(g) any Contracts which restrict any of the
Companies from freely engaging in business or competing anywhere;
(h) any distributorship, customer sales or leasing
Contracts under which the Company is currently providing or receiving
products or services; and
(i) any Contracts which otherwise are material to
the Condition of any of the Companies.
True and correct copies of all Scheduled Contracts have been
made available to the Investors. All of the Scheduled Contracts are in full
force and effect and constitute legal, valid and binding obligations of each of
the Companies that is a party thereto and, to the best
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knowledge of the Company, the other parties thereto. Each of the Companies and,
to the best knowledge of the Company, each other party thereto, has performed in
all material respects all obligations required to be performed by it under the
Scheduled Contracts, and no violation exists in respect thereof on the part of
any of the Companies or, to the best knowledge of the Company, any other party
thereto; none of the Scheduled Contracts is currently being renegotiated; and
the validity, effectiveness and continuation of all Scheduled Contracts will not
be materially adversely affected by the transactions contemplated by this
Agreement.
2.9 Intellectual Property. (a) (i) Set forth on Part 2.9 of
Schedule 2 hereto is a true, correct and complete list of all
patents, trademarks, service marks, trade names, brand names,
franchises, technology, areas of know-how and processes, and
registered copyrights, and any applications for any of the
foregoing (collectively, the "Intellectual Property") of any
kind in which any of the Companies has an interest or which is
otherwise used in, the business of, such Company. Part 2.9 of
Schedule 2 hereto also contains a true, correct and complete
list of all licenses or agreements that materially affect the
rights of the Companies to any of the Intellectual Property or
any trade secret material of the Companies (the "Intellectual
Property Licenses").
(ii) Except as set forth in Part 2.9 of Schedule 2,
the Companies are the sole and exclusive owners, free and
clear of all Liens, and have all right, title and interest in
all of the Intellectual Property. With respect to any
Intellectual Property or trade secret necessary to conduct its
business, each of the Companies owns or has the right to use
such Intellectual Property or trade secret in its business.
Each of the Companies has the right to use all Intellectual
Property necessary to conduct the business of such of the
Companies as now being conducted and as proposed to be
conducted by such of the Companies.
(iii) Each of the Intellectual Property Licenses is
in full force and effect and constitutes a legal, valid,
binding and enforceable obligation in accordance with its
terms against each of the Companies party thereto, except as
the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the
enforceability of creditors' rights in general or by general
principles of equity and, to the best knowledge of the
Company, each other Person party thereto. Each of the
Companies has performed all obligations imposed upon it under
each of the Intellectual Property Licenses to which it is a
party. None of the Companies nor, to the best knowledge of the
Company, any other party thereto is in default thereunder,
nor, to the best knowledge of the Company, is there any event
that with notice or lapse of time, or both, would constitute a
default thereunder. None of the Companies has received any
notice that any other party to any of the Intellectual
Property Licenses intends to cancel, terminate or refuse to
renew the same or to exercise or decline to exercise any
option or other right thereunder. No licenses, sublicenses,
covenants or agreements have been granted or entered into by
any of the Companies in respect
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of any of the Intellectual Property or any trade secret material
of any of the Companies, except the Intellectual Property
Licenses. To the best knowledge of the Company, no director,
officer, stockholder, employee or other Affiliate of the Company
owns, directly or indirectly, in whole or in part, any of the
Intellectual Property or any trade secret material of any of the
Companies. To the best knowledge of the Company, none of the
officers, employees, consultants, distributors, agents,
representatives or advisors of any of the Companies have entered
into any agreement relating to such of the Companies' business
regarding know-how, trade secrets, assignment of rights in
inventions, or prohibition or restriction of competition or
solicitation of customers, or any other similar restrictive
agreement or covenant, whether written or oral, with any Person
other than the Companies.
(iv) None of the Companies have disclosed other than
in the ordinary course of business consistent with past
practice any proprietary information relating to the
Intellectual Property or the Intellectual Property Licenses to
any person other than the Investors and the Companies'
employees, consultants, accountants, lawyers and other
advisors. Each of the Companies has at all times maintained
reasonable procedures to protect and have enforced all trade
secrets of such Company. Each of the Companies has disclosed
trade secrets to other Persons solely as required for the
conduct of such Company's business and solely under
nondisclosure agreements that are enforceable by such Company.
None of the Companies is under any contractual or other
obligation to disclose any proprietary information relating to
the Intellectual Property, any trade secret material of any of
the Companies or the Intellectual Property Licenses, nor, to
the best knowledge of the Company, is any other party to the
Intellectual Property Licenses under any such obligation to
disclose proprietary information included in or relating to
Intellectual Property, any trade secret material to any of the
Companies or the Intellectual Property Licenses to any Person,
and no event has taken place, including the execution and
delivery of this Agreement and the transactions contemplated
hereby or any related change in the business activities of any
of the Companies, that would give rise to such obligation.
(v) The consummation of the transactions contemplated
hereby will not alter or impair the rights of any of the
Companies to any of the Intellectual Property, any trade
secret material to any of the Companies, or under any of the
Intellectual Property Licenses.
(b) (i) No claim with respect to the Intellectual
Property, any trade secret material to any of the Companies, or any
Intellectual Property License which would materially adversely affect
the ability of any of the Companies to conduct its business as
presently conducted and as proposed to be conducted in accordance with
the Business Plan is currently pending or, to the best knowledge of the
Company, has been asserted, or threatened by any Person, nor does the
Company know of any grounds for any claim
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against any of the Companies, (A) to the effect that any operation or
activity of any of the Companies presently occurring or contemplated,
including, inter alia, the manufacture, use or sale of any software,
product, device, instrument, or other material made or used according to
the patents or patent applications included in the Intellectual Property
or Intellectual Property Licenses, infringes or misappropriates any
United States or foreign copyright, patent, trademark, service ▇▇▇▇ or
trade secret; (B) to the effect that any other Person infringes on the
Intellectual Property or misappropriates any trade secret or know-how or
other proprietary rights material to any of the Companies; (C)
challenging the ownership, validity or effectiveness of any of the
Intellectual Property or trade secret material of such Company; or (D)
challenging the license of any of the Companies or other legally
enforceable right under, any Intellectual Property or the Intellectual
Property Licenses.
(ii) None of the Companies is aware of any presently
existing United States or foreign patents or any patent
applications which if issued as patents would be infringed by
any activity of any Company.
(c) (i) The patents and patent applications listed in
Part 2.9 of Schedule 2 hereto (the "Patents and Applications") as part
of the Intellectual Property, to the best knowledge of the Company,
have been properly prepared and filed on behalf of each of the
Companies named therein and are being diligently pursued by the
Companies. The inventions described in the Patents and Applications are
assigned or licensed to the Company or a Subsidiary and no other entity
or individual has any right or claim in any of the inventions, Patents
and Applications or any patents to be issued therefrom. None of the
Companies is aware of any material defects in any of the Patents and
Applications which would cause any of them to be held invalid or
unenforceable. Each of the Companies named in any of the Patents and
Applications has filed in the Patents and Applications to which it is a
party all relevant and noncumulative prior art of which it is aware.
(ii) The Company has no knowledge of any objection or
proceeding, pending or threatened, that would affect the
validity of any patent issued pursuant thereto.
(iii) Except in connection with the prosecution of
the patent applications listed on Part 2.9 of Schedule 2
hereto, there are no pending judicial or governmental
proceedings, including but not limited to interferences and
oppositions, relating to any of the Patents and Applications
or any other proprietary information to which the Company or
any Subsidiary is a party or by which any property (such
term "property" specifically to include rights pursuant to
licenses or options or other rights to acquire licenses) of
the Company or any Subsidiary is subject, and no such
proceedings are threatened or contemplated by Governmental
Authorities or other Persons.
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2.10 Insurance. Each of the Companies has in full force and
effect (i) fire and casualty insurance policies, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to
replace any of its material properties that might be damaged or destroyed, (ii)
all workers' compensation or similar insurance required by the laws of any
jurisdiction in which the business of such of the Companies is operated, (iii)
public liability insurance against claims for personal injury, death or
property damage suffered upon, in or about any premises occupied by such of the
Companies or occurring as a result of the ownership, maintenance or operation
by such of the Companies of any automobile, truck or other vehicle, (iv)
products liability insurance against claims for personal injury, death or
property damage suffered as a result of the distribution, resale or use of
products distributed, manufactured, produced or sold by such of the Companies
or services rendered by them, providing coverage in such amounts as is
customary for companies of established reputation engaged in the same or
similar business and similarly situated, (v) business interruption insurance
covering risk of loss as a result of cessation of any substantial part of the
business conducted by such of the Companies for such periods as are customary
for companies of established reputation engaged in the same or similar business
and similarly situated, (vi) comprehensive general liability insurance
providing coverage in such amount as is customary for companies of established
reputation engaged in the same or similar business and similarly situated, and
(vii) such other insurance policies as are sufficient for compliance with all
requirements of law and applicable agreements.
2.11 Labor Union Activities; Employee Relations. No employee
of any of the Companies is represented by any labor union or covered by any
collective bargaining agreement; nor, to the best knowledge of the Company, has
any labor union sought to represent any employee of any of the Companies. There
is no strike or other labor dispute involving any of the Companies pending, or
to the best knowledge of the Company, threatened. To the best knowledge of the
Company, no officer or key employee intends to terminate his employment with
any of the Companies. To the best knowledge of the Company, no officer or key
employee of any of the Companies is a party to or bound by any Contract, or
subject to any restrictions (including, without limitation, any non-competition
restriction), which would restrict the right of such person to participate in
the affairs of any of the Companies. Except as set forth in Part 2.11 of
Schedule 2, the employment of each officer and key employee of each of the
Companies is terminable at will, subject to the payment of severance
obligations to those employees who are party to employment agreements with the
Company.
2.12 ERISA. (a) Except as set forth on Part 2.12 of Schedule
2, neither the Company nor any entity that would be deemed a "single employer"
with the Company under Section 414(b), (c), (m), or (o) of the Internal Revenue
Code of 1986, as amended (the "Code") or Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (an "ERISA
Affiliate") maintains, sponsors, contributes to, or has or has had an
obligation to, or otherwise participated in or participates in or in any way,
directly or indirectly, has or has had any liability with respect to any
"employee benefit plan," as defined in Section 3(3) of ERISA, or any other
bonus, profit sharing, pension, deferred compensation, incentive, stock option,
fringe benefit, health, welfare, change in control, or other employee benefit
plan,
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agreement, policy, trust fund, or arrangement, whether written or
unwritten, insured or self-insured (each a "Plan" and, collectively, the
"Plans").
(b) With respect to each of the Plans listed in Part 2.12 of
Schedule 2:
(i) in all material respects each Plan complies and has been
maintained and administered at all times in accordance with its
terms and all applicable laws, rules and regulations, including,
without limitation, ERISA and the Code and any trust maintained
pursuant thereto is exempt from federal income taxation under
Section 501 of the Code and nothing has occurred or is expected
to occur through the date of the Closing that caused or could
cause the loss of such exemption or the imposition of any
material penalty or tax liability;
(ii) no claim, lawsuit, arbitration or other action has been
threatened, asserted, instituted, or anticipated against the
Plans (other than non-material routine claims for benefits, and
appeals of such claims), any trustee or fiduciaries thereof, the
Company, any ERISA Affiliate, any director, officer, or employee
thereof, or any of the assets of any trust of the Plans;
(iii) no "prohibited transaction," within the meaning of
Section 4975 of the Code and Section 406 of ERISA, has occurred
or is expected to occur with respect to the Plan (and the
consummation of the transactions contemplated by this Agreement
will not constitute or directly or indirectly result in a
"prohibited transaction")
(c) The consummation of the transactions contemplated
by this Agreement will not give rise to any liability, including,
without limitation, liability for severance pay, unemployment
compensation, or termination pay, or accelerate the time of payment
or vesting or increase the amount of compensation or benefits due
to any employee, director, shareholder, or beneficiary of the
Company (whether current, former, or retired) or their
beneficiaries solely by reason of such transactions. No amounts
payable by the Companies under any Plan will fail to be deductible
for U.S. federal income tax purposes by virtue of Section 280G or
162(m) of the Code. Neither the Company nor any ERISA Affiliate
maintains, contributes to, or in any way provides for any benefits
of any kind whatsoever (other than under Section 4980B of the
Code, the Federal Social Security Act, or a plan qualified under
Section 401(a) of the Code, or as otherwise required by applicable
law) to any current or future retiree or terminee. Except as
disclosed in the Financial Statements, neither the Company nor any
ERISA Affiliate has any material unfunded, uninsured liabilities
pursuant to any Plan that is not intended to be qualified under
Section 401(a) of the Code.
2.13 Litigation. Except as set forth in Part 2.13 of Schedule
2 hereto, there is no action, suit, proceeding, investigation or governmental
approval process (collectively, "Actions") pending or, to the best knowledge of
the Company, threatened against any of the
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Companies, or affecting any of the properties or assets of any of the Companies
(including, without limitation, any of its Permits) which individually or in
the aggregate could have a material adverse effect on the Condition of the
Companies, taken as a whole, nor, to the best knowledge of the Company, is
there any basis for any such Action. To the best knowledge of the Company after
due inquiry, there is no Action against any director, officer or employee of
any of the Companies in connection with the business of any of the Companies
which, in the event of an adverse judgment against any such Person, could have
a material adverse effect on the Condition of the Companies, taken as a whole,
nor, to the best knowledge of the Company, is there any basis for any such
Action. The foregoing includes, without limitation, any Action pending or, to
the Company's best knowledge, threatened (or any basis therefor known to the
Company) involving the prior employment of any employees of any of the
Companies, their use in connection with the business of any of the Companies of
any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. None
of the Companies nor any of their respective assets or properties, nor, in
connection with its business, to the best knowledge of the Company, any
stockholder, director, officer or employee of any of the Companies, is subject
to any order, judgment, writ, injunction, decree, ruling or decision
(collectively, an "Order") of any Governmental Authority which is material to
the Condition of the Companies, taken as a whole. There is no Action by any of
the Companies currently pending or which any of the Companies intends to
initiate which is material to the Condition of the Companies, taken as a whole.
2.14 Compliance with Laws; Permits. None of the Companies has
violated or failed to comply with any statute, law, ordinance, rule,
regulation or policy of any Governmental Authority (collectively, "Laws") to
which it or any of its properties or assets is subject, except where the
failure to so comply could not reasonably be expected to have a material
adverse effect on the Condition of any of the Companies. Each of the Companies
has all permits, licenses, orders, certificates, authorizations and approvals
of any Governmental Authority (collectively, the "Permits") that are material
to the conduct of its business as presently conducted and as proposed to be
conducted consistent with the Business Plan. All such Permits are in full force
and effect, and to the best knowledge of the Company no violations or notices
of failure to comply have been issued or recorded in respect of any such
Permits. None of the Companies has any knowledge of any reason why such Permits
may be revoked or suspended. All applications, reports, notices and other
documents required to be filed by the Companies with all Governmental
Authorities have been timely filed and are complete and correct in all material
respects as filed or as amended prior to the date hereof, except where the
failure to so file could not reasonably be expected to have a material adverse
effect on the Condition of any of the Companies. With respect to any required
Permits, applications for which are either pending or contemplated to be made
pursuant to the business strategy of the Companies, the Company does not know
of any reason why such Permits should not be approved and granted by the
appropriate Governmental Authority. None of the Companies nor, to the best
knowledge of the Company, any of their respective officers or agents has made
any illegal or improper payments to, or provided any illegal or improper
inducement for, any governmental official or other Person in an attempt to
influence any such Person to take or to refrain from taking any action relating
to any of the Companies. After due inquiry, the Company has no knowledge that
during the past five
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years, any officer or key employee of the Company has been (a) arrested for or
convicted of a crime (other than minor traffic violations), (b) adjudged a
bankrupt or (c) been an officer or director of a company that has been adjudged
a bankrupt.
2.15 Taxes. All federal, state, city, county, local and
foreign income, franchise, sales, use and value added tax returns and reports,
and all other tax returns and reports required to be filed by any Company in
those or in any other jurisdiction (collectively, "Returns") have been timely
filed other than such failures which are not material to the Condition of the
Companies taken as a whole. All such Returns are true, correct and complete in
all material respects. All taxes, assessments, fees, interest, penalties and
other charges with respect thereto (collectively, "Taxes") due or claimed to be
due from any of the Companies have been paid except to the extent reserved
against on the Financial Statements. Except as set forth in Part 2.15 of
Schedule 2 hereto, no income tax return of any of the Companies has been audited
by the applicable Governmental Authority, no controversy with respect to taxes
of any type is pending or, to the knowledge of the Company, threatened, and
there are in effect no waivers of the applicable statute of limitations for
Taxes in any jurisdiction for any of the Companies for any period. Neither the
Company nor any of its stockholders has ever filed an election pursuant to
Section 1362 of the Code, that the Company be taxed as an S Corporation.
2.16 Books and Records. The books of account, ledgers and
records of each of the Companies accurately and completely reflect in all
material respects all information relating to its business, the nature,
acquisition, maintenance, location and collection of its assets, and the
nature of all transactions giving rise to its obligations or accounts
receivable. The minute books of each of the Companies fully set forth all
action taken by the Board of Directors, stockholders and, if any, executive
board (or other committee thereof) of each such Company.
2.17 Environmental Matters. The business, assets and
properties of each of the Companies are and have been operated and maintained
in compliance with all applicable federal, state, city, county and local
environmental protection laws and regulations (collectively, the "Environmental
Laws"), except where the failure to so comply could not reasonably be expected
to have a material adverse effect on the Condition of any such Company. No event
has occurred which, with or without the passage of time or the giving of notice,
or both, would constitute a non-compliance by any of the Companies with, or a
violation by any of the Companies of, the Environmental Laws, except for
violations which could not reasonably be expected to have a material adverse
effect on the Condition of any such Company. None of the Companies nor any of
their respective predecessor companies has caused or permitted to exist, as a
result of an intentional or unintentional act or omission by any such Company,
any of their respective predecessor companies or, to the best knowledge of the
Company, by any contractor or supplier of any of their raw materials, a
disposal, discharge or release of solid wastes, pollutants or hazardous
substances, on or from any site which currently is or formerly was owned,
leased, occupied or used by any of the Companies or any predecessor company, or,
to the best knowledge of the Company, any contractor or supplier of any of their
raw materials, except where such disposal, discharge or release was in
compliance with the Environmental Laws. Part
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2.17 of Schedule 2 hereto contains a complete and correct list of the name and
location of each site (i) which is listed, or proposed for listing on a
registry or inventory of inactive hazardous waste sites maintained by any
Governmental Authority and which currently is or formerly was owned, leased,
occupied or used by any of the Companies or any predecessor company or (ii)
with respect to which any of the Companies or any predecessor company has
received notice that such Company is considered to be a potentially responsible
person for cleanup or other liability in respect of Environmental Laws.
2.18 Transactions with Affiliates. Except as set forth in
Part 2.18 of Schedule 2 hereto and as provided in the footnotes to the Audited
Financial Statements, none of the Companies has entered into any transaction
with any past or present Principal Owner of the Company or with any of his or
its Affiliates, associates or relatives. Except for employment arrangements
with its employees, and except as provided in the footnotes to the Audited
Financial Statements, none of the Companies has any obligation to or, to the
best knowledge of the Company, claim against any past or present Principal
Owner of the Company, or any of his or its Affiliates, associates or relatives,
and no such Person has any obligation to or claim against any of the Companies.
All products, services or benefits provided to any of the Companies by any such
Person, or provided by any of the Companies to any such Person, are set forth
on Part 2.18 of Schedule 2 and are provided at a charge equal to the fair
market value of such products, services or benefits.
2.19 Registration Rights. Except as provided in the
Registration Rights Agreement, no Person has demand, "piggy-back," or other
rights to cause any of the Companies to file any registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), relating to any
securities of any of the Companies or to participate in any such registration
statement.
2.20 No Brokers or Finders. Except for the agreement between
the Company and ▇▇▇▇▇▇ Brothers attached hereto as Exhibit H (including a
schedule of the types and amounts of fees payable thereunder), none of the
Companies nor any of their respective Affiliates has entered or will enter into
any agreement pursuant to which any of the Companies or any Investor will be
liable, as a result of the transactions contemplated by this Agreement or any
of the Investment Documents, for any claim of any person for any commission,
fee or other compensation as finder or broker.
2.21 Investment Company Act. Neither the Company nor any of
its Subsidiaries is an "investment company" nor is the Company or any of its
Subsidiaries directly or indirectly controlled by or acting on behalf of any
Person which is an "Investment Company" within the meaning of the Investment
Company Act of 1940, as amended.
2.22 Use of Proceeds. The Company will use the proceeds from
the sale of the Securities to the Investors solely for general corporate
purposes arising in the ordinary course of business, to repay certain
indebtedness as detailed in Part 2.22 of Schedule 1 hereto and for
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working capital and growth, modernization and expansion. The Company may also
use such proceeds for research and development.
2.23 Business Plan. The business plan of the Company dated
July 1999 (the "Business Plan"), including the projections contained therein,
was prepared by the senior management of the Company, is based on assumptions
which are considered by senior management of the Company to be reasonable, and
reflects management's reasonable best judgment based on present circumstances
of the most likely set of conditions and courses of action and most likely
financial condition and results of operations, for the period(s) reflected
therein. The Company is not aware of any fact or condition which could
reasonably be expected to result in the Company not achieving the results
described in such business plan; however, the Company makes no assurance that
the Business Plan will reflect actual results.
2.24 Employee Non-Disclosure and Proprietary Information and
Inventions Agreements. Each employee and officer of each of the Companies who
has, or has had, access to any Proprietary Information has executed a
Non-Disclosure and Proprietary Information and Inventions Agreement in
substantially the form attached hereto as Exhibit I. The Company is not aware,
after reasonable investigation, that any such employee or officer is in
violation thereof, and the Company and each of the Subsidiaries will make
reasonable efforts to prevent any such violation.
2.25 Real Property Holding Corporation. None of the Companies
is, and none of the Companies have been, a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code.
2.26 Year 2000 Compliance. The computer systems of the
Company (including without limitation all software, hardware, workstations and
related components, automated devices, embedded chips and other date sensitive
equipment such as security systems, alarms, elevators and HVAC systems) are
Year 2000 Compliant. The term "Year 2000 Compliant" as used herein means that
the computer systems (1) are capable of recognizing, processing, managing,
representing, interpreting, and manipulating correctly date related data for
dates earlier, later than, and including, January 1, 2000, including, but not
limited to, calculating, comparing, sorting, storing, tagging and sequencing,
without resulting in or causing logical or mathematical errors or
inconsistencies in any user-interface functionalities or otherwise, including
data input and retrieval, data storage, data fields, calculations, reports,
processing, or any other input or output, (2) have the ability to provide date
recognition for any data element without limitation (including, but not limited
to, date-related data represented without a century designation, date-related
data whose year is represented by only two digits and date fields assigned
special values), (3) have the ability to automatically function into and beyond
the year 2000 without human intervention and without any change in operations
associated with the advent of the year 2000, (4) have the ability to correctly
interpret data, dates and time into and beyond the year 2000, (5) have the
ability not to produce noncompliance in existing information, nor otherwise
corrupt such data into and beyond the year 2000, (6) have the ability to
correctly
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process beyond January 1, 2000 data containing dates before that date, (7) have
the ability to recognize all "leap years," including February 29, 2000. The
products and services of the Company are Year 2000 Compliant. To the Company's
knowledge, the computer systems have the ability to properly interface, and
will continue to properly interface, with internal and external applications
and systems of third parties with whom the Company and its subsidiaries
exchange data electronically (including without limitation customers, clients,
suppliers, service providers, subcontractors, processors, converters, shippers,
warehousemen, outsourcers, data processors, regulatory agencies and banks)
whether or not they have achieved Year 2000 Compliance. The Company has
inquired of all such third parties whose lack of Year 2000 Compliance would be
materially adverse to the Company, and all such third parties have represented
that they are Year 2000 Compliant.
2.27 Disclosure. In connection with the purchase of the
Securities by the Investors as contemplated hereby, the Company has disclosed
to the Investors in writing all material facts and information concerning the
Companies, their Condition and the Securities, and has not made any untrue
statement of a material fact or omitted to state any material fact necessary
in order to make the statements contained herein or in any other Investment
Documents or other written disclosure to the Investors not misleading.
30 Representation and Warranties of the Investors Each Investor, with
respect to itself, severally and not jointly, hereby represents and warrants to,
and agrees with, the Company as follows:
3.1 Organization. If such Investor is a legal entity, such
Investor is, duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization.
3.2 Authorization. Such Investor has, all requisite power
and authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the other Investment Documents to which it is
a party, and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary action on the
part of such Investor. This Agreement and the other Investment Documents to
which it is a party have been duly executed and delivered by such Investor and
constitutes its legal, valid and binding obligation, enforceable against such
Investor in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency or other similar laws affecting the
enforceability of creditors' rights in general or by general principles of
equity.
3.3 No Intended Resale. The Securities are being acquired by
such Investor for investment for its own account and not with a view to the
resale or distribution thereof in violation of applicable securities laws.
3.4 Due Diligence. Such Investor has been granted access to
the facilities, property, books and records and personnel, customers,
distributors, vendors, professionals and any other sources of information of
the Companies and all requests for information made by such
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Investor or its agents have been satisfied by the Company; provided, however,
that the conduct of such due diligence review and investigation shall not
affect or otherwise diminish any of the representations or warranties of or
with respect to any of the Companies.
3.5 Accredited Investor. Each Investor is an "accredited
investor" as such term is defined in Rule 501(a) promulgated under the
Securities Act.
40 Conditions of Investor's Obligations at Closing. The obligation of
each Investor to purchase the Securities to be purchased by it at the Closing
is subject to the fulfillment to each such Investor's satisfaction, prior to or
at the Closing, of each of the following conditions:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in this Agreement and the other Investment
Documents shall be true and correct in all material respects on and as of the
date of the Closing as if made on and as of such date.
4.2 Performance. The Company shall have performed and
complied with all agreements and conditions required by this Agreement and the
other Investment Documents to be performed or complied with by it prior to of
at the Closing.
4.3 Sale of Securities. The Company shall have sold a
minimum of $15,005,750.00 of the Securities, of which ▇▇▇▇▇ shall have
purchased at least $15,005,750.00.
4.4 Stock Certificates, etc. At the Closing, the Company
shall have tendered to each Investor a certificate representing shares of
Preferred Stock (and, in the case of ▇▇▇▇▇ and divine interVentures, inc., a
Warrant) in accordance with Section 1.2 hereof, all in form and substance
satisfactory to such Investor and sufficient to transfer to and vest in such
Investor good and valid title to the Securities, free and clear of any Lien.
4.5 Consents. The Company shall have obtained all
consents, approvals or waivers from Governmental Authorities and third Persons
necessary for the execution, delivery and performance of this Agreement, the
other Investment Documents and the amendments to the Certificate and the
transactions contemplated hereby and thereby, all without material cost to the
Company. Without limiting the generality of the foregoing, each of the
Company's existing stockholders shall have waived any preemptive right or right
of first offer any such stockholder may have to purchase any of the Securities.
4.6 No Litigation. There shall not be any Action of or
before any Governmental Authority or other Person pending or threatened (i)
with respect to this Agreement or any of the other Investment Documents or the
transactions contemplated hereby or thereby or (ii) which might materially
adversely affect the Condition of any of the Companies.
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4.7 Opinion of Counsel. The Investors shall have
received from ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, an opinion dated as of the
Closing, in the form attached hereto as Exhibit J.
4.8 Compliance Certificate. The Investors shall have
received certificates dated as of the day of the Closing executed by each of
the Chief Executive Officer and the Chief Financial Officer of the Company
certifying that the conditions specified in Sections 4.1 through 4.3, 4.5, 4.6
and 4.9 have been fulfilled.
4.9 Directors. Those persons listed on Schedule 5-A
hereto shall have been duly elected and qualified as directors of the Company
and at the Closing shall constitute the entire Board of Directors of the
Company. Those persons listed on Schedule 5-B hereto shall have been duly
elected and qualified as members of the Compensation Committee of the Board of
Directors of the Company and at the Closing shall constitute the entire
Compensation Committee of the Board of Directors of the Company. Those persons
listed on Schedule 5-C hereto shall have been duly elected and qualified as
members of the Audit Committee of the Board of Directors of the Company and at
the Closing shall constitute the entire Audit Committee of the Board of
Directors of the Company.
4.10 Related Documents. The Investor Rights Agreement,
the Stockholders Agreement and the Registration Rights Agreement shall have
been executed and delivered by each of the parties thereto and in full force
and effect, and the Certificate shall be in full force and effect.
4.11 Satisfactory Completion of Due Diligence; Etc.
▇▇▇▇▇ and its representatives (including, without limitation, attorneys, agents
and accountants) shall have completed their due diligence review of the
business and affairs, assets and liabilities and Condition of each of the
Companies; and the results of such review shall be satisfactory to ▇▇▇▇▇.
4.12 Certificates and Documents. The Company shall have
delivered to Proskauer Rose LLP:
(a) The Certificate, certified by the Maryland
State Department of Assessments & Taxation;
(b) A certificate, as of the most recent
practicable date, as to the corporate good standing of the Company,
issued by the Maryland State Department of Assessments & Taxation
confirming such good standing on or immediately prior to the Closing;
(c) The By-Laws, certified by the Secretary or
Assistant Secretary of the Company as being in effect of the Closing
Date; and
(d) Resolutions of the Board of Directors of the
Company, authorizing and approving all matters in connection with this
Agreement, the other Investment
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Documents and the transactions contemplated hereby and thereby,
certified by the Secretary or Assistant Secretary of the Company as of
the Closing Date.
4.13 Payment of Expenses. The Company shall have paid
all fees and expenses in accordance with Section 8.1 hereof.
4.14 Proceedings and Documents. All proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in substance
and form to the Investors and their counsel, and the Investors shall have
received all such counterpart originals or certified or other copies of such
documents as the Investors may reasonably request.
If at the Closing the Company fails to tender to the Investors
the documents specified herein which are required to be delivered to the
Investors at the Closing or if at the Closing any of the conditions specified
in this Section 4 shall not have been fulfilled to each Investor's
satisfaction, such Investor shall, at its election, be relieved of all further
obligations under this Agreement.
50 Conditions of the Company's Obligations at Closing. The
obligations of the Company to the Investors under this Agreement are subject to
the fulfillment, prior to or at the Closing, of each of the following
conditions:
5.1 Representations and Warranties. The representations
and warranties of each Investor contained in this Agreement shall be true and
correct in all material respects on and as of the date of the Closing as if
made on and as of such date.
5.2 Payment of Purchase Price. Each Investor shall have
delivered to the Company the purchase price specified in Section 1.1 hereof.
5.3 No Litigation. There shall not be any Action of or
before any Governmental Authority or other Person pending or threatened with
respect to this Agreement or the transactions contemplated hereby.
5.4 Related Documents. The Investor Rights Agreement,
the Stockholders Agreement and the Registration Rights Agreement shall have
been executed and delivered by each of the parties thereto and in full force
and effect.
60 Certain Post-Closing Covenants of the Company. The Company
covenants and agrees with the Investors as follows:
6.1 Annual Meetings. The Company will hold an annual
meeting of all stockholders at which information with respect to its business
will be furnished and discussed.
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6.2 Exemption from Investment Company Act; FIRPTA. The
Company shall conduct its business so that neither the Company nor any of its
subsidiaries shall become (i) an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or (ii) a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code.
6.3 Accounting and Reserves. The Company shall, and the
Company shall cause each of its subsidiaries to, maintain a standard and
uniform system of accounting and shall keep proper books and records and
accounts in which full, true and correct entries shall be made of its
transactions, all in accordance with generally accepted accounting principles
applied on a consistent basis through all periods, and shall set aside on such
books for each fiscal year all such proper reserves for depreciation,
obsolescence, amortization, bad debts and other purposes in connection with its
operations as are required by such principles so applied.
6.4 Payment of Taxes and Claims. The Company shall, to
the extent possible, use its best efforts to, and the Company shall, to the
extent possible, use its best efforts to cause each of its subsidiaries to, pay
and discharge promptly all lawful taxes, assessments and governmental charges
or levies imposed upon it or any such subsidiary, as the case may be, or upon
their respective income or profits or upon any of their respective properties,
real, personal or mixed, before the same shall become delinquent, as well as
all lawful claims for labor, materials and supplies which, if unpaid, would by
law become a Lien or charge upon their respective properties; provided that if
both of the following conditions are met in any instance, the Company shall not
be obligated, and the Company shall not be obligated to cause any of its
subsidiaries, to pay or discharge, or to cause to be paid or discharged, such
tax, assessment, charge, levy or claim: (i) if and for so long as the Company
or such subsidiary, as the case may be, is contesting in good faith by
appropriate proceedings the amount, applicability or validity thereof, and (ii)
if the Company or such subsidiary, as the case may be, shall have set aside on
its books reserves deemed by it in accordance with generally accepted
accounting principles to be adequate with respect to such tax, assessment,
charge, levy or claim; provided further that notwithstanding the previous
provision, the Company shall pay or cause to be paid all such taxes,
assessment, charges, levies or claims forthwith upon the commencement of
proceedings to perfect or foreclose any Lien which attached as security
therefor.
6.5 Satisfaction of Judgments. The Company shall not,
and the Company shall cause each of its subsidiaries not to, allow any judgment
against the Company or such subsidiary, as the case may be, to remain
unsatisfied; provided that the Company shall not be required to satisfy, and
the Company shall not be obligated to cause any of its subsidiaries to satisfy,
any judgment so long as the validity thereof is being contested in good faith
by appropriate proceedings and, if the Company or such subsidiary, as the case
may be, shall have set aside on its books reserves deemed by the Company or
such subsidiary, as the case may be, in accordance with generally accepted
accounting principles to be adequate with respect to such judgment, unless such
payment is necessary to prevent forfeiture or loss of a material part of the
properties or assets of the Company or such subsidiary, as the case may be.
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6.6 Payment of Indebtedness. The Company shall, and the
Company shall cause each of its subsidiaries to, pay and discharge when due or
renew or extend any indebtedness heretofore or hereafter incurred by the
Company or such subsidiary, as the case may be, which was or is incurred as
permitted hereunder and discharge, perform and observe the covenants,
provisions and conditions to be performed, discharged and observed on the part
of the Company or such subsidiary, as the case may be, in connection therewith;
provided that if both of the following conditions are met in any instance, the
Company shall not be obligated, and the Company shall not be obligated to cause
any of its subsidiaries, to pay or discharge, or to cause to be paid or
discharged, such indebtedness: (i) if and for so long as the Company or such
subsidiary, as the case may be, is contesting in good faith by appropriate
proceedings the amount, applicability or validity thereof, and (ii) if the
Company or such subsidiary, as the case may be, shall have set aside on its
books reserves deemed by it, in accordance with generally accepted accounting
principles to be adequate with respect to such indebtedness; provided further
that notwithstanding the previous provision, the Company shall pay or cause to
be paid all such indebtedness forthwith upon the commencement of proceedings to
perfect or foreclose any Lien which attached as security therefor.
6.7 Insurance. The Company shall, and the Company shall
cause each of its Subsidiaries to, maintain such insurance coverage as is
customarily maintained by companies of established reputation engaged in the
same or similar business and similarly situated. All such insurance coverage
shall be effected under valid and enforceable policies issued by insurers of
recognized financial stature and responsibility, except that the Company may,
and the Company may cause any of its subsidiaries to, effect workmen's
compensation or similar insurance in respect of operations in any jurisdiction
by maintaining a system or systems of self-insurance in accordance with
applicable laws. The Company shall maintain in effect a "key man" life
insurance policy in the amount of $1,000,000 for each of ▇▇▇▇▇▇▇ Faint, ▇▇▇▇
Wesker and ▇▇▇▇▇▇▇ ▇▇▇▇▇.
6.8 Maintenance of Corporate Existence. The Company
shall, and the Company shall cause each of its subsidiaries to, do all acts and
things of whatsoever nature as are necessary to preserve and keep in full force
and effect the corporate existence, rights and franchises of the Company and
each of its subsidiaries, as the case may be, and shall not omit to do any act
or thing necessary to that end or to do any act or thing that would or might
cause a forfeiture of any material part of the properties or assets of the
Company or any of its subsidiaries, unless the Board of Directors has approved
a restructuring of the Company.
6.9 Availability of Conversion Stock and Preferred Stock
for Conversion and Exercise of Warrants. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of Series
D Stock and Common Stock, such number of its duly authorized shares of (x)
Series D Stock as shall be sufficient to effect the exercise of the Warrants
and (y) Common Stock as shall be sufficient to effect the conversion of each of
the Series C Stock and the Series D Stock, as the case may be, from time to
time outstanding or otherwise to comply with the terms of this Agreement and
the Certificate. If at any time the number of authorized but unissued shares
of Series D Stock or Common Stock, as the case may
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be, shall not be sufficient to effect the conversion of the Series C Stock and
the Series D Stock and the exercise of the Warrants, or otherwise to comply
with the terms of this Agreement, the Stockholders Agreement and the
Certificate, the Company shall forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Series D Stock or
Common Stock, as the case may be, to such number of shares as shall be
sufficient for such purposes. The Company will obtain any authorization,
consent, approval or other action by or make any filing with any court or
administrative body that may be required under applicable state securities laws
in connection with (x) the issuance of shares of Series D Stock upon exercise
of the Warrants and (y) the issuance of Common Stock upon conversion of the
Series C Stock and the Series D Stock.
6.10 Indebtedness. The Company shall not at any time
incur or permit to exist any Indebtedness for Borrowed Money (as defined below)
of the Company and its subsidiaries in excess of $250,000, except Indebtedness
for Borrowed Money existing at the Closing and described in Part 2.8 of
Schedule 2 hereto. As used in this Agreement, "Indebtedness for Borrowed
Money" as applied to the Company and its subsidiaries shall mean (without
duplication): (a) any indebtedness, whether or not represented by bonds,
debentures, notes or other securities, for the repayment of borrowed money
which the Company or any of its subsidiaries has directly or indirectly
created, incurred or assumed; (b) any indebtedness, whether or not for borrowed
money, secured by any Lien on any property or asset owned or held by the
Company or any of its subsidiaries, whether or not the indebtedness secured
thereby shall have been assumed; (c) all indebtedness of others with respect to
which the Company or any of its subsidiaries has become liable by way of a
guaranty; (d) any capital lease obligations of the Company or any of its
subsidiaries; and (e) any indebtedness, whether or not for borrowed money, with
respect to which the Company or any of its subsidiaries has become directly or
indirectly liable and which represents or has been incurred to finance the
purchase price (or a portion thereof) of any property or services (other than
property or services acquired in the ordinary course of business on ordinary
trade terms not exceeding 60 days) or business acquired by the Company or any
of its subsidiaries whether by purchase, consolidation, merger or otherwise.
6.11 Business Activities. Unless approved unanimously by
the Board of Directors of the Company, the Company will not, and will not
permit any of its subsidiaries to, engage in any business activity, except for
those presently conducted by the Companies, and such activities as may be
incidental or related thereto.
6.12 Transactions with Affiliates. Neither the Company
nor any subsidiary of the Company shall directly or indirectly, enter into any
transaction or agreement with any Related Person (other than (v) this
Agreement, (w) the Warrants, (x) the Investor Rights Agreement, (y) the
Stockholders Agreement and (z) the Registration Rights Agreement), unless the
transaction or agreement is (i) reviewed and approved by a majority of
Disinterested Directors (as defined below) and (ii) on terms no less favorable,
taking into account all considerations deemed relevant by the Disinterested
Directors, to the Company or any such subsidiary than those obtainable in an
arm's length transaction from a non-Related Person. A "Disinterested Director"
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with respect to any specified transaction or agreement shall mean any director
who has no personal (by reason of any family or business relationship or
otherwise) or pecuniary interest in any such specified transaction or
agreement. As used herein, the term "Related Person" of a specified Person
shall mean (i) any stockholder, partner, director, officer or employee of such
specified Person or any Affiliate or relative, or Affiliate of a relative, of
any of the foregoing, (ii) any Affiliate of such specified Person, (iii) if
applicable, any past or present Principal Owner of such specified Person or
(iv) in the case of a natural Person, any member of such Person's family or any
Affiliate or relative of such member.
6.13 Governing Instruments. The Company shall not amend
the By-Laws in any manner adverse to the rights of the holders of the
Securities.
6.14 Public Announcement. Neither the Company nor any of
its employees, officers, directors or security holders shall issue or cause the
issuance or the publication of any press release or any other public
announcement with respect to the transactions contemplated by this Agreement
without the prior review and written consent of ▇▇▇▇▇ unless required by law.
6.15 Employee Non-Disclosure and Proprietary Information
and Inventions Agreements. The Company shall ensure that each new employee and
officer of each of the Companies shall execute a Non-Disclosure and Proprietary
Information and Inventions Agreements in substantially the form attached hereto
as Exhibit I as a condition precedent to serving as an employee or officer.
6.16 Employment Agreements. Within 30 days of the
Closing the Company shall have entered into employment agreements, reasonably
satisfactory to ▇▇▇▇▇, with each of ▇▇▇▇▇▇▇ Faint, ▇▇▇▇ Wesker, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇.
6.17 Retention of Investment Banking Firm. The selection
of, and fees to be paid to, any investment banking firm by the Company shall be
approved by the Board of Directors. The consent of ▇▇▇▇▇ shall be required in
connection with the selection of underwriters for the initial public offering
of the securities of the Company.
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7. Miscellaneous.
7.1 Expenses. The Company shall pay all stamp,
documentary and other taxes which may be payable in connection with the
execution, delivery and performance of this Agreement, and the purchase and
sale of the Securities. In addition, the Company shall pay all of the
following out-of-pocket fees and expenses, up to a maximum of $100,000,
incurred by ▇▇▇▇▇ in connection with this Agreement and the transactions
contemplated hereby: (i) the fees and expenses of counsel for ▇▇▇▇▇ (including
the fees and expenses of Proskauer Rose LLP) and (ii) the fees and expenses of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. All of the foregoing fees and expenses incurred by ▇▇▇▇▇
prior to or in connection with the Closing shall be paid at the Closing, and
▇▇▇▇▇ may in its discretion offset the amount of such fees and expenses against
the purchase price of the Securities. In addition, the Company shall pay the
fees and expenses of ▇▇▇▇▇ relating to any future waiver, consent or amendment,
whether or not any such future action is given or consummated, including
without limitation, any filings under the Exchange Act and the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (including any
such filings relating to the transactions contemplated hereby).
Notwithstanding anything herein to the contrary, if the transactions
contemplated hereby are not consummated at the election of the Company, the
Company shall pay all fees and expenses of the firms previously referred to in
this Section 8.1 in an amount not to exceed $100,000. In addition, the Company
shall pay the out-of-pocket (legal) fees and expenses, up to a maximum of
$15,000, incurred by divine interVentures, Inc., in connection with this
Agreement and the transactions contemplated hereby.
7.2 Publicity. Except as may be required by Law, the
Company shall not use the name of, or make reference to, any Investor or any of
its Affiliates in any press release or in any public manner without such
Investor's prior written consent.
7.3 Indemnification. The Company agrees to indemnify
each Investor and each officer, director, employee, agent, partner, stockholder
and affiliate of each Investor (collectively, the "Indemnified Parties") for,
and hold each Indemnified Party harmless from and against: (i) any and all
damages, losses, claims and other liabilities of any and every kind, including,
without limitation, judgments and costs of settlement, and (ii) any and all
out-of-pocket costs and expenses of any and every kind, including, without
limitation, reasonable fees and disbursements of counsel for such Indemnified
Parties (all of which expenses periodically shall be reimbursed as incurred),
in each case, arising out of or suffered or incurred in connection with any of
the following: (a) any misrepresentation or any breach of any warranty made by
the Company herein or in any of the other Investment Documents, (b) any breach
or non-fulfillment of any covenant or agreement made by the Company herein or
in any of the other Investment Documents and (c) any claim relating to or
arising out of a violation of applicable federal or state securities laws by
the Company in connection with the sale of the Securities by the Company to the
Investors.
7.4 Survival. All representations, warranties,
covenants and agreements contained in or made pursuant to this Agreement or
contained in any certificate delivered pursuant to this Agreement, shall remain
operative and in full force and effect, regardless of any
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investigation made by or on behalf of any party hereto, and shall survive the
transfer and payment for the Securities and the consummation of the
transactions contemplated hereby; provided, however, that the representations
and warranties contained in Sections 2 and 3 (other than the representations
and warranties set forth in Sections 2.1 through 2.4, 2.12, 2.15, 2.18, 2.19
and 2.27 which shall survive so long as an Investor or its successors or
assigns holds any Conversion Stock or Securities) shall terminate on the later
to occur of (i) two years from the date hereof and (ii) the consummation of a
Qualified Initial Public Offering (as such term is defined in the Investor
Rights Agreement), provided further, however, that no representation or
warranty shall terminate until after the final non-appealable resolution of any
claim relating to such representation or warranty, which claim shall have been
made prior to the expiration of such representation or warranty; provided
further, however, that the covenants contained in Section 6 shall terminate
upon the consummation of a Qualified Initial Public Offering.
7.5 Assignment. This Agreement and all the provisions
hereof shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns, except that neither this
Agreement nor any rights or obligations hereunder shall be assigned or
delegated by the Company without the prior written consent of the Investors.
After the Closing, ▇▇▇▇▇ and divine interVentures, inc. may assign this
Agreement and such Investor's rights hereunder, in whole or in part, to (i) any
Affiliate or partner of such Investor or (ii) any other transferee of at least
25% of the Securities acquired by such Investor.
7.6 Amendment; Waiver. Any term, covenant, agreement or
condition of this Agreement may be amended, and compliance therewith may be
waived (either generally or in a particular circumstance and either
retroactively or prospectively), by one or more substantially concurrent
written instruments signed by the Company and the Requisite Investors (as such
term is hereinafter defined); provided, however, that the provisions of this
Agreement may not be amended or waived without the consent of each Investor
adversely affected by such amendment or waiver if such amendment or waiver
adversely affects some investors but does not so adversely affect all
Investors. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Investor and the Company. As used herein, (i)
"Requisite Investors" mean Investors that hold 51% or more of the Common Share
Equivalents (as such term is hereinafter defined) then held by the Investors;
provided, however, that the "Requisite Investors" shall in all cases include
▇▇▇▇▇ so long as ▇▇▇▇▇ continues to own a majority of shares of the Series C
Stock (or shares of Common Stock issuable upon conversion thereof) (x)
purchased by it hereunder or (y) then outstanding and (ii) "Common Share
Equivalents" means shares of Common Stock at the time outstanding or issuable
upon conversion of shares of Series C Stock or Series D Stock at the time
outstanding or conversion of the Series D Stock issuable upon exercise of the
Warrants at the time outstanding.
7.7 APPLICABLE LAW. THE LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS
AGREEMENT, REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF
CONFLICTS OF LAW.
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7.8 JUDICIAL PROCEEDINGS. ANY JUDICIAL PROCEEDING
INVOLVING ANY DISPUTE, CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE RIGHTS OR INTERESTS OF THE INVESTORS OR THE BREACH OR ALLEGED
BREACH OF THIS AGREEMENT, WHETHER ARISING DURING OR AT OR AFTER THE TERMINATION
OF THIS AGREEMENT (EACH OF THE FOREGOING DISPUTES, CONTROVERSIES AND CLAIMS
HEREINAFTER REFERRED TO AS AN "AGREEMENT DISPUTE"), SHALL BE BROUGHT ONLY IN A
FEDERAL OR STATE COURT LOCATED IN THE COUNTY, CITY AND STATE OF NEW YORK, AND
EACH OF THE PARTIES HERETO (i) UNCONDITIONALLY ACCEPTS THE EXCLUSIVE
JURISDICTION OF SUCH COURTS AND ANY RELATED APPELLATE COURT AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY AND (ii) IRREVOCABLY WAIVES
ANY OBJECTION SUCH PARTY MAY NOW HAVE OR HEREAFTER HAS AS TO THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT
FORUM. EACH OF THE PARTIES HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING AN AGREEMENT DISPUTE.
7.9 Notices. All notices and other communications
provided for herein shall be dated and in writing and shall be deemed to have
been duly given (x) on the date of delivery, if delivered personally or by
telecopier, receipt confirmed, (y) on the following business day, if delivered
by a recognized overnight courier service, or (z) two days after mailing, if
sent by registered or certified mail, return receipt requested, postage
prepaid, in each case, to the party to whom it is directed at the following
address (or at such other address as any party hereto shall hereafter specify
by notice in writing to the other parties hereto):
(i If to the Company, to it at the following address:
Overlook Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇)▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. Faint, Jr.
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
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(ii If to any Investor, to it, him or her at the
address set forth on Schedule 1, or at such other address as
may have been furnished in writing to the Company by the
Investor;
7.10 Integration. This Agreement and the documents
referred to herein or delivered pursuant hereto or pursuant to such documents,
including all exhibits and schedules, contain the entire understanding of the
parties with respect to their subject matter and supersede all prior agreements
and understandings between the parties with respect to their subject matter.
7.11 Severability. Each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
7.12 Descriptive Headings. The section and other headings
contained in this Agreement are for convenience of reference only and shall not
affect the meaning or interpretation of this Agreement.
7.13 Counterparts. This Agreement may be executed in two
or more counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which together shall be deemed to be one
and the same agreement.
7.14 Understanding Among Investors. The decision of each
Investor to purchase Securities pursuant to this Agreement has been made by
such Investor independently of any other Investor and independently of any
statements or opinions as to the Condition of the Company which may have been
made or given by any other Investor or by any agent or employee of any other
Investor. Each Investor acknowledges that no other Investor has acted as agent
for such Investor in connection with making its investment hereunder and that
no other Investor will be acting as agent of such Investor in connection with
monitoring its investment hereunder.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands to this
Series C Convertible Stock Purchase Agreement as of the day and year first
above written.
COMPANY:
SEQUOIA SOFTWARE CORPORATION
By:
---------------------------------
▇▇▇▇ Wesker, President
PURCHASERS:
▇▇▇▇▇ COMMUNICATIONS FUND, L.P.
By: ▇▇▇▇▇ Capital Partners, LLC,
General Partner
By:
---------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Manager
DIVINE INTERVENTURES, INC.
By:
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇,
ANTHEM CAPITAL, L.P.
By: Anthem Capital Partners, L.P.,
General Partner
By: Anthem Capital Partners, Inc.
General Partner
By:
---------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇, Principal
{Signatures Continue on Next Page}
31
NEPA VENTURE FUND II, L.P.
By: NEPA II Management Corporation
General Partner
By:
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇, Vice President
------------------------------------
▇▇▇▇▇▇▇ ▇. FAINT, JR.
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
APPROVED ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ TRUST ESTATE
-TRUST B
By: By:
--------------------------------- ---------------------------------
Miro Vranac, Jr., ▇.▇. ▇▇▇▇▇▇▇, Trustee
Member Advisory Board
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ TRUST -
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
By: By:
--------------------------------- ---------------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ Vranac, Jr., Trustee
Trustee
------------------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
FLANDERS LANGUAGE VALLEY
FUND, C.V.A.
By:
---------------------------------
Name:
---------------------------
Title:
--------------------------
{Signatures Continue on Next Page}
32
LAMBRO'S L.P.
By: CJ Capital Management LLC
By:
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Investment Advisor
SMART TECHNOLOGY VENTURES 2
By:
---------------------------------
Name:
---------------------------
Title:
--------------------------
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ MANY
JODA ENTERPRISES, LTD.
By:
---------------------------------
Name:
---------------------------
Title:
--------------------------
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
ODYSSEY CAPITAL, LP
By:
---------------------------------
Name:
---------------------------
Title:
--------------------------
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
{Signatures Continue on Next Page}
33
JODA ENTERPRISES LTD.
By:
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
{Signatures Continue on Next Page}
34
SEQ CAPITAL INVESTMENTS
By:
---------------------------------
Name: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: General Partner
▇. ▇▇▇▇▇▇▇ FAMILY TRUST DATED 8/15/93
By:
---------------------------------
Name:
---------------------------
Title:
--------------------------
W. ▇▇▇▇▇▇ ▇▇▇▇▇ AND ▇▇▇▇ ▇. ▇▇▇▇▇
AS JOINT TENNANTS WITH RIGHT OF
SURVIORSHIP
By:
---------------------------------
W. ▇▇▇▇▇▇ ▇▇▇▇▇
By:
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
CILLIAN S. O'BRADAIGH
------------------------------------
▇▇▇▇ WHITIER ▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
{Signatures Continue on Next Page}
35
TABLE OF CONTENTS
SECTION PAGE
1. Purchase and Sale of Convertible Preferred Stock and Warrants............................................1
1.1 Sale and Issuance of Convertible Preferred Stock and Warrants...................................1
1.2 Closing.........................................................................................2
2. Representations and Warranties of the Company............................................................2
2.1 Organization, Good Standing and Qualification...................................................2
2.2 Capitalization..................................................................................2
2.3 Authority; Execution and Delivery; Requisite Consents, Nonviolation.............................4
2.4 Subsidiaries....................................................................................5
2.5 The Company Financial Information...............................................................5
2.6 Certain Changes or Events.......................................................................5
2.7 Title to Assets.................................................................................6
2.8 Contracts.......................................................................................6
2.9 Intellectual Property...........................................................................8
2.10 Insurance......................................................................................10
2.11 Labor Union Activities; Employee Relations.....................................................11
2.12 ERISA..........................................................................................11
2.13 Litigation.....................................................................................12
2.14 Compliance with Laws; Permits..................................................................13
2.15 Taxes..........................................................................................13
2.16 Books and Records..............................................................................14
2.17 Environmental Matters..........................................................................14
2.18 Transactions with Affiliates...................................................................14
2.19 Registration Rights............................................................................15
2.20 No Brokers or Finders..........................................................................15
2.21 Investment Company Act.........................................................................15
2.22 Use of Proceeds................................................................................15
2.23 Business Plan..................................................................................15
2.24 Employee Non-Disclosure and Proprietary Information and Inventions Agreements..................15
2.25 Real Property Holding Corporation..............................................................16
2.27 Disclosure.....................................................................................16
3. Representations and Warranties of the Investors.........................................................17
3.1 Organization...................................................................................17
3.2 Authorization..................................................................................17
3.3 No Intended Resale.............................................................................17
3.4 Due Diligence..................................................................................17
3.5 Accredited Investor............................................................................17
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4. Conditions of Investors' Obligations at Closing.........................................................17
4.1 Representations and Warranties.................................................................17
4.2 Performance....................................................................................18
4.3 Sale of Securities.............................................................................18
4.4 Stock Certificates, etc........................................................................18
4.5 Consents.......................................................................................18
4.6 No Litigation..................................................................................18
4.7 Opinion of Counsel.............................................................................18
4.8 Compliance Certificate.........................................................................18
4.9 Directors......................................................................................18
4.10 Related Documents..............................................................................19
4.11 Satisfactory Completion of Due Diligence; Etc..................................................19
4.12 Certificates and Documents.....................................................................19
4.13 Payment of Expenses............................................................................19
4.14 Proceedings and Documents......................................................................19
5. Conditions of the Company's Obligations at Closing......................................................20
5.1 Representations and Warranties.................................................................20
5.2 Payment of Purchase Price......................................................................20
5.3 No Litigation..................................................................................20
5.4 Related Documents..............................................................................20
6. Certain Post-Closing Covenants of the Company...........................................................20
6.1 Annual Meetings................................................................................20
6.2 Exemption from Investment Company Act; FIRPTA..................................................20
6.3 Accounting and Reserves........................................................................20
6.4 Payment of Taxes and Claims....................................................................20
6.5 Satisfaction of Judgments......................................................................21
6.6 Payment of Indebtedness........................................................................21
6.7 Insurance......................................................................................21
6.8 Maintenance of Corporate Existence.............................................................22
6.9 Availability of Conversion Stock and Preferred Stock for Conversion and Exercise of Warrants...22
6.10 Indebtedness...................................................................................22
6.11 Business Activities............................................................................23
6.12 Transactions with Affiliates...................................................................23
6.13 Governing Instruments..........................................................................23
6.15 Employee Non-Disclosure and Proprietary Information and Inventions Agreements..................23
6.16 Employment Agreements..........................................................................24
7. Miscellaneous...........................................................................................24
7.1 Expenses.......................................................................................24
7.2 Publicity......................................................................................24
7.3 Indemnification................................................................................24
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7.4 Survival.......................................................................................25
7.5 Assignment.....................................................................................25
7.6 Amendment; Waiver..............................................................................25
7.7 APPLICABLE LAW.................................................................................26
7.8 JUDICIAL PROCEEDINGS...........................................................................26
7.9 Notices........................................................................................26
7.10 Integration....................................................................................27
7.11 Severability...................................................................................27
7.12 Descriptive Headings...........................................................................27
7.13 Counterparts...................................................................................27
7.14 Understanding Among Investors..................................................................27
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EXHIBIT LIST
Exhibit A - Certificate
Exhibit B - Warrant
Exhibit C - Investor Rights Agreement
Exhibit D - Stockholders Agreement
Exhibit E - Registration Rights Agreement
Exhibit F - By-Laws
Exhibit G - Unaudited Financial Statements
Exhibit H - Broker Agreement
Exhibit I - Non-Disclosure and Proprietary Information and Inventions Agreement
Exhibit J - Opinion of Counsel
SCHEDULE LIST
Schedule 1 - Investors, Securities and Consideration
Schedule 2 - Schedule of Exceptions
Schedule 3 - Securityholders
Schedule 4 - Subsidiaries
Schedule 5 - Directors
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CROSS REFERENCES TO
SELECTED DEFINITIONS
Term Section Location
---- ----------------
Actions Section 2.13
Affiliate Section 2.6
Audited Financials Section 2.5
Agreement Prefatory Language
▇▇▇▇▇ Prefatory Language
Business Plan Section 2.23
By-Laws Section 2.3
Certificate Section 1.1(a)(i)
Clipper Investors Prefatory Language
Closing Section 1.2
Code Section 2.12
Common Share Equivalents Section 8.6
Common Stock Section 1.1(a)(i)
Companies Section 2.1
Company Prefatory Language
Condition Section 2.1
Consulting Agreement Section 5.16
Contracts Section 2.8
Conversion Stock Section 1.1(b)
Convertible Notes Section 2.22
Disinterested Director Section 7.15
Environmental Laws Section 2.17
ERISA Section 2.12
ERISA Affiliate Section 2.12
Exchange Act Section 7.19
Financial Statements Section 2.5
Governmental Authority Section 2.3
Intellectual Property Section 2.9
Intellectual Property Licenses Section 2.9
Investment Documents Section 2.3
Investor Rights Agreement Section 2.2
Investors Prefatory Language
Ireland Section 2.1
Laws Section 2.14
Liens Section 2.7
Order Section 2.13
Patents and Applications Section 2.9(c)
Permit Section 2.14
Person Section 2.3
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Plan Section 2.12
Preferred Stock Section 2.2
Principal Owner Section 2.8(d)
Radian Section 2.1
Related Person Section 9.2(a)(x)
Registration Rights Agreement Section 2.2
Requisite Investors Section 8.6
Returns Section 2.15
Scheduled Contracts Section 2.8
Securities Section 1.1(b)
Securities Act Section 2.19
Series A Stock Section 2.2
Series B Stock Section 2.2
Series C Stock Section 1.1(a)(i)
Series D Stock Section 1.1(a)(i)
Stockholders Agreement Section 1.3(a)
Stock Option Grants Section 2.2
Subsidiaries Section 2.1
Taxes Section 2.15
Unaudited Financials Section 2.5
Warrants Section 1.1(a)(i)
Year 2000 Compliant Section 2.26
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